Dilrook Kannangara

Corruption has become a hot topic once again. Unfortunately corruption is discussed only during election time. Winners of elections burry it for good until their opponents resurrect it at the next election. So the cycle continues. Lack of credible direct evidence of corruption is the main difficulty in taking action against it. However empirical evidence is available for all to see about the degree of relative corruption. Relative corruption is the level of corruption of one government compared to another government.

In 1994 Chandrika alleged massive corruption of the UNP government. It worked well for her but did the country do any better? Actually she was blaming the Wijetunga administration of faults of his predecessors! While at no place she mentioned WijetungaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s corruption or his governmentƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s corruption, she was complaining about Jayawardena and Premadasa administrationsƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ corruption. However people voted out the not so corrupt Wijetunga government and elected to office a government which is considered far worse. Turning back at the events of the last two decades, it is crystal clear that the 1993-94 Wijetunga government was less corrupt that its replacement of 1994-2001.

Corruption indicators

When there is large scale corruption it becomes evident through practical indicators. High corruption means less welfare schemes, inability to meet state financial commitments, reckless borrowing, depleting foreign reserves, selling government owned entities, economic hopelessness, reducing investor confidence, closure of universities for long periods, cuts in public spending and staff and no salary increases for the public sector.

If one compares these practical and real indicators of previous governments and the Rajapaksha government, a strange conclusion emerges. It is strange because it is not what you hear on political stages and politicised media.

Reduction or increase in welfare schemes?

Although it is not considered sound economic practice, the Rajapaksha government increased the welfare spending. The fertilizer subsidy was extended to Vanni, displacement subsidies from Mavil Aru to Menik farm, drought and flood subsidies, Samurdhi subsidy and a number of other subsidies were granted.. Not a single subsidy was cut. The increase in welfare schemes took place despite allocating double than before for defence.

Reckless borrowing, what happened to foreign reserves?

The Rajapaksha government never went for reckless borrowing. GovernmentƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s lack of desperation in borrowing was displayed to the IMF and other donors. This was despite the war. From 2001 to 2003, within just two and a half years, Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s external debt rose from US$ 8.3 billion to US$10.6 billion even without a war! However, from 2005 to 2009 for four years Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s external debt only rose from US$10.85 to US$13.50 billion. Whether the annual increase is considered or the percentage increase is considered, the Rajapaksha administration has done very well.

The composition of the loan portfolio is also important. By 2005 about 60% of the state debt portfolio was external (foreign) debt. This reduced to close to 45% by 2009. Lesser foreign debt means less national indebtedness as it lowers the impact on the exchange rate and external reserves. This is a remarkable achievement despite the war.

External reserves reached an all time high in 2009.

Can both these happen at the same time if there was more corruption than before? Very unlikely.

Exchange regulations were eased as never before since the country has a stable level of foreign reserves and managed external debt with the hope of a gigantic economic expansion.

In the last couple of years the world went into recession. Contrary to dire predictions, Sri Lank overcame this challenge with flying colours.

Selling government owned entities

Selling government owned entities has always been a popular escape. When in a situation of unmanageable budget deficit, selling off ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”family silverƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ has been a quick fix. However, people suffer as a result. How many government owned entities were sold by the Rajapaksha government? Almost none. All previous governments after 1977 sold off public owned enterprises to cover the budget deficit. Ceylon Oxygen, Ceylon Cold Stores, Textile Corporation, Kelani Valley Plantations, Kotagala Plantations, Maskeliya Plantations, Namunukula Plantations, Sri Lanka Telecom, Sri Lanka Insurance Corporation, National Insurance Corporation, Distilleries Corporation, Sri Lankan Airlines (formerly Air Lanka), Ceylon Transport Board, Lanka Gas (sold to Shell gas), CINTEC, the lucrative distribution arm of the Ceylon Petroleum Corporation (sold to Indian Oil Company), etc.

Many desperate attempts were made to sell Bank of Ceylon, PeoplesƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ Bank, National Savings Bank, State Investment and Mortgage Bank, Ceylon Electricity Board, Sri Lanka Railways, Sri Lanka Post, etc.

The Rajapaksha administration didnƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢t do this. Where did the government find the money to manage a US$1.5 billion war, welfare schemes while not earning a quick buck by selling off state owned entities? If the Rajapaksha administration was more corrupt or as corrupt as other administrations, this should not be the trend.

Further, previously sold out entities including Sri Lankan Airlines were brought back under peoplesƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ ownership.

Cuts in public spending, employment and salaries

On top of all that, the Rajapaksha administration increased the number of persons employed in the state sector. While modern economists would not like it, the government managed the increase very well. Economists note with concern that Sri Lanka has the highest state sector employment as a percentage of the GDP. Despite that salary increases were awarded as never before.

Employing unemployed graduates in very large numbers was also seen during this time. Over the years most of them have been equipped with skills to meaningfully contribute to the economy.

Where is the money? Of course the government increased taxes but total taxes as a percentage of the GDP steadily fell. It is obviously not possible to sustain such a massive state sector if corruption was higher than previous governments.

Economic hopelessness?

There were times when economic hopelessness reached astronomical proportions. In 1971, 1980, 1987, 1988, 1989, 1994, 2001 and 2004 were examples of utter hopelessness in the economic front. Is there economic hopelessness today as it was then? No. Although the cost of living has skyrocketed, peopleƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s income has also increased. But above all there is much anticipation of future economic prospects.

All this is because there is wide anticipation that the economy will do well despite the loss of GSP+, 26 years of war, international pressure and other adversities.

A simple question would clarify the matter. Do you have better prospects today than there were following the tsunami (2005)? The answer is obvious.

Universities, education and healthcare

University disruptions have reduced compared to the past and the government is spending a huge amount of money on primary, secondary and tertiary education. University admissions have steadily increased. Percentage of schooling children has increased over the years. Teaching in the English medium meaningfully started and is expanding. Once this was thought impossible. The healthcare system was also protected and in fact improved. Improvement in the healthcare system helped it cope up with the very large number of war casualties from 2006-09.

If corruption had not reduced compared to the past, none of this would have been possible. When governments were in dire financial state, their attention is first directed towards these vulnerable sectors.

Investor confidence

Investor confidence has increased as never before. The Colombo Stock Exchange became the worldƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s best stock exchange. It shows the tremendous increase in investor confidence. If the present administration was as corrupt as the previous ones, this cannot happen. Many third world countries despite more liberal economic policies were defeated by the Colombo Stock Exchange in the past few years.

Very large scale investment activities take place from the South to the North.. Potential of these investments is even higher.

Bridges, flyovers, road construction, power plants and ports

Infrastructure development in this sector is unprecedented. A very large number of key bridges have come up linking communities and industries. New bridges have opened up new markets, production sources and reduced transportation cost and time. Economic development in the Eastern Province alone was unthinkable a few years before..

Traffic congestion around the City has been a major wastage factor causing wastage in time, fuel, money, property and even lives. Flyovers that came up during the past few years have eased congestion. Real benefits will be seen in time to come. Compared to the previous work of similar nature especially the Baseline Road Project, the present government has been very efficient..

Work on key roads has been stalled for over 25 years until the Rajapaksha government got down to it. Now these artery roads are being built at a vigorous speed. Economic contribution that comes with it would be significant.

Power plants are coming up around the country. Although some of these were on the drawing board for decades, actual work started only recently. There was a time not so long ago when governments think of power plants when CEB is forced to cut electricity.

Finally, the war

A staggering US$1.5 billion was made available for defence. Compared to previous allocations, it has almost doubled. Other ancillary defence related expenditure also increased. Government refused to cut corners when it comes to requirements. Although the budget was passed with extreme difficulty, spending was better managed.

A massive defence allocation along with all the other large spending endeavours was possible thanks to a reduction in relative corruption.

Otherwise not only the war effort would have stalled but also the state sector would have collapsed, state enterprises would have been sold out and welfare spend would have been cut.

During election time these facts are not given enough prominence as the craze for power blinds a section of the population. However, the society must recognize these before it is too late to correct. Politicians are willing to wait another six years for power but people cannot wait for development any longer. They have already waited for 26 long years.