Kath Noble

A few thoughts for the Opposition

Posted in The Island by kathnoble on June 5, 2013

Why the UNP needs to do better in its analysis of what’s wrong with the economy

share of exportsThis is hardly news, but the Opposition continued to be uninspiring last week. If a country is going to change its constitution, it really ought to be worth the bother. But the most encouraging thing about the draft published by the UNP on Wednesday is its support for provincial level devolution within a unitary state, which is exactly what is already in place thanks to the 13th Amendment to the existing constitution.

It is also one of the few commitments to which voters would trust it to stick in the unlikely event of Ranil Wickremasinghe being elected.

The Government should grasp this opportunity to confirm its own position and forge a consensus of what should be the vast majority of the country, rather than using it as an excuse to change direction and side with a few extremists in the form of the JHU and the NFF. There is a lot of space in the centre of the political spectrum in Sri Lanka, and Mahinda Rajapaksa should see the importance for the long term future of the SLFP of occupying it.

Sadly, by comparison with its attempts to challenge the Government on the economy, this rather underwhelming move by the UNP is absolutely brilliant.

The strike against the electricity tariff hike was pathetic. It was either too little too late or too much too soon. Even though this was an issue that had caused a major stir in the country, particularly with the urban middle class who should be the least attached to the Government, participation was extremely limited. And of course this is not so surprising since the action was really very badly timed, coming well after the President had stepped in to give the impression that he was rolling back some of the increase. It made the Opposition look ineffective – or I guess I should say even more ineffective – when it should have been gaining strength from its successful protest the previous week.

Having made a mess of that, it is now back to the business of trying to make less important problems look both vital and urgent. Thus Harsha de Silva has been deployed to ‘expose’ the possibility of an impending debt crisis.

To do this, he has been employing the recently published report of the IMF on its annual consultations with the Government. He says that the IMF has ‘revealed’ figures that the Government wanted to hide, in the form of the consolidated budget deficit. This stands at 8.6% of GDP, compared to a budget deficit of 6.4%. The claim is that the Government is trying to hoodwink the public into believing that the economy is in better shape than is the reality.

This being something people tend to be quite willing to accept, no doubt he thinks that he’s onto a winner.

The trouble is that the more often you predict disaster and it doesn’t happen, the less you look as though you know what you’re talking about.

The fact is that there are several different versions of the budget deficit, and they are used for different purposes. Harsha de Silva would know this, being an economist. And Ranil Wickremasinghe would know it, because the UNP too talked of the budget deficit and not the consolidated budget deficit in the brief period when he was Prime Minister. In any case, even if we all agreed that the consolidated budget deficit is ‘best’, the data to calculate it from the budget deficit is in the public domain.

This doesn’t mean that the Government isn’t trying to deceive people. It means that the Opposition has no idea whether the Government is trying to deceive people.

It means that the Opposition has no idea whether the country is overburdened by debt.

And that’s a pity, since a debt crisis wouldn’t be much fun.

Interestingly, the IMF seems to think that the Government is moving in the right direction, and that the prospect of such an unfortunate eventuality is diminishing. The major problem, according to the IMF, and as I have said on numerous occasions, is the very low level of tax revenue in Sri Lanka. The Government having decided that the IMF is correct to insist on cuts in the budget deficit, shortfalls in tax revenue mean that expenditure has to be curtailed, which even the IMF now accepts is detrimental to economic growth.

The UNP has been making some noise about taxation in recent weeks, which is long overdue. But if it is to make a serious contribution, it must say how it would raise more tax.

Who should pay?

Taxation obviously isn’t the only issue, since a significant amount of the debt that administrations in Sri Lanka have incurred over the years is due in foreign currency, which means that even more foreign currency has to be earned by the country to make the repayments of the capital plus interest. As demonstrated as recently as the beginning of last year, when reserves of foreign currency fell to the equivalent of 3.2 months of imports – three months being the usual point at which panic sets in – this is not so easy. Towards the end of the war, they reached 1.2 months of imports and the Government had to agree to an emergency loan from the IMF, with all its associated conditions.

The IMF being particularly obsessed with the ‘losses’ of the CEB and the CPC, this is clearly a situation that the Government would like to avoid if at all possible.

I wrote a few weeks ago about Sri Lanka’s increasing dependence on workers’ remittances, which now bring in $6.0 billion, compared to $4.0 billion from exports of textiles and garments, $1.4 billion from exports of tea and $1.0 billion in tourism receipts. In the context of a downturn in the country’s key export markets in the US and EU, it is easy to understand why the Government is happy to see remittances take on such an important role in the economy. Not only do they flow primarily from other parts of the globe, but so long as those countries remain willing to accept migrants, they also tend to be more stable than export earnings, since they are generally sent by individuals to their families.

However, as I said, this is clearly not a happy situation, since most people don’t want to have to travel thousands of miles to earn a decent living. I asked what the Government’s plan was for generating proper jobs at home.

Connected to that should be the question of what it is doing to boost exports.

Both the share of exports in GDP and Sri Lanka’s share of world exports are falling. If that were only the result of lower demand in the US and EU, it would be reasonable to do what the Government appears to be doing and borrow abroad to cover the shortfall. The debt could be repaid when exports recovered.

However, one of the infinitely more important facts highlighted by the IMF report is that these figures have been falling since 2000. In other words, it is not a temporary glitch.

A very useful recent article by Verite Research on the electricity tariff issue has shown exactly what can happen when the Government acts on what it hopes the future will bring and it is wrong. They say that the extraordinary ‘losses’ of the CEB in 2012, which surely contributed to the recent hike, were to a large extent the result of a gamble. They show how over the last decade the CEB has been relying much more heavily on hydro power, which is cheapest, assuming that low rainfall in one year will be compensated in the next, and how this strategy was employed to an even greater – by implication reckless – extent in 2010 and 2011, because the authorities thought that they had the Norochcholai coal power station as a back-up. What actually happened was that Norochcholai broke down, as it does regularly, and because reservoirs were already so close to empty, the CEB had to resort to expensive oil generation by the private sector.

This is also why the country was subject to major blackouts, which would have cost the economy a lot more than the CEB had to spend.

In a sense, this is not much different to the oil hedging fiasco that got the CPC into trouble in 2008. The Government thought that it would be a good idea to enter into contracts that would save it money if oil prices continued to go up, but failed to consider the impact of a collapse in the market.

As these examples demonstrate, the Government isn’t very good at managing risk.

In fact, as various commentators said after oil prices plummeted from nearly $150 per barrel to well under $50, that doesn’t seem to be its objective. Rather, it would appear to be speculating, which is all very well when it is right, but otherwise potentially disastrous.

No wonder people worry about a debt crisis.

The Opposition plays on their fears in the hope of generating a reaction. With every new loan the Government takes, it gives the impression that the world is about to end. No doubt that is simpler than trying to understand whether that particular deal makes sense, working out what it would do instead and explaining the whole thing to the electorate. But that is what the UNP would have to do if it were running the country.

It’s about time it started to look like it could.

This article was published in The Island on 5th June 2013. The internet version may be accessed here.

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On the not so natural rise in electricity prices

Posted in The Island by kathnoble on April 24, 2013

How the Government is making the masses pay

Handing over Presidential Taxation Commission reportOne of the many conspiracy theories that has emerged with regard to the anti-Muslim campaign of the Bodu Bala Sena and others is that it is an attempt by the Government to distract people from other concerns, primarily the state of the economy.

If so, it isn’t working. Last week’s increase in electricity tariffs hasn’t been overlooked by anybody in Sri Lanka.

However, the Government has succeeded in convincing a fair share of the electorate that it isn’t really its fault. Keheliya Rambukwella summed up its argument at the regular media briefing on Thursday. He explained that the tariff increase was unfortunate but unavoidable, since ‘no administration can subsidise utilities forever’.

This sounds reasonable, but it isn’t actually true.

The concept of ‘breaking even’ doesn’t make sense when discussing a public enterprise. The CEB is not a company. We have come to talk of its ‘losses’, but this is to accept the neo-liberal logic that the Government claims to reject. The Ministries of Health and Education also spend more than they earn, but we don’t consider them to be ‘indebted’.

In that sense, the Opposition is right in pointing out that the Government is neo-liberal, as its economic affairs spokesman Harsha de Silva did in response to the hike. Of course he should have said ‘also neo-liberal’, since the credentials of the UNP as the vanguard of neo-liberalism in Sri Lanka are unquestionable, thanks to Ranil Wickremasinghe. Unfortunately, he combined that accurate observation with a totally misguided suggestion as to what to do about it, saying that if the economy is in so much trouble, what is needed is austerity.

Even the IMF is having second thoughts about ‘cuts’ as a response to a downturn, as its advice to the UK just days ago shows, with that country on the verge of an unprecedented ‘triple dip recession’.

Austerity isn’t the same as tackling waste and corruption. There is a difference between ensuring that expenditure is productive and targeting an overall reduction in expenditure.

In the same way, there is a difference between targeting subsidies so that the right people benefit and reducing the level of subsidies.

This is not to suggest that there is no problem with the amount that the Government spends on the CEB. It comes to 0.8% of GDP, which is an awful lot in comparison with the 1.9% that it allocates for education and the 1.3% that it gives to health.

Efforts should certainly be made to reduce this amount.

In terms of costs, Tilak Siyambalapitiya has produced a very succinct analysis (‘Talk sense about electricity costs and prices’, The Island, March 6th). He says that the approved cost of Rs. 2.56 for distributing a unit of electricity, which includes the cost of investment and maintenance of the distribution network and the supply of electricity, including metering and billing, is comparable with international norms, but could be brought down by 1% per year in real terms. A similar conclusion is reached for the transmission of a unit of electricity, with an approved cost of Rs. 0.73. He makes the same assumption as Keheliya Rambukwella that expenditure should be met by income to conclude that a unit of electricity has to be generated for Rs. 10.74, taking into account 12% losses and a total income of Rs. 15.50 per unit (10.74 = 0.88 x [15.50 – 2.56 – 0.73]), which is the case only for the CEB owned hydro and coal power stations.

An equally helpful discussion of prices is needed. The Rs. 15.50 per unit charged by the CEB is an average, and the way in which the burden should be shared is not obvious.

In response to the hike, everybody from bakers to the manufacturers of bathroom tiles have said that they will have to increase the prices of their products to compensate. This has to be taken into account in deciding who should pay how much.

Unfortunately, this is not going to happen by itself.

The Government carefully avoids debate of ‘zero-sum games’. It doesn’t want to admit that it makes choices between different groups in society, since that would mean alienating somebody. It prefers us to believe that all situations are ‘win-win’ or at least ‘lose-lose’.

This is equally true of taxation, and we should remember that the 0.8% of GDP that the Government spends on the CEB is only a problem because the share of taxation is so low and falling.

We may assume that the reason the Government has still not published the report of its Presidential Commission on Taxation, submitted to Mahinda Rajapaksa way back in 2010, is that it doesn’t want to upset people who really ought to be paying more. It thinks that it can get away with collecting almost everything from taxes on goods and services, rather than taxes on incomes, which is very bad news for people with low or no incomes.

High income earners not only pay relatively little in taxes on goods and services, they also pay relatively little for electricity.

The JVP raised another important point with regard to the electricity tariff hike. Its spokesman asked why the Public Utilities Commission bothered to hold a ‘consultation’ when it paid absolutely no attention to the opinions of anybody who participated.

Its report makes amusing reading. An unfortunate employee clearly wasted a very long time summarising the suggestions of the 275 people who either sent a written submission or made a presentation at the public hearing. Every single one of them is marked ‘no’ or ‘no comment’. Even proposals to ‘reduce corruption in the CEB’ are ruled out.

Given that the public has to pay for the opportunity to express their ideas, this is more than a little disappointing.

However, it is hardly surprising.

The Public Utilities Commission was established by the administration of Ranil Wickremasinghe, as part of its effort to privatise the CEB.

By now, everybody knows that this is a policy that has failed in many countries.

Even the Government has accepted that the private sector cannot help with electricity. At the media briefing, Keheliya Rambukwella also confirmed that it would be progressively reducing its purchases from the private sector, in favour of CEB owned power stations. If only it had worked this out earlier!

Also, it doesn’t seem to have understood why, since it is cheerfully pursuing exactly the same policy of privatisation in even less appropriate sectors of the economy.

Most extraordinarily, last week it was reported that the Government is to sign agreements with companies interested in investing in medical equipment such as MRI and CT scanners to be installed in public hospitals. The Secretary to the Ministry of Health was careful to explain that these services would continue to be free at the point of use – the Government will pay the owners of the machines according to the number of patients treated. How on earth they can’t see that this will end up in the Government spending more than if it had bought the machines itself is a mystery.

It may not be long before the Government thinks that the country’s health needs can just as well be met in private hospitals, in much the same way as it is so eager to have private universities cater to its education needs.

A little more attention to the state of the economy is therefore most certainly needed.

That doesn’t mean that the Bodu Bala Sena and others can be neglected, since they present a very serious immediate danger to society. However, what could very easily be ignored are the rest of the conspiracy theories that surround the anti-Muslim campaign. Far more likely than it being the work of Norway or Israel or India or the United States or any other country is that Sri Lankans have created this problem all by themselves. In any case, nobody else is going to solve it.

This article was published in The Island on 24th April 2013. The internet version may be accessed here.

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Slaves to slogans

Posted in The Island by kathnoble on December 29, 2012

A few thoughts on the UNP’s criticism of flood relief efforts

sajithAs I concluded last week, it is the failure of the Opposition that has put Sri Lanka into its current mess. This political system requires competition between the two main parties, since it is only fear of being thrown out of office that limits the behaviour of the Government. When the Opposition is weak, the Government doesn’t take it as an opportunity to solve the long-term problems of the nation, free from the compulsions of electoral politics – it focuses on its own future and how it can further strengthen its grip on power. It becomes dictatorial.

Ranil Wickremasinghe has been defeated so many times that his name must surely be entered in the Guinness Book of Records. People don’t like his policies, and he refuses to change them.

His economic agenda is no more popular than his conflict resolution strategy. Indeed, they are very similar. He wants to hand over responsibility for the well-being of the Sri Lankan people and the resources that belong to them to unelected individuals with a record of exploitation.

My point was that the country seems to be doomed to undergo more spectacles like the impeachment of the Chief Justice, since the Opposition is apparently determined to remain ineffective. Eighteen years in any position should be enough. But the UNP has agreed to give Ranil another six as its leader, guaranteeing his grip on the party until well after the next presidential and parliamentary elections. (Anybody who thinks that Ranil would run the country more democratically than Mahinda Rajapaksa is an idiot – wearing a suit and tie doesn’t make him a ‘gentleman politician’!)

One really begins to wonder whether there is anybody in the UNP who is up to the job. Several of its politicians have been agitating for reforms in the party, but their campaign has now been going on for more than half a decade without any results.

And this week offered a look into the thinking of Sajith Premadasa.

Addressing the media on the floods that have afflicted Sri Lanka in recent days, he attacked the Government for its response. The Security Forces had done a good job of rescuing people, he said, but the relief being provided was condemnable. In particular, he questioned the offer of Rs. 5,000 in exchange for ten days of work, which he said amounted to ‘enslaving’ the victims.

Now, I am sure that the affected people could do with rather more than Rs. 5,000. According to the Disaster Management Centre, by Sunday, 35 people had been killed and 22 injured. A total of 44,901 people had been displaced, while 3,136 houses had been destroyed and 7,693 partially damaged. These problems obviously cannot be solved with such a small sum of money, and they are only part of the burden the victims will have to bear – the Disaster Management Centre has not collected data on the impact of the floods on livelihoods. Since the Government regularly wastes a lot more than Rs. 5,000 on totally useless activities, Sajith was right to be critical.

The people of his own district would surely prefer a bit more assistance to a Rs. 4 billion cricket stadium, for instance!

If that amount had been divided among the 66,299 families reported to have been affected by the floods, they would have each received a little over Rs. 60,000.

This is an important argument, but it is not the point that Sajith was making. He was concerned not so much with the amount as with the way in which it is to be provided – in exchange for labour. Apparently, even if the Government gives Rs. 60,000, it must be a gift.

Of course gifts are very nice. But they limit the amount that people can be given.

If the victims each need Rs. 1 million, it would require a genuinely impossible allocation, taking up the budgets of several ministries.

The idea of offering employment in exchange for assistance has already been used to good effect in this year’s drought, with farmers who couldn’t cultivate their fields due to lack of water being paid to rehabilitate local tanks instead.

The Government claims to have spent almost Rs. 5 billion for this purpose. The advantage is that instead of being cast as victims, unable to do anything to help themselves, the affected people were involved in productive work that should contribute to avoiding a repetition of the drought, or at least to reducing its severity.

Farmers will benefit from their own work, and so will the country.

We should remember that natural disasters are becoming ever more frequent. Climate change is a reality, and Sri Lanka is now facing drought and floods on a regular basis.

It is important to be prepared, and I believe that the Disaster Management Centre has done some work in that direction. But the Government should also have a clear and consistent policy on the assistance that it is going to offer to people affected by natural disasters – their fate shouldn’t be decided according to the whims of politicians.

Of course the Government doesn’t like to guarantee anything.

In lieu of such a promise, it has started to push insurance schemes.

Mahinda Rajapaksa announced in the budget speech that farmers who receive chemical fertiliser from the Government at a subsidised rate will now have to pay Rs. 150 per 50 kilo bag towards crop insurance. No doubt the motivation behind this move is not what is best for farmers but how to reduce the cost of the fertiliser subsidy, on which the Government spends more than Rs. 30 billion. Instead of providing bags at Rs. 350, they will be given for Rs. 500. This is not very honest, but perhaps one should not complain too much since the fertiliser subsidy is clearly not the best way to support farmers. (In addition to the now widely accepted impact on the environment, and hence on our health and the economy as a whole, the fertiliser subsidy is totally inefficient. To cultivate one acre, farmers use three bags of chemical fertiliser. These are sold to them for Rs. 350, when the market rate is Rs. 6,500. For the amount that the Government thus has to hand over to the manufacturers to support a single individual – nearly Rs. 20,000 – it could have bought them an indigenous cow! And such an animal would have fertilised as many as 30 acres for several years, without any of the disadvantages of chemical fertiliser. Why is it not done? Because the fertiliser companies are enthusiastic sponsors of a whole range of activities of both officials and academics.)

The problem with ulterior motives is that things don’t generally work out as we expect. One would have to see how easy it is to make a claim, since it is well known that the other major intervention in agricultural markets – purchasing at a minimum price – is largely ineffective, with the Government purposely making it difficult for farmers to take advantage.

Better than insurance schemes, or at least as well as them, would be a guarantee of work in exchange for a minimum income.

My advocacy of this idea is inspired by the experience of India’s National Rural Employment Guarantee Act, passed in 2005, which guarantees 15 days of employment at the minimum wage to Indians living in rural areas willing to do manual labour. Despite being plagued by corruption, as most things are in India, it has made a vital contribution to the development of the country.

The situation in rural areas in Sri Lanka is nowhere near as difficult as in India, except perhaps in the former conflict areas, but the country could still think of such a scheme islandwide.

Alternatively, this could also work as a Disaster Recovery Scheme.

It would be the opposite of enslavement, since it would confer on the Sri Lankan people a new right that they do not as yet enjoy, without imposing on them any new duties.

And that is bound to be popular.

Sajith Premadasa had better give it some more thought.

Of course Ranil Wickremasinghe cannot be expected to approve. His neoliberal handbook says that it is only a matter of time before we are all as rich as him, so long as the Government doesn’t try to help the process along.

He must love being in the Opposition!

This article was published in The Island on 28th December 2012. The internet version may be accessed here.

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The limits of the budget debate

Posted in The Island by kathnoble on December 17, 2012

What sloganeering misses about the budget and what the budget tells us about Mahinda Rajapaksa’s popularity

chamal rajapaksaParliament has become a place where its members go for a free lunch when they have no better offer. And it would seem that MPs receive plenty of attractive invitations, since most of them are rarely to be seen in the chamber, even for a nap on the comfy recliners the Sri Lankan people have so thoughtfully funded, assuming that their representatives would be spending long hours debating the future of the nation.

The Speaker admitted as much last week. There is no point in holding the budget debate, he said, when the responsible ministers are not present.

In principle, he was quite right. Why bother to ask questions about the allocation for higher education when SB Dissanayake is not there to answer or at least to hear what is being said? Suggestions cannot be taken into account in formulating policy if the person taking the decisions is ignorant that they have even been made. And on the day Chamal Rajapaksa made his statement, only four out of the scheduled twenty-two ministries were represented!

However, practically speaking, we should probably breathe a sigh of relief when ministers stay away.

Consider the Parliamentary Select Committee that has been impeaching the Chief Justice. Ministers enthusiastically attended every one of its sittings. But what did they contribute? When they were not calling Shirani Bandaranayake names, they were justifying a very obviously unjustifiable process on the pathetically simplistic grounds that what Parliament says goes. There was no debate about the decision to require the Chief Justice to reply to more than 1,000 pages of ‘evidence’ literally overnight. It was simply declared by the ministers present. Likewise, once she had walked out of the proceedings in protest at her treatment, there was no debate about calling the ‘witnesses’ they had previously said would not be available for cross-examination. They arrived within minutes, once the coast was clear. And by the following day, the Parliamentary Select Committee had managed to finish its ‘deliberations’ and prepare a lengthy report (including references to cases from as long ago as 1852!) – more work than any of the ministers had done in the previous year.

But what Parliament says goes. And in this case it said that it didn’t care to give the Chief Justice a fair trial according to the principles that Sri Lanka applies to everybody else (including ministers!).

In any case, the budget debate is generally used by MPs not so much for commenting on the Government’s plan for the following year as for presenting what they hope will be a headline-catching soundbite, on whatever subject happens to take their fancy.

And this time was little different.

The Opposition quickly latched onto a catchy slogan. The budget was summed up with the phrase ‘lamborghinis for politicians, badagini for the people’, which no doubt resonates with the middle class in Colombo. However, it is not really accurate. If things were that simple, Mahinda Rajapaksa would be a lot less popular than he is with the masses.

Of course the war victory is important in explaining the support he enjoys among the majority Sinhalese, but it can no longer be the only factor.

We need to understand the secret of his success. For if the President were even somewhat more unpopular, his capacity to use the powers that he has won would be considerably restricted. He would not be able to control Parliament to the extent that he does today.

And then the Chief Justice might just stand a chance.

As the Government’s plan for the following year, no matter how many changes are bound to be made later, when nobody is paying attention, the budget gives us an idea of Mahinda Rajapaksa’s appeal.

The lamborghini-badagini slogan is not really accurate, but it is not completely inaccurate either. As the UNP’s chief economist MP Harsha de Silva pointed out, the budget maintains taxes on food such as milk powder and tins of salmon while exempting racing cars. He called it a budget for the 0.1%, no doubt consciously evoking parallels with the popular campaign of the Occupy Movement in the United States and elsewhere that talks about 1% of the population controlling an ever greater share of the country’s wealth. His point was that only the richest of the rich can afford racing cars, which are now going to be cheaper thanks to the Government’s proposals, while the price of basic food items is of most concern to the poor.

The Treasury issued a totally ridiculous statement in response to this criticism. It seems that it is not lamborghinis but go-karts that are being exempted from tax. Well, that’s a relief, isn’t it? People are constantly complaining about the cost of go-karts!

Of course tax exemptions for racing cars of whatever kind are completely misguided.

The proliferation of such random concessions is one of the many things that are wrong with the Government’s tax policy. The more complicated the system, the easier it is to avoid paying one’s dues. At the same time, exemptions mean less revenue for the Government.

Far too little attention is paid to the appallingly low level of tax revenue being collected in Sri Lanka. Taxes amounted to only 12% of GDP in 2011, far below the international benchmarks of 25% for a Middle Income Country and 18% for a Low Income Country, as noted by Anushka Wijesinha in a recent article on the Institute for Policy Studies ‘Talking Economics’ blog. And rather than improving with average incomes, the ratio is getting worse. This is a massive anomaly.

In the absence of sufficient tax revenue, the Government resorts to borrowing, which tends to push the country ever further into debt.

Another huge problem is the extraordinary dependence on indirect taxes, meaning taxes that fall not directly on incomes but indirectly through consumption.

There are two issues here. First, the two forms of taxation are not substitutes. Indirect taxes create inflation, since they add to costs – if a company has to pay taxes on its inputs, it will simply increase the price of its output to compensate. By contrast, direct taxes have no inflationary effect. And so long as the Government spends the money it collects, taxing corporate profits actually increases the level of profits in the economy and thus also the national income. This is counterintuitive, but non-economists should try to understand that this is often the case in economics. Something that is true at the level of an individual is often not true at the level of the economy as a whole. A company might believe that taxes reduce its profits, but it does not exist in a vacuum – the effect of spending by the Government increases economic activity and generates increased profits, albeit not necessarily for that particular company. (This idea should be more easily accepted now, since it was such a fallacy of composition that Keynes pointed out at the time of the Great Depression, saying that if individuals all saved more then aggregate demand would fall, which would mean a lower national income and thus less savings in the aggregate – the ‘paradox of thrift’. The Global Financial Crisis and its aftermath have repopularised his ideas regarding the need for what is now called a ‘fiscal stimulus’ to get out of an economic downturn.)

Secondly, the poor bear more of a burden than the rich when taxes are collected indirectly rather than directly, since consumption forms a larger share of their income. They may spend half of what they earn on food, but it would be physically impossible for Bill Gates to do likewise – even throwing so much food away would be a challenge!

In Sri Lanka, direct taxes constitute only 20% of the total, with the remaining 80% being indirect taxes. This compares extremely badly with other countries.

Totally ignored by just about everybody, the Government is busy making things worse. Last year, when it finally restored income tax liability to public servants, it managed to ensure that this resulted in no overall increase in tax collection by significantly reducing tax rates and doubling the tax-free allowance. And this year it has introduced a whole range of additional concessions, such as reducing the income tax rate for IT professionals to 16%, organic tea exporters to 12% and large scale poultry farmers to 10%. Meanwhile, companies that list on the stock exchange are to be given a three year half tax holiday. And these are just the new measures. Some time ago, the Institute of Policy Studies estimated that concessions offered by the Board of Investment to foreign companies cost Sri Lanka 1% of GDP, in the process of attracting investment that amounts to no more than 1.5% of GDP – and this money would likely have come anyway, since foreign companies openly state that they are not primarily interested in the level of taxation. Soon it will cost the Government more to administer the tax system than it actually collects!

Many of these issues were undoubtedly highlighted by the Presidential Commission on Taxation, which spent about a year working solidly on the issue, submitting its report in October 2010. But Mahinda Rajapaksa has declined to publish it.

When presenting the budget, he highlighted the fact that the Government has not resorted to privatisation, a recruitment freeze in the public sector, cuts in subsidies or neglect of infrastructure development, even though it is short of revenue. But what the President was hiding is that he has nevertheless cut expenditure. Or rather he has prevented expenditure on certain items – education and health in particular – from going up in line with the national income.

Why? Because he wants to meet the fiscal deficit target set by the IMF.

I would argue that there is absolutely no need to follow the advice of the IMF, but even doing so would not have been a problem if Mahinda Rajapaksa had got a grip of tax policy.

All that said, even if we limit ourselves to discussing tax policy, Harsha de Silva’s analysis of the budget is tellingly off the mark.

He wants to abolish taxes on milk powder and tins of salmon, but these are not just a matter of revenue. They are an integral part of Mahinda Rajapaksa’s programme for the development of agriculture in Sri Lanka. Backed up by a whole range of other interventions, including through the much criticised (including by me) Divi Neguma, they provide incentives to farmers and fishers to boost production, since they increase the price of imported goods. And they are working.

Sri Lanka has become self-sufficient in rice, maize and black gram, and will soon be in green gram, onion, sugar and milk.

This is a good thing, since the prices of food on the international market are now subject to speculation by financiers, who regard it as just another commodity. They are volatile and increasing at a faster rate than ever before.

It is also one of the reasons why Mahinda Rajapaksa is popular with the Sinhala masses. For he has put a lot of money into rural areas.

Rural areas have also benefited from what I would describe as his other major economic policy – maintaining a large army and putting them to work in all manner of ways. I have written at length against this on political grounds, but economically speaking it has been a key source of growth. And the budget shows that there will be no change in approach. It justifies a significant increase in spending on the police on the basis that they will take on some of the responsibilities that the army handled during the war, while making no proposal to reduce spending on the army.

An addition this year is the plan to establish twenty technical colleges catering to the requirements of jobs in other countries.

Of course there are many other things to be said about the budget, but they will have to be left for another opportunity. For the moment, let us simply realise that things are not as clear cut as Harsha de Silva made out.

The UNP’s problem is that it has no coherent alternative to present to the people. Its policies under Ranil Wickremasinghe were tremendously unpopular, and he does not appear to have changed his mind about them. What is worse, the UNP does not appear to have changed its mind about him. He has been given another six years to accomplish what he could not do in the last eighteen. And the country’s problem is how to keep Mahinda Rajapaksa in check when the Opposition seems so determined to remain ineffective.

Until that question is answered, any debate in Parliament is bound to be a waste of time.

This article was published in The Island on 17th December 2012. The internet version may be accessed here.

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A one-man show with a one-man agenda

Posted in The Island by kathnoble on October 25, 2012

Why the search for another non-party ‘common candidate’ is doomed to failure

When launching an initiative in Sri Lanka, it is well known that one should be careful to call it the opposite of what it really is. Worried about infighting? Then be sure to include the word ‘united’ in the title. Concerned that the dubious public image of the leaders may dissuade people from joining up? Then it is inspirational concepts like ‘freedom’ that one needs to reference.

And so it is with the National Movement for Social Justice, whose inaugural rally was held in Colombo last week.

Sarath Fonseka’s latest attempt to resurrect his political career was a flop. Several hundred people came to listen to him speak. But he could not get the support of any established political parties, which is after all what is needed when it comes to winning elections. The organisers didn’t bother to invite the TNA, the JVP was united in ignoring the event, and even the UNP reformists weren’t keen on attending – Sajith Premadasa was convinced from the off that it wasn’t worth the struggle with Ranil Wickremasinghe, while Karu Jayasuriya left it to the last minute to decide to drop out. Even the remnants of the DNA, which Sarath Fonseka himself established, didn’t all show up.

He was left with the United Bhikkhu Front and a few individuals like Sarath N Silva, former Chief Justice, about whom the less said the better, plus assorted NGOs.

As such, Sarath Fonseka proved once and for all that his role as the ‘common candidate’ in the 2010 presidential election campaign was a one-off. It was an extraordinary contest at an extraordinary moment in the country’s history. Just a few months after the end of the generation-long war, the Army Commander took on his Commander-in-Chief. He will not get another chance.

I am relieved, I must say.

Few people believed Sarath Fonseka’s pledge to abolish the Executive Presidency when he made it the first time around. Indeed, even he didn’t seem totally convinced, so busy as he was making promises.

I certainly didn’t trust him to give up power. For why did he enter politics? Because he was upset at Mahinda Rajapaksa’s refusal to allow him to further increase his empire as Army Commander. His plan for the post-war expansion of the Army was rejected by the Government. Critical as I am of Mahinda Rajapaksa, I believe that this decision indicates that he is not as bad as Sarath Fonseka might have been.

While this may not be saying much, it is the choice that Sri Lanka was faced with.

Also, justified or otherwise, Sarath Fonseka was commonly regarded as a guy concerned more with ends than means. Even if this was necessary in the circumstances, which is debatable, surely we can all agree that it is not a desirable trait in a peacetime leader? In peacetime, there can be no discussion about the acceptability of exceptions to the rule of law, although, as we have seen in the last three years, they may still occur in abundance. (Mahinda Rajapaksa is working hard to develop a similar reputation for himself.) But although we do not know for sure who is responsible for many of the worst crimes committed during the war, such as the various attacks on journalists (now totally forgotten, unlike the attempted assassination of Sarath Fonseka, one of the perpetrators of which was sentenced to 35 years rigorous imprisonment this week), I don’t think that there is any chance that Sarath Fonseka is less guilty than Mahinda Rajapaksa.

Sarath Fonseka may have changed since then, having lost first an election and then his liberty. But I still believe that there are many people more suited to running the country than him.

I also believe that symbolism is important. Sri Lanka’s president should not be a military man.

Of course there is nothing wrong with people from other fields going into politics after their retirement. Even there is nothing wrong with military men going into politics. But the presidency is different. The president represents the country, to its people and with the rest of the world. Sri Lanka should be giving the impression that it is moving away from the military, not drawing closer to it.

This is a sensitive time, and such matters should be handled sensitively.

It is for the same reason that the proposal being advanced by various people in the last month or so for the Ven Sobitha Thero, Chief Incumbent of the Kotte Naga Vihara, to put himself forward as a ‘common candidate’ is also undesirable.

Whether or not one agrees with the analysis of those who took up arms against the State, there is no getting away from the fact that one of their arguments was that the State is irretrievably Sinhala Buddhist in nature. And there is no need to give them another reason to think so.

Also, if the Ven Sobitha Thero were to pledge to abolish the Executive Presidency, many people would trust him.

I dare not suggest that they would be anything but wise to do so, which is why I believe that the clergy should keep out of politics altogether.

The clergy are given special treatment in view of their office, and rightly so. Religion is important to the vast majority of people in Sri Lanka, and the leaders of the various faiths play an important role in their lives. They should maintain their honoured position. But when the clergy become politicians this is impossible. Either respect for them diminishes or the democratic functioning of society is undermined. There cannot be any hesitation about criticising elected representatives.

In any case, it is not the Executive President who can abolish the Executive Presidency. That is the task of Parliament.

The real question for those who advocate a ‘common candidate’ is whether or not they can trust the UNP.

I think that last week’s rally gave us a good indication of the future, and it is a future without the National Movement for Social Justice.

The UNP may be divided, but its various factions are clearly agreed on one point – it will be putting up its own candidate for the next presidential election. Ranil Wickremasinghe will of course try to make sure that it is him. After all, he will only have been party leader for a mere 20 years by then! But he won’t have an easy time. Sajith Premadasa is perhaps starting to think that he might make it, while Karu Jayasuriya undoubtedly hasn’t given up hope either.

Sarath Fonseka’s role as the ‘common candidate’ in the 2010 presidential election campaign was only possible because the UNP was sure that it could not win, the vote taking place so soon after the war victory.

And such circumstances are unlikely to be repeated.

Rather than ignoring this reality, people interested in anything more important than Sarath Fonseka’s political career had better shift their focus away from distractions like the National Movement for Social Justice and back to where it is needed.

The established political parties need serious attention. Each one of them is in chaos, with no clearly defined programme and leaders who should have relinquished their positions long ago. They have split or they are in the process of splitting. And with each split they get weaker, leaving Sri Lankan democracy worse off. They should be looking inward, working out how to get themselves and the country out of the mess they are in, not waiting for outsiders to act.

They all have good names. They just need to remember what they mean.

This article was published in The Island on 25th October 2012. The internet version may be accessed here.

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Next stop, Jaffna

Posted in The Island by kathnoble on September 19, 2012

A few thoughts on the provincial council elections

Mahinda Rajapaksa must really love elections. Since he came to power, at least some part of the country has gone to the polls almost every year, sometimes more than once. We had local and provincial council elections in both 2008 and 2009, parliamentary and presidential elections in 2010, more local elections in 2011 and now more provincial council elections in 2012. No prizes for guessing that in 2013 somebody somewhere in Sri Lanka will be voting.

I hope that it will be the turn of the Northern Province.

Concerns have been raised about the prospect of a TNA-led administration in the North, on the basis that the party may use the platform to push for more devolution or even a separate state, by itself or with the support of the West.

Indeed it might. The TNA hasn’t done enough to distance itself from the use of violence to achieve political ends, or to distance itself from the goal of Eelam. Both would have been helpful for its constituency and for the country, since distrust of the TNA’s intentions encourages or is used as an excuse by the Government to delay the much-discussed ‘political solution’, or to avoid it altogether. Perhaps the TNA is under pressure from the diaspora, or maybe it is yet to be convinced that the war is over.

Whatever, keeping it out of power by undemocratic means isn’t going to convince either the party or its supporters to change their ways. The voters of the Eastern Province demonstrated as much on September 8th.

There have been many fascinating attempts in the media to present the results of the provincial council elections in the East as a resounding endorsement of the Government and its policies. However, this is no more than wishful thinking.

For a start, the UPFA won by a margin of less than 1%, receiving 31.58% of the popular vote compared to 30.59% for the TNA. Given the usual massive abuse of state resources by the incumbent administration, it is ridiculous to suggest that people are anything like enthusiastic about Pillayan et al staying on at Trincomalee.

Also and most importantly, while the UPFA’s vote share fell by well over 10% of the total, the TNA’s went up by nearly 10% – it secured only 21.89% of the popular vote in the 2010 parliamentary elections. The TNA now enjoys the support of the vast majority of Tamils in the East. And it got eleven Tamils elected to the provincial council, compared to only one from the UPFA (the former chief minister, whose achievement has been questioned).

Being out of office clearly isn’t a problem for the TNA in terms of popularity.

Of course it isn’t. While the Government insists that life is now very good in the former conflict areas, a lot of people living there don’t agree. They aren’t so hopeful about Mahinda Rajapaksa’s development agenda. This we know from many sources, including the fact that according to official figures, 2,992 Sri Lankans crossed the sea to Australia in the first eight months of this year, compared to 736 in the last twelve months of the war. The vast majority of them were Tamils. And this data includes only those who reached their destination, not those who are now being caught by the Navy on an almost daily basis. Everybody is debating whether or not they should be classified as refugees, as if it would be quite normal for so many people to want to undertake such a perilous journey for economic reasons – it is not.

In the North, the TNA will be the sole beneficiary of dissatisfaction with the Government. The party has its faults, but at least it won’t put up any more signboards in Sinhala and English in areas where Tamils make up 100% of the population. (I am taking a trivial example not because there aren’t more important things to be done, but to demonstrate that it is will as much as ideas and resources that is lacking.)

The TNA must know that its prospects are only going to improve the longer it is prevented from challenging the Government, so it isn’t going to feel at all pressured to fall into line.

The other point to note from the East is that the SLMC too increased its vote share. At the 2010 parliamentary elections, the SLMC and UNP together achieved 26.57% of the popular vote, increasing to 32.80% in 2012. The ever-hopeful supporters of Ranil Wickremasinghe may like to think that the UNP is the party whose fortunes improved, but that is plain silly. It achieved 11.82% of the popular vote in the provincial council elections, compared to 20.98% for the SLMC. And for their information, 11.82% is pretty close to zero! The UNP is in a deep hole, electorally speaking, but it is hard to feel sorry for people who believe that clinging to the same leader for nigh on two decades is perfectly normal. If only their foolishness didn’t have such an impact on the rest of the country.

It is equally clear that the SLMC would not have seven provincial councillors if it had run under Mahinda Rajapaksa. The party leadership’s rumoured decision to form an administration with the UPFA, going against the wishes of its members from the Eastern Province and likely also the views of its voters for the sake of concessions in Colombo, is not very democratic.

Totally undemocratic are the moves reported by DBS Jeyaraj to persuade five of the eleven provincial councillors from the TNA to switch their allegiance to the UPFA, which if they had been successful would have given the Government its all-important majority without the need for the support of the SLMC. DBS Jeyaraj says that the TNA representatives were approached by military intelligence operatives with a range of ‘carrots’ and ‘sticks’, including the offer to one provincial councillor who is also a building contractor of a major state infrastructure project and the threat to another that his young son would be taken into custody for alleged involvement with the LTTE.

As DBS Jeyaraj points out, attempts to engineer crossovers are nothing new, although the employment of military intelligence operatives certainly adds a novel and even more reprehensible dimension to the phenomenon.

Also, we don’t normally get to hear the details of the ‘carrots’ and ‘sticks’.

For this we should be grateful to the TNA. It has shown us what politics in Sri Lanka has become, and how difficult it will be to clean up – Mahinda Rajapaksa is clearly very good at engineering.

I hope that we will find more reasons to thank the party once elections are called in the North.

Although the TNA did not stand up to Prabhakaran, for which it deserves the harshest of criticism, it is willing to stand up to the Government. And it would be in a position to do so in the Northern Province. A TNA-led administration could do what most Sri Lankans now agree is necessary and show the Government that it cannot get away with everything everywhere. The danger for the TNA and indeed for Sri Lanka as a whole is that as things stand its positions and actions can easily be dismissed as sectarian and extremist, which could end up deepening the divisions in society and further entrenching the Government.

For that reason, and of course also as a matter of principle, the West should firmly resolve to say and do absolutely nothing.

It is only a matter of time before Mahinda Rajapaksa starts to fear elections.

This article was published in the Midweek Review on 19th September 2012. The internet version can be accessed here.

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The one and only family

Posted in The Island by kathnoble on August 29, 2012

How Mahinda Rajapaksa is promoting his relatives to consolidate his power

The rise of Basil Rajapaksa has been rapid to say the least. Having spent years out of the country pursuing other interests, his return to support his brother’s presidential campaign was unexpected. Even more surprising was the popular backing he managed to acquire within a very short period in an unfamiliar district – he recorded the highest number of preferences in Gampaha in the 2010 parliamentary election, about as many as the next three candidates combined.

He is projected as a man who gets things done. The idea is that he will do for the economy what Gotabhaya did in terms of security, with Mahinda Rajapaksa being the figurehead who holds it all together.

The family brand is now so strong that people either love them or hate them.

It is perhaps understandable that Mahinda Rajapaksa is so obsessed with his family. Politicians adore power and want to hang onto it for as long as possible, and in this region in particular one means of extending their period of influence is to promote their relatives, lining them up for eventual succession.

Some months ago, Namal Rajapaksa gave a most amusing speech in Delhi at a forum on ‘political dynasties’ in which he claimed that the only real advantage of being the President’s son was that it had been slightly easier to get a nomination to contest elections. He argued that it was then up to the public to decide. This must be one of the most ridiculous statements of 2012. Yes, they have to collect votes, but even if they do so honestly on the basis of their image and not through the abuse of state resources that we all know is rampant in Sri Lanka, their image is only partly reflective of their capabilities. It is far more dependent on the opportunities they are given.

And both Namal and Basil have had a lot of help.

Why does Sri Lanka even have a Ministry of Economic Development? Because after the 2010 parliamentary election, Basil wanted a portfolio that would enable him to get involved in everything that might help to increase the family vote bank while making him responsible for nothing that could jeopardise it.

The Economic Development Ministry undertakes programmes that involve distributing freebies, money and jobs, especially focusing on young people in rural areas. Divi Neguma is an excellent example. Launched in 2011, its first phase involved the creation of one million home gardens. A lot of people were recruited to go around handing out seeds and equipment, or the money to buy them, and the whole exercise was given a lot of publicity. Never mind the impact of an increase in household production on farmers, since their marketing problems are the responsibility of the Minister of Agriculture.

Or is it the Minister of Agrarian Services and Wildlife? Livestock and Rural Community Development? Rural Affairs? Could Divi Neguma be run by the Minister of Food Security?

Does anybody actually remember who is responsible for these subjects?

Mahinda Rajapaksa believes in the centralisation of all useful power in the hands of his family, and the distribution of all useless responsibilities among as many other people as possible, so as to reduce the likelihood of any challenges to his authority from both inside and outside his governing coalition. He is constantly on the lookout for Parliamentarians he can induce to join the Government. Crossovers weaken the Opposition, but they also dilute the influence of each Cabinet Minister – instead of being one of about 20, they are now one of 60.

The resulting confusion obviously creates tremendous wastage and inefficiencies, which people ‘tut tut’ about from time to time.

But wastage and inefficiencies are only really actively opposed in Sri Lanka when they are sins committed by provincial councils. People are ever ready to find reasons to get rid of provincial councils, and their consumption of resources without producing much in the way of improvements to well-being is the issue cited most often as justification.

However, this problem too is created by the Government. Provincial councils don’t get a lot done because the Government doesn’t want them to do a lot.

The Government implements whatever projects it likes, wherever it likes, never mind whether their subjects fall within its purview or within that of the provincial councils. Cabinet Ministers may be given a chance to get involved to stop them feeling too bad about their increasingly powerless situation, but the really important stuff is bound to be given to a member of the Rajapaksa family. Why else would Basil have been put in charge of reawakening the East and bringing spring to the North – as far away from his constituency as one can get while remaining within Sri Lanka’s borders?

It is obviously nonsense to suggest that there are no capable people in the Northern and Eastern Provinces, or that the Chief Ministers couldn’t have done the job with appropriate support from Parliamentarians representing those areas.

There is not even the explanation generally put forward as regards Gotabhaya, that Mahinda Rajapaksa really needed somebody he could trust due to the sensitivity and urgency of the situation during the war.

There was no justification for giving the responsibility to Basil.

I have made the same argument about the recent expansion of the Ministry of Defence to include street cleaning and landscape gardening as surely the world’s only Ministry of Defence and Urban Development (‘The Army’s No-War Games’, The Island, June 20th). Gotabhaya is apparently now spearheading the Rajapaksa family’s popularity drive among the middle class in Colombo.

Mahinda Rajapaksa doesn’t want devolution on anything other than a highly selective basis to people who won’t be in a position to use the power they are given meaningfully.

Divi Neguma is his ideal model. The key actors in the programme are community-based organisations, which operate in just one Grama Niladhari division or indeed in only part of one Grama Niladhari division. This is supposed to be empowering. Indeed it might be if there was a mechanism to enable these community-based organisations to have a say on policy – if the process were actually democratic, in other words. However, this is clearly not what is intended. They are given every opportunity to discuss amongst themselves, in a whole range of different forums at the local and even national level, no doubt involving plenty of wastage and inefficiencies that people won’t mind in the slightest, but all important decisions are taken by somebody else – Basil and officials under the control of Basil.

Provincial councils, which could reasonably expect to be in charge of work to promote home gardens, and more importantly to decide whether promoting home gardens is really the best option to make people in their areas better off, aren’t given the chance. They are not the ones with the money.

Why discuss this now? Because the Government is in the process of further extending and formalising this way of operating by means of a bill that transforms what was once merely a programme into a permanent structure of the Government – the Department of Divi Neguma Development, to be established within the Economic Development Ministry – which will also take over the work of regionally-focused development bodies such as the Udarata Development Authority and the Southern Development Authority, plus the work of the Samurdhi Authority.

The move is being challenged in the Supreme Court this week by a range of different groups, including the JVP.

A particular concern is that money deposited in Samurdhi Banks could be used by the Ministry of Economic Development without oversight, while the bill says that officials will be required to maintain absolute secrecy about their work, which is rather unusual.

However, it is the implications for the coordination of the development process that are most disturbing. Is Sri Lanka really best served by a system in which everything is decided by one, two or at best three people in Colombo?

Even if passage of the bill is blocked as a result of this legal action, it is clear that the real work will still remain to be done – the growth of Basil’s empire will be only slightly affected.

Mahinda Rajapaksa will pay no attention, certainly. He will continue to promote his relatives, in the expectation that being the President’s father will bring plenty of benefits in his dotage, and the space for others to contribute will continue to be closed down.

People may not feel very inclined to care about the fate of politicians, such is the frustration that has built up. The fact that internal democracy is as much of a problem in the SLFP as it is in the UNP doesn’t seem very important. However, it is through political parties that change has to come. The impact of their internal problems is being amply demonstrated by Ranil Wickremasinghe, who is preventing the Opposition from mounting a serious challenge to the Government by refusing to give up the UNP leadership. What Mahinda Rajapaksa is doing to the SLFP should be equally obvious.

Reforms are needed, and soon.

Basil Rajapaksa’s admirers shouldn’t get agitated by this suggestion – if he is as competent as they believe, he can manage without so much assistance from his brother.

This article was published in the Midweek Review on 29th August 2012. The internet version can be accessed here.

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Mumbo Jumbo

Posted in The Island by kathnoble on July 25, 2012

Why the UNP needs a new leader

Everybody knows about the crisis in the UNP. Of the many elections there have been in Sri Lanka in the last two decades, it has lost all but one. This includes four presidential elections and four out of five parliamentary elections. And it will have the opportunity to lose a few more in September, as the Eastern, North Central and Sabaragamuwa Provinces go to the polls.

In the last general election, it could secure only 29% of the popular vote, worse than either of the two major parties have fared in a very long time.

The main reason for its failure was identified last year in a survey by the Centre for Policy Alternatives. It found that less than 20% of Sinhalese support the UNP. And although the party does rather better than the SLFP with minorities, it has to compete with ITAK, which is backed by more than 50% of Tamils, the CWC with about 30% of Up Country Tamils and the SLMC and NUA, which together have the backing of some 35% of Muslims. Meanwhile, the SLFP is the preferred party of nearly 75% of Sinhalese – Sinhalese being nearly 75% of the population, this alone gives it a good shot at 55% of the popular vote.

To have any hope of ending its losing streak, the UNP needs to rebuild its base among Sinhalese.

Some analysts argue that the SLFP’s popularity is due to the war victory, so we shouldn’t be surprised by the number or scale of its electoral successes, which have given Mahinda Rajapaksa amongst other things a two thirds majority in Parliament – a feat that was supposedly impossible with proportional representation. That a more balanced distribution of power would be good for the country is widely accepted. They suggest that things will get back to ‘normal’ in a while, even if no action is taken. In other words, there is no cause for concern. However, such confidence in the automatic revival of the Opposition is misplaced. Voters are more discerning than they think. Having ended a war is no guarantee of support, as Winston Churchill found out within months of Hitler’s death – the British public acknowledged his brilliant wartime leadership and were grateful, but many of them preferred to have somebody else in charge of the recovery. Sri Lankans would have done the same if the UNP had presented them with an attractive alternative.

The fact that in the most recent local election – more than two and a half years after the end of the war – the UNP lost strongholds like Kandy that it had held for over five decades demonstrates that there is every reason to worry.

The problem, which I find it hard to believe anybody can fail to see, is Ranil Wickremasinghe.

Ranil really is Mahinda Rajapaksa’s best friend. He is irreversibly associated with two policies that much of the Sri Lankan public – certainly the vast majority of Sinhalese – regard as anathema. Also, Ranil doesn’t seem to have changed his mind about them. These are his enthusiasm for appeasement and his commitment to neo-liberal economics. And Ranil isn’t just keen on these policies. He is a radical adherent. His Regaining Sri Lanka programme envisaged a sharp reduction in the role of the state in pretty much every sector, no matter how cherished. And he wasn’t just willing to do whatever it took to do a deal with the LTTE, he went so far as to ridicule the Government’s military campaign almost until it reached the banks of Nanthikadal.

He has not admitted that he was wrong. Indeed, he often sounds as though he would do it all again if he had the chance.

In addition to being a liability with voters, Ranil is not even able to hang onto the few members his party does manage to get elected. Dozens of his MPs have crossed over to the Government, especially in the last seven years. Of course this is the result of the smart manoeuvring of Mahinda Rajapaksa, but the Opposition too has to be smart. There’s nothing wrong with the Government making use of MPs’ interest in ministerial positions to boost its numbers – this is politics. (Of course it would be good to set a constitutional limit to the number of ministers an administration can appoint.) But Ranil should be able to take advantage too. He should be capitalising on the growing dissatisfaction within the SLFP at the dominance of Mahinda Rajapaksa and his family and their plans for his succession.

I can’t think of many other democratic countries in which the same person has been in charge of a major party for as long as Ranil Wickremasinghe. In the UK, Tony Blair took over as party leader just a couple of months before Ranil became leader of the UNP. Even though he won three successive terms for the British Labour Party, in 1997, 2001 and 2005, he was still compelled to hand over power to a successor after ten years as Prime Minister. Meanwhile, the British Conservative Party changed its leader four times until it found David Cameron, who finally defeated Labour in 2010. Imagine their fate if they had stuck with John Major! It is standard practice to bring in new faces – and hopefully also new ideas and new energy – from time to time, even when things are going well. Ranil has been party leader for 18 years, almost all of which have been spent out of office, yet still nobody has been able to replace him.

In the circumstances, it is quite ridiculous for the UNP to accuse Mahinda Rajapaksa of clinging onto power, when he has only been in charge for seven years. The worst dictatorship in Sri Lanka is to be found in the UNP.

This is exactly the argument made by those who have crossed over.

The struggle to eject Ranil has been going on for most of Mahinda Rajapaksa’s time in office. And it has occasionally looked pretty serious – recall the awful death of Rienzie Algama, who set himself on fire outside Sirikotha in July 2010.

Ranil’s eventual agreement to initiate an annual secret ballot to select the party’s key office-bearers seemed to offer some hope of change. However, the constituency was only the Working Committee, and Ranil easily won the first round in December 2011 – he beat Karu Jayasuriya by 72 votes to 24. (Polling all party members would obviously give a much better idea of the mood in the country than asking a group of people who are either directly appointed by Ranil or indirectly depend on him.) That there were many in the party who were desperately unhappy with the result was made clear by the violence that engulfed Sirikotha soon after it was declared.

Now this violence is being used as a pretext to undo even this very small reform, with the Working Committee announcing last week that the party leader will henceforth be chosen for terms of not one but six years. They say this is essential for party unity.

Frankly, why does the party need to be united in defeat?

In any case, party unity is overrated. Plenty of leaders, from Margaret Thatcher to Mahinda Rajapaksa, and even leaders of the UNP in its more dynamic era, have won elections despite vicious infighting – it can even bring out the best in them.

Six year terms will enable Ranil to stay on until 2018. That is until after the next general election.

This must be music to the ears of Mahinda Rajapaksa. His strategy is clear – he intends to make the UNP face one election after another in the next few years, to keep its members obsessed with party unity. They will think twice about agitating against their leader if they are constantly in campaign mode. And they won’t have the spirit to resist Ranil when they are continually reminded of what bad shape the party is in, courtesy their regular election defeats. Because Mahinda Rajapaksa would love nothing better than to compete with Ranil for the presidency again – his unprecedented third term. He wants to ensure that the UNP never recovers from its crisis.

The UNP can’t play somebody else’s game. It must forget about the Eastern, North Central and Sabaragamuwa Provinces, which are not very important in comparison with what is at stake in Colombo, and instead refocus its efforts on choosing the most suitable leader and working out a new and more appealing programme for the next general election.

This article was published in the Midweek Review on 25th July 2012. The internet version can be accessed here.

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