The wisdom of throwing Arjuna Mahendran to the wolves

* Power struggle in ruling coalition out in the open
*   Quo warranto writ application against CB Governor
*   Traders up in arms against VAT hike


As the end of June draws near, the question of extending the tenure of Central Bank Governor Arjuna Mahendran has taken the political centre stage. Last Friday, an emergency meeting was held between the President and the Prime Minister and the pro-yahapalana NGOs to sort out the issue of the CB Governor’s reappointment. As we go to press, the matter still appears unresolved. Last week, NGOs in the yahapalana project were preparing to make an application for a writ of quo warranto in the Court of Appeal against Mahendran praying that he be declared unfit to hold the position of CB Governor. Last year Mahendran was appointed to serve out the remainder of former Governor Ajith Nivard Cabraal’s term which ends at the end of this month.

This has now given rise o a tug of war between the opposition and the government on the one hand and between groups within the government itself. The Joint Opposition wants Arjuna Mahendran removed firstly because they have serious misgivings about the manner bond auctions had been conducted under his tenure and also about his personal style. Former COPE Chairman D.E.W. Gunasekera’s allegation that Mahendran spent most of his time traveling overseas after being appointed Governor and Wimal Weerawansa’s revelations about his alleged profligacy with his expense account are cases in point. The joint opposition sees him as a playboy living the high life at the expense of the Central Bank while presiding over highly questionable bond auctions which is why they express their headlong opposition to his continuation in that office.

Another unstated but obvious motive in pressing for Mahendran’s removal on the part of the Joint Opposition is that it provides an opportunity to drive a wedge between the UNP and SLFP partners in the government. Mahendran is a favourite of the UNP leader and a member of the inner circle in the UNP set up. However he is being targeted by the SLFP faction in the government and the NGOs associated with the yahapalana project which sees him mostly as a useful scapegoat whose sacrifice on the altar of public opinion will enable them to save their own skins and revive the government’s anti-corruption credentials. Outside the UNP, nobody in the yahapalana camp sees why the government should draw any flak just to save Mahendran’s skin. Prof. Sarath Wijesuriya of the Movement for a Just Society told The Island that the UNP would have lost up to five seats at the last parliamentary election due to Mahendran.

The power struggle in the government which had been going on under the surface since the last parliamentary election has come out into the open over the Central Bank Governor’s tenure. Next week, when the pro-yahapalana NGOs make an application to the Court of Appeal praying for a writ of quo warranto declaring that Mahendran is disqualified from holding the office of Governor of the Central Bank, the petitioner will be Ranjith Keerthi Tennakoon of the elections monitoring NGO CAFFE. The Court of Appeal petition will focus on three matters – firstly that Mahendran is a citizen of Singapore and is not a citizen of Sri Lanka and that though the Governor of the Central Bank is a public officer within the meaning of the Constitution, Mahendran as a citizen of Singapore is unable to pledge allegiance to Sri Lanka and to take the oath as set out in the 4th Schedule of the Constitution which every public servant should take.


 How dispensable is Mahendran?

 Secondly, the petition avers that according to Mahendran’s profile published in Business Week Bloomberg, he appears to be affiliated to the Credit Suisse Group AG, which is a global financial institution from which the Government of Sri Lanka has decided to borrow money and that in terms of Section 11(c) of the Monetary Law Act, a person who is a director, officer, employee or shareholder of any banking institution other than the Central Bank of Sri Lanka is disqualified from holding office as the Governor of the Central Bank. Thirdly that there are serious allegations of corruption against Mahendran regarding the treasury bonds issue of 27.02.2015 about which much has been spoken of.

The SLFP faction in the government and the NGOs in the yahapalana project see Mahendran as another Tilak Marapone, a dispensable individual who can be sacrificed to save their own skins. But is he really that dispensable? The whole country saw the procession of UPFA ministers who went to Singapore just before they crossed over in late 2014. Even if Mahendran was not physically present in Singapore at the time, it is very unlikely that he was not privy to all the cloak and dagger stuff that went on to topple the government. Most of those in the Sirisena faction of the SLFP including Sirisena himself are not really aware of the buying and selling that went on to bring him into power because that side of it was handled by Chandrika Kumaratunga. Nobody in the Sirisena faction or the NGOs seem to have given any thought to the fact that Mahendran may be in the inner circle of the UNP because he may be privy to and involved in many things.

Nirmal Ranjith Dewasiri was shown on TV saying that the proceeds of the bond scams may have gone to finance the UNP. If there is even a partial truth in that allegation, would it be politically feasible to throw Mahendran to the wolves? After all the bad publicity that Mahendran has got during his short tenure at the Central Bank, it is highly unlikely that he will get another job at a suitable level in the private sector. Furthermore in the event of a change of government someday, he will be directly in the cross hairs as well. If Mahendran is privy to the deals that contributed to forging the yahapalana alliance, it would be very unwise to throw him to the wolves unless he voluntarily agrees to step down and be shunted off into some diplomatic posting. If the Court of Appeal petition succeeds, that will be a triumph for the Sirisena faction and also perhaps a way out for Ranil Wickremesinghe, who can then lay the blame for Mahendran’s removal on the CA.

But such an outcome will place both the UNP and the Sirisena faction in jeopardy because a resentful Mahendran may end up doing a Sajin Vaas. Even when Mahendran faced COPE, he never tried to waffle over the fact that he was a political individual affiliated to the UNP. If Ranil Wickremesinghe is defending Mahendran, there has to be a good reason for that. The Sirisena faction’s eagerness to sacrifice Mahendran for their own survival may be a case of shooting themselves in the foot. Be that as it may, if Mahendran is removed, this will be another instance where the UNP has been stymied by Sirisena. After the August parliamentary election, the Sirisena faction in the government has been becoming more and more dominant within the ruling coalition. That the Sirisena faction holds some of the best ministries and that the UNP has got the leftovers, is an obvious fact. From the time the UNP agreed to this outrageous division of subjects they have been in retreat. The Sirisena group managed to force the resignation of Tilak Marapone on the grounds that he was in cahoots with the Rajapaksas and now they are after Mahendran.

With each step they have whittled away at Ranil Wickremesinghe’s power. One person from within the yahapalana camp who openly spoke about this situation is Wickremabahu Karunaratne - a very unlikely ally for Wickremesinghe. He openly said last week that this eagerness to get rid of Mahendran smacks of an attempt to chip away at the power of the PM. One good thing is that the UNP appears to have closed ranks behind their leader with even one time detractors like Sajith Premadasa and Palitha Range Bandara making statements in defence of Mahendran.


Dancing on thin ice

That President Maithripala Sirisena appeared in person in parliament to support finance minister Ravi Karunanayake does not mean that he was backing the UNP. He was really backing one of his allies within the UNP. It is due to Sirisena’s backing that Ravi K’s appointees to many public institutions that he controlled before August 2015 are still in their positions despite orders from the prime minister himself to resign. Hemasiri Fernando is the Chairman of the People’s Bank and of the ITN as well. Ranil Wickremesinghe’s appointee as the Chairman of People’s Bank Nissanka Nanayakkara is out twiddling his toes. Krishantha Cooray described as a ‘strategist’ of the UNP managed to make it to the Chairmanship of Hilton Hotel only because Sagarika Delgoda who was appointed by Ravi Karunanayake resigned after the Freiedrich Neumann Foundation where she worked earlier, decided to recommence operations in Sri Lanka. If she had not resigned of her own volition, Cooray would have still been out in the cold.

Whether Wickremesinghe has the courage to dig his heels in and make the president reappoint Mahendran is yet to be seen. Why the UNP is unable to stand up to Sirisena is because they are dependent on him to maintain their power. They can confront Sirisena only if they are willing to take him down with them, which of course they can do if they want to. Wickremesinghe’s worry however may be that even if they try to do something like that, a group from within the UNP may take Sirisena’s side – there are already at lest half a dozen Sirisena loyalists who have been elected on the UNP ticket.

So there is a very strong possibility that even on the matter of Mahendran, Wickremesinghe may be forced to retreat as he had done on so many previous occasions. Be that as it may, this is all a drama in a ship with a gaping hole in the hull. The future of this government will not be determined by anything that happens to Arjuna Mahendran but on the more crucial matter whether they will be able to meet their debt servicing commitments. Before the end of this year, the present government has to pay back well over two billion USD that they had borrowed in short term loans since January last year in addition to around two billion USD of the loans that previous governments took. Whether this government will be around to see 2017 depends on how successful they are in meeting their debt commitments.

In this respect, ominous signs have been manifesting themselves. One unexpected development was the highly successful hartal that took place in the Galle town last Thursday against the increase in the VAT. That it took place in Galle is a surprising development because the Galle town electorate is a bastion of the UNP. The overwhelming response the hartal got from the businesses in Galle is because even small retailers were drawn into the VAT net by reducing the applicable turnover to Rs. one million a month, which would bring virtually all the business establishments in any town within the ambit of VAT. To almost all retailers other than the large supermarket chains, this would be a sudden 15% tax on their turnover and they would have to pay this out of their operating profits depleting margins. The BBC Sinhala service reported that even the smallest boutiques as well as Muslims who rarely close their shops had joined the hartal in Galle. This was followed on Friday with a no less successful hartal in Maharagama and the campaign looks set to spread countrywide in the coming days.

That the government is not insensitive to complaints about the application of VAT to areas that had been VAT exempt is clear from the announcement that VAT would be removed from certain parts of the private health care service such as medical tests. In the health sector, as in the small and medium retail and wholesale sectors, the jump was from 0 to 15%, not from 11% to 15% as in many other sectors. If the government is forced to roll back the VAT on sections of the health sector and on the retail trade, the targeted revenue from VAT will not be realized, generating another raft of problems. The doubts that the credit ratings agencies expressed about the capacity of this government to implement the IMF program is partially coming true. The capital gains tax that is to be introduced before the end of this year is already drawing flak from many quarters. The government will also have to implement market based pricing for fuel and electricity. If these IMF conditions are not progressively implemented, the government may fail to qualify for the remaining tranches of the IMF loan. Compared to the economic challenges facing this government, the Arjuna Mahendran affair is just a sideshow.


The Tilina Gamage affair

There is no lack of problems in the country. Another looming problem is the bus fare hike demanded by private bus operators by 4 July. If bus fares are increased so will other road transportation costs leading to a chain reaction which will culminate in higher prices for consumers and commuters. The postal workers were on strike until last Thursday and undelivered letters had piled up at the central mail exchange. There is a simmering dispute between the trade unions and Minister Arjuna Ranatunga in the Colombo Port which has the potential to blow up into a major confrontation. In the meantime the victims of the recent natural disasters are still demanding relief. The Aranayake landslide victims are demonstrating and hooting at ministers due to delays in relocating them, the flood victims in Kolonnawa are signing petitions asking for relief in paying the water and electricity bills.

The government seems to be making some headway in providing relief only in the case of the Kosgama disaster and that too only due to the involvement of the army. It doesn’t look as if the government will be able to overcome the challenges confronting it because their priorities lie elsewhere. As this was being written, parliamentarian Udaya Gammanpila - a live wire in the opposition - was arrested and due to be presented before a Magistrate over an alleged forgery case. The government is spending far too much time on trying to intimidate the opposition and far too little time on trying to get any real work done.

In the middle of the serious issues facing the country, the drama that is being enacted with regard to Magistrate Tilina Gamage gives cause to wonder whether the authorities have taken leave of their senses. This is symptomatic of the irrationality that has gripped this country since last year. A Magistrate is being pursued like a fugitive from justice not because he had committed rape or murder but because he owned an elephant. How can the possession of an elephant even without proper documentation be a matter for a body like the CID to handle? Furthermore, who in his right mind would want important members of the community like leading Buddhist monks and Magistrates remanded for possessing an elephant? There may be various laws in the statute books but that is no excuse for the Tilina Gamage drama or the Ven. Uduwe Dhammaloka drama that preceded it.

Our statute books are full of unbelievably idiotic laws. We have laws that can put a permanent end to the family as an institution if implemented properly. Among the silliest laws in our statute books are our election laws. Even at this very moment, there is an informal agreement between the elections commissioner and the political parties not to implement some of the more impractical provisions of the law. How many people in this country know that there is an ongoing conspiracy between the elections commissioner and the political parties to intentionally flout the law of the land? When it comes to the implementation of the law, commonsense is an important interpretative tool. Unfortunately, it is not being utilized in the law relating to rearing elephants.


Sri Lanka and Brexit

The Prime Minister’s appeal last week that Britain should remain within the EU was a reminder that while we are preoccupied with our domestic issues, there are other events outside the country which could have a direct and very considerable impact on Sri Lanka. One such event is the possible exit of Britain from the European Union. The referendum that would decide whether Britain stays within the EU or not, will be on 23 June. Britain accounts for over one third of our exports to Europe and therefore what Britain does is important to us. As of now, all the polls indicate that Britons may vote to exit from the EU.

The Brexit debate in many ways mirrors some of the issues faced by the present government in Sri Lanka as well. Despite repeated warnings of a negative economic impact in the event Britain exits the EU, the polls are showing that the majority of Britons may vote to leave. The issues at stake here are British nationalism, a need to assert the sovereignty of Britain as against the diktat coming from Brussels and for Britons to regain control of their own borders and immigration policy. The warning by the British Chancellor of the Exchequer that Britons would be poorer by £4,300 by 2030 if they leave the EU, which Ranil Wickremesinghe also used to buttress his pro-EU argument, may not deter those who want to leave the EU. Last Friday, a UK newspaper, the Evening Standard reported that a telephone survey carried out by a reputed organization revealed that only 17% of Britons believed the Chancellor’s claim that UK households will lose £4,300 and be permanently poorer after a Brexit.

The loss of a few thousand pounds from their annual incomes may not look like too high a price to pay so as to be able to regain control over one’s own destiny. Donald Trump is fighting the presidential election in the USA on much the same issues as the British "Leave EU" camp. In fact Trump has endorsed the "Leave EU" campaign because he can empathize with those who espouse that view. In more ways than one, Ranil Wickremesinghe too is grappling with similar issues in Sri Lanka. Try as he might, he has not been able to convince the Sri Lankan public that a comprehensive economic partnership with India would be a good idea. Last Friday in a statement to the press from Temple Trees, the Prime Minister once again stated that the ETCA with India would be signed before the end of this year. That is an open invitation to another round of agitation in addition to the smorgasbord of issues confronting the government already.

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