Leadership and governance key drivers of credibility

The IMF Resident Representative in Sri Lanka has expressed positive sentiments before the top expert packed ICASL National Conference, in regard to the developments with Sri Lanka’s macro statistics compared to the position in 2009, highlighting the massive capital flows in to the country and the increase in remittances.

He has however expressed his surprise as to why the Foreign Direct Investment flows have not increased post war and with the availability of added attractive tax and other advantages. (Daily FT Special Report – 2 November 2010 – Page 10)

At the aforesaid conference titled ‘Seizing Opportunity in Sri Lanka,’ a gem of a contribution in response has come from Ranjit Fernando, stating: “Why aren’t the investments coming in? Credibility of what the Government does and what it stands for is one of the issues I think. We need to convert post war enthusiasm in to real strategy of benefiting the country so that we can have foreign investments come in to the country.” (Daily FT Special Report – 2 November 2010 – Page 11)

The examples of independent assessments and evaluations of executive action having a direct impact on “credibility” are:

•    Low rankings of Sri Lanka on international indices e.g. transparency, ease of doing business, etc.

•    High levels of short term commercial borrowings.

•    High budget deficits with poor budgetary control.

•    Economy, efficiency and effectiveness of management by the state of capital projects and revenue spends being poor.

•    Low levels of executive accountability and commitments’ leading to significant spends being made without benchmark project evaluations and without adequate risk management eg. 2018 Common Wealth Games.

•    Parliamentary Committees being ineffective in enhancing control over public finances.

•    Transparency and integrity of information being challenged by academics and professionals.

•    Right to information and whistle blower/witness protection laws not in force.

•    Effective control over key institutions of governance and law enforcement agencies, whose independence, integrity and professionalism are key for good governance.

•    Laws delays.

•    Question marks over the application of the rule of law, justice, judicial independence and democratic freedoms including freedoms of expression and the media.

•    Perceived political persecution.

•    Regulatory failures despite the presence of necessary regulatory authorities.

•    Questions marks over international relations stance in dealing with lead nations forming the back bone Sri Lanka’s sustainable key trade, service and technology support partnerships.

•    Non transparent government to government deals.

•    Meritocracy of key public service and Foreign Service appointments.

•    Sri Lanka with a small internal market having an exchange rate policy favouring imports and not value added exports.

•    Short term capital flows receive comparatively higher returns within the exchange rate policy in place.

•    Knowledge, skills, attitudes and work ethics of the available human resource pool lacking quality and productivity oriented needs of investors.

•    Excessive costs of redundancy costs.

•    Government announced incentive schemes being abruptly terminated and not honoured.

•    State intervention and reacquisition of previously privatised entities.

•    Resources of provident/trust funds and resources of state banks and corporations being used to acquire and operate commercial businesses.

•    Inconsistent regimes of taxation, price control and regulation.

•    Perceived high levels of corruption and conflicts of interest.

The issue of “credibility” in the eyes and ears of foreign investors are further impacted by the;

1.    Adverse publicity generated in the foreign media and by some Diaspora groups during the period of the conflict.

2.    The continuing adverse issues with Internally Displaced Persons, detainees and war victims even following the end of the war.

3.    Continuing reluctance to agree to independent international inquiry on purported criminal activity in the conduct of the war against terrorism.

4.    Expected measures of acceptable power sharing not being progressed.

5.    Militarisation of the Civil Service.

6.    Perceptions that ‘fear’ and ‘reward’ style administration approach by the executive.

7.    Lack of intellectual debate and critique on many key macro economic, social and governance issues.

8.    Self censorship by the media, professionals and business chambers.

9.    Concentration of executive power amongst a small coterie of networked persons.

10.    A week opposition and a divided and disengaged civil society.

In the backdrop of the above, the opportunity facilitated by Pathfinder – Harvard Seminar series for business, academia and civil society to engage in a value added intellectual exchange with Professor Robert Rotberg, Director, Program on Intrastate Conflict and Conflict Resolution at Harvard Kennedy School on the topic ‘Leadership, governance and conflict in the developing world’ paved the way to develop potential strategies to enhance the credibility of Sri Lanka in the eyes of foreign direct investors.

Professor Rotberg described ‘governance’ as “the performance of governments in the delivery of political goods” and that it is measured by holding governments to account on a five pillar conceptual structure, comprising of:

1.    Safety and security

2.    Rule of law, transparency and corruption

3.    Participation and human rights

4.    Sustainable economic opportunity, and

5.    Human development

He was able to draw examples from Asia (Singapore, Malaysia, Indonesia, South Korea and Vietnam) and from Africa (South Africa and Botswana ) in support of an established hypothesis that” there is a direct co-relation between leadership and governance in the developing world with the achievement or not of sustainable growth and prosperity”.

Professor Rotberg stressed that “transformational leadership” and not “transactional leadership” that mattered and emphasised that the quality of leadership had a greater influence in post conflict affected nations.

He went on to further emphasise that governance based on the undernoted key drivers:

•    A political culture and value systems embracing inclusivity and democratic traditions (not benevolent dictators).

•    High quality institutions operating under effective leadership (not constitutional guarantees).

•    Positive engagement with a sense of belonging together by all component segments of society and so knit together by the visionary transformational leaderships in the processes of governance and development.

•    Intellectual honesty.

•    The leadership educating (not influencing) publics during free and fair elections held periodically.

•    Both the rulers and the ruled honouring the traditional Chinese philosophical concept –“The Mandate of Heaven,” which argues for the removal of incompetent or despotic rulers, and provides an incentive for rulers to rule well and justly. This concept was often invoked by philosophers and scholars in ancient China as a way to curtail the abuse of power by the ruler, in a system that otherwise offered no other check to this power will pave the way for sustainable growth and prosperity of nations and their people.

Professor Rotberg strongly urged leaders of developing countries coming out of conflict to bear in mind that “bold, daring, repressive and risky military tactics deployed during periods of war will not lead to growth and prosperity during periods of peace.”

The Mo Ibrahim Index of Governance model (set out in annex) which is based on the five pillar structure referred to above allows the measurement of the 57 different components of effective leadership and governance and was recommended for consideration by developing countries, especially those coming out of conflict.

(http://composite-indicators.jrc.ec.europa.eu/Document/EUR23773_IndexofAfricanGovernance.pdf)

The valued added policy and practice perspectives set out by Professor Rotberg have great significance to Sri Lanka and it is timely that the leadership, the executive, business, academia and civil society jointly engage in developing the model and adapting it to measure how Sri Lankan leadership and governance moves from year to year in this post conflict period, recognising the vision of Sri Lanka as an aspirant nation wishing to be the next ‘Miracle of Asia’.



(The writer is a former chairman of the Ceylon Chamber of Commerce.)