“Changing the system”: How the President could start

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

By Dhananath Fernando

A day has 24 hours but the clock ticks faster in some countries, and Sri Lanka is certainly one of them. We have many things to get done, but time is running out and the conditions are right to brew the perfect storm. Our economy’s fundamentals have been in poor shape for a few decades. The country’s economic growth was 2.3% in 2019, a budget deficit of 8.5% in comparison to the GDP of 2020 is expected this year, and we are already on an IMF (International Monetary Fund) bailout programme. There is nearly $ 7.2 billion as reserves in Treasury coffers, but debt servicing payments account for nearly $ 6 billion up to December 2021.

Amidst these conditions, a pandemic was the last thing we needed and its abrupt arrival damaged the main economic engines of Sri Lanka on a larger scale than ever before. Tourism, which brought in $ 4 billion revenue in 2018, and the export industry were severely impacted, and the unfolding events in the US, which is the market for 37% of our apparel exports, are not in our favour. The impact on the Middle East will not only bring down nearly $ 7 billion worth of remittances but will also result in job losses and the repatriation of Sri Lankans due to the global economic contraction.

In that context, it seems President Gotabaya Rajapaksa will have to sacrifice nearly nine to 10 months of his five-year tenure to address unexpected challenges. He has been pushed to a difficult corner with many restrictions from the system itself (postponement of elections, etc.) to convert decisions into actions. Leaving this gloomy story aside, let’s unpack a few opportunities hanging around to get things done along with priority actions to be taken during this difficult time up until the general election in early August.

Reforms through structural changes

Considering our public finances are weak and the spending capacity is limited, we have a grand opportunity to make structural changes to the system rather than investing our time on micromanagement. The President’s mandate was to “change the system” within a democratic framework and set up a new, functional system. Since the clock is ticking at a faster pace, we need to identify a few major reforms that could generate faster results and meaningfully benefit the people of Sri Lanka.

Below are a few areas the President could focus on in carrying out major reforms through which an impact would be visible within his five-year tenure.

Governance structure and KPIs for State-Owned Enterprises (SOE’s)

The big gaping hole in our national account is the losses of state-owned enterprises (SOEs). In 2018 itself, 54 strategic SOEs out of 527 SOEs made a Rs. 28 billion loss and received government budgetary support of Rs. 58 billion. The total of these two figures is almost two times the entire allocation of the Samurdhi fund. The initial attempt to appoint a separate panel to appoint qualified members for state institutions was commendable, but it had its own challenges.

Since a new Cabinet and new ministers are to be appointed post general election, if we are able to set key performance indicators (KPIs) for SOEs at the soonest time as the first step at the year end, then the President can evaluate the performance of SOE boards and make them accountable accordingly. When every minister is given their appointment letters when the new Parliament is appointed in a grand red carpet ceremony at the Presidential Secretariat, every minister receives an additional file listing the institutions under their purview and indicators under which the minister will be monitored along with their respective institutes’ boards.

In the list of deliverables, we can start with including basic requirements such as presenting an annual report with profits, losses, and employment for each institute so as to ensure the newly appointed boards are accountable. Ideally, the KPIs can be published before the election in selected SOEs as there would be less reluctance from the newly appointed ministers when they take over the job. In terms of management, it would be easier to get the consent for already established guidelines rather than imposing guidelines after they take up the job.

If we have the political capital, we can consolidate a few institutes early on and publish the plan to facilitate the appointment of members for all 527 SOEs, of which the total number of people in the boards alone would be a factory of senior people. When the governance structures are in place, performance will improve and losses, in turn, will decrease. Therefore, the changes will be visible to showcase to the people, and it will bring significant relief to the Treasury. At the same time, it is easier to identify the poor-performing institutes and so the boards of those can be shuffled based on meritocracy.

Public transportation

As highlighted in “The coordination problem” column earlier, public transportation bottlenecks are mainly caused by structural issues rather than investment issues. One main issue every individual goes through every morning and evening is public transportation. Regardless of whether they travel in their own car or via bus/train services, the experience is essentially the same.

In this regard, re-implementing the bus lane structure is a positive move. Removing the route permit structure and having a more open and competitive system is an easy and quick way of improving the public transport system before moving on to large-scale infrastructuring projects, given the tight public finance situation. A period of four years is a good time frame to showcase improvements on public transportation, and these reforms are fairly easier to implement especially as Covid-19 has given the perfect opportunity.

Buses are already operating only under the capacity of the number of seats and we expect that the University of Moratuwa would release official data on the improvement in average speed with the new bus lane system. This is a golden opportunity to implement the long-awaited plans of reformation with the blessings of the people and the industry.

Establishing E-courts

Another hassle for a majority of Sri Lankans is the delay in court cases. The outside of every court is fully crowded on weekdays with disappointing faces seen in every direction due to a completely inefficient system. Mostly, the poorest in society have fallen prey to this problem and the problem extends to prison and every sector of the economy. In Sri Lanka, the time for contract enforcement is 1,318 days and it’s just 22.8% of the claim value.

An e-court is a system of services that ensures minimum use of paper during the course of a court proceeding with digitally captured information, an unbroken chain of data exchange, readily available case histories, electronic fee payments, and an overall streamlining of court proceedings. Since a plan already is in place to digitise Sri Lanka, a two-year time frame is more than enough to establish a functioning e-court with necessary legal reforms, given the Covid-19 social distancing guidelines. If less complicated cases are moved to e-courts, there will be space for more complicated cases to proceed with the physical presence. Isn’t this the main mandate of the Minister of Justice and Legal Reforms after the election?

Land reforms

Land is the most precious resource in Sri Lanka and it’s very limited given the size of our country. Most of our economic bottlenecks have a greater bearing on land titling. We should not forget that land is a stable capital asset and only 18% of it is owned by our people whereas the rest (82%) is owned by the government. It is well documented how badly we have managed even our forest cover and sanctuaries which account for 30% of our land. Most of the bottlenecks in agriculture and investments are due to our land concerns. Investment is slow (investments from Sri Lankans) and technology is not entering our shores.

In an age where Google provides live updates of real-time traffic movement at our fingertips, we Sri Lankans cannot spend anymore time without a digital land registry, with the decades-old land registry at government offices wasting our precious time. As long as we continue with the unresolved land issues, which are to an extent connected to our judiciary system, Sri Lanka will not see a connection to the Fourth Industrial Revolution.

Above are the big four insights the present Government should focus on. In my humble opinion, a four-year time frame (calculating for many unexpected events in the global context) is a reasonable period to achieve reasonable progress. Even more importantly, people across Sri Lanka will experience a tangible difference if the above reforms take place. Furthermore, except for e-courts and land reforms, the other two big reforms are comparatively less investment-driven.

Execution over politics

Most of the leaders who take up the challenge to lead the country find themselves preoccupied with micromanagement, appearing in one meeting after another or one ceremony after another. In building the needed political capital, we should not misread the President’s mandate to “change the system” and his voter base appears to be measuring him based on the execution of his big ideas rather than the traditional political micromanagement.

I hope the current Government is reading the peoples’ mandate correctly and would not drift away and lose sight of it after the general election on 5 August. I hope…

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.