Ever since Sri Lanka’s 2022 economic meltdown, it has been popular – if not the mainstream consensus – to argue that the country’s travails were chiefly the result of poor economic decision-making and policy. Absent swinging tax cuts and a decision to go organic in agricultural production, so the argument goes, things would (probably) have gone a whole lot better for the country.
But other approaches to understanding the economic crisis are increasingly in evidence, not least a so-called ’governance approach’ to understanding the country’s economic travails? In his foreword to this Policy Brief CPA Director Paikiasothy Saravannamuttu emphasizes the ‘overarching governance dimension of the [Sri Lankan} crisis’, arguing that ‘misgovernance has been rife throughout successive post-independence governments’: allegedly, its accumulated burden was ‘exacerbated by certain decisions of the over last decade in particular’ and ‘brought to a head [in] the crisis of 2022’: an argument earlier put forward in the ‘Civil Society Governance Diagnostic and the IMF Governance Diagnostic of Sri Lanka’ produced in response to the 2022 crisis.
Navigating Sri Lanka’s Economic Precarity: The Need to Address Foundational Issues in Governance
The Brief itself identifies a series of key governance areas the author sees as needing urgent reform.
First, the current concentration of power within the executive presidency. While it is suggested that this concentration of powers, originally instantiated in JR Jayawardene’s 1978 Constitution, was intended to promote ‘decisive action towards economic development’, the Brief argues that in practice, this has resulted in ‘unilateral and opaque decision-making’, in turn facilitating ‘incompetence or corruption’. It’s not hard to find examples of this phenomenon in recent history, not least in Gotabaya Rajapaksa’s catastrophic presidency, in particular his early introduction of sizeable tax cuts, drastically reducing government income, and the agriculturally disastrous decision to order an overnight switch to organic farming in spring 2020.
The proposed remedy has three components. The first is constitutional reform centred on abolition of the executive presidency – long-promised, but never delivered by a succession of governments – and its replacement by a (return to) collective decision-making within a parliamentary democratic framework, which seems both eminently sensible and supported by many in the country. In this context one can only hope, too, that current President Anura Kumara Dissanayake will prove himself to be more visionary – and true to his electoral word – than many of his predecessors in introducing reforms.
Second, the Brief argues that government expenditure in the public sector, deemed to be ‘excessive and [with] little impact’, needs to be significantly downsized, not least with a view to improving sectoral ‘service delivery’. The military is put forward as an emblematic example in which ‘spending on far too many personnel … does not translate [in]to [meeting] the country’s defensive needs’. Details are a little thin on the ground here, and the principle proposed, that outlays should be ‘proportionate to each government department’s needs’, seems pretty self-evident. Equally clear, too, is the fact that downsizing Sri Lanka’s bloated public sector will be politically challenging – not least for an NPP government whose core electorate includes many of its employees.
Third, with respect to the plethora of state-owned enterprises (SoEs), the Brief suggests that the state needs to have a ‘coherent rationale for engaging in the market’. In this context it argues that the Sri Lankan state should simply exit ‘competitive markets where the private sector can deliver goods and services more cheaply, efficiently, and at better quality’, a policy prescription that suggests major change, with the state essentially retreating into economic control of ‘natural’ monopolies such as railways, water and electricity, divesting itself of white elephants such as Sri Lankan Airlines and allowing the private sector full rein to manage them.
While in principle supportive of appropriate privatizations, this author also needs to register a cautionary note based on his own country – the UK’s – experience during the 1980s and beyond. Simply put, the UK’s experience with, for example, privatization of/in the railways and health service demonstrates clearly that privatization is not a magic wand that can simply be waved at economic policy challenges in a bid to make them go away.
In a country such as Sri Lanka with robust traditions of social solidarity and equity, it is critical that, for example, decisions on privatization be taken with a clear understanding of who will benefit – and who will lose out – from them. In this context it is encouraging, then, to hear the Brief’s author discuss, in an accompanying interview, the importance of, for example, providing vocational training to those – be they soldiers or bureaucrats – who stand to lose their jobs in the context of workforce reductions and/or privatization.
Finally, the Brief focuses on the vexed question of corruption, which every Sri Lankan knows to be one of the country’s major – and all-pervasive – challenges. Here the Brief rightly points out that a wider culture of impunity, in particular a prevailing ‘absence of punitive action against corruption’ has ‘resulted in its prevalence throughout government’. To address this it argues that first and foremost, anti-corruption measures – legal, structural and practical – need to be both ‘shielded from political influence’, ‘sufficiently resourced to recover losses due to corruption’, and most importantly to all, to serve as a practical ‘deterrent’ against corruption.
In this context it proposes two practical measures, long advocated by anti-corruption activists, as first steps in this direction: secure political autonomy for the Commission to Investigate Allegations of Bribery and Corruption (CIABOC); and, mindful of the conflict of interest inherent in the Office of the Attorney General’s functioning, the establishment of an independent Public Prosecutor’s office.
All in all, a useful, future-orientated Brief of which the Sri Lankan government, no less than political parties, civil society and other actors would do well to take note.