Looming political and economic challenges ahead of elections

By Dhananath Fernando

Originally appeared on the Morning

“We know what should be done to get the country on the right track, but we don’t know how to get power back after implementing the policies.” This is a popular statement I hear often when I meet quite a few politicians. The truth is that politicians do not know how to get back power because it’s not an attractive solution.

The popular policies that bring politicians into power are the very same that inspire their ousting at the very next election cycle. People hardly object to good policies unless the same politicians instigate false propaganda. The Right to Information (RTI) Act was just one such instance.

As an election is due next year, it is vital to understand and remember our priorities, otherwise our politicians are likely to take a wrong turn and pass the buck back to the people.

In an election year, the behaviour of any political party is to completely abandon rational economic reforms and play to populist narratives that result in outcomes that are the complete opposite, with the motive of coming to power.

Bringing down fuel prices and announcing other types of subsidies are common tactics. This is harmful, especially when those benefits cannot be financed sustainably, or in some situations, brought into life in the first place.

Even if it does not retain power, the newly-elected government will have a tough time preventing plans that have already been put in place and enacting better policies.

Political risk

In the current context, we run a very high risk of our politicians bringing us back to square one; i.e. another economic crisis. This, given the fact that 2024 is set to be an election year, is a recipe for disaster.

All political parties will shift their focus to slowly becoming more populist rather than being driven by objectivity. Therefore, the real risk is going back to another debt restructuring if we fail to grow the economy and our exports.

There are many politicians who do not understand the gravity of the need for reforms. Regardless of which party or coalition comes to power, there are fundamental issues that need to be addressed.

The process is more or less the same as handing over a house with structural issues from one tenant (government) to the other. The new tenant cannot function because neither the previous tenant nor the owner (people) is willing to fix the fundamental problems.

Risk of a second debt default

Given the unstable political environment coupled with a country already going through debt restructuring, the risks of a second debt default are astronomically high. As we are still struggling with finalising the first debt restructuring, adding a second one into the mix will leave us in dire straits.

The second one will undoubtedly be harder, especially given the significant increase in interest rates and being unable to print money with the new Central Bank Act. If we fail to raise money through markets in order to roll over debt and if we are not open to increasing interest rates, the only option we will be left with is to default again. At that point, most likely there will be pressure once again to amend the newly-enacted Central Bank Act to allow money printing.

Of course, that would be an inflationary measure and we will be back at square one with a balance of payments crisis, debt crisis, humanitarian crisis, and likely a banking crisis too.

Solutions: A common minimum programme for reforms

Reforms are easier in the first 100 days of any government. If we fail to enact reforms within the first 100 days, more often than not, no reforms will take place. Failing to undertake reforms in 100 days means a cost of a five-year delay plus many bad policy decisions in the middle, which are costly and difficult to reverse.

Ideally, if key political parties come to an agreement before an election on selected reforms and execute them regardless of who comes into power, it will at least ensure some stability for Sri Lanka. There are many ideas that all political parties have in common.

Regarding State-Owned Enterprise reforms, there is no political party that says the Government should run an airline. Even National People’s Power Economic Advisor Dr. Anil Jayantha, in an interview with Advocata, noted that they did not believe the Government should do any business with hotels.

Accordingly, there are many other similar areas where we can arrive at an agreement with little difficulty. Therefore, regardless of who wins elections, people can win and sustain some of the economic reforms.

The truth is that reforms are inevitable if Sri Lanka needs to move forward and for any political party to sustain its power. Implementing bad policies, especially considering the status of our country, will make it very difficult to sustain power, because then we will be setting the standard for a new normal in economics and politics.

Curtailing liberty

Originally appeared on The Daily FT

By Prof. Rohan Samarajiva

Imagine a day in the life of a daily wage earner, before COVID-19. Of a woman who makes her living by providing cleaning services to several houses in Colombo.

She was free to take public transport, and on occasion a three-wheeler to get to work. She was free to take up or decline work and negotiate rates and days. She was free to keep cash, put some money in a bank and withdraw when needed. She could choose the vendors from whom she purchased groceries and other items.

It was no walk in the park. The work was hard, the madams were not always nice, the buses crowded… But she was able to feed her family and live her life. She could make small donations and participate in a seettu. She was not dependent on handouts or charity. She had liberty.

Now imagine her post-COVID-19 life. The money has run out, the jewellery is in the pawnshop. She cannot work, she cannot earn. April is burning hot, and her family is cooped up in a tiny tenement. Even when she has money, she cannot choose: she must buy whatever is offered at whatever price by whoever comes down the lane. She has to rely on handouts from the Government and from others. It used to be like this after the floods, but then one knew the water would recede and normalcy would return.

The curfew was supposed to be just for the weekend when first imposed. Now it has been over a month. Dates are announced and then changed for reasons unexplained. No one knows when this will end. Will she be welcome in the houses she used to clean? Will they fear her as a carrier of the disease and do their own cleaning? Will there be other work? She sees the streets are still being swept. Who should she talk to, how much is the bribe?

This is what the loss of liberty is for daily wage earners, for those whose work requires co-presence, those most affected by the curfew. The freedom to earn a living, to traverse public thoroughfares, to choose from whom to buy and what, to have some peace with the children out playing. All taken away by distant politicians and officials whose earnings are certain, who have no worries about food on the table when they are driven home by a chauffeur after a drink at the Hilton with a friend.

Let us concede that the lockdown (or its more severe version, the curfew) was needed to prevent the health system from being overwhelmed.

To save the lives of the elderly and those with weakened immunity. To buy time to get the tests and the acute-care beds and the PPE [personal protective equipment] organised.

The curfew was State action with significant positive externalities for society. Everyone benefited, including the daily wagers and the politicians. But the costs were not borne evenly. Those with the curfew passes and the Government vehicles may have borne none. Those among them who exercised discretionary authority may have even benefited.

The child who could not celebrate a birthday bore some of the costs. The executive who could not maintain the jet-black head of hair did too. But their costs were nothing compared to the daily wager cooped up in a tiny tenement without money to buy food and no certainty about what next week and next month would bring.

Giving these people money is not charity. It is compensation for the harm done to them by the State that dwarfed the benefits they received. It has been common practice to provide compensation when the State takes away assets or livelihoods. That is what has been done by the curfew.

When the State acts in ways that result in life-changing impacts on citizens (the curfew in this instance, but could also be allowing infected individuals to clear the airport), there must be accountability. There must be evidence that decisions were taken on the best available information and with best efforts made to minimise harms to citizens.

For this, two things are needed. The decisions must be taken under some written law and must be documented. There must be independent entities such as the Courts and the Legislature in place to examine the way the decisions were taken and with the power to hold the Executive to account. Do these conditions exist now?

The Acting IGP makes all sorts of announcements and arrests are made. But what laws are being broken by persons using public roads? What laws made by our elected representatives require shops to be closed?

Who decides what is essential and what is not? On what basis? Where are the emergency regulations? There can be no emergency regulations when an emergency has not been declared. There is no Parliament where questions can be raised, and the Courts are not fully functional.

A week of improvisation can be understood and forgiven. But now it’s more than a month. It is time to abide by the Constitution that all elected officials have solemnly committed to uphold. Perhaps we should consider requiring the unelected decision-makers to also take an oath of office, so they are reminded we live under law.

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.

Allocating ministries: scenario post-parliamentary election

In this weekly column on The Sunday Morning Business titled “The Coordination Problem”, the scholars and fellows associated with Advocata attempt to explore issues around economics, public policy, the institutions that govern them and their impact on our lives and society.

Originally appeared on The Morning

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By Erandi de Silva

With the 2019 presidential election complete, some of the main policies that have been outlined include establishing a meritocracy, improving efficiency, and eliminating corruption. Although an interim cabinet has now been appointed, the upcoming 2020 parliamentary elections will ultimately determine the new government of Sri Lanka. Given this, it is necessary to take a deeper look at the structure and functionality of our ministry system.

Why should ministry allocation be a policy priority?

Sri Lanka had a total of 34 different ministries that each contain numerous departments under them. However, these ministries and departments are often arbitrarily created and grouped within a complicated structure that doesn’t make a lot of logical and functional sense (for example, the Ministry of City Planning, Water Supply, and Higher Education). Allocation of ministry positions in Sri Lanka is also often decided based on party seniority, and not on the minister’s educational background or familiarity with the subject area.

To make things more difficult, cabinet reshuffles are not uncommon as governments struggle to balance functionality and keeping their cabinet members content. With each reshuffle, ministry positions are moved around, ministries are renamed, and departments are relocated. This results in unnecessary institutional costs as government employers adjust to new reporting structures, new bosses, and new work priorities. These reshuffles damage inter-ministry relations and disrupt the flow of project work.

When ministry allocations defy logic and ministries are given mandates that encompass topics as diverse as telecommunications, foreign employment, and sports, prioritisation of work can be understandably difficult. Apart from the challenges that come with such a diverse ministerial portfolio, when the departments under them are allocated in a seemingly ad hoc manner, the problem is exacerbated. For instance, when departments that serve similar objectives are strewn across various ministries, it may hinder co-ordination and cripple the department’s ability to function well.

Ultimately, the system creates unnecessary confusion and inconveniences to both the public that require services from various departments and the public servants that find it very difficult to do their job. This not only blocks the general progress of development but also makes larger government projects to transform the economy tedious affairs.

Sustainable reform

Singapore, which is hailed as a bastion of modern development in Asia, now has merely 15 ministries in comparison to the 34 that existed in Sri Lanka. This suggests that when it comes to efficiency in the public sector, perhaps the phrase “the more the merrier” is not appropriate.

Of course, these observations have been made before. In early 2018, Dr. Sujata Gamage presented an alternate framework for clustering cabinet portfolios under 15 core subjects that can be refined and redefined as necessary. This clustering of portfolios is centred on subject area, and included practical changes such as the shifting of vocational training out of the portfolio of the Ministry National Policies, Economic Affairs, Resettlement and Rehabilitation, Northern Province Development, and Youth Affairs, and under the purview of the Ministry of Education. However, given the reality of politics in Sri Lanka, the number of portfolio positions demanded is possible to increase as governments distribute positions of power. Though this is not ideal, the system may still remain functional if these positions are created under the respective 15 core subjects.

While clustering is an important step, it will only facilitate better policymaking and implementation. It does not guarantee that the country will see the envisaged improvement in the government service. Addressing this concern, the Ceylon Chamber of Commerce has put forward further recommendations focused on the introduction of performance indicators. These indicators (which would be measurable and specific) would be set up for each ministry to ensure ministers are made accountable for the delivery of their key objectives. Making these indicators public at the beginning of each fiscal year would create a stronger culture of accountability in the government service. To push this reform further, ministerial performance on these indicators should also be a main criterion when allocating funds for the following years.

The introduction of performance indicators could ideally be coupled with the proposal advocating for a layer of technocrats (that are independently and impartially selected by a civil service commission) entrusted with daily administration duties under the ministers. This would ensure that ministers do not run astray with unrestrained power and that hasty election promises are weighed against legal, moral, and practical implications before being transformed into policy.

In light of these existing suggestions, and the evident complications of our current system, it is necessary that we streamline the allocation of our ministries by systematically grouping only the relevant departments that share a broader common objective together in order to create a clear mandate for each ministry and ensure proper channels of communication and co-ordination.

After parliamentary elections, the new government should move away from constant reshuffles in order to create policy stability and a continued flow of work within government. Finally, as President Gotabaya Rajapaksa himself pledged to support, cabinet ministers should be appointed upon a system of meritocracy. Their selection must be based on their level of competency and familiarity with the area of authority as opposed to seniority within the party.

The new government has a window of opportunity until parliamentary elections. This space and time can be utilised to formulate a structure of performance indicators and set the foundation for a more efficient and accountable system.

If these reforms are made and accountability is ensured under each ministry, it is likely that overall efficiency will increase. This means that government decisions like budget approvals and approval for projects can happen a lot faster, public services through each department will be more efficient and accessible, and public servants are provided with secure employment positions and clear responsibilities under their jobs. If the President is truly serious about improving the efficiency of our country, promoting meritocracy, and erasing corruption, what better way to start than with the peak of our governing administration?

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