The Pathfinder Presidential Manifesto

Tuesday, 9 December 2014 00:35 - - {{hitsCtrl.values.hits}}

Setting a challenging standard The Pathfinder Foundation has indeed done something commendable. Before commenting further, I have to disclose an interest, that I had the privilege of being associated with the institution many years ago at its formative stage.

With that confession behind me, I must state that the Policy Agenda the Pathfinder Foundation has placed before the public and political parties through the pages of the Daily FT on 28 November is indeed a welcome step towards forcing and challenging political parties to be realistic in the preparation of their manifestos for the forthcoming presidential election. Too often manifestos are a crappy mishmash of unaffordable lies. Pathfinder has presented some vital issues which must be dealt with by any responsible and serious candidate at the Presidential election. While not boring readers with a repetition word for word, it would be important to mention and critically comment upon some of the issues raised by Pathfinder. The Manifesto opens with the statement that the idea is to stimulate discussion. The document is devoid of dogma, focused on practical, pragmatic and implementable reforms. The spirit inherent is one of constructive engagement. The blueprint is one aimed at transforming a low productivity agro based traditional economy into a modern one based on higher productivity and higher technology and services in a global environment. Propitious circumstances Pathfinder bases its ideas on an unprecedented set of ‘propitious circumstances’ available in our country just now, unavailable in the last half century. We probably had an opportunity like this at independence in 1948, which was frittered away by irresponsible petty power politics of language and race bigotry. The present set of circumstances are: The annihilation of the LTTE, the rise of India and China and Sri Lanka’s crucial positioning at the crosshairs of that transformation, rapid globalisation with the focus on Asia , which is destined to be the future power house of the global economy, among others.

Macroeconomic fundamentals, biz climate Pathfinder starts with macroeconomic fundamentals. A sustainable medium term budgetary framework with sustainable debt dynamics to transform Sri Lanka from a ‘begging bowl’ nation, living on foreign aid and irresponsible commercial borrowing , to one which has to face up to the discipline imposed by rating agencies and the international capital markets. Second – improving the business climate. Statist policies have reached their limit. Transparent, predictable, business-friendly policies must be reflected in the manifesto. Deregulation is essential; over-regulation by an overstaffed, bloated and underemployed public service should be done away with. Statist adventures like military ‘camouflage businesses’ operating on taxpayer subsidies crowd-out private enterprise. A fast, cost effective and efficient legal process unlike the present ‘functional anarchy’ which prevails in the Halls of Justice would be a sine qua non. Bribery and corruption, rule of law Elimination of bribery and corruption is another obvious step. Returning to the Rule of Law rather than the present Rule by Law is basic. A foreign policy regime which is not driven by alcohol-driven assault and battery but based on pragmatic national interest in today’s rapidly-evolving globalised dynamic power structures would be vital. On the factors of production, Pathfinder decries the State domination of the land market. It is about time we had the courage to accept that land reform was a disaster in terms of agricultural productivity. Land just was transformed into a State monopoly – like in the times of the ancient kings – and is unproductive. Government agencies, the Railways, the Postal Department, the military and other Government agencies sit on prime land. Labour, capital markets On labour, the rigidities brought about by over-regulation in an environment of an ageing work force, and issues relating to a low birth rate below replacement level, with a high export of migratory labour, should be recognised and addressed. On the financial and capital markets, prudential and robust regulation on good governance criteria must be improved, and things like ‘pump and dump’ rackets must be eliminated. Confidence of investors must be restored if IPOs are to flourish. Pathfinder calls or the promotion of venture capital and the encouragement to angel investors. Exports, FDI, SMEs, microfinance In the area of exports and Foreign Direct Investment, Pathfinder draws attention to the small Sri Lanka domestic market which makes the promotion of export markets essential. The success of the Indian FTA and the potential of the one with China is another factor which Pathfinder draws attention to. The fact that much will depend on what is covered by the Negative List in the China FTA is not referred to. The much-vaunted Maritime Silk Route and Sri Lanka’s strategic location is referred to; the other side of this coin is that the String of Pearls naval bases are a strategy which predated this, and that MSR may be just a benign rebranding, is ignored. Pathfinder also repeats the mantra of the SME miracle, without referring to the drawback created by the lack of prudential regulation for micro finance institutions, which are outside the banking, finance companies and cooperative sector, resulting in a plethora of diverse Ponzi-type pyramid schemes, robbing depositors of their hard-earned savings. The cradle for SME is in the micro sector and it is a huge constraint that there is a reluctance to regulate the microfinance industry which is said to finance up to 80% of women who are involved in income generating activities. It is these entrepreneurs who must be supported to graduate to the SME level.

Agriculture and land The large proportion of the population involved in agriculture, with low productivity, notwithstanding subsidised water, guaranteed purchase price and exemption from taxes and other support measures is highlighted by Pathfinder. Land consolidation is required to help agro industry to recover from the deprivations of land reform and to re-establish a credible agro commerce business. Land laws are a constraint and should be amended. HR, education The crisis in human resource development, which has resulted in the process of education and training not producing skills which the labour market requires, has to be addressed, according to Pathfinder. Freedom in education far beyond free education, which was introduced in the 1930s, is the need of the hour. This will give parents and students the right to make value choices of their education options, instead of being force-fed a State system. This includes the preschool, primary, secondary and tertiary levels. Apprenticeships are the most robust market-oriented method of providing cutting-edge technical skills; the German Dual System should be more robustly introduced throughout the sector. Reform of SOEs, social protection Pathfinder highlights the need for reform of SOEs as a priority. The strategy of converting them into stock companies and listing them on the stock market is one way of improving performance and increasing compliance. The reform of a bloated public service and improving service delivery with an autonomous, accountable management system is seen as a priority. Pathfinder refers to the weaknesses in the existence social protection, the need for better targeting with an exit strategy and concentrating on the really poor and marginalised has to be emphasised. Emerging global trends such as urbanisation, climate change which provide opportunities for the Sri Lankan economy to latch on to and draw benefits from is also pointed out by Pathfinder. Analyse manifestos It is indeed a timely intervention by Pathfinder to raise these issues which should be an integral part of the manifestos of all presidential candidates. But it would be a pity if the process stops at this. Next steps would be to analyse the respective manifestos based on this criteria and see whether the issues which Pathfinder says faces the country are being addressed. It is only then that the voters will be able to take a long hard look into the reality of election promises put forward by the candidates. Further, the spending proposals for taxpayers’ money in the manifestos must be compared with the present reality on State revenue and debts of the Government and so called private (but State-controlled) banks which borrow internationally and lend to Government entities, also factoring in any new revenue proposals in the manifesto. This might be a futile exercise as manifestos rarely contain revenue proposals; they only refer to spending largesse! But the reality that the numbers don’t add up should be highlighted. The proposal is that the Pathfinder manifesto should be used as a benchmark to evaluate the presidential election manifestos. This is logical next step. Further, where Constitutional reforms are concerned, the Report of the Committee on the National Question commissioned by the Government in 2006 and subsequently abandoned should be used as criteria in order review the viability of the proposals. The proposals by the Ceylon Chamber of Commerce submitted to this Committee would be of special importance for the promotion of business and job creation. Pathfinder should get together with civil society institutions like the OPA and the Ceylon Chamber of Commerce and media institutions like the Daily FT and commission experts to comment on the presidential election manifestos compared with the proposals in the Pathfinder Manifesto and other available benchmark documents. This would enable the voting public to have educated analysis of the proposals and provide a reality check. Good governance Sri Lanka is at a stage of its development at which good governance in a liberal democratic environment is fundamental. It is important that the presidential election manifestos are analysed from this aspect, whether whatever is proposed will result in good governance in a liberal democracy. Let’s examine the fundamental requirements for an accountable, liberal, democratic system of government. Strange as it may seem, the most fundamental factor which is required to ensure a democratic system is two sets of restraints: One restraint, among the people, and the other, between the people and the state. These restraints rest on four basic features, all essential. Capacity to tolerate dissent First of all, a democracy needs citizens who have the capacity to tolerate dissent. Dissent, that is, which operates within the law. There must be space for what has been described as a ‘loyal opposition’. Loyalty of the citizen to the democratic political process must override their loyalty to their own particular political point of view. Citizens must accept the legitimacy of a government run by and even for their opponents. They must have the confidence that they, who oppose, the present administration, will in time have their own turn in government. While the legitimacy of dissent is accepted, the use of force must be ruled out. Democracies need ‘guardians’ Secondly, democracies need ‘guardians’. Those who hold positions of political, bureaucratic, judicial or military and police power, must act within the law, recognising the need to comply with constitutional limitations placed on their behaviour and that the citizens have the right to challenge excesses or abuse of power, through recourse to an independent judiciary. The role of an independent media to draw attention and communicate such abusive behaviour is also essential. The guardians are different, from those who are referred to as ‘bandits’, in that the guardians use their powers not for their own material or political advantage, but act according to law, observing the legal limitations on their authority, and act in favour of a nation of the benefit of the nation as a whole and not in a partisan manner. One may, perhaps, contra distinguish a ‘statesman’ from a mere ‘politician’ in this context. Unfortunately, throughout the history of mankind, power and wealth have been conjoined! The idea that the two should be separate is a relatively new and revolutionary concept, not yet totally and universally accepted. Concepts of constitutional law such as the Rule of Law and the Separation of Powers, and the Independence of the Judiciary and Fundamental Human Rights and Freedoms, have all evolved in the context of empowering and institutionalising, this separation of power from pecuniary wealth. Fundamentally, the ‘loot, shoot and scoot’ tendency in undemocratic regimes is the very antithesis of this concept of guardianship. Properly-functioning markets and state Thirdly, democracies need properly-functioning markets, supported by a well-functioning state. By a functioning market, analysts definitely do not mean, the abuse of power by the state to turn ordinary citizens assets into a ruling classes private wealth. So-called entrepreneurs who build their fortunes on such blatant theft are no more legitimate than the politicians who connive with them. Properly functioning markets support prosperity. A social system which is able to ensure a decent and reasonably secure standard of living is also most likely to ensure a stable society. This enables citizens to place trust in the rational economic behaviour of their fellow citizens and in a stable and predictable economic future. Most importantly, effectively functioning markets loosen the connection between financial prosperity and political power. Effectively functioning markets make it possible for people to regard the outcomes of elections as important, but most importantly, not as a matter of life and death either for themselves or for their families. This lowers the temperature of politics to a bearable level, rather than to one of basic survival. A commonly-accepted legal regime Fourthly, democracies need a commonly-accepted legal regime; most importantly, constitutional laws and conventions. Such laws enacted and implemented in accordance with accepted procedures shapes the rules of political, social and economic activities within the state. A country that lacks the Rule of Law is permanently on the verge of anarchy, chaos or tyranny. As succinctly stated by Lord Bingham, former Lord Chief Justice of England, described as the greatest English Judge since World War II, the Rule of Law implies that ‘All persons and authorities within the state, whether public or private, should be bound by and entitled to the benefit of laws publicly made, taking effect (generally) in the future and publicly administered in the courts’. Survival of a democratic system The four principles enunciated above, should make it abundantly clear that being a democracy is more than just being an electocracy, each adult, one vote, periodically! Or even: One person impersonates an adult, by a rigged vote, on a regular basis! The survival of a democratic system requires and entails a complex web of rights, obligations, powers and most importantly constraints. Basically a democracy is the political expression of free individuals acting in concert, otherwise it simply cannot exist. Fundamentally, those who have won an election do not have the right to do as they please. That is not democracy, but merely an electocracy, an elected dictatorship! Without the four fundamental requirements – of true citizens, honest guardians, functioning markets and just laws – there cannot exist a liberal democratic system of governance. Such a rules-based liberal democratic system is a bulwark against corrupt, abusive and autocratic governments. Liberal democracies are on average richer than non-democracies. They are less likely to go to war and have a better record for fighting corruption. More fundamentally, a liberal democratic environment gives citizens the space to speak their minds freely and shape their own and their children’s futures. Decline in democracy In the second half of the 20th century, principles of liberal democracy have taken root in some very challenging political and social environments – post-Nazi Germany; post-colonial India, which had the world’s largest population of poor people; and post apartheid South Africa. The process of decolonisation created a host of new democracies in Asia and Africa. In countries such as Greece, Spain, Argentina, Brazil and Chile, autocratic regimes were replaced. By the year 2000, Freedom House, a think tank, classified 120 countries as democracies. But in the 21st century although more people than ever before, estimated to be 40% of the world’s population, live in countries which will hold free and fair elections, democracy’s global advance has come to a halt and may even have gone into reverse. Freedom House estimates that 2013 was the eighth consecutive year in which global freedom declined. Many nominal democracies have slipped towards autocracy, maintaining the outward appearance of democracy through elections, the veneer of an electocracy, but devoid of the rights, restraints, institutions and laws that have shown to be an equally important aspect of a functioning liberal democratic system. A welcome start The Pathfinder Election Manifesto is a timely and welcome start of a process, but only the first initial step. The challenge will come when the presidential candidates’ manifestos are published and they have to be critically analysed on the basis of the Pathfinder Manifesto and other benchmark documents to consider whether they will usher in a liberal democratic system which will ensure good governance. Without that step, publishing a set of proposals alone, while, as said, is an important first step, would be, at the end of the day, an exercise in futility. (The writer is a lawyer, who has over 30 years of experience as a CEO in both State and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)