Over a century ago, when the initial rumblings to obtain adult franchise in then British-ruled Ceylon surfaced, the Governor at the time, McCallum, made a pertinent observation, noting the immaturity of the electorate to appoint suitable people to represent them in matters of governance.
Governor McCallum believed that the adult Ceylonese – above the age of 18 – were not mature enough to understand the concept of democratic governance and therefore were incapable of voting in proper leaders who could adequately look after the interests of the people. As a result, he observed, a few families with connections in the right places would lord it over the people into the foreseeable future. While McCallum was spot on in his analysis, never in his wildest dreams would he have thought that 115 years later, the same immaturity would yet persist and those elected would plunge the country into economic chaos.
Today, as elections draw near and bankrupt Sri Lanka stands at the crossroads awaiting directions from the people, the billion-dollar question that is probably topmost in the minds of all politicians and the more enlightened sections of society is whether the harsh economic realities of the recent past have finally succeeded in bringing about the requisite maturity for the majority to vote more wisely next time around.
While plans, promises, and manifestos of all sorts will now be placed before the people, what those who do so, and more importantly those at the other end of the table, the electorate, must understand is that talking is one thing and walking the talk is altogether another thing – as epitomised by the Gotabaya Rajapaksa saga.
Those aspiring to take over political leadership need to consider the fact that whatever the plans they have to steer this ship out of troubled waters are wholly dependent on implementation, which will necessarily involve the same lethargic and bloated bureaucracy that has become more of a liability than an asset to this country, notwithstanding some outstanding officers who are, unfortunately, greatly outnumbered.
A liability in the sense that the bureaucracy taken as a whole – the result of years of politicisation – mirrors the abject lack of talent, direction, and initiative of its political masters, not to mention rampant corruption. Therefore, it is incumbent upon the next political leadership – however unpleasant a task it may be – to first begin by purging the bureaucracy of political sycophants and hangers-on and replacing them with professionals in the respective fields.
It is unfortunate that no political party currently vying for office has thought it fit to focus on uplifting the standards of the Sri Lanka Administrative Service. Its forerunner, the Ceylon Civil Service, was not only the envy of Asia for the exemplary manner in which the public sector was managed, but also for making then Ceylon a model for public sector governance.
For a nation that once did it right to come to this sorry state today, where even public transport is disrupted, with 25 train services being abruptly cancelled last week due to workers not turning up, must surely tell the story of the deteriorating quality of political leadership.
The fact that it takes up to three years for an investor to set up a business here – from the time they first approach the Board of Investment to obtaining the final approval from an ever-increasing number of State agencies – proves beyond doubt that there is much more that is rotten than mere political leadership. The same story is duplicated in almost every other area of strategic interest to the country’s economy, with red tape and corruption at every level marring a rebound even if the noblest political leadership were to take office.
In contrast, India’s success story is fundamentally rooted in its policy of transforming red tape that hinders investment into a red carpet for investors. The dramatic turnaround is the direct result of the Modi administration’s relentless pursuit of streamlining the ‘investment experience’ to one from despair to exhilaration.
The transformation over the course of the last seven or eight years has been nothing short of dramatic and the numbers are proof of it. In the entire 76 years since India’s independence, total Foreign Direct Investment (FDI) is estimated to be just over $ 1 trillion. What is stunning is that $ 600 billion or 60% of it has come in during the current Modi administration, averaging $ 80-90 billion per year. To put that in perspective, Sri Lanka’s single biggest investment to date has been the Colombo Port City with an investment of $ 1.5 billion. Contrasting that with India’s annual FDI inflow is equivalent to 60 new port cities every year.
Even more astonishing is that if we rewind to the ’90s, it was the other way around, with tiny Sri Lanka, despite a debilitating war, attracting more FDI than India. However, while India has relentlessly pursued organic economic growth, leveraging its greatest asset – its people – and leader after leader has added momentum to that growth by sticking to one consistent investment policy, Sri Lanka has done the opposite, with every government undoing the work of the last while adding more red tape.
However, the silver lining to Sri Lanka’s economic misery is that what its politicians could not do for all these years, allowing corruption and bureaucratic red tape to thrive, is now finally being brought under the microscope through the twin tools of the IMF’s ‘to-do’ list, which had cited 16 points on tackling corruption, enhancing the ease of doing business, and cutting down red tape to debt restructuring incentives proposed by private creditors where haircuts on capital repayments have been linked to better governance standards.
Meanwhile, shifting to the economic front, it appears that the much-vaunted rebound will be coming up against a formidable roadblock over the deadlock in debt restructuring efforts, with private creditors or International Sovereign Bond (ISB) holders adamant on new baseline criteria for debt restructuring involving around $ 12.5 billion of the external debt stock. The criteria essentially revolves around linking repayments and applicable interest rates to the country’s Gross Domestic Product (GDP) performance.
There are also valid questions regarding the transparency of the so-called ‘restricted discussions’ between the Government and Steering Committee of ISB holders representing around 50% of the outstanding ISBs. This is essentially due to the fact that from the little tidbits that have emerged from the ‘private’ discussions thus far, there is a probability of the repayment period being stretched up to the year 2040.
While there is no escaping the question of ethicality of a regime with a questionable mandate and a lifespan of a few months conducting negotiations with external creditors with the intention of agreeing to terms that will impact a minimum of three future governments – assuming they run the full course of five years each – the danger is that if the next elected government finds the terms agreed upon unserviceable, it will lead to a second default, pushing the country further into the abyss and making attracting new investment almost impossible.
It is for this reason that the Government should reassess its options by either involving the Opposition parties in the ongoing negotiations or leave the negotiations to the next elected government. This would mean putting the IMF’s second review and disbursement of the third tranche in jeopardy. Another way out is to call for a snap General Election ahead of the scheduled Presidential Election.
Whichever way, it is not likely to be easy and those who appear to have assumed that the worst is over will have to prepare for tough times ahead.