Harsha hammers economic policies

•  Charges Government has not delivered on its promises and is now trying to find scapegoats

United National Party Parliamentarian and economist Dr. Harsha de Silva guarantees the present regime will be changed by the people before too long. “The UNP will soon form the next government. It is not going to take long as we thought.”

De Silva further states that Rajapaksa regime that failed to deliver its economic promises is now trying to find scapegoats to put the blame on. “Policies are not made by the Treasury Secretary. Policies are made by the President and his Government. It does not say ‘PB’s Chinthana,’ it says ‘Mahinda Chinthana’.

Following are excerpts from the interview:

Q: A prominent Government Minister claims the country is facing an economic crisis. Do you agree?

A: It is Minister Wimal Weerawansa who reiterates about an economic struggle. I completely agree with him. We see an economic crisis brewing. In fact we have been speaking about this for some time. Two years ago, I spoke about Chinese economic hitmen invading our country and making fatal attacks on the economy. Unfortunately the following day I was criticised by the Central Bank Governor and various other people and was labelled as a traitor. But just after two years, everybody agrees with what I said, including Government Ministers like Weerawansa. But the issue seems to be in identifying who the real economic hitmen are.

Weerawansa seems to believe that the Treasury Secretary is the economic hit-man. I don’t know from where he got this idea that P.B. Jayasundera is leaking information to me. People can come up with all kinds of stories, but they are not necessarily true. However, that shows the fear they seem to have in Harsha De Silva’s criticism of the economy. I am happy they have realised that what I have been saying all these years is the truth. But my accusations were not based on information I received from Jayasundera or anybody else; this is coming from my ability to analyse the economy for what it is. That is my strength.

In several newspaper interviews Wimal Weerawansa has questioned my educational qualifications. I think I should respond to these below-the-belt allegations. I was a bright student at Royal College. I chose to study science because I wanted to be a medical doctor. But the impact of my mother’s death as a teenager was a massive blow to me. This derailed my plans of becoming a medical doctor. But I did well enough to change my focus, not give up, and study management and economics. By the time I was 28 I obtained myself the highest degree that one could get in economics from one of the world’s most recognised universities. I got it from a 100% scholarship from the US Government.

I studied development economics. My dissertation was on financial liberalisation with particular reference to Sri Lanka. For the last 20 years, since my PhD in development economics, I have held some very important jobs as an economist. I have been an international economic consultant with the world’s top multilateral organisation such the ADB, World Bank or UNDP. I have consulted in North America, South America, Africa and emerging Asia. I have published in some of the world’s top international academic journals as well as in the Sri Lankan economic journals.

I have taught economics at the University of Missouri. I have also taught economics at the post graduate program at the University of Sri Jayawardenapura and University of Moratuwa. I am the only PhD in Economics in the current Parliament. My first book is coming out in June so all curious people can read about my life once the book is out. I am in fact quite adequately qualified to speak on economics. It is not the way I have been brought up to ridicule people. Therefore I wish not to question other people on whether they are qualified to speak on various subjects.

Q: How do you respond to Minister Weerawansa’s accusations against the Treasury Secretary?

A: I know P.B. Jayasundera just as I know Nivard Cabraal. I have no special love or hate for either Jayasundera or Cabraal. There is no reason to make any of these policy criticisms personal. But when I say the problem is identification of the real economic hitmen, I like to take an example which Weerawansa has been taking in subsequent newspaper interviews. He says that Cabraal did not want the rupee devalued and that Jayasundera got it done through President Rajapaksa. It is very strange because it was Cabraal who signed the agreement with the IMF to ensure that the rupee would be floated and it would reflect market value. Jayasundera has nothing to do with the IMF agreement.

I feel Weerawansa should have a chat with me in Parliament. I want to help him to clear this misconception. If Weerawansa was calling Jayasundera a hit-man because the rupee was depreciated against Cabraal’s wishes, it is completely and totally misunderstood. It was Cabraal who undertook to do that.

It is childish to put it on a person. It is not Jayasundera or Cabraal who should be held responsible for the sorry state of economy today. Managing an economy requires stability in the macro economy. Artificially holding the currency at an overvalued level and selling down our reserves to maintain that value was completely distorting the economy and creating a balance of payments crisis. There was nothing anybody could have done. If Weerawansa was either the Secretary of Finance or Governor of the Central Bank, that is exactly what he would have done. Whoever is brainwashing Weerawansa to say depreciating the currency at the time was an act of an economic assassin, he is mistaken.

Actually I like Weerawansa. He is my friend. I like him because he is like me, he stands up for what he believes in. He is vociferous in his criticism. He articulates himself very well but in this case he is completely misled. He should get independent view from independent economists who have studied economics. Then he will understand who the real economic hitmen are.

In his book ‘Batahira Balaya ha Lankawe Iranama’ (Western Influence and Fate of Lanka) Weerawansa talks about John Perkins and his famous book ‘Confessions of an Economic Hit-Man’. Everything that is explained in that book sounds familiar because that is exactly what is happening in Sri Lanka today. Everyone should read this book then they can realise who the real economic hitmen are.

Who is forcing a poor nation like ours to build massive ports with no ships? Who is forcing us to build airports that have no aircraft? Who is forcing us and giving loans to make sports stadiums in places there are no people? Who is building power plants at huge commissions that break down all the time? Who is doing all these? Instead of Bechtel and Halliburton as described in the book, it is China Harbour, China Mechanics, China Engineering. Wimal is correct. I agree with him. But he has misdiagnosed the culprit.

Weerawansa has written this book in 2007; why doesn’t he get up in Cabinet and say these things? If he is true to what he said, then it is very easy for him to identify who the real economic hitmen are. Who is taking all the loans? Who is taking NSB to go for a billion dollar loan? Who is going around the world saying give us sovereign bonds? Is it Jayasundera? Why can’t Weerawansa identify the correct culprit? Although he may not be aware, he is very much a part of this group of hitmen or the agents the hitmen are working with to massacre this country economically.

Q: Is it true that P.B. Jayasundera created a minus economy in 2000/2001 in order to bring Ranil Wickremesinghe in to power?

A: Jayasundera is as guilty as everybody else for the crisis in this economy. Like I said before, I have no special fondness for any of these people. To me both Cabraal and Jayasundera are equally responsible for what we are facing today.

The economy fell into a terrible hole during the 2000/2001 period. Ranil Wickremesinghe’s very prudent policies with Charitha Ratwatte as the Secretary to the Treasury and Faiz Mohideen as the Deputy were able to resuscitate the economy. And that required some painful medicine. When the Government was taken over by the PA in 2004, the economy was in good shape and progressing steady. But since then, except for two years of 8% growth due to pent-up demand, former war areas coming back into streams and also the Government’s unsustainable easy credit and strong currency policy, we had a spike for two years. Since then it is back to the 6% of during the war. In fact Prof. Nimal Sanderatne recently writing in a weekend newspaper says the growth was only 5.8% and the Government is now trying to show it to be 6.5%.

Government policies have failed to sustain 9% to 10% growth post-war. Policies are not made by Jayasundera. Policies are made by the President and his Government. What Jayasundera does is implement those policies. It does not say ‘PB’s Chinthana,’ it says ‘Mahinda Chinthana’. There are people who think they understand how to run an economy but in fact they don’t. They have only contributed towards the crisis for which Weerawansa is trying to blame Jayasundera.

I must also say Jayasundera was found fault with in the Supreme Court. He was asked to resign. But who took him back? Why did the President say ‘I can’t run the Treasury without Jayasundera’? Why didn’t Weerawansa oppose his reappointment at that time? Even some other senior people who are running the economy have multiple allegations against them for fraud. In fact, there are bribery allegations against some of the top people who are supposedly the drivers of this economy. These people act as if they know everything and others know nothing.

Q: Why is the UNP defending P.B. Jayasundera?

A: Weerawansa had told a weekend Sinhala newspaper that by 2015/16 President Rajapaksa will be in the Opposition because the country’s economy is in such dire straits. He says the people will throw Rajapaksa and his Government out. He says Jayasundera is the reason behind this. The UNP and I as our party’s Spokesperson on Economic Matters are always watchful as to which way the winds are blowing in terms of economic policy shifts, so we as an Opposition can take advantage.

We are in politics not to be in the Opposition. I am politics to run this country. The UNP will soon form the next Government. It is not going to take long as we thought. When we form a government, Harsha de Silva will certainly be a key decision maker in economic affairs in this country. In order to get there, we need to dislodge this Government. If Sajith, Tissa or I said something, that is our strategy. We need to show the people that it’s no longer only us who are criticising the present regime, but that top people in Government are also agreeing with us. The five million plus UNPers in this country expect us to bring out these issues. We are not trying to defend Jayasundera; we are trying to dislodge this Government.

Q: If it was the Central Bank Governor whom Weerawansa was accusing, will the UNP act and respond the same way you are doing right now?

A: Whatever I may have said that has been misconstrued as defending Jayasundera, my criticisms do not have any political connotations. I was a vociferous critic of the unsustainable exchange rate policy of Cabraal, which ended by becoming a balance of payment crisis, losing half of our reserves. I continue to propose both publicly and in consultative committees in Parliament in the presence of the President as the Minister of Finance. Both Cabraal and Jayasundera know where I stood.

I argued vehemently for the relaxation of the unsustainable policy. It is as an economist more than opposition politician that I agreed with the policy of a flexible rupee which may have been misconstrued as supporting Jayasundera. I have nothing personal against Jayasundera or Cabraal. As the Opposition we will continue to criticise Government policies. If Jayasundera does something that I believe is not in the best interests of the people, I will say so. If Cabraal is going something that is not in the best interests of the people, I will say so. I attack the Government whenever I feel it needs to be attacked. I have no deals with anyone! People talk to me, they text me, they send me mails saying that what we have been saying right throughout was correct. People are realising these things.

Where is the 9% growth that Cabraal promised for 2012? Where is the US$ 4 billion of foreign investment that Dhammika Perera promised in 2009? Where is the glorious acceptance of this country in the world as promised after the war? We are muddled completely and are cornered by every right-thinking rational person. There are no investors coming; we are under tremendous pressure by the global community; electricity bills have been doubled for small users; people can’t live; people use filth to describe this Government. Is this the ‘Wonder of Asia’?

Q: Did you arrange a meeting between Ranil Wickremesinghe and P.B. Jayasundera?

A: No. I did not arrange a meeting between Ranil Wickremesinghe and P.B. Jayasundera.

Q: Who is actually responsible for this much-discussed economic crisis?

A: When I sit in Parliament, I see the dynamics of the Government. Only a very few people control this economy. There may be 100 ministers, but 95 of them have no say. So the few people who are making these decisions must be held responsible. Weerawansa is free to get rid of Jayasundera. That would be early Christmas for the UNP. We are not going to stop him; we encourage him to get rid of Jayasundera. But the problem will not end with that. That is clear.

The Government presented 21 bills in Parliament last Friday to be passed before 31 March. This Government has many other things to do like impeaching the Chief Justice so they have forgotten to put these bills before.

There are some amazing changes in these bills. Casinos originally had to pay Rs. 100 million in tax. In one bill the Government is bringing in a law to not only remove tax but also to make casinos strategically important. By doing that the Government is going to give them a 25-year tax holiday. This is the policy of this Government. When investors don’t come, they want to bring black money to this country and the Government is trying to use every possible technique to do that.

Recently the Indonesian Embassy has made a statement saying that 2,000 Indonesian women are working in the sex trade in Sri Lanka. Where do these people work? They are all in these casinos. Are they UNP people who own these casinos or are they people with the Government? Now they want to make casinos a strategic development and free them from VAT, NBT, economic service charge, payee tax and also give them a 25-year tax holiday.

There is another important bill. This Government instead of borrowing for itself is getting various others to borrow for it and it is guaranteeing those borrowings. In one bill it says that it wants to increase the borrowing limit to 7% of three years of GDP. That is about 20% of GDP. Some of these borrowings are for private companies close to the regime. The Government is trying to guarantee borrowings of some of the companies close to the regime. Some of these companies have been found fault with for securities fraud. The Government is trying to give guarantees so that they can deceive the people to say the debt to GDP ratio is coming down whereas they are getting others to borrow for them.

On the limit of debt to GDP, which was supposed to come down to 60% at the end of 2013, they are bringing in an amendment to the law to be extended to 2020. Is this responsible? Who is putting this forward? This bill is being put forward by the Ministry of Finance. This is the road to hell. This is the Fiscal Management Responsibility Amendment Act tabled for some people in Parliament on Friday. For some people it was delivered to their residence at one o’clock in the morning on Saturday. The Government is so bankrupt they can’t even present a bill properly. These are things we will fight for. We will not let this go through. Weerawansa should support the UNP to defeat this bill. If he is a true patriot, support us to defeat this bill. If they pass this bill, they will continue to borrow until our sovereignty will be no longer ours.

What is the point in winning the war? Winning an economic war will be much more difficult than winning the military war. It needs thinking, understanding of the subject, it needs strategy, it needs a set of good advice, it needs the ability to think beyond the next election. Ranil Wickremesinghe’s UNP that took the country out of the hole got this legislature (Fiscal Management Responsibility Act) enacted. He did it with the full knowledge that it is going to be detrimental to his Government in the short run. But it was something that immediately had to be done for the betterment of the country in the long run. This is no politics here; it is good economic management.

Q: If the country is in such grave situation both politically and economically, don’t you think the UNP as the main Opposition should act more responsibly?

A: In this dictatorial regime, we are doing our level best to catalyse the people’s voice. The Government will be changed by the people before too long. It will happen because the people will unite behind a common Opposition, which will be led by the UNP. Our responsibility right now is to reinvigorate the grassroots. Once in the near term the machinery is put in place, it will be a tsunami that will come to dislodge this dictatorial regime and re-establish a people’s government in Sri Lanka.

The Government has not delivered on its economic promise. Now they are trying to find scapegoats. However strong they think they are, sooner than later like Weerawansa says this Government will be in Opposition and we will form a government.