The government began budget week on an inauspicious note. The Supreme Court ruled that the Appropriation Bill for 2009, had concealed total governmental expenditure for the coming year in not having included the debt service payments amounting to Rs 722 billion in the Bill. The court observed that the government was caught in a veritable ‘debt trap’ in which debt service payments for the current year were met by raising further debt in that year, thereby increasing the debt service payments for the succeeding year. It averred that this situation was due to the ‘reckless and irresponsible handling of public finance by the Treasury and a failure on the part of Parliament to exercise to exercise control over public finance’.

The SC also referred to a clause in the Appropriation Bill empowering Treasury officials to transfer money allocated for development to any other programme. The argument presented to the court was that this enables officials to amend the allocations made by Parliament and that the proper procedure was if there was a shortfall, in some area, a supplementary estimate had to be presented to Parliament. The court also observed that the large sums of money transferred by Treasury officials from the development activities programme had been used for ‘foreign travel, purchase of vehicles and other miscellaneous items of expenditure far removed from development activities’.

Getting the job done

This coming from the SC on budget week was a telling indictment of the government and the way they handled the finances of the country. But in fairness to the government it must be said that wheeling and dealing when it came to finances probably started in a major way much earlier. The development oriented UNP government of 1977 worried less about red tape and more about getting the work done. The way the UNP found money to get things done was revealed in the case filed by former Mayor of Colombo, Ratnasiri Rajapakse against his removal from the mayoralty. One of the charges against him was that he gave CMC money on loan to the housing ministry to be used for Gamudawa projects. Former President J.R.Jayawardene appeared in person at the Commission appointed to look into this case of ‘financial abuse’ and testified in Ratnasiri Rajapakse’s favour saying that this was pursuant to a cabinet decision which was taken when he was president, to enable the housing ministry to implement its programmes without hindrance.

The money borrowed in this manner from the CMC, would be paid back when the Treasury released money to the housing ministry. R.Premadasa was then the minister of housing and his chief lieutenant, Sirisena Cooray, was the Mayor of Colombo and this cosy relationship facilitated the shuffling of CMC money around to help Premadasa’s projects. Obviously, this too would fall into the category of financial deals outside the control of parliament that the SC has referred to. This particular deal was not only outside the control of parliament, it was even outside the control of the treasury, with the decision to borrow and lend being taken by the housing minister and the Mayor of Colombo. The smelly stuff hit the fan only after Ratnasiri Rajapakse became mayor. Even though he too was a close protégé of Premadasa, he was outside the controlling ‘mafia’ that had run things for a long time in the CMC.

The CMC was unlike any other political institution in the country. Usually what happens is that the ruling party takes everything on offer and the opposition gets nothing. But in the Colombo Municipality, the ruling party and the opposition shared the spoils. The Colombo Municipality is a wealthy organization with an annual budget running into billions and there is plenty for everybody. For years, especially under the stewardship of Sirisena Cooray, the CMC opposition was very tame. Cooray could do whatever he wanted and there was nobody to raise a whimper. At the 1991 local government elections, Cooray who was by then in Parliament and the Minister of Housing in the Premadasa government, wanted his protégé K.Ganeshalingam re-appointed Mayor. But Premadasa annointed Rajapakse instead. So long as Premadasa was alive, Rajapakse was safe. But the moment Premadasa was assassinated, the effort to have Ganeshalingam back was revived. The way it was done was by fixing Rajapakse on (among other things) the charge of giving CMC money to the housing ministry. In one of the most sordid deals in local government, the majority of the ruling party and the opposition connived in fixing Rajapakse on doing something that had been going on for years.

So this shifting of money around, outside the supervision of parliament, has been standard practice of all governments for some time. Some leeway to shuffle money around however would aid an action oriented government and the SC, in its judgment last week, accepted this. It stated that money moved around by officials would be not inconsistent with the Constitution if the money so transferred would be deemed a supplementary allocation made to the particular ministry and the transfer was reported to parliament within two months. This has been a face saver for the government.

Unexpected bonanza

Unlike at earlier budgets, the UNP has not had any plans to topple the government. But in what can be described as an unexpected bonanza, there are moves from within the UNP(D) group for some members to make their way back into the UNP. Whether this is going to take place during the budget readings or afterwards is a moot point. But what is certain is that it is going to happen at some point. It certainly won’t be everybody who will return, but those who feel that their prospects of getting elected to parliament on the UPFA ticket is too slim to take the risk. Right now, the attitude within the UNP(D) group is that it’s every man for himself. Those who are not nimble enough will not be in parliament or in politics after a few months from now as the indications are that a parliamentary election will be held in the first half of next year.

Even though the government said that they would not allow a delegation of the European Commission to come to Sri Lanka to conduct an investigation as to whether Sri Lanka qualifies for an extension of GSP+, the European Commission announced that they were going ahead with the investigation anyway. So presumably the investigation is now under way even though we have not been hearing much about it. Since a decision has to be announced before the 15th of December, the review process should be completed within the coming few weeks. There are some pertinent matters with regard to this that needs to be considered. The first question that the EC investigators should go into is the criteria and procedure adopted in granting GSP+ to Sri Lanka in 2005. The GSP+ concession was never given to Sri Lanka because Sri Lanka was qualified or on the verge of qualifying for it in terms of the criteria laid down by the EC. The European Commission has strictly stipulated that "To join GSP+ countries have to ratify and implement 27 international conventions and undergo a rigorous vetting and application process". At the time that Sri Lanka got this GSP+ concession, this country had not to the best of my knowledge, ratified all the 27 international conventions that the EC speaks of or undergone a rigorous vetting process to see whether these were being implemented at the ground level. Sri Lanka got GSP+ as part of tsunami aid.

In other words, it was given to this country on sympathetic grounds and not because we were qualified to receive it. There are other countries like the Seychelles, Nigeria and Trinidad and Tobago that have ratified 26 of the international conventions required by the EC, but they have not been given GSP+ because they haven’t ratified the 27th convention! Of the 176 countries getting the normal GSP concession, only 14 have been granted GSP+. Obviously, Sri Lanka was not subject to such a vetting process when this concession was given because it was only late last year that people in Sri Lanka even began talking of the 27 conventions that needs to be ratified for GSP+. It was Rohan Edirisinha, an academic attached to the Centre for Policy Alternatives, who first raised a hue and cry about some provisions of the International Covenant on Civil and Political Rights being inapplicable in Sri Lanka and that therefore we have not ratified or implemented the ICCPR which is one of the 27 conventions needed to qualify for GSP+.

Arbitrary withdrawal?

Since Sri Lanka was not given this concession because it qualified in terms of the ratification and implementation of the 27 conventions, it is extremely unfair to start applying that criterion at this stage. Sri Lanka has to be judged by the same criteria that was applied when the concession was first given and since it was given on sympathetic grounds after the tsunami, the criteria that the European Commission should be applying is whether Sri Lanka has fully recovered from the tsunami. In this, Dr Karunasena Kodituwakku, an economist, and opposition politician, said in an interview with the Island that Sri Lanka has not yet fully recovered from the tsunami. So that is the criteria that the European Commission should be applying. To give GSP+ as tsunami aid and then to start talking about the ratification and implementation on the ground, of 27 international conventions is a case of shifting the goal posts. The EC has kept some countries waiting for years and years to prove that they have not only ratified the required 27 conventions but implemented them on the ground as well. So to expect a country that was not put through the vetting process before granting the concession as tsunami aid, to go through the drill in just three short years is highly unrealistic. Other countries with no terrorist problems have been kept waiting for years to prove they have implemented the 27 conventions. Had Sri Lanka been put through the vetting process, we would have been kept waiting for much longer because of the war situation here.

In the first instance, it was wrong of the EC to have given GSP+ as tsunami aid. In fact, in an official document dated 27 September 2007, the Commission has held that they can’t bend the rules and allow countries that do not meet the GSP+ entry criteria to join because, among other things, it would be unfair to countries that had gone through a rigorous entry processes. They averred that they could not make ‘a mockery of the application process’ and ‘devalue the efforts of those who followed it’. Well, with regard to Sri Lanka, this has happened. Before being granted the GSP+ concession, which allows duty free exports to the EU, Sri Lanka with 176 other countries, was receiving the normal GSP concession which charges only a low import duty. We were doing fine exporting over one billion US$ worth of garments to the EU in direct competition with other countries like India, Bangaladesh, Indonesia, Vitenam and so on. Then we were given tsunami aid in the form of GSP+ privileges outside the stringent vetting process, and now we have this mess. By the admission of the EC itself, it takes years to really verify whether a country has not only ratified but implemented on the ground the 27 conventions.

The EC decision of 21st December 2005, (2005/924/EC) which extended the GSP+ facility to Sri Lanka and 13 other countries, says in clause (2) that the facility was being granted pursuant to an application in writing giving "…comprehensive information concerning ratification of the relevant conventions, the legislation and measures to implement effectively the provisions of the conventions…". This can’t possibly be true with regard to Sri Lanka. This country started discussing the 27 conventions only late last year, with that article by Rohan Edirisinha concerning the applicability of the ICCPR in Sri Lanka and the subsequent Supreme Court ruling to the effect that the provisions of the ICCPR are enshrined in the legislation of Sri Lanka. Clause (3) of the European Commission decision says that "The Commission has examined these requests….and has established the final list of beneficiary countries which fulfill the relevant criteria".

That too couldn’t have been true of Sri Lanka in 2005. Did we really meet all the criteria, and provide comprehensive information about the implementation of these 27 Conventions at ground level? If we did, what was Edirisinha talking about leading to the SC delivering rulings on the subject in late 2007? If we did not, then what that means is that GSP+ was extended to Sri Lanka on criteria different to that of the other beneficiary countries. Hence in examining the eligibility of Sri Lanka for an extension, the only criteria that should be applied is the same criteria that was applied in granting it. It is manifestly unfair for a group of developed countries to grant a struggling developing country a concession on one set of criteria and to withdraw it later on a different set of criteria. The whole GSP scheme is based on an enabling clause in the 1979 General Agreement of Trade and Tariffs of the World Trade Organisation which allows member countries to give preferential treatment to developing countries. There should be some rules in international law against the granting and arbitrary withdrawal of such preferential treatment in trade matters, which would wreak havoc in the recipient countries. If the EC holds its unilateral ‘inquiry’ and decides that Sri Lanka is not eligible for GSP+, then that should be challenged in a tribunal of the WTO or the ICJ.

JVP gives prior notice

In its latest statement on Sri Lanka, the EU speaks of human rights issues in Sri Lanka. But when GSP+ was given in 2005 Sri Lanka was at war as it has been for the past three decades and more. Of the other 13 recipients, of GSP+, Bolivia, Colombia, Costa Rica, Ecuador, El Salvador, Georgia, Guatemala, Honduras, Mongolia, Nicaragua, Panama, Peru and Venezuela, no country has been at war quite in the same manner as Sri Lanka. When we were given GSP+ the ceasefire was in effect. But it’s not as if the EU did not know what was going on in Sri Lanka. The EU itself placed the LTTE on their list of terrorist organizations while the ceasefire was still very much in effect because it was commonly known that the LTTE was violating the ceasefire and that it would not hold for long.

It does not need much to realize that a country that is at war with an organization that is placed on the terrorist lists of foreign countries during a ceasefire will not necessarily have a perfect human rights record. No country in the world that is at war can have such a record. That is why one often hears Sri Lankan commentators talking about Iraq and Afghanistan whenever the west preaches to this country about human rights.

The JVP was at pains to say last week that there was no problem between the party and their trade union leader, K.D.Lal Kantha. But there is in fact a problem. Faced with a string of failures, the blame game has been going on apace within the JVP for the failure of the July 10th general strike and it was pressures emanating from this that caused Lal Kantha to react. The JVP, which cannot afford any more rifts after the events of the past few months, has been trying to bring things under control. Whether they will succeed in containing the problem as they did in the case of parliamentarian Handunnetti is yet to be seen. Parliamentarians have to be in parliament for at least five years in order to qualify for a lifetime pension. Once the present crop of JVP MPs have qualified for a pension, by around April/May 2009, some people believe that there will be many more who will defect as most of the sitting MPs of the JVP have no chance of getting re-elected. The fact that the JVP has been facing failure after failure would have created fissures even in a normal political party.

But the JVP is not a normal party. It is a Stalinist organization which exercises extraordinary control over the lives of its members. The telephone bills of all JVP MPs is paid by the party and the party checks the detailed bills to see who their members have been in contact with. Then the vehicles of all JVP parliamentarians have drivers assigned to them. These drivers are in fact the ‘handlers’ of these parliamentarians and they keep close tabs over where the MPs go and whom they meet. Readers will remember that on the day that the breakaway Weerawansa group held their first press conference, the house of one of the dissident MPs in the Puttalam district was invaded by a JVP mob who threatened the MP but did him no physical harm. But they mercilessly assaulted his driver before leaving. That was because he was remiss in not reporting the suspicious moves of his ward, the Puttalam district MP, to the party! Even without the string of recent failures, the sheer impossibility of living under the Stalinist control of the party apparatus will be one of the factors in an impending ‘great escape’ after April next year.

The JVP held a press conference on Friday to announce that they would be voting against the budget. Last year, they played their cards close to their chest and the uncertainties of how they would vote saved the day for the government. This time however the JVP has announced beforehand what they are going to do.This gives an opening to the UNP to try and topple the government. Especially in the context of the confusion prevailing within the UNP(D) group, anything might be possible. But in the present context, it is questionable whether the UNP will want to foist an election upon itself.

The UNP had the opportunity the week before last to topple the Southern Provincial Council, but they chose not to. When people questioned this decision, one of their excuses was that the JVP cannot be relied on. The JVP’s prior announcement of what they are going to do at Friday’s press conference seems to be designed to absolve themselves of blame if the UNP fails to or refuses to topple the government at the budget.