Coomaraswamy replaces Mahendran but other headaches remain

* Tough ask for Coomaraswamy to restore credibility of CB
* Strikes tomorrow by private bus services and health sector
* More town based hartals against VAT


As we go to press, the multiple crises in the country were threatening to spill out onto the streets with the private bus services due to launch a countrywide strike tomorrow (Monday) demanding a hike in bus fares and several health sector unions led by the GMOA going on strike the same day protesting against ETCA and the private medical college in Malabe. This is coming on top of the hartals that we have been seeing in towns all over the country. The government seems incapable of containing the situation or even thinking of solutions for the issues raised. The system is now in danger of experiencing creeping paralysis. The various factions in the government were holding meetings late into the night not to discuss what was happening on the streets but to sort out disputes among themselves.  

The drama surrounding the appointment of the Central Bank Governor ended yesterday with the appointment of Indrajith Coomaraswamy to the position by the president obviously as a compromise candidate. Last week we saw the unedifying sight of the President and the Prime Minister sitting together in the premises of the Central Bank in what was clearly a turf war. There was probably no instance at any time in our history when the President and Prime Minister were both present in the premises of the Central Bank unless it was for a really important ceremonial occasion. It was certainly not a sign of unity – it was a clear sign of disunity. Even while sitting together they were obviously unable to agree on a candidate for the post of Governor. Both of them came to the Central Bank, sat together, spoke to the staff and then left leaving the position of Governor still vacant. What kind of message does that send to the public?


Another controversial

CB Governor

Then on Saturday we heard that Indrajith Coomaraswamy has been appointed Governor of the Central Bank. While his credentials in terms of ability and experience are impeccable Coomaraswamy does have a blemish in that he was closely associated with Raj Rajaratnam and his Galleon Group just before it went down in an insider trading scam that reverberated around the world. Indrajith Coomaraswamy was one of the two founding directors of Galleon Research Services which was a fully owned subsidiary of Galleon International Management LLC – Rajaratnam’s company.  He served as director in this company for two years until it was voluntarily dissolved in August 2010. It was Coomaraswamy himself who applied to dissolve the company. In 2011 Raj Rajaratnam was found guilty of all 14 charges of insider trading against him. Rajaratnam was arrested in October 2009 and Coomaraswamy was working with him when the scandal came out into the open.

The government has ended up removing one Governor because of allegations of insider trading and related party transactions against him, and appointed another Governor who was at the wrong place at the wrong time. If the bond scam gave the opposition grist for their mill, Coomaraswamy’s appointment will allow them a continued supply. Even before Coomaraswamy had been formally appointed, the National University Teacher’s Association was screaming blue murder over the appointment saying that Coomaraswamy had been working with Rajaratnam when the latter went down. Because Rajaratnam was accused of contributing money to the LTTE coffers, Coomaraswamy too is now being painted with the same brush perhaps unfairly. It is very unlikely that Coomaraswamy would have had anything to do with the LTTE given the proximity of the family to the slain Neelan Tiruchelavam. Coomaraswamy would have been eminently suited for the role if not for this unfortunate sojourn in the wrong place. That blemish apart, it is now incumbent on Coomaraswamy to restore the credibility of the Central Bank which was sorely compromised during Mehendran’s tenure. Among the previous names suggested the two most suitable individuals for the post would have been W.A.Wijewardena and Nandalal Weerasinghe.

The tussle over the appointment of the CB Governor brought a wider issue out into the open. The UNP won the parliamentary election of 2015 and the Central Bank was placed under the purview of the Prime Minister’s own ministry in the power-sharing arrangement between the President and the Prime Minister. The Prime Minister should be able to appoint a candidate of his choice as the CB Governor without any wrangles with the president. That arrangement has now been disturbed with the president appointing a compromise candidate who was obviously not the first choice of the prime minister.

This will directly run counter to the whole yahapalana project which was supposed to curb the power of the presidency and to restore parliamentary democracy. Whoever is appointed to head the Central Bank should have been the choice of the UNP which heads the parliamentary government. Many of those in the yahapalana coalition in their headlong quest to sacrifice someone - anyone at all - on the altar of public opinion to save their own skins have lost sight of the wider issue involved here. The only person among the freelance yahapalanites who seems to realise the gravity of the situation is Wickremabahu Karunaratne who has steadfastly backed the Prime Minister’s choice. All the freelance yahapalanites and the yahapalana NGOs should in fact be backing the prime Minister because their entire struggle was to restore a prime ministerial form of government to this country.  After the presidential election of 2015, the common candidate was supposed to preside over the abolishing of the executive presidency and walk off into the sunset to become the great elder statesman of Sri Lanka who restored parliamentary democracy after nearly four decades of presidential dictatorship. The UNP was then supposed to form a government and rule the county.

That however is not how things turned out. Maithripala Sirisena who won power in a windfall was not willing to give up that which had dropped onto his lap as if by divine providence. No sooner had he been elected president, Sirisena and the scheming entourage he has around him were devising ways and means of keeping him in that post without abolishing the executive presidency as pledged. The first thing Sirisena did was to go around the country saying that if he had lost the election he and his entire family would have been six feet under. Ranil Wickremesinghe in his misguided need to portray the Rajapaksas in a bad light agreed heartily.


Sinbad the sailor

Wickremesinghe apparel did not realize what Sirisena and the scheming cabal around him were up to. Later when the 19th Amendment to the constitution was being drawn up, Ranil Wickremesinghe, Wijedasa Rajapaksa and Jayampathy Wickremesinghe had gone to see Sirisena with the draft amendment which included the abolition of the executive presidency and the creation of a ceremonial presidency, Sirisena had snapped at Jayampathy saying "Mawa pambayek karanna hadanawada? Mewa aran enna epa mama gawata." (Are you trying to turn me into a scarecrow? Don’t come to me with these suggestions hereafter.)

From that point onwards, try as they might, the UNP has not been able to get Sirisena to stick to the original pledge to abolish the executive presidency. More recently, when the parliamentary resolution establishing the Constitutional Assembly to draft a new constitution was being prepared, the preamble to the resolution had referred to the fact that President Sirisena had repeatedly expressed his resolve to abolish the executive presidency. The entire introduction to that resolution barring one sentence was struck off by Sirisena’s loyalists! So now a new constitution is being promulgated without the stated objective of abolishing the executive presidency. After becoming president, Sirisena moved to take over the leadership of the SLFP and the justification he gave for this at that time was that this was to obtain the majority necessary to pass the 19th Amendment.

But it soon became clear that Sirisena wanted to lead the SLFP in his own right. This has led to a situation where both the SLFP that he leads and the UNP that brought him into power are being driven into the ground. When it came to the distribution of ministries last year after the August parliamentary election, there was a hiatus of several weeks as the President and Prime Minister wrangled over who gets what. Ultimately the UNP was left with the dregs while Sirisena took many of the best ministries. Today, the SLFP has more ministers than the UNP in numerical terms as well. The UNP has been getting more and more marginalised even though it is they who provided the majority of the votes to defeat Mahinda Rajapaksa last year. At village level, UNP activists have found that they can’t get anything done by the political authorities firstly because their own ministers don’t have any real power and secondly because they are not countenanced by the SLFP ministers who have their own constituencies to look after. If another four years lapse in this manner, the UNP will be in very serious distress electorally. What makes things worse is that the UNP has been on the back foot all along with the appointment of a compromise candidate as the Central Bank Governor being the latest episode.  

Prime Minister Ranil Wickremesinghe is now in the position of Sinbad the Sailor who found himself shipwrecked on an island inhabited by an old man who wanted Sinbad to carry him on his shoulders to another part of the island and Sinbad obliged only to find that once on his shoulders, the old man refused to get off and used him as a beast of burden to get about. Ultimately, Sinbad had to get the old man drunk to make him loosen his grip so that he could escape. Sinbad feared that if he did not get the old man off his shoulders he would die. Well, it is not too difficult to imagine what would happen to Prime Minister Wickremesinghe and his party if Sirisena remains on their shoulders for the next four years of this government. That the Prime Minister had the courage to at least defend Arjuna Mahendran in public is an improvement over what has been happening over the past one year.

Some time ago, in referring to the fact that the SLFP group in the government holds most of the best ministries, at a television appearance, Sirisena actually said that the ministries had been apportioned between the two political parties not by him but by the Prime Minister!  Some may exult in the fact that the UNP is in this mess today due to unprincipled politics – forming alliances with anybody and everybody in order to gain political power and all that they are going through now is richly deserved. That is indeed true, but if people just stand by allowing the UNP to stew in its own juice there will be serious repercussions as far as the democratic system is concerned. Already the democratic system is under tremendous strain not just because of the power struggle between the two main political parties but also because of the stifling of the main opposition group in parliament which speaker Karu Jayasuriya has steadfastly refused to accept as a separate group in parliament resulting in the anomalous situation where the largest group of opposition MPs in parliament have been deprived of the position of Leader of the Opposition.

The UNP itself is complicit in this. While oppressing the opposition through non-recognition in parliament, investigations against opposition members and the imprisoning of key opposition figures, the UNP in turn is being used as a doormat by the Sirisena faction of the SLFP – the unholiest political situation that this country has seen in its post independence history. The only bright side of this is that a strong and united opposition is forming outside parliament against the yahapalana hegemony in parliament. In Britain, the Conservative Party, Labour Party and the Liberal Democrats were all defeated by the British public on the question of leaving the EU. A very similar situation is building up with regard to the parties that made up the yahapalana coalition in Sri Lanka as well. Once the present yahapalana set up is defeated, things may once again reach equilibrium. But if democracy to be safeguarded in the interim period, the UNP should not lose even more ground to what is now becoming a presidential dictatorship. Presidential powers have never been used so blatantly to suppress both the parliamentary government as well as the parliamentary opposition.


Why SF didn’t join Sirisena     

That Minister Sarath Fonseka joined the UNP was not surprising since it is the UNP that gave him a new lease of life after he had been rejected at the hustings at the parliamentary elections last year. The UNP too seems to have many uses for him especially in attacking the Joint Opposition and the Rajapaksas in parliament. There is of course an additional reason why SF would have joined the UNP rather than the SLFP rump led by Maithripala Sirisena. The Sirisena faction of the SLFP does not have any electoral prospects whereas the UNP does. A high profile individual like Fonseka has a good chance of being elected to parliament on the UNP block vote whereas the Sirisena faction of the SLFP has no block vote worth talking about and are likely to end up a poor third at the forthcoming LG elections if they contest separately.

The small minority based political parties that have allied themselves with the Sirisena faction of the SLFP see it as a half way house back to the Rajapaksa camp. It would be inconvenient for these minority based parties to join the Joint Opposition at this juncture because they don’t have political power. However the SLFP’s Sirisena faction will be a convenient half way house for parties like the EPDP and the CWC until the Joint Opposition is able to make it back into power. Even if the Sirisena faction gets wiped out at the polls in the Sinhala areas, the EPDP and the CWC have their own voters who will keep them afloat. Their association with the Sirisena faction will give them some influence in the government even if they don’t have ministries.

If the Sirisena faction contests separately at the elections, that will split the government vote – a situation that neither of the two governing parties can afford. However there appears to be some resistance on the part of UNP grassroots activists at the idea of fielding a common UNP-SLFP list as that means that they will have to share a lot of slots with the SLFP’s Sirisena faction. So a lot of tough decisions lie ahead of the yahapalana coalition. In the meantime pressure has been building up on the Elections Commissioner to hold the elections.

The elections Commissioner’s claim that he had written to the authorities asking for the details of the LG institutions which have no delimitation issues is a matter to be taken notice of. The fact is that there are no delimitation issues with regard to the majority of the LG institutions. As the elections can be held for the LG institutions which have no delimitation issues while the others can be held later, there is much that can be said for this piecemeal approach. There is at present a case in the Supreme Court about the infringement of the people’s rights by the postponement of the LG elections and the election commissioner’s indirectly expressed view that it may be feasible to hold elections in the LG bodies where there are no delimitation issues will undoubtedly be taken into consideration by the supreme court in their deliberations.        

That the government did not extend the terms of the last remaining 23 LG institutions including the Colombo Municipality when they lapsed on June 30, is largely due to the public outcry against the postponement of the elections.   It is easy to predict that the manner of facing the LG elections will cause even more tensions within the government. Before we get to the LG elections, the day of reckoning may come for the government if they are unable to raise enough money to meet their foreign debt repayments during the rest of this year. The financial press reported that the Rs. 700 million USD three month currency swap with India which was given to tide over the government for three months or until the IMF money started coming in, has now been paid off. Yet there are more loans due during the rest of this year mainly, short term Sri Lanka Development Bonds issued by the present government over the past 18 months.

With the VAT protests spreading throughout the country, President Sirisena announced that the VAT will be reviewed on Monday. If the VAT is reduced, that will not only seriously affect government revenues but also be a direct violation of the conditions of the IMF. However there is a rather large gap between what the government promises and delivers. Even though it was announced that the VAT on the health sector will be abolished for medical tests and consultations, this has not yet happened. If the government retreats on VAT, then the prediction that was made by the credit ratings agencies Fitch and Moody’s that the IMF targets will not be met because of the ‘patchy’ implementation record of the government will come true. The only disaster left to befall us now is for the IMF to shut us out of their programme – which will mean that we will not be able to raise more debt and we may end up defaulting on our loans.

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