Corruption can snowball into destroying a country, along with those corrupt
Thursday, 4 September 2014 00:00
A lesson from Venezuela
Country and the resources
Venezuela, as most of the readers may know, is the country that the charismatic leader President Hugo Chavez ruled from 1999 till his unfortunate death due to cancer in March 2013. He was loved by the masses in his country and many millions the world over for his brave leadership against Western powers and his rhetoric against the American economic empire.
Venezuela is a country with a land mass of 912,000 Sq Km (14 times bigger than Sri Lanka) with a population of 29 million people. Per capita income of the country in 2012 was $ 13,800 with 95% of export revenue coming from crude oil (source: Index Mundi.com). Currency of Venezuela is â€˜Bolivarsâ€™ and it has officially depreciated against $ from 2.1 in 2008 to 6.0 in March 2014.
Due to my interest to travel the world and witness how different economies develop against the Western pressures that try to keep them suppressed, I decided to visit Venezuela in March 2014. The responses to my initial queries about visiting Venezuela were not very positive as the capital Caracas was said to be one of the most dangerous cities in the world, where foreigners did not dare to go as you could get mugged or shot in broad daylight by robbers just to grab your personal belongings such as your wallet and wristwatch. Flights in and out of Caracas were exorbitantly expensive due to a boycott of flying by many foreign airlines. Despite all odds, I made my visit to Venezuela in March 2014.
Venezuela is best known for beautiful women but the countryâ€™s astonishing natural beauty is less known. It has beautiful forest cover and hundreds of magnificent waterfalls that help to generate the countryâ€™s hydropower needs. I visited a national park named â€˜Canaimaâ€™ which is half the size of Sri Lanka (30,000 Sq Km) and has many beautiful waterfalls, including the worldâ€™s tallest waterfall â€˜Angel Fallsâ€™.
In spite of the above beauty in Venezuela, my attention was mostly on the alarming state of the countryâ€™s economy. Although they have the highest crude oil reserves in the world with 297.6 billion barrels in 2013 (Saudi Arabia is in second place with 267.9 billion barrels), natural gas and 95% of electricity generated by hydropower, the country is virtually bankrupt and the entire manufacturing industry (other than crude oil) is destroyed by state sector corruption and bad governance. Corruption in the state sector cannot be attributed only to the â€˜Chavez eraâ€™ as it had prevailed even before the revolution that gave power to Hugo Chavez in 1999.
Although Venezuela has the highest oil reserves in the world, their daily Crude Oil production in 2013 was at 12th position with only 2.49 million barrels per day. Main reasons for this poor production are said to be inefficiency, lack of proper maintenance, mismanagement and above all, corruption of the state sector.
Price of petrol and diesel
Adding fuel to this crisis, Venezuela exports crude oil and imports petrol and diesel due to insufficient refining capacities in the country. Making matters worse, imported fuel is supplied to the public at an unbelievable price of $ 0.02 per litre and anyone could have a full tank of petrol/diesel (50 Lts) for just $ 1 or six Bolivars. This seems to be a government strategy to keep the masses happy for political reasons.
Reasons for the crisis Â
When you have the worldâ€™s largest oil reserves and 95% of electricity coming from hydropower, one would expect that countryâ€™s industry to flourish. In complete contrast, Venezuelaâ€™s industry is completely destroyed by state sector corruption and regulations that are imposed by governing bodies with the aim of collecting kickbacks when granting approvals and monitoring.
These increasingly unbearable regulations and corruption have systematically destroyed the local industry in Venezuela. At present, even liquid milk packets and butter are imported to a country where there are plenty of cattle. Toilet paper too is imported. The dollars earned by exporting crude oil is simply not enough to meet the import dollar demand due to almost zero production of consumables within the country.
As a result, Venezuela is saddled with a major foreign exchange crisis and has no dollars to import essential food items. When I visited in March 2014, the official exchange rate was 6 Bolivars to a USD, but the black market rate of a USD was 60 Bolivars (Yes, ten times the official rate). I saw many queues outside shops to get essential food items and most airport duty free shops were empty due to shortage of USD for imports.
Most of the foreign airlines do not fly to Venezuela as there is a dispute on the rate of exchange used to pay for the tickets issued in Bolivars. The tourism industry is also adversely affected by the very bad security situation in the cities and by the severe shortage of flights to Caracas.
It is difficult to imagine how a country with such vast natural resources, forests and agricultural landmass blessed with regular rainfall could drift into such an economic crisis. I do not think even the ruling politicians and state sector officials who stole the country of billions of dollars in cash and stashed them within the country and in bank accounts abroad would have thought their greed to collect billions in personal wealth by all sorts of corrupt practices would lead their country to this level of destruction and danger. Reversing such a situation will be next to impossible and would take many decades even if there is a genuine effort by the public sector and the government.
Parallels in Sri Lanka
While feeling sad about the plight of the 29 million people in Venezuela, I deeply fear that Sri Lanka too may fall into such a situation with what is going on in our country. News items on corruption of politicians and state sector employees have become a usual sight both on electronic and print media today.
Unprecedented levels of smuggled goods including drugs seem to be leaking into the country. Corruption seems to be spreading like a virus across the entire fabric of the society and therefore it is not going to stop only by pointing the finger at the politicians and public sector employees. Majority of the people seems to be on a rat race to make money by doing almost anything.
Having said the above, it is important to mention that the corruption by decision makers such as politicians and government officials could cause major damage to the countryâ€™s future than the corruption of the private sector and the common man.
In the recent past we have seen some government officials aggressively canvassing for detrimental economic agreements, some using their powers to introduce various regulations to collect revenue from industrialists for the benefit of selected foreign companies, and multinational companies openly offering financial payments to government sector organisations. I could go on about the corruptions that I know of, but there may be a much longer list of corrupt activities that I am not aware of, which are slowly but steadily destroying the local manufacturing industry, thus harming the countryâ€™s future.
All the sectors of the social fabric of Sri Lanka who are involved in such corrupt practices at different levels of magnitude should understand that the money they make cannot bring them the happiness they seek once the country is in shambles. Have you ever met anyone who robbed his country, stacked tons of money abroad and is living happily in another country after his/her country fell into trouble? I have never met such a person.
Governmentâ€™s role in curtailing corruption
It is a fact that the local industry has taken off well since 2005 under the policies of the present Government. His Excellency the President has a great vision for the country. A few ministers and some top officials understand his vision and the need to develop the local industry for the country to sail towards prosperity. Unfortunately, most others do not seem to understand the above or are not moving in the right direction.
Much more has to be done to develop the local industry from its present infancy stage to a level that it can bring real economic benefits to the country. Corruption cannot be totally eliminated from a developing country but it must be controlled and curtailed for proper development of a country and for the benefits of development to trickle down to the poor and the masses. Today, the waves of corruption are becoming stronger and stronger to a level that something must be done before it is too late.
There is a cry from some sectors to abolish the executive presidency as the solution to all problems. That will not stop this wave of corruption. If at all it could make the situation worse both in Government and at provincial levels. My personal experience is that the present Executive President has very strategically handled a situation to save the countryâ€™s economy from being grabbed by a regional power, when a group of officials were trying to get the government to sign a detrimental economic agreement during the period from 2007 to 2010. I believe a strong, powerful and patriotic leadership is a requisite to take the economy forward to surpass at least a per capita income of $ 6,000.
If the country is to progress to such an economy, state sector decision makers must ensure that such an economic growth shall be achieved by empowering and building Sri Lankan entrepreneurs and not by selling our assets to foreign powers. It can only be done by a conscious effort of the state sector like in the case of exponentially developed economies such as South Korea and China.
Some economists who have no industry experience propose Sri Lanka to be a â€˜service economyâ€™ that buys products from mass producing countries and ask Sri Lankans to be service providers for visitors from other countries. As an industrialist with a fair amount of exposure in international markets, I totally disagree with the theory that a country like Sri Lanka can achieve real development only by becoming a service economy. Once we let our manufacturing industries die and become a service economy, it will be too late for the Government or the state sector officials to reverse what they have done.
I personally feel that if corruption continues unabated, our country will move towards the grave economic situation that Venezuela is in today. Having very limited natural resources, Sri Lanka will not be able to bounce back if we fall into such a situation.
Our duty to the MotherlandÂ Â Â
Our war heroes have done their duty to the country and now it is our turn to make the right decisions to take the country to a much better position for the benefit of our future generations. We should not leave room for our children and grandchildren to curse us for allowing the destruction of a country that has had a great history of over 5,000 years. If our great ancestors prioritised â€˜money before countryâ€™ like some people do today, Sri Lanka would not have survived for 5,000 years.
The purpose of my article is to humbly appeal to the Government and State sector decision makers to be at least mindful of the plight of their own children and grandchildren before engaging in or allowing corrupt practices that endanger the future of our country.
If the â€˜Snowball Effectâ€™ of corruption can destroy an economy of a country like Venezuela that is so rich in natural resources, I leave it up to the readers to imagine the future of Sri Lanka once our â€˜corruption snowballâ€™ continues to roll bigger and bigger in size.