Ajit Kanagasundram

The Perfect Storm

Ajit Kanagasundram

In the past year the mood of optimism that accompanied the Yalpanaya government in 2015 has evaporated. We simply seem to have exchanged the misguided and dictatorial regime of Rajapakse for the misguided and weak government of Sirisena/Ranil. There is a confluence of factors – political, economic, financial, inter-ethnic relations and international that is converging and are not in our favour. This combination of factors will cause a major crisis within 2 to 3 years.

But first let me explain my title, which is a nautical term – The Perfect Storm. It refers to the convergence of gale force winds, strong tidal forces and huge waves that takes place during typhoons in the Southern Atlantic in winter months. It was feared by sea farers  in the age of sail as no ship could withstand it and survive. It is still feared even now in the age of large passenger and cargo ships. It is the confluence of winds, tides and waves that is so dangerous and irresistible. This is a good analogy for what we as a nation face now.

Let me take politics first. The coalition between the UNP and Sirisena’s wing of the SLFP (a brilliant piece of political engineering by former president Chandrika Kumaratunga) was fragile in the first place as it brought together disparate elements united only by their liking for the perks of power with no common ideology. The only way they could hold together was if the leadership had quickly implemented the Joint Manifesto – an excellent and rational policy document- so that the coalition could continue to win future elections. The main points were to eliminate corruption and bring those responsible to industrial scale corruption in the previous to justice, privatize loss making government corporations to eliminate the drain on the Treasury, foster National Reconciliation and Justice, attract FDI by providing a benign and stable investment environment and bring down the cost of living for the average man.

Instead this is what actually happened. 

Time was frittered away in taking action against the kleptocrats of the previous regime who were known – all it required was special courts under new legislation to handle corruption with simplified rules of evidence and a mandate to make quick decisions (our current judicial system is highly inefficient and ineffective and clever lawyers can cause interminable delays by obstructive tactics and appeals on legal minutae – something we as a nation are really good at). Now the chance is lost and the lessons for politicians is – you can get away with it if you stall long enough.  This was made worse by the Central Bank Bond scandal. This held the nation enraptured for 18 months with daily revelations of dishonesty and to make it worse the ultimate loser was the EPF – the common man’s retirement fund. This forever tainted the UNP with corruption –  when the truth is that the money lost is a fraction of what the previous regime stole or what Sri Lankan Airways or the CPC lose each year. This was the single most damaging blunder by the present regime relating to its reputation and moral authority to counter corruption – a cancer eating into our national life.

Now the ability of the government to take the hard and unpopular steps taken to achieve national progress is being undermined by political infighting within the coalition – which as I mentioned earlier was a heterogeneous group united only by their love of power. The earlier constitutions had the virtue of simplicity and accountability– in the pre 1978 constitutions Cabinet responsibility and the Post 1978 constitution an all- powerful Presidency. Now the 19th amendment ( actually a compromise and interim measure till a new constitution was passed) has muddied the waters and split responsibility between the President and PM. No one quite knows who is ultimately in charge and politicians are pulling in opposite directions. The President dissolves the Prime Minister’s Cabinet sub-committee on Economic management and cabinet ministers publicly criticize government policy, oppose specific cabinet decisions and publicly advocate their pet projects like coal fired power plants. The recent results of the local government elections only made things worse. The result is decision making paralysis that prevents the hard and necessary decisions on the economy being taken. The only voice of sanity in this bedlam is the Central Bank Governor Dr Indrajit Coomaraswamy, who has publicly warned that political instability will threaten foreign investment and economic growth (the latest economic growth figures are a dismal 3%). The problem is that as a Harrow and Cambridge educated economist and gentleman he is too polite. It would be more effective to be blunt and use Bill Clinton’s famous phrase (that helped him to win the 1992 Presidential election in the US) – “It is the economy, Stupid” to concentrate politicians minds on what is really important.

After the recent Local Government Elections we face Provincial Government elections in September  and Parliamentary elections in another 15 months then another Presidential election thereafter. These are gripping the attention of our leaders and preventing them from taking the hard political and economic decisions – and the nation is enthralled by this Political Theatre (by far the most entertaining in the world) while the affairs of the nation are left to drift.

The government’s financial affairs are in a mess and the Treasury is running out of money to subsidize loss making government corporations. To quote just a few examples :

  • It was quoted in the papers on April 1 that the Minister in charge of the Ceylon Petroleum Corporations had said that the CPC was loosing Rs 244 million a week and prices would have to be raised on petrol and , the poor man’s fuel, kerosene. This will further worsen the cost of living for the long suffering ordinary man. The government’s hands are tied on this as they have committed to the IMF and World Bank to implement a transparent pricing formula to link the local prices to the international benchmark price of crude oil, which has currently risen to $65 per barrel. The deadline for this was March and we are already in breach of this covenant to the IMF
  • The same goes for the Ceylon Electricity Board, who are short of power as the Mahaweli reservoirs are silting up (they now only provide 35% of our power rather than the previous 50%) and a decision on a new power plant (either coal or Liquefied Natural Gas) that should have been taken 18 months ago has been delayed due to infighting. They now have to supplement power supply with expensive diesel and Marine Fuel Oil plants at twice the price of coal. This situation will get worse when the CPC raises the price of fuel. The government had committed to the IMF to introduce a transparent pricing formula for electricity by September. The long suffering consumer can expect a significant price rise to his tariff which is already 40% higher than in Singapore.
  • The CPC is running a 50 years old refinery whose efficiency (or lack of it ) is such that a friend who is an expert and a consultant to the CPC told me that it would be cheaper to import refined products and close down the refinery. This will never happen as it would put thousands out of work. A new refinery will cost $ 1 billion that we don’t have.
  • We have similarly committed to the IMF (deadline June) to selling loss making corporations like Sri Lankan Airways and hotels like to Hilton and the half completed Hyatt. This will be difficult as in the airline case the government will have to absorb $1 billion in past losses and our reputation for corruption in the purchase pf planes and political interference is such that no reputed airline will touch us – we have had 4 alliances with foreign airlines previously all of which ended badly. In the case of the Hilton and the Hyatt the government will have to take a significant write off in values to make it worthwhile for a foreign buyer. Again the Treasury does not have the funds for this and the ultimate loss may have to be borne by the Insurance Corporation and the EPF who are the current shareholders.
  • There has been no significant FDI in the past 2 ½ years except for the aborted proposal to “build Volkswagens” in Sri Lanka. Actually this was a scam to get government land cheaply and was denied by Volkswagen management at Wolfsburg in Germany.
  • The list can go as every government corporation is overstaffed and financially underperforming

Now ethnic reconciliation and foreign diplomatic relations that I will touch on only briefly as they are reported on ad nauseam in our press.

Ethnic relations : It should be remembered that the UNP led coalition won the 2015 election entirely on their promises of justice for the minorities and the Tamils and Muslims therefore overwhelmingly voted for them – Rajapakse won the plurality of the Sinhala Buddhist vote. But after making unrealistic promises the government has done almost nothing. No justice for the victims of the war (I oppose foreign judges as that would be infringement of our sovereignty but action could at least been taken in local courts against the white van murders of Tamils), no compensation as promised, no new constitution as promised and an Office of Missing Persons which after 2 ½ years  has not yet found a single Tamil missing person (perhaps they should be asked to find Arjuna Mahendran who is the most prominent Tamil missing person! ). The government could have taken simple steps like giving back all the army lands taken by the Tamils that are now used for hotels and holiday homes. Instead of a new constitution (which is now dead in the water after 2 years of ballyhoo) that government could have taken simple steps like instructing the Provincial Government to listen to the Provincial Chief Minister on matters relating to land and policing  (and recruit Tamil speaking Policemen so people can make a report in a language they understand). I happen to believe that the Tamils in the North and East will be better off under a competent and benign Central government (I repeat competent and benign) till the wounds of war have been healed, civil society re-established and trust built between the two communities and leave it to a future kinder, wiser generation the task of a permanent constitutional settlement. After all we Tamils have waited 60 years since the Bandaranaike Chelvenayagam pact and endured 25 years of war. Will another 20 years make a difference to our people?  To complicate the situation further there are dark forces secretly inciting violence against the Muslims, who are the targets now as there are no viable Tamil targets left.

Similarly in the diplomatic arena we have made entirely unrealistic promises to the UN Human Rights Commission and Western governments and have done almost nothing to fulfill them. These organizations are not stupid and their patience is running out – goaded by the Tamil Diaspora with their equally unrealistic agenda of “Tamil self-determination” (ignoring the history of the past 35 years).

So after 70 years of independence, once the model colony of the British, one of the highest levels of per capita aid in the world, patrons with deep pockets like China (we are a willing pawn in the “Great Game” being played out between the US, China and India in the Indian Ocean), we are now facing an existential threat of our own making.

We are drifting towards a crisis and no one is paying attention. The public are distracted by our Political Theatre and the necessity of making ends meet on a daily basis amid the rising cost of living, which is due to get worse. The politicians are jockeying for position when the Government changes. In Colombo there are grand parties for the rich in 5 star hotels, even grander weddings at destination resorts and “parties” for rich young businessmen where cocaine and Russian girls are available at a price that will pay the expenses of the average family for a month.

To continue my nautical metaphor – this is exactly the same as when the band played dance music on the deck of the Titanic to distract the passengers when the ship was slowly sinking into the icy waters of the North Atlantic – and in our case  the Captain and Chief Officer are arguing and pulling the wheel in different directions and the crew are escaping on lifeboats leaving the passenger stranded. Meanwhile the ship of state drifts helplessly towards the rocks where a Perfect Storm awaits us.


The author welcomes comments and criticism by email, and he will respond