Economic freedom for true independence

By Dhananath Fernando

Originally appeared on the Morning

For the last 76 years, we Sri Lankans have looked at different ways of making Sri Lanka a wealthier and developed country. A popular refrain during every Independence Day celebration week has been that “when we got independence, we were only second to Japan”. Another quote bragged about how good we were, as “Singapore was behind us and they took Sri Lanka as their model for development”. 

Unfortunately, much of Sri Lanka’s independence has only been ceremonial, not real. We have still failed to capture the science of equitable wealth creation, which only comes with economic freedom. Economic freedom leads to true and meaningful independence. All countries in the region, including Singapore and Japan, overtook us by establishing the elements of economic freedom at various degrees rather than simply taking Sri Lanka as an example.  

Science of wealth creation 

Wealth creation is science, not magic. It has always been a function of maximising the use of limited resources and increasing productivity. Both can be done when individuals have better incentives to create wealth. For individuals to create wealth, their rights over property have to be secure. The government should ensure that the property of people belongs to them. 

The government should allow individuals to do business and create wealth instead of trying to intervene in markets and pricing. Further, a government poking its fingers in and preferential treatments in a sector serve to discourage individuals from being in the same business. 

Wealth can also be created when raw materials are competitive in price and good in quality. Having a variety of choices in a competitive market system is paramount. The simplest way of creating a competitive environment is by opening up for international trade. 

Regulatory barriers have to be minimal. This does not mean the government plays no part in regulation. The government can adopt a regulatory function without intervening in the market to ensure that the competition and competitive nature of the industries are protected. 

Lastly, all transactions in the modern world take place in a fiat currency. Simply put, we store all our production as individuals in a form of a paper called money. The monopoly of money belongs to the government and when it does not protect the value of the money, it amounts to theft of the hard work and production of an individual. 

The science of wealth creation is simply establishing these five principles. This has been statistically proven by the Economic Freedom of the World Index by the Fraser Institute. 

Over the decades, it has monitored these five indicators and data have shown the relationship and causation between wealth creation. 

The per capita GDP of countries with the highest level of economic freedom is on average about $ 48,000 while for countries with the lowest level of economic freedom the per capita GDP averages at $ 6,300. 

Even if we consider the standard of living amongst the poorest 10% of the population in the countries with higher economic freedom, the income distribution among the poorest 10% is eight times higher than in countries with very low economic freedom. 

Sri Lanka falls under the third quartile, meaning that our performance in economic freedom is not that great. We have ranked 116 out of 165 countries. 

Science of economic freedom

In modern times, many people consider happiness as a function of wealth, freedom, and independence. When we look at the data on economic freedom, it is clear that countries with higher ratings indicate a higher score on the UN World Happiness Index as well. 

Even if we look at poverty numbers, the countries with higher economic freedom obviously have low poverty rates compared to countries with low economic freedom. 

Over the last 76 years, the science of economic freedom is something we have failed to utilise. One reason this column has always advocated for reforms of State-Owned Enterprises (SOEs) is because a limited government improves the economic freedom of people, which leads to creating wealth. People having ownership and rights over land is another reform we require to improve the property rights indicated in economic freedom, which will also lead the process of wealth creation.   

On this independence day, our prime focus has to be on creating wealth. We can create wealth by establishing economic freedom. When we have wealth and economic freedom, we become independent. That is when we leave the trap of poverty, our standards of living improve, and we provide value for the globe. 

Happy Independence Day, Sri Lanka.

A flawed independence

Originally appeared on The Morning.

By Dhananath Fernando

Over the years, our definition of ‘freedom’ has become full of flaws. We took freedom for granted and we lost both our freedom and independence. Even though we gained independence in 1948 from Great Britain, we have no understanding of what real freedom is. 

We fail to understand that freedom comes at the cost of hard work, courage, respect, the ability to cooperate, and being competitive with the world. There is an ecosystem we should have built if we really want to be free. We did not build that ecosystem, so over the 75 years of independence, we question ourselves and argue back, asking, “Are we really free?”

Prof. Amal Kumarage in a recent tweet has asked this question very eloquently on independence and freedom.

“I’m confused as to what’s happening on 4 February in #SriLanka. Is it: 

1. A fake celebration of a real independence, 

2. A real celebration of a fake independence, or 

3. A fake celebration of a fake independence?”

Freedom is an alluring subject to many as people in general summarise freedom to being liberated to have an easy life, getting things free of charge. Over time, as the dire need for freedom kept rising, the wrong seeds of freedom grew by encapsulating and manipulating the idea of freedom to a level where people truly believed that we are entitled to many benefits even though we lack the resources. 

The drive down the tunnel of distorted versions of freedom led to many ethnic and religious turns over the years, believing that freedom is restricting someone else’s freedom for the betterment of someone else.

This is similar to a situation where a child learns the wrong values or habits without realising they are wrong and instead thinking they are right. After 75 years of practising the wrong values and ethics, we now have an operating system which we try to sustain with unsustainable resources. That is a brief summary of insights on our 75 years of independence.    

During that journey of 75 years, we have failed to understand the damage done by the existing system to our competitiveness and productivity. We simply became irrelevant in the world over a period of time. By deciding not to compete with the world, we decided to sacrifice our freedom. 

Our decision to not compete with the world mainly came through our economic policy. We simply misread the world and future of the world. In a world of sharing resources and collaborating for each other’s benefit and independence, we thought that real freedom is the ability to produce everything on our own. 

We supported the narrative of ‘self sufficiency’ when the world actually moved away from self sufficiency to interdependence. As per the Fraser Institute’s Economic Freedom of the World Index, Sri Lanka has been ranked at the 138th position out of 165 countries based on our ‘Freedom to Trade Internationally’. Though we claim we are an open economy, the facts say otherwise. In terms of our openness, we are at one of our lowest points.

My father used to say: “If you think you are the smartest person on the street, it is time to change the street.” This is because an uncompetitive environment does not support growth. Without growth, no wealth will be created nor will there be freedom or independence.

When we isolate ourselves from global trade, we avoid competition. Avoiding competition means we are out of touch with the real needs and wants of people. Not only that, we try to become dependent on the world without contributing anything to the world or to its maximum utility of resources. Being open to competition is what keeps us all competitive and relevant.

Real freedom is the freedom to compete and be competitive in a global landscape. Even when we are one of the closed economies in the world, we are open for global competition. Our IT, apparel, tea, and rubber sectors and even unskilled labour that contribute with remittances are competing at a global level. 

When we are really competitive it provides us the tools and freedom to change the direction of our fellow human beings and to support humanity. That comes only through the freedom to trade. That is the real freedom we should all aspire to. We are far from this and we are moving further away, but at least it is important to keep the idea alive so that one day someone can move towards it. 

A fake celebration of a real independence, 

A real celebration of a fake independence, or

A fake celebration of a fake independence? 

According to Prof. Kumarage, it is difficult to judge what we are actually trying to do this year, but we should aspire to have real freedom and this real freedom comes at the cost of hard work, free exchange, and free trade by being relevant and competitive in relation to the world.

Source : Central Bank of Sri Lanka

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

On the 75th Independence, time to re-plug to the world economy

Originally appeared on the Daily FT

By Anuka Rathnayake & Thilini Banadara

As Sri Lanka is inaugurating its political independence of 75 years on 4 February, the burning issue the public is struggling to grapple with, in the recent past, is the worst economic slump. Many factors have contributed to the current economic crisis but protectionism and trade barriers are main elements that have further depleted the economy, shaping it as uncompetitive and inward-looking.

Even though Sri Lanka was known as a fairly open economy, the dynamics of trade has changed since 2004. The planned reduction of tariffs into a single band had been abandoned by the end of 1990s.  Since about 2005, Sri Lankan trade policy has been characterised by a protectionist approach. 

The Government was involved in economic decision making and policies related to import substitution were much more prominent. As highlighted in the Trade Policy Review of Sri Lanka by the World Trade Organisation in 2010, the average tariff protection increased . In fact, it can be noted as frequent and ad hoc changes in tariff structure. The trend in protectionist policies resulted in a fall of exports as depicted by the ratio of exports to GDP . 

In 2009, by the time peace was restored, Sri Lanka had nine para tariffs applicable for imports  in addition to the standard customs duties, of which , five were ‘para-tariffs’: taxes which are only applied to imports and there is no domestic equivalent. Adding  to whatever protection is provided to domestic production by customs duties, with such para tariffs being in place, the protectionism became even more complicated. 

A systematic comparison of Sri Lanka’s tariff structure at November 2002, January 2004, 2009 and January 2011 suggests that the total protection rate notably increased between 2004 and 2009 . 

The ensuing years were followed by many ad hoc and duty exceptions and case-by-case adjustment of duties on many imports which directly compete with domestic production. By 2015, the average effective rate of protection for manufacturing production had increased by 16%.

This trend is well depicted through the Trade Openness indicator as given in Figure 1. The degree of openness is measured by the actual size of registered imports and exports of an economy. In other words, it suggests how free or restricted a country is in its relations with the rest of the world. 

Since 2004 onwards there has been a decline in the trade openness of Sri Lanka and this trend continued up until 2010. By 2015 with an increased rate of protection, the trade openness deteriorated to 36.6%. 

Since 2019, Sri Lanka has been pushing many import controls creating disruptions in the market. This tendency resulted in further decline of trade openness 32.2% in 2020. It is similar to the trade openness during 1970 - 1976 when the liberalisation policies were reversed and the economy had high regulations. The trade policy was more aligned towards import substitution.

Trade restrictions 

Sri Lankan businesses face a variety of trade restrictions exacerbated by the economic crisis. Accordingly, such conditions that impact the price, quality, quantity, or timeliness of product delivery but are outside the direct control of the exporter or importer. 

Both the importing country’s border and the border of the exporting country have been parallelly imposed with restrictions. Even though a number of Free Trade Agreements have reduced external trade barriers and expanded access to markets, Sri Lanka has kept its borders closed by enacting internal trade restrictions.

Internal trade restrictions can be identified in terms of broader categories such as; 

1. Monetary and regulatory barriers, 

2. Procedural barriers, 

3. Service barriers,

4. Technical barriers and 

5. Market barriers 

Currently a number of monetary and regulatory barriers exert pressure on Sri Lankan businesses, while lowering the country’s competitiveness on international trade. Such barriers include complex tariff structures, quotas, import restrictions, excessive duties or levies and export and import licenses. 

Both exporters and importers encounter ineffective, unpredictable, and less transparent procedures throughout the entire trade process. This is mostly the result of poor coordination between agencies and excessive bureaucracy (red tape) among Government employees.

Additionally, the distribution and financial services channels are two areas where existing enterprises face significant service obstacles, which slows down the final stage of clearance.  Shedding further light on the obstacles placed, the technological obstacles  have a negative impact on the export competitiveness of local enterprises because of their limited technical and financial resources. Besides the market constraints like price controls are a significant obstacle because they are unrealistic in a setting of shifting global markets and fluctuating currencies.

Impact of trade restrictions

Over the years, the country has experienced a number of adverse effects due to trade restrictions. Net economic losses in the wider economy have increased as this restricts competition. Shrinking volumes of exports and imports have negatively affected domestic production. Consumers are left with limited choice of products while they experience increased prices. 

Trade restrictions impact the macroeconomy with a fall in employment opportunities mainly due to the deterrents on domestic and foreign investment. Limitations on land, labour and capital have disincentivised investors from competitive export industries to protected industries and inefficient import substitution. Reduction in economic activity has increased the economic woes among people.  

Restrictions on trade have put a significant number of businesses in a precarious position.  Starting with street vendors, small and medium scale enterprises who depended on imported raw materials to the larger apparel and construction industries; all the businesses are finding it a challenge to continue their business. 

Way towards trade freedom

The way to greater freedom of trade is to reformulate the existing monetary policies and laws in order to enhance trade freedom and provide more opportunities for local enterprises to engage in trade. Also in the current context, easing import restrictions and reducing taxes or levies on imports and exports would be crucial.  Additionally, it is important to remove unnecessary Government red tape or bureaucracy wherever possible to make customs processes more simple, effective, clear, predictable and timely. This will help to cut down on processing times at the border and make the movement of goods cheaper, faster and more efficient.

Paving way to greater freedom to Trade - the ability to exchange goods and services openly, creates greater opportunities for Sri Lankans to achieve greater economic prosperity. It opens many avenues towards competition, innovation and economies of scale. The beneficiaries of open trade are the Sri Lankan citizens and businesses who will benefit from lower prices and greater choice.  

Freedom to trade will ensure the economic freedom by which the fundamental rights of an individual to make their economic decisions will enhance. The true meaning of independence will only be assured through greater economic freedom. 

Source : Central Bank of Sri Lanka 

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

No true independence without economic freedom?

Originally appeared on The Morning

By Dhananath Fernando

This is a story I’ve heard, the validity of which I am not too sure about. The story goes that post India’s independence in 1947 the then Indian Prime Minister Jawaharlal Nehru was visiting villages to celebrate the newly attained freedom. However, the Prime Minister was slapped by an old man who emerged from the crowd, stating that he had lost his three sons and wife to the war. “Is this the freedom you brought to India?’” he asked the Prime Minister. 

The old gentleman’s question contained a great deal of emotions and obviously it went beyond a matter of political freedom. Income and wealth wise it was not sustainable and India as a country was very poor then, even more than it is today, and quality of life was deteriorating. 

After thinking for a little while Prime Minister Nehru provided a thought-provoking answer: “Now a senior citizen of India like you can slap the Prime Minister. That’s the freedom we brought to Bharat.” 

While Nehru’s answer was more relevant in the context of political freedom, the same story remains valid even in the context of economic freedom. Every citizen prefers to live in a society and an economy where they are free to make their own choices and have the freedom of choice when it comes to economic matters. As a result, countries that experience a higher degree of economic freedom have a higher GDP per capita. 

Graph 1 – Per capita GDP of least free countries and most free countries 

Graph 2 – Economic freedom and the income share of poorest 10% 

Indeed, economic freedom and political freedom usually go hand in hand, especially in attracting investments, skills, and capital. 

Currently, Sri Lanka is celebrating its 74th Independence anniversary. We must ask ourselves, how economically free are we, really? 

According to the Economic Freedom of the World Index in 2019 Sri Lanka ranked 92nd out of 165 countries and in most of the indicators our performance has been constantly poor.

Economic Freedom of the World Index evaluates countries on five main parameters. Our performance is extremely poor in International Trade. Being an Island located in one of the main maritime routes, we have been ranked 146 out of 165 countries which really reflects our constant policy flaws over the years. Our inward looking anti-trade bias policies have brought Sri Lanka to where it is today. 

Our ranking is equally bad in Regulation. Our score is 6.9 out of 10 and our rank is 110. Sri Lanka has too many regulations for micro, small, and medium enterprises and a fairly large licensing system. In fact, in the inaugural 72nd speech on Independence Day, the President pledged to remove unnecessary regulation. He appointed a deregulation commission headed by Lalith Weerathunga and Krishan Balendran, and we are awaiting the implementation of the recommendations. 

Soundness of Money is another important parameter evaluated by the Economic Freedom of the World Index. This considers the standard deviation of inflation and how strong the currency will be. So, the property in cash form will not be diluted over sudden currency depreciation. Sri Lanka ranks 103 with a score of  8.2 on this measure. The above numbers are from 2019 when we had single digit inflation. Now our year-on-year (YoY) headline inflation is 14% and food inflation is 25%. Therefore, on a sound money front our ranking obviously cannot be performing well. 

In the pillar of Legal System and Property Rights our ranking is 85th out of 165 countries with a  score of 5.1. This is an area we need urgent attention, and some reforms such as digitising our judiciary system is commendable. However, we have a lot to improve, especially regarding the time taken to resolve a case. As the Minister of Justice once said, an average criminal case takes about 10 years and a land case takes more than 20 years, which is a serious bottleneck in our investment system. Investors impart extra attention in doing their due diligence on matters of the judiciary system, as rule of law and independence of the judiciary are one of the fundamentals of democracy. 

On the pillar of Size of the Government as per 2019 data we were doing reasonably well. We ranked 17th out of 165 countries with a score of 8.28. However, our scores seem to be skewed due to low taxes and not actually because the size of our government is limited. We have 1.5 million State workers and in most of the industries State Owned Enterprises have a fairly large footprint with government intervention. 

Ultimately, after celebrating independence for 74 years, our economic freedom is deteriorating overall. Most Sri Lankans apply for visas and make attempts to get permanent residency in countries that are economically free. Hong Kong, Singapore, New Zealand, Switzerland, Australia, the US, and Denmark are the countries at the top of the list. Rather than blaming Sri Lankans who plan to migrate permanently, we should focus on changing our policies to become a country with more economic freedom, and ensure that the same Sri Lankans who are looking to leave as well as others around the world will find Sri Lanka an attractive place to live and work. 

As Jawaharlal Nehru responded to the old gentleman on freedom in 1947, if we start our reforms and bring economic freedom to Sri Lanka, our leaders too can tell our youth and boast of how they made Sri lanka an economically attractive country. 

Reference:

https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20220131_inflation_in_january_2022_ccpi_e.pdf

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Celebrating all the wrong things

Originally appeared on The Morning

By Dhananath Fernando

There can be no independence without economic freedom

The lockdowns amidst the pandemic left all of us with ample time to explore new avenues in life. A friend of mine, excited to learn, enrolled himself in a bunch of online lessons with the motive of productively utilising this time. However, as time progressed, he got too lazy to keep up with the lessons and succumbed to the comforts of his home. He watched television, read novels, and baked way too many cupcakes. He did everything except follow through with his lessons, all the while feeling immensely guilty for failing to do so.

Every independence day, I can’t help but draw parallels between my friend and my motherland. We, Sri Lankans, are quick to celebrate independence with much excitement, just like my friend was to learn, but we fail to actually do the hard work to follow through with the initial commitment. We are quick to identify that learning is vital and even advocate for education. However, we lack initiative. Similarly, we proudly celebrate the British leaving us but have failed to do the work to achieve freedom in real terms.

As a result, over the years, Sri Lanka has only achieved certain elements of independence and democracy. Economic freedom remains an enigma up to date. Whether our fellow Sri Lankans have the ability to engage in business and trade with each other voluntarily has become a serious question. 80% of our land is owned by the Government. People have to wait in long lines and oil the palms of bureaucrats with discretionary powers to obtain a licence to cultivate a crop they think is best to earn a living.

Whether our fellow Sri Lankans can make economic decisions for the betterment of themselves and their children is a question which still remains unanswered. Yet, we opt to proudly celebrate “independence” with minimal comprehension of the true essence of freedom. I fail to see a big difference between my friend and this popular uninformed “patriotism”. 

Over the years, we have been excessively reactive rather than being proactive. Similar to my friend who celebrated the opportunity he had to learn but failed to follow through with it, we too continue to celebrate independence in its literal terms. To put things into perspective, let’s take a look at Sri Lanka’s economic incidents in the recent past.

We signed a Free Trade Agreement (FTA) with Singapore and went against our own terms and celebrated the “victory”. Since then, we have done very little to enhance Sri Lanka’s involvement in global trade. Instead, we continue to hamper the island’s economic growth and development through consistent import and export restrictions as highlighted by this column on numerous occasions.

We spent way too much time debating the Millennium Challenge Corporation (MCC) Compact for more than two years and eventually celebrated not signing the agreement. The agreement could have helped Sri Lanka enhance her land use and improve transport and traffic. It is clear the issue was politicised. However, we could have informed the donors as to why we opted not to sign the agreement before they directed the funds elsewhere. Even without the MCC Compact, we have done very little to reform the island’s myriad transport, traffic, and land use issues.

Recently, we celebrated withdrawing from signing a Memorandum of Understanding  (MoU), foregoing much-needed Foreign Direct Investment (FDI) for the development of the East Container Terminal (ECT). The development here had already been delayed by more than five years. Do we have a plan for the ECT’s development? Have we thought of competitive bidding? Do we have a better cost structure to implement investments on strategic assets? Sadly, the answer is “no”, yet again. It is clear that we Sri Lankans celebrate poor policy measures as victories and fail to embark on proactive actions that cause real change.

What causes real change?

Instead of celebrating policy measures that stunt Sri Lanka’s growth, we have to work towards establishing economic freedom and initiate important but hard reforms. What we should celebrate, however, is the implementation and impact of progressive policies.

The Economic Freedom of the World Index by the Fraser Institute states that countries with high economic freedom are more likely to prosper. The quality of life in these countries is evidently much better than countries with low economic freedom. If we wish to be free and independent, we have to prioritise economic freedom.

Sri Lanka has to implement reforms that ensure people’s ability to do business with ease, voluntarily without any barriers. We have to strive towards attaining a small government. The legal system and property rights have to be strong. People should be able to resolve their court cases faster and with improved efficiency. Sri Lankans should be given the right of ownership to their land and property especially on what they wish to do and grow on these lands.

Sri Lanka’s monetary system has to be stronger. We should have sound money where people do not lose the value of money in hand, due to the use of a bad monetary policy. When the value of money depreciates (from inflation), it is the poor who lose their freedom to buy what they want. Vulnerable sections of Sri Lanka are definitely the most affected.  Inflation is the unkindest tax of all as the poor have no defence against it.

Our businesses should have the freedom to trade internationally and barriers to trade have to be removed. Sri Lankans should not pay about 80% on their tiny bathroom tiles or 300% for the vehicles they use as taxes. They should be given access to trade internationally without any barriers. A minimum and appropriate regulatory environment is fundamental if we Sri Lankans wish to enjoy real freedom. Currently, to register a sole proprietorship or a partnership, a library of documents have to be submitted to authorities. It takes weeks for these documents to process when it should be a matter of a few minutes. The Government should not hinder the growth and development of our own people and their businesses.

On last year’s Independence Day, President Gotabaya Rajapaksa stated that he wants to remove regulatory barriers at all levels. A few weeks ago, he appointed a committee to evaluate unnecessary regulation for businesses.

The Economic Freedom of the World Index compiled by the Fraser Institute is a good indication of whether a country is moving in the right direction in terms of economic freedom. I wish and pray that we celebrate actions and reforms taken to improve economic freedom instead of celebrating the wrong forms of independence. If we fail to initiate hard reform and establish economic freedom, we will continue to celebrate independence for the wrong reasons. Then Sri Lanka’s prospects would be the same as my friend who makes no progress.

The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute.

Post-independence reflections: Gaps in our freedoms

Originally published in Daily Mirror, and Daily FT.

By Erandi De Silva

Seventy two years ago, Sri Lanka gained independence from the shackles of British rule. This meant the autonomy to govern our people, the freedom to create and maintain our institutions and the ability to carve our own political narrative. Beyond political liberty, independence also restored our control over land, resources and Sri Lanka’s economy; we obtained the prerogative to our prosperity. 

Reflecting upon the speech delivered by President Gotabaya Rajapaksa on Independence Day, it is clear that the modernisation of restrictive and out-dated systems, ensuring the increase of efficiency within the local institutions and curbing corruption are well within the new government’s mandate for the country. Upon welcoming this anniversary and amid the dawn of a new decade, it is important that we do more than celebrate the past – it is time to reflect on the extent to which we have secured our future.

The most recent revision of the Economic Freedom of the World Index ranks Sri Lanka at 104, out of a total of 162 countries. While our ranking places us at the lower end of the spectrum, we fare exceptionally poorly on the ‘Legal System and Property Rights’ indicator with an overall score of 4.91 out of 10. It is clear that Sri Lanka has taken certain measures and improved our overall score for Economic Freedom throughout the past few decades and consistently increasing its ratings, apart from the slight deviation from 2015-2017. However, our pace towards such progress and reform has been sluggish compared to that of other countries and our regional competitors. This is reflected in our overall rankings on the index as they have consistently deteriorated from 1980 (ranked 68) to 2017 (ranked 104), even as our scores inched higher over time.  

Given the relative progress and prosperity of other nations that have scored and ranked higher on the index (such as Singapore, Malaysia, Thailand and India), it is evident that Sri Lanka has to prioritise similar reforms – starting with our most vulnerable areas – in order to improve our economic and political future.

 
Main problem areas
Under the ‘Legal System and Property Rights’ indicator, our lowest performances are for the sub-indicators ‘legal enforcement of contracts’ and ‘impartial courts’, where we score 3.61 and 3.74 out of 10, respectively. Sri Lanka’s legal system is notorious for being riddled with corruption, lack of transparency and inefficiency. 

In 2018, the Justice Ministry revealed that 697,370 court cases had been brought forward from 2017, in addition to the cases filed that year itself; at the end of 2018, a total of 775,620 cases that were due to be settled were still pending in court.  

Despite the effects of the 19th Amendment to the constitution that significantly curtailed the excessive control and influence of the executive, alleged corruption and manipulation of the judiciary has still been prevalent due to the persistence of political appointments and the intimidation and transfer of judges upon behaviour that is unfavourable to those in power.  
Therefore, the ability to hold politicians and officials accountable has remained challenging, especially in the lower courts, leaving civilians untrusting of and unsupported by the legal system. 

Furthermore, the time and cost required to enforce a contract through Sri Lankan courts is considered extremely arduous and time-consuming, compared to the processes of other economies within our region; we rank 164/190 with an overall score of 41.2/100 for ‘Enforcing Contracts’ under the Ease of Doing Business index published by the World Bank.

The state of property rights in the country is similarly complicated and ruptured. While there are many delays and inefficiencies in procedures such as registering property, some of these issues are often linked to issues within the legal system as well.

The inability to quickly settle minor disputes over land ownership and the struggle to find relevant records within out-dated systems of data collection further deteriorate our standing in terms property rights. Sri Lanka scores particularly low on the sub-indicator ‘Quality of the land administration index’ under ‘Registering Property’ for the Ease of Doing Business index 
(scoring 5.5/30).

Impacts of our weak systems
Apart from affecting the general security, autonomy and free-will of individuals within our country, Sri Lanka’s inability to maintain and improve the status of its legal systems and property rights has had significant impacts on the state of our economy and future prosperity as well.

The perceived instability and corruption within the legal system often lead potential investors and business away from the country due to their doubts about the strength of the rule of law and its enactment. The likelihood of commercial disputes being prolonged and unjustly handled by the courts further harms our prospects of attracting local and foreign commerce into Sri Lanka. The inefficiencies of the legal system also render it an unreliable solution to the woes of local entrepreneurs and small businesses, acting as a legal barrier to their growth and development.

Moreover, the disputes, bureaucracy and technicalities that convolute property ownership in Sri Lanka further deter the emergence and growth of new businesses and entrepreneurs that could enrich our economy. For example, the inability for many individuals, such as farmers, to secure titles to their land severely curbs their ability to invest and make full use of the property they cultivate within. 

It also inhibits the growing land markets and the potential to use land as collateral within the country. Such issues squander the potential of our youth, resources and skills and ultimately hinder the progress of our entire nation.

Pathway to reform
Given the above problems and their precarious effects on our economy, it is clear that Sri Lanka needs to prioritise reform for its two most vulnerable areas that have long been neglected by politicians and those in power. 

Readdressing the promises brought out by the former Digital Infrastructure and Information Technology Minister Ajith P. Perera, in September 2019, one major leap in streamlining and reforming our legal system would be looking towards digitisation. While it would be a long-term investment and a difficult step for Sri Lanka, it would be a crucial step that may concurrently curb the corruption, manipulation and inefficiency of our current system as well as improve upon the system’s transparency and accessibility to the public.

As Dr. Laksiri Fernando presented in 2019, digitisation of the court system “could not only expedite legal proceedings, crime control and civic justice” but also “ensure common standards throughout the country” in terms of how proceedings take place and how all citizens are treated within the court system. Human errors and language barriers may also be overcome while reducing the time and cost of legal proceedings for both the government and civilians.

Furthermore, the digitisation of legal records, including those related to land ownership, could prevent the misplacement and damage of relevant documents in the case of necessity. The ‘e-land’ initiative by the Registrar General’s Department to enable the digital protection and registration of legal documents pertaining to movable and immovable properties may be considered a good first step. 

In his speech, the president acknowledged the importance of an independent judiciary “for the well-being and advancement of any democratic society” as well as affirmed the need to revise systems that prevent people from freely undertaking self-employment or engaging with businesses.  While this admission on the need for reform is commendable, it is necessary that we ensure it more than mere rhetoric that placates us as weak institutions persist over time. 

A completely functional digital court system may still be quite a challenge that will require constant dedication and fruitful efforts in order to be successfully implemented. In the meantime, it is crucial that the government takes all possible measures to focus on the improvement of our legal sector and the fortification of our property rights as they are fundamentals to ensuring the protection of individual liberty as well as the state of our economy. 

Free from the limitations of our colonial past, land and time are priceless resources that are well in our hands; Sri Lanka’s progress is now contingent upon our prioritisation. Ultimately, a nation is only as independent and free as its people are; if Sri Lankans cannot be promised security through law and access to land, it appears the fight for freedom is still ongoing. 

#Lka70. Independent. Not free.

Photo Credit : Nazly Ahmed

By Ravi Ratnasabapathy 

Sri Lanka achieved ‘independence’ seventy years ago. What does this mean? What we achieved was self-government – the ability to elect our own rulers; but as a society did we become freer? We are no longer administered by rulers appointed from afar but is the citizenry free?

Representative, constitutional democracy is the best means known for keeping rulers accountable. Contrary to popular belief its real benefit is in removing bad leaders, not in choosing good ones.

To get elected politicians may lie or may make meaningless appeals to emotion, only a handful truly understand the problems or have real intent on solving them. Citizens have to sift truth and assess ability with minimal information. There is no way to know how a politician will perform once elected.

As a system for choosing leaders, it fares poorly but citizens can remove the really bad ones. This is the most important, maybe even the only real check that citizens have on power.

Thus while democracy is an improvement on colonialism, it does have its limits. Power remains in the hands of fallible human beings but at least the bad can be booted out. It is a good way to make a few big decisions-once elected the politician has little concern with the citizen until the next election-but it is best to leave smaller ones in the hands of citizens themselves.

What matters in daily life is personal freedom.

The Government intervenes heavily in the economy, its motives driven by corruption and the protection of special interests. They benefit a few to the detriment of the many. Fiscal prudence must be restored and cuts made to the size and scope of Government spending. This regime was elected on mandate of good governance, so they should use the mandate to restore the personal freedom of the citizenry in all spheres of life

Freedom is about not being limited by in ones actions by threats, coercion or interference of others – specifically, other individuals or institutions, such as government or religious bodies. The only good reason to interfere with people’s freedom is to prevent them doing or threatening actual harm to others.

Freedom is guaranteed by laws that restrain the power to interfere in people’s lives. The role of Government is to uphold the rule of law. As Francisco de Paula Santander (1792-1840), Colombian soldier and statesman said “Weapons have given you independence. Laws will give you freedom”.

Colonial laws

Sri Lanka has no bill of rights and we inherited some colonial laws that intrude into personal freedom.

For example, articles 365 and 365A of the Penal Code are widely considered to criminalise homosexuality and are used to arrest, detain, harass, intimidate, blackmail and shame. The Vagrant’s Ordinance is used to harass, arrest and detain sex-workers, and is also used to criminalise the poor, mentally ill, disabled and other vulnerable people. Abortion is illegal except to save the life of the mother. Half the population, women, are discriminated in the Thesawalami, Kandyan and Muslim laws.

These are questions of morals, customs and ethics, things that concern individual citizens. It is individuals who must tussle with these issues, not the law. In any case the law should apply equally to everyone, regardless of gender, race, religion or language.

We may well detest other people’s morality, religion, political views or lifestyle. We may worry that they are harming their health but these are not valid reasons to interfere in the lives of others. Minors should be protected but consenting adults should be left in peace.

Any regulation should focus on limiting public harm, not protecting morality. Strict laws on drunk driving, prohibition on sale of alcohol to minors or limiting public smoking may make sense but the recent foray of state policy, through punitive taxation and restrictive laws to stop the consumption of alcohol and tobacco is wrong.

There are licenses and taxes that most countries impose but they must be reasonable. The fact that some people disapprove of something is no reason to restrain others. The goal of taxation should be the raising of revenue, not punishment.

It is a fact that individuals disagree on things. What is the interest of one is not necessarily of the other. When one is called to give up some freedom for society what happens in reality is the sacrifice of one set of interests to another, there is no real common interest.

Self interest of politicians, officials

When the state makes laws, a choice will be made over many conflicting sets of interests-a choice in which only one side can win. The process of lawmaking is tainted by the self- interest of politicians, officials and lobbyists. It can lead to minority groups being exploited and their liberties curbed.

Therefore the passing of laws, especially those that curb rights should only be resorted to only when strictly necessary. Calls to curb or ban activities must be viewed sceptically. For example, why is horse racing banned in Sri Lanka? This may not be an important example but the problem is ‘mission-creep’ restrictions start innocuously but then keep expanding.

If freedom is to be restricted it should be up to those who want to do so to show why this is both necessary and sufficiently beneficial to warrant it. Election success does not license the winning majority to treat other people exactly as it chooses.

The philosopher John Locke listed life, liberty and property as basic freedoms: people have a right to live, to do as they please (provided they do not infringe the equal right of others) and to enjoy all that they own.

Locke’s concept of property was not limited to land, he claimed people had property in their own lives, bodies and labour. They deserved to own the things that they had spent personal effort in creating and ownership should be secure under the law.

Sri Lanka’s emergency regulations and the Prevention of Terrorism Act granted the authorities sweeping powers of search, arrest, and detention, which have led to arbitrary detention, torture, and enforced disappearances. The Government has been widely criticised for abuses against political opponents and innocents, particularly minorities who claim to have been targeted purely on suspicion.

These laws remain even nine years after the end of the war. For at least some, the right to life could be under threat. The right to property has also been under attack.

Land, houses and businesses were expropriated by law. Laws were passed limiting what property citizens could own and how they could use it. For example, land classified as paddy land can only be used for paddy, not other crops or purposes. Restrictions apply to the sale of tea, rubber and coconut land. Never mind that people may no longer want to farm or have other needs, such as housing. The colonials also confiscated land but there is no need to repeat the error.

Land reforms

Whether the exercise even benefited society is doubtful, certainly Sri Lanka never became rich as a result.

Land reforms, ostensibly to help the poor, weakened a fundamental pillar of freedom-the right to hold what we own. Once personal property is no longer sacrosanct a precedent is set for future abuse: witness the complaints of the poor evicted from their homes in Colombo or the plight of some of the displaced in the conflict zone, denied access to their land. Laws enacted to reengineer society for the betterment of the weak have created the conditions for their oppression.

Money, lawfully earned cannot be used as we wish. Exchange Controls, introduced in 1953, later expanded and later partially reversed dictate how we spend our own money. At one time it was impossible to travel abroad, spend on overseas education or buy anything imported unless deemed “essential” by the state. Thankfully some rules have been relaxed but try sending money to relatives overseas (for medical or other reasons) or remit the proceeds of property sales and we face obstacles. Are these trivial issues? Perhaps, but even so why? Colonial Ceylon had no restrictions but independent Sri Lanka does. Problems of mismanagement of finances by the Government translate to restrictions on citizens.

If citizens, even if displaced or poor, feel their rights are infringed they should be able to seek justice through the courts. Few seem to try. The system of justice has corroded. The courts exist and the police exist but are they independent enough to uphold and enforce the law? Can an ordinary person hope to win in court against a politician?

A new regime is in power, when they celebrate independence they must reflect on the state of personal freedom.

The purpose of Government should be to expand freedom, not restrict it.

New constitution

A new constitution can help protect natural justice: enshrine the due process of the legal system, ensure equal treatment; and define a personal sphere into which legislation and officialdom can never intrude.

They must recognise that people’s beliefs, lifestyle or morals vary. There is no common agreement on what is acceptable, unacceptable, tolerable or intolerable. As long as no harm is done to others the state should not intervene in such matters, legislation that permits this should be rolled back.

The independence and integrity of the system of justice must be restored.

The Government intervenes heavily in the economy, its motives driven by corruption and the protection of special interests. They benefit a few to the detriment of the many. Fiscal prudence must be restored and cuts made to the size and scope of Government spending.

This regime was elected on mandate of good governance, so they should use the mandate to restore the personal freedom of the citizenry in all spheres of life.

Ravi Ratnasabapathy is a resident fellow at the Advocata Institute.