Government juggling from constitution to budget to SAITM, people getting furiouser and furiouser



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Rajan Philips


It has been a long week in politics. Even as the babel of a debate on the constitution in and out of parliament was getting nowhere near its end, it was time for the Finance Minister to deliver his first, his government’s fourth and apparently the country’s 72nd budget to a weary parliament. And wearier still for those MPs who cycled for the occasion in their sartorial best, led by Mahinda Rajapaksa with his security alongside on foot and holding up traffic all around the bicycle parade. There may not have been too much traffic anyway with everyone’s tank running empty, courtesy of a government-made fuel drought. Fewer and fewer people are happy with the government’s goings on. Rather, more and more people are getting furiouser and furiouser with its misdoings.


The government may have managed to please at least some people by announcing the closure of SAITM, but SAITM was, or still is, just the symptom of a national educational epidemic that medical doctors (medical pedagogues are a different species) are hardly the people to be entrusted with curing. On a positive note for the government, all of its ministers, despite the UNP/SLFP backbiting, seemed pleased with Mangala Samarweera’s maiden effort and his self-described "clean, lean and green budget." It certainly was a refreshing short breeze after the three windbag budgets that came and went before it. And, lest it be forgotten, Mr. Samaraweera is a man of both parties, if not for all seasons.


The budget will pass easily, even getting a two-thirds majority in parliament. The big political question is whether the government can muster the two-thirds majority required for constitutional reform, let alone going for and winning a national referendum. The true taste or test of the budget will be well beyond the portals of parliament. And its success or failure will have a serious bearing on the prospects of constitutional reform. The government obviously faces a much stronger opposition on the constitutional front than, hardly any for that matter, on the economic front. The opposition to the constitution is more voluble among the critics outside the parliament than it is within the Joint Opposition inside the parliament. Any setback on the economic front will be a cudgel to the critics of constitutional reform to beat up on the government. Imagine the government risking a referendum with petrol stations standing empty, no coconuts for cooking, and the parents of government medical students going on fasting leaving the parents of private medical students watch their investment go down with SAITM.


Yet, the government seems confident, even cocky, that it will win the argument of numbers on the constitution regardless of the number of arguments that its critics are spewing out daily in the media. That most of these arguments don’t hold any water is beside the point, because they fill the vacuum with rubbish when no one from the government side bothers to respond to them. A case in point is the legal pettifogging and political nonsense – not to mention the outright lie that the late AJ Wilson drafted the 1978 Constitution for JR Jayewardene, that the former Minister of Justice marshalled into a three-part article in a likely fit of post-portfolio pathos. Someone in the government should have responded to it – not for its mostly indefensible content or the long tail of degrees pinned at the end, but for the sake of the position, as Minister of Justice, that Wijeydasa Rajapakshe held in the cabinet until he was shown the door recently.


It may be the government is too arrogant to bother about criticisms, serious or spurious, because it is cocky about winning the argument of numbers – i.e. getting two-thirds majority in parliament and 50%+ in a referendum. Indeed, the LSSP drafters of the reform proposals have been criticised for being arrogant, just like the old-LSSP but without the intellect of the old-LSSP. Old timers may recall that it was government miscalculation that, despite the best tactical signalling by Dr. Colvin R de Silva from the opposition benches, led to the momentous parliamentary defeat of the first Coalition government in 1964. Now the shoe is on the other foot, you might think, but it is not so because in the current situation of rampant political promiscuity the old party labels – UNP, SLFP or whatever – do not carry the same old meaning.


The two parties are cohabiting in the government, but there is no structure or well defined purpose to their relationship. There may not be an effective opposition in parliament, but there are ministers and their opponents in the same cabinet. They want to fight one another in the local elections but they, at least the UNP, expect to campaign together in a referendum. What is more, the SLFP in government is looking at the possibility of joining the SLFP in opposition to fight the local elections as a ‘united front.’ That will upset the UNP’s calculations not only for the local elections, but also for the referendum on the constitution. The only area of unity for now among government ministers is that the economy must do well for the sake of all them no matter in which wagon they find themselves in this or that election. So the economic question for the political survival, individually and collectively, of those in the government is simply: what prospects does the budget have for the economy?


The budget and its prospects


The budget’s success or failure will depend not so much on the budget proposals themselves, as on how the government as a whole uses the budget framework to sensibly navigate the national economy in global circumstances that are reasonably promising at least in the short term. The great uncertainty is the weather and how Sri Lanka is poised to manage the alternating shocks of drought and flood disasters. The main source for risk is the government’s stubborn persistence with mega infrastructure projects regardless of their technical complexities, negative externalities, opportunity costs and the lack of institutional infrastructure to ensure project delivery on time and on budget. As for the specifics of the budget, I will limit myself to a few broad-brush policy questions.


The budget understandably is aligned to the targets set by the government’s Vision 2025 economic plan that was released some time ago. They include a 5% growth rate, $5,000.00 per capita income, one million new jobs, $5 billion FDI inflow, and $20 billion exports – a target that doubles the present status. While it is not reasonable to expect the budget to include a detailed blue print for expanding exports, it is not unreasonable to expect the government to have some idea as to what will make up the targeted export expansion. How much from the agricultural sector – in addition to the traditional and shrinking components of tea, rubber and coconut? How much in industry and in what areas – food and agriculture, consumer goods, manufacture, electronic goods and services etc.? What will be the provincial shares of the state expenditures in basic infrastructure development?


The budget is silent on the controversial trade initiatives that the government has been vigorously pursuing but seems to be opening new ground in promising to repeal or amend quite a list of longstanding legislations, including the Paddy Lands Act, Agricultural Lands Act, the Rent Act and the Shop and Office Employees Act. Targeting these time honoured legislations could stir up multiple hornet’s nests from rural farmers to urban renters to mercantile employees. The government has been complaining about the lack of land for opening up industrial and agricultural export zones. But as Nimal Sanderatne pointed out in his weekly Economic Column last Sunday, it is the government that is the biggest landowner in the country and the alienation of state lands for productive use is apparently tied up in regulations and commission requirements. If that is the bottleneck to making land available, why target a land tenure reform system that was introduced sixty years ago? And the same goes for rent regulations in the housing sector and the working conditions of mercantile employees.


Assembling and alienating land for wooing foreign investors is fraught with many problems, not only environmental externalities but also social dislocations. Many governments have gone down this path and have had to pay a huge political price in elections without reaping much of the anticipated economic benefits. Even Jyoti Basu’s Communist (CPM) government in West Bengal tried this and it became one of the factors that led to the CPM’s defeat after decades in power. The railway lands are up for grabs everywhere, not just in Sri Lanka, and all governments rush them to the market for quick revenue, without much thought as to the consequences of redevelopment. The agents of land alienation carry the same playbook from country to country, but the Sri Lankan government coming late to this global game must at least study the experiences elsewhere before getting rid of family silver for gambling money.


If political smartness is also part of budget making, the government must seriously evaluate its proposals for their voter effects – both numerically and territorially. The urban-rural divide, and the relative levels of investment in the Western Province (Megapolis) and the rest of the country, are critical to being not only politically smart, but also equitably distributive. The budget allocates Rs 17 billion for rural infrastructure including housing and another Rs 4 billion for repairing rural roads damaged by floods. By comparison, Rs 24 billion is earmarked for urban renewal projects – all of them centred for the Colombo hub. Where is the proportionality here – in terms of potential voter satisfaction, even if not in terms of economic equity? Buried in the details is the allocation for providing ancillary infrastructure to the Port City. Ancillary – is a euphemism here; public money is being used to provide all live services to the Port City. What seems to be missing among the details is any allocation for minding the garbage mounds in Colombo and elsewhere.


There is allocation for flood mitigation measures in Colombo and its suburbs including the Weras Ganga project, but no apparent allocation for flood mitigation in the Ratnapura area for which plans and studies have been on the drawing board from the 1960s. Good luck, when it is time for the Sabaragamuwa provincial election. But even Colombo and the Kotte parliament are in danger of being inundated in the next downpour according to the sensational announcement on Thursday, in parliament, by Minister Champika Ranawaka. According to the Minister, the dams at Ambatale and Nagalagam Street, built by British colonialists a hundred years ago, are in danger of being breached. The state of these bunds is an old story, but what are the emergency plans? The Minister just indicated that he had informed the Speaker about the danger to parliament. So, is it time for an Executive Speaker?


In fairness to the Finance Minister, he is promising the farmers a Rs 3 billion insurance scheme, partnered by farmers and the government, to provide Rs 40,000 per acre of land impacted by flood or drought. Will this be available to farmers affected by drought for over one year now? The budget also breaks new ground in promoting electrical vehicles at the expense fossil fuel vehicles. But the promise to phase out fossil fuel vehicles by 2040 requires a comprehensive assessment of not just the transportation sector but even the energy sector. Another proposal is for establishing State Medical Schools in the universities in Wayamba, Sabaragamuwa and Moratuwa. Is this the just sop to the SAITIM Cerberus, or is there more to it?


On the subject of education, the former Minister of Finance, Ravi Karunanayake, made an interesting intervention during the debate on the constitutional proposals. He was highly critical of the proliferation of international schools and the damage done by them. This, in fact, is more than interesting coming forty years after a UNP government at the pinnacle of its powers opened the public educational system literally to robber barons from within and without. It did the same with the public transport system. It was not only economic liberalization that the then UNP government brought in but also the worst manifestation of mendicant capitalism. The shortcoming of socialism is that it has no substitute for the market in providing private goods, and the folly of capitalism is in letting the market mess up the realm of public goods.


 
 
 
 
 
 
 
 
 
 
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