Economic democracy: Miracle or myth of Asia? Who will lead the debate?

What our leaders say

“Most important human right for the people of the conflict-affected North Eastern Provinces was to get basic facilities to restart their life at the end of the conflict and the Government of the Sri Lanka provided all the facilities within a short period of time for that ensuring their basic right. Now these people are experiencing a peaceful life after three decades and normalcy has come to their life again,” said Basil Rajapaksa Senior Adviser to the President and Minister of Economic Development when he met the representatives of the office of the High Commissioner for Human Rights.

The Governor of the Central Bank at the opening of the new seven-storey parking lot of the Central Bank costing Rs. 131 m for its first phase, stated that common people ask him what the so called ‘miracle’ is all about and that he points to the improved state of the roads of Colombo and their cleanliness as proof of the ‘miracle’ having already arrived.

MP M.A. Sumanthiran in his weekly column in a Sunday paper on 17 September stated that “The ‘Democracy’ that is practiced in this country since ‘independence’ in 1948 is nothing but majoritarianism.”

Who will create the space lead the debate on the above three viewpoints?

What the indices show

Sri Lanka Economy: Facts, Data, and Analysis on Economic Freedom www.heritage.org/index/country/srilanka - United States

Property Rights             40.0

Freedom from Corruption     32.0

Limited government

Government Spending         81.4

Fiscal Freedom             73.5

Regulatory efficiency

Business Freedom         78.0

Labour Freedom         62.1

Monetary Freedom        68.5

Trade Freedom             77.1

Investment Freedom         30.0

Financial Freedom         40.0

Sri Lanka’s economic freedom score is 58.3, making its economy the 97th freest in the 2012 Index. Its score is 1.2 points higher than last year, reflecting solid gains in trade freedom, monetary freedom, and business freedom. Sri Lanka is ranked 16th out of 41 countries in the Asia-Pacific region, and its score remains below the world average.

The Sri Lankan economy continues to progress toward greater economic freedom, registering significant score gains in the past two years. Notable changes have been implemented in key areas. Regulatory efficiency has been considerably enhanced through establishment of a streamlined business formation process and simplification of licensing requirements. Non-tariff barriers are relatively low, statutory tariff rates have been reduced, and many import surcharges have been eliminated.

Nevertheless, challenges to economic freedom in Sri Lanka are considerable, particularly in strengthening the fundamentals. Property rights are undermined by an inefficient judicial system that remains susceptible to substantial corruption and political influence. The heavy state presence in the economy continues to hamper private-sector development.

What Sri Lankans feel

Sunday Times Business – http://sundaytimes.lk/110904/BusinessTimes/bt10.html:

Most Sri Lankans believe the ‘general economic’ situation in the country has seen some improvements after the end of the conflict, a new survey has revealed. In a survey on post-war democracy in Sri Lanka, the study conducted by Social Indicator (SI), the survey research unit of the Centre for Policy Alternatives (CPA) found 10.7% of Sri Lankans saying the general economic situation in the country has got a lot better while 38% said that it has got a little better. 15.5% believe it has stayed the same.

“However, 19.7% said that it has got a little worse while 16% said it has got a lot worse. In terms of the ethnicity of the respondents, it is mostly the Sinhala and Tamil who believe it has got a lot or little better, with the Sinhalese respondents being the most optimistic, when compared to the Up country Tamil and Muslim respondents. 57.1% of Up-country Tamil respondents believe that the general economic situation in the country has got a lot worse in the last two years,” the study said.

Economic freedom

Literature describes ‘economic freedom’ as the freedom to prosper within a country, without negative interventions from a government or economic authority or external forces, where Business and Individuals are free to secure and protect their/his/her human resources, labour and private property and apply same for business or personal growth and economic empowerment.

Economic freedom must incorporate other civil liberties to be deemed as truly free. Economic democracy is thus also about equity, rule of law, justice, openness, and encompasses all democratic rights and privileges, with effective practice of democracy extending these values and rights to the entirety and across the national economy, its participants and stakeholders, and leading to democratising the economy for the sustainable benefit in the long term to all living beings. These democratic rights essentially create specific and general obligations and norms of society including;

nProper taxation and tax payments

nFairness, equity and equality of treatment              of wider participants of society

nSustainable growth and development

In the Western eye economic democracy exists within business when the units of economic organisations are owned and controlled by the people who work in them, and/or by those who use their services. The global norms however encompass the wider participation of citizens, as shareholders, employees, intermediaries, consumers, creditors and debtors and participant stakeholders.

Are we only paying lip service to Buddhist economics?

The teachings of the Thathagatha the Buddha reflects how he encouraged the spirit of consultation and the adherence to a democratic process, promoting kings and rulers to manage the “Economy” as well for the welfare of the subjects.

Although a majoritarian Buddhist approach in governance is given primacy of place in Sri Lanka, not only via the Constitution, but in the articulated vision and words of the leaders of the Executive, Legislature and Judiciary, a question worth pondering is as to whether in practice the fundamental teachings bordering on economic governance and specifically on consultation of the subjects and placing their welfare and future at the apex are in fact in effective operation.

Jeffrey Sachs has pointed to his recent discovery, having heard the Prime Minister of Bhutan and visited the country and experienced it firsthand: “Bhutan’s deep tradition of Buddhist reflection, there is an active, effective and important process of national deliberation. Therein lies the inspiration for all of us. Improved healthcare, reduced maternal and child mortality, greater educational attainment, and better infrastructure, especially electricity, water, and sanitation. Yet Gross National Happiness goes well beyond broad-based, pro-poor growth. Bhutan is also asking how economic growth can be combined with environmental sustainability – a question that it has answered in part through a massive effort to protect the country’s vast forest cover and its unique biodiversity. It is asking how it can preserve its traditional equality and foster its unique cultural heritage. And it is asking how individuals can maintain their psychological stability in an era of rapid change, marked by urbanisation and an onslaught of global communication in a society that had no how to guide an economy to produce sustainable happiness – combining material well-being with human health, environmental conservation, and psychological and cultural resiliency – is one that needs addressing everywhere.”

Are we having these wonderful thoughts adapted and embodied in our so called “home grown” solutions of democratic economic management?

Are business perspectives of economic democracy embedded in codes of chambers/business?

Are the following cornerstone business perspectives of ‘economic freedom’ embedded, and exercised with the associated obligations, and effectively implemented with transparency and commitment by chambers and business houses? Are they individually and collectively able to withstand political, executive or other external pressures, nepotism, cronyism, unprofessional directives, unacceptable rules and regulations and interference from licensing authorities, revenue agencies for facilitation fees, bribes and favours? And are they able to withstand power capture corruption?

nThe right to invest and do business, upholding legal, moral, ethical, and sustainability commitments and delivering long term outcomes benefitting all stakeholders.

nThe right to trade, imports, export and provide services of quality, productivity and delivering the value and other benefits as promised, on best competitive pricing, upholding applicable warranties and conditions.

nThe right to market, promote and distribute, products and services, with ethics and acceptable codes of conduct

nTo engage in effective human resource deployment upholding rights and human dignity of employees at all times and exercising development options for their empowerment

nExercise property rights whilst optimising value on a sustainable basis

nProtecting intellectual property rights with ethics and without violations

If the above principles cannot be upheld without exception or where there is political or executive interference, power capture corruption or the need to seek patronage or network assistance in exercising these rights, then only a facade of economic democracy is in existence.

Do case study experiences support that economic democracy is in practice in Sri Lanka?

The undernoted case studies will guide us to determine whether there is ‘economic democracy’ effectively in practice or only prevalent as a facade;

nWere economic issues, economic performance accountability and national/citizen outcomes from planned future economic policies and programmes placed before the voters at the recently-conducted provincial council elections?

nDo legislators, academics, businessmen, professionals, media and citizens know the full picture of the country’s debt situation and its future impact on them? Are they aware whether the fiscal gap, which signals whether the country is bankrupt or not in terms of the value today? I.e. the present value of the difference between projected spending, including servicing official debt, and projected revenue in all future years is negative or positive? Is this not a transparency essential for ‘economic democracy’?

Had there been citizen consultations, would they have endorsed the significantly high investment in road and highways, especially the main connections to the Northern and Eastern Provinces and the selection of road networks linking villages in a manner that justifies investments in terms of value to citizens?

nIn line with the accepted best practices of project monitoring and evaluation at midterm, of all significant development projects, have independent evaluation of stakeholder citizens’ benefits from ‘Uthuru Wasanthaya’ and ‘Nagenahira Navodaya linked

nReconstruction and rehabilitation of highways and key roads

nResettlement and livelihood development

nRestoration of banking, financial institutions and trade and commerce

been assessed by a competent multi disciplinary team, engaging in mapping not only the actual progress to budgeted time lines and costs and planned disbursements, but more importantly to assess the actual delivered outcome benefits as accruing to the stakeholder citizens in meeting their priority aspiration and expectations from the three initiatives?

nThe national economic justification and citizen stakeholder benefit of Nelum Pokuna performing arts theatre built at a cost of over Rs. 3,000 million, especially

nWhether the citizen benefits would have been more if in each district a smaller complex costing Rs. 120 m been constructed instead?

nWhether citizen benefits would have been more had this spend been replaced by irrigation, water supply, education or health linked capital investments of Rs. 350 m in each province?

nHow many performances outside State sponsorships are likely and will it be adequate to defray maintenance costs and even break even on cash flow terms in settling Chinese Government loan and interest payments?

nHas the expected subsidy on the theatre to be incurred by the defence services now in charge of it been budgeted with due accountability?

nCan the deferred Pensions Bill qualify as one promoting ‘economic democracy’ and protecting the interests of the impacted stakeholders?

nCan the stock market investments made by the EPF, ETF, State banks and State institutions be justified as being in the interests of the participating contributors, depositors and citizens at large?

nCan the investment in non investment grade ‘Greek Bonds’ by the Central Bank and the original investments by Templeton Fund and other investors in Government bonds just prior to a change in policy rates ,bestowing on them huge capital gains within weeks, be justified and be shown to uphold ‘economic democracy’?

nWere the principles of ‘economic democracy’ brought in to focus in the decision that allowed sea planes to land in the Negombo lagoon?

n‘Barbarians breach the Gates,’ an article in the new business magazine ‘Echelon’ which goes on to state: “Sri Lankan stock market has been under a siege by barbarians threatening to tear apart its credibility, loot investors and decimate its systems of governance”; and ends with the statement “Criminals don’t belong around a reconciliation table, they belong in jail”. The million dollar question is what happened to all those complaining stock brokers, who felt the market decline was due to overzealous regulations? What happened to those business leaders who momentarily worried about the best indicator of economic prosperity being damaged by political cronyism and market interference? How come the market is now in a bull run without a single regulatory change? Did the act of the king makers in pushing the barbarians beyond the gates to the table of governance lead to the stock market becoming the best performing? Is this the ‘miracle’ arrival paving the way for the future prosperity of a few and a downfall of innocent many?

nProfessional studies label Sri Lanka to have the second largest informal economy linked to GDP in the Asia Pacific region and the public are unaware of it; the dangers it poses to ‘economic democracy’. What attempts are made to control and minimise its negative impact?

nLoan sharks operating over the Kelani Palama as recently reported shows the operation of a unsupervised banking system and presence of pyramid marketing schemes are apparent to those who chose to ask questions; what is the banking regulator doing in pursuit of ‘economic democracy’?

nAre money laundering controls and the special unit to control it established by legislation effectively functioning?

nExchange rate management fiasco driven by the Monetary Board that brought the nation to its knees before the IMF with a begging bowl, an indication of effective ‘economic democracy’ in action?

nThe uncertainty and opaqueness of the transactions surrounding the investment, foreign borrowings and national economic returns based justification of key infrastructure projects including the Hambantota Port, Airport, Lakwijaya Power Plant, Colombo Sea Reclamation project, etc. in pursuit of ‘economic democracy’?

nThe Kalpitiya land leases and lands identified within strict natural forests and environmentally sensitive and ecologically preserved areas identified for leasing for tourism and attempted by effecting changes to governing laws, within the principles of ‘economic democracy’?

nThe rumours that sea areas within the territorial waters may have been leased for trawler fishing, without transparent processes and significant local value addition, in pursuit of ‘economic democracy’?

nDenying essential investments in education and health whilst reserving funds for tamashas, international travel, and unsuccessful international sporting bids valid in terms of ‘economic democracy’?

nThe strange powers, structure, planned operations, violation of principles of internal control and exemption from critical national laws in framing the Divi Neguma Bill in pursuit of ‘economic democracy’?

nWas the ‘Expropriation Bill’ also in justification of ‘economic democracy’?

nLack of effective control over public finances via Parliament, ineffective functioning of the Bribery and Corruption Commission, The Finance Commission, COPE and PAC also in pursuit of ‘economic democracy’?

nThe failure to have a Right to Information Law, the New Audit Act and Whistle Blowing and Witness Protection laws also in assurance of ‘economic democracy’?

Can arrogance of power and egoistic governance promote economic democracy?

It is well known that where arrogance of power and egoistic and non transparent governance practices are exercised by those without ‘fear’ or ‘shame’ to do wrong , it cannot lead to ‘economic democracy’. These practices are ripe grounds for a façade of economic democracy to foster hiding crony capitalism practices not for the benefiting the majority, but for the preservation and prosperity of a few select rulers, leaders and their ‘henchmen’ and those who sing their praise for their personal rewards.

Who will provide the space for public intellectual debate?

It is obvious that there in an urgent need for a debate on the status and robustness of ‘economic democracy in Sri Lanka!

Will the Central Bank, IPS, Economist Association, Chambers, think-tanks, academics, professional institutes or the media provide the essential leadership and transparent space for public debate, on ‘Quo Vadis economic democracy in Sri Lanka’?

(The writer is a good governance activist and former Chairman of the Ceylon Chamber of Commerce.)