“The number tampering by the Central Bank and the present Government is a serious issue,” warns United National Party Parliamentarian Eran Wickramaratne, adding that “by altering the number, we cannot really see the red lights.” Speaking further Wickramaratne says there is a serious issue about data integrity. “It has implications. They are talking about a low budget deficit like 5.8% but if your GDP number is actually inflated, then the budget deficit may not be 5.8%, it may be 8.5%.” Following are excerpts from an interview with the Daily FT:
Q: What are your views about the present economic situation in Sri Lanka?
A: We just completed a Budget. This Budget lacked direction. The Budget was distributing a little bit everywhere. There was a serious issue of transparency. There is something called a Budget Transparency Index. According to the index, from 2010 Sri Lanka dropped 40 positions. This was within a short period of two years. Transparency is determined by information provided during a budget and also midyear reviews that are done. Even though the Constitution says Parliament has control over finance, certainly there are many things that the Members of Parliament don’t know, simply because the information is not available.
The thing that came into focus right towards the end of the Budget was that the data provided by the Central Bank and the Government left a lot to be desired. We know that the GDP numbers have been altered. The Department of Census and Statistics has said what happened in that particular quarter; the numbers came to be 5.4% of GDP growth and after a lot of discussion it was moved to 5.5%. But later they issued a statement saying it was 6%, so somebody just took a pen and altered it to 6%.
There are serious allegations on the Budget numbers. But then it’s not isolated on the GDP numbers because there is evidence that the inflation numbers have also been tinkered with. There was always a problem on the definition on these things. They were doing different things at different times to give a lower inflation number. They altered the food basket; they took out things like cigarettes and alcohol just to bring the number down. The latest is altering of tourist arrivals numbers. The website of the Ministry had the tourist arrivals from January to October. The number was there in November too. They had forecast 1.25 million tourists for the year and they were short by nearly 300,000. To put that number at the end of December would have been highly suspicious. Therefore, what did they do? They wiped out all the data and did some adjustments from January and said they have exceeded their forecast number.
This raises very serious issues about data integrity. This number tampering is a serious issue. It has implications. For example, they are talking about a low budget deficit like 5.8% but if your GDP number is actually inflated then the budget deficit may not be 5.8%, it may be 8.5%. By altering the number, you are not really seeing the red lights.
Playing around with definitions is the other thing. In 2006 we were told poverty was 15% of the population. Last year during the Budget speech we were told that it was about 7.5%. This year we were told it was 6.2%. In other words, in the period of seven years from 2006 to now there has been a drastic reduction of poverty in the country. By any standard in the world it would be exceptional. I went into that a little more deeply and realised that they are defining poverty in their own way. They say there is an official poverty line; that is the daily requirement for an individual is 230 kilo calories. And then to consume those kilo calories on the Colombo price index and as of September 2013 you need about 3,766 rupees. If you calculate that number it is less than one dollar a day. They are saying the percentage living on one dollar a day is less than 6.2%.
Internationally poverty definitions vary. Normally if it is less than US$ 2 a day, they would regard those people as the poorest of the poor. If we apply any other definition, Sri Lanka’s so-called poverty won’t be 6.2 %. According to the IPS report they say it is about US$ 2 a day; worked on the Purchasing Power Parity (PPP) they say about 23% of the population of the country lives on below US$ 2 a day.
Meanwhile, we know the country’s debt situation has gone up rapidly. Ultimately to pay these debts you need your exports. Basically there is no road map for exports. Exports are rapidly declining. It’s been happening for a decade. It is continuing to happen. And the Government has no plan as to how it is going to happen. Exports are not receiving their due place.
We lost the GSP but we had the opportunity to reapply for it. But Sri Lanka stayed out of it. Sri Lanka could have negotiated. We are losing at least 315 million dollars a year. But apart from the cash loss, we are losing our markets. So the actual impact of the GSP is not only the cash loss but it is a bigger loss because you are losing your future markets.
Then on the loan repayment front, as long as others are willing to lend to us even at exorbitant rates, we are alright. But we are in the cycle where we are taking debt to repay. If there are any external shocks in the economy, Sri Lanka will be in trouble. We will not have the foreign currency to redeem ourselves out of that external shock.
One of the things they have been poor in planning is our vulnerability regarding imported oil. One is the fact that we are dependent on oil. The second is not that we are dependent on oil but that we are dependent on light Iranian crude. We know global politics have changed; despite that the sanctions on Iran continue. Sri Lanka which asked to be released from the sanction has specifically not been released. That means that we have to pay higher prices to bring down refined oil. Our oil bill could be more than what we have budgeted for.
If we take the situation of unemployment, the Government is singing its hosannas once again. But the statistics are suspicious. The private sector has not added jobs for almost a decade. So where are these jobs? The industrial sector has not grown. The Government’s main policy on solving the job crisis is sending more and more people to the Middle East. Particularly women who are going there to very difficult work environments for low pay adds on a tremendous social cost for the country. There is no real economic policy to increase the industrial base or the service sector and create meaningful jobs. Even if people have jobs, they don’t have the income.
"This Government has not been able to get the necessary investment. If you want the economy to genuinely grow and that is not by altering numbers, we have to attract the investments. Foreign investors are looking for political stability. This Government has unfortunately interpreted political stability as Parliamentary majority
To bring in this systemic change, you have to create independent institutions. Today we are living in a country where every institution is basically subservient to the President. We are living in a society in which people are scared to voice their opinion. We have to make the Parliament and the Judiciary independent of the Executive. We want to abolish the presidential system. The presidential system as it is today makes all other Government organs subservient
When the first minister of a future administration is caught for corruption charges, he must be punished. The moment that is done, things will fall in place. That is the acid test. People in this country are looking for better governance. And they are losing hope thinking it is not possible. It is actually possible. Financially it is possible; it is the political will that is lacking. This is why I say, when we get the opportunity at the next election we must vote for a systemic change – not just for a regime change"
If you look at the Government sector, a Government servant has not got any increase in basic income since 2006. What did they do this year? They increased the benefits by Rs. 1,200. By Central Bank numbers, inflation is nearly 10 and this was before price hikes that followed the Budget. People just can’t live. They may have a job but that don’t have income. Although income is a serious issue, this Government has no remedy to solve this situation.
Q: You criticise the Government and claim people live in misery, but as the main Opposition what have you done to rectify this situation?
A: This Government has not been able to get the necessary investment. If you want the economy to genuinely grow and that is not by altering numbers, we have to attract the investments. Foreign investors are looking for political stability. This Government has unfortunately interpreted political stability as Parliamentary majority.
Parliamentary majority does not mean political stability. It is very evident in Sri Lanka. Even a two-thirds majority is not giving them the political stability they are looking for. It is not the case of numbers. It is a case of getting it right. Doing it right. Another important factor an investor is looking at is rule of law. There are impunity issues. What the country needs is a systemic change more than a regime change. To get this economy and the country back on a growth path there has to be a systemic change.
Q: How do you go about bringing in this systemic change?
A: To bring in this systemic change, you have to create independent institutions. Today we are living in a country where every institution is basically subservient to the President. We are living in a society in which people are scared to voice their opinion. We have to make the Parliament and the Judiciary independent of the Executive. We want to abolish the presidential system. The presidential system as it is today makes all other Government organs subservient.
When making Government institutions independent, we have to pay all the public servants in this country well. There are some positions called Constitutional appointments such as Judges and the Auditor General. Parliament should take the responsibility for paying them, not the Executive. The present Auditor General gets a monthly salary of Rs. 45,000. There are some in his department earning more than him. How ridiculous can it be? Parliament should be paying these people well. No individual can be independent unless they are financially independent. Otherwise they are dependent on the Executive.
There is a social contract between the public and those who are accountable to the public. We as the public must take good care of them so they will discharge their responsibilities. I believe even the Parliamentarians should be paid more. I am not advocating more pay for politicians, what I am advocating is better pay. Meanwhile, if they break the rules they have to be punished. Pay and jail; otherwise you cannot redeem this situation.
Q: Do you think such systemic change can be achievable?
A: I think it can be done. The cost of reforms can be made because it will bring down corruption. When the system works it will pay for itself. When you are getting the right decisions out of the system, there will be much more efficient allocation of resources. It can be done, but what is needed is the political will to do it. There is a lack of political will to make a systemic change in this country. Why? Because it is difficult to reform a system when you yourself have a hand in it.
If you get this picture right, one of the things you will have coming in your favour is confidence; Independent institutions, consistent policies, rule of law. Such situation will bring in all the investments. We are talking about good legitimate investments. Then we do not need to go after investments in casinos and we don’t need to trade in drugs and in ethanol.
What is Sri Lanka’s competitive advantage? Firstly it is our geographical position. Our rulers realised this many thousand years ago and we had relationships with Europe. When you stand on the southern tip of Sri Lanka and you see 200 to 300 ships going by the day, there is certainly a case for the Hambantota port. The issue is you must make investments which have returns. That is why governments are often bad at making investments.
The next biggest resource we have is our human resources. Unfortunately this Government has not recognised that. It is not worth having an economic policy which is inward looking for the market in this country. We have to have a global market. We will have to prepare our human resources to cater to that global market.
Sri Lanka still has the lowest investment in education in the whole of South Asia. Can you see the impact of having no investment in education in another 20 years? To maintain our living standards and to grow, we have to move into a high income economy. We are now a low income economy. That means the economy has to be more complex. In order to have a complex economy, we have to have a complex workforce; otherwise you are going to employing Chinese and Indian people.
In this year’s Budget, the Kotelawala Defence University got a capital approval of Rs. 17 billion. This is just one university with 1,500 students. The rest of the 17 universities in the country have 85,000 students and they together got Rs. 10 billion. I am not suggesting even for a moment not to invest in the Kotelawala Defence University, but what’s the justice with regard to the rest of the universities? They should have allocated at least four times higher than what they allocated for the rest of the 17 universities. This is clear evidence on the distortion in the system.
Q: You may speak about changing the system but once you come into power you will act in the same manner. What is the guarantee that a UNP administration will not be corrupt and be different from the present regime?
A: When the first minister of a future administration is caught for corruption charges, he must be punished. The moment that is done, things will fall in place. That is the acid test. People in this country are looking for better governance. And they are losing hope thinking it is not possible. It is actually possible. Financially it is possible; it is the political will that is lacking. This is why I say, when we get the opportunity at the next election we must vote for a systemic change – not just for a regime change.
Q: Do you think people will vote for the UNP and bring it to power in the next election?
A: The UNP has governed this country for a long period of time. It had its pluses and it had its minuses. We are in the Opposition because we made mistakes. If we look at the previous elections, in 1994 UNP just lost. At the presidential election with Chandrika Kumaratunga and Ranil Wickremesinghe, the LTTE deprived the UNP. At the next presidency the LTTE deprived the UNP. People talking about the UNP having lost 20 elections, that is nonsense. It is been much closer than the people think. This Government uses this as a slogan to demoralise the UNPers and keep them away from polls.
In 2009 people in this country felt that it is proper to give another chance to President Mahinda Rajapaksa. And people including UNPers voted for Mahinda Rajapaksa. But what did the President do with that mandate? The first thing he did was change the Constitution. He destroyed the independence of the Judiciary. But I feel that the people have now realised that the term limit on a president is the right thing to do to ensure checks and balances are in place. I think we are moving to get that opportunity.
What happened is that when the President won the war, people supported him and naturally our election performances weakened. But it has been nearly five years and things are now changing. Now we have an opportunity. The President weakened Parliament through the 18th Amendment and as a result the Opposition is in disarray. Why are we a weak Opposition? It is because the Judiciary has made us weak. The entire system has been weakened.
The UNP has realised this and taken some significant steps. One of the most important steps is transferring the powers of the Party Leader into the Leadership Council. This change is more significant than people think. It is the Leadership Council that will decide who will be the organisers for the 150 electorates. Nineteen powers of the Leader have also been transferred to the Leadership Council. It has been only three weeks since the Leadership Council was set up. It is going to take us three to six months to see the actual impact of what the Leadership Council is doing.
All the work that the Leadership Council is doing is going to be focused on general election or the presidential election. What is the Leadership Council model doing? The Leadership Council model is giving a very clear signal that what the country needs is a more collective leadership. There is wisdom in the counsel of many. You don’t need to depend on one super person who knows everything and who can deliver everything. Sri Lanka has many capable people. So the Leadership Council concept is to bring all those people together and create a future.
It is blatantly clear that this system is putting people in power who are not willing to relinquish power. That is why we need to change this system.
Q: Although you speak highly about the Leadership Council, it is being viewed as another unsuccessful attempt by the UNP. Your comments?
A: I think that is a very unfair comment from a section of the media when the power of the Leadership Council was given to it just three weeks ago. This is why say there is clearly vested interest even in the media. That is aligned with the present regime. Any clear-minded people will know three weeks is not enough to make any impact. This is an absolutely unfair allegation without a base. We will see the first benefits of the Leadership Council in another six months.
Q: Are you trying to say there will be no more fractions in the UNP?
A: Politics by nature will always have fractions. It will never go away. Aren’t there fractions in the Government? Part of the Government is asking the Prime Minister to resign because according to them he has had a hand in the import of drugs. What is keeping them together is the common purpose. What is the common purpose? Corruption and personal gain. The nature of politics is such that everybody will not agree on everything.
Q: The Democratic Party headed by Sarath Fonseka performed well at the last provincial council elections. Do you agree that the reason why people flock around Fonseka is due to lack of alternative?
A: Certainly the electorate does not want the Government. They are frustrated with what is happening. They could not see UNP projecting that alternative. It was not a vote for anybody else; it was a protest vote against the UNP. But that situation is changing. Casting that vote away from the UNP will only ensure one thing; Mahinda Rajapaksa will only stay. It is only the UNP that can be the alternative. Therefore people have to trust us.
Q: Is it true that Karu Jayasuriya will be contesting from the UNP at the next presidential election?
A: There has been no decision as to who its presidential candidate is going to be. But remember, our presidential candidate will only stand to abolish the presidency and basically to push through a reform program. On the reform program, we are willing to work with everybody, including parts of the SLFP. There is a section in the SLFP that believes in a systemic change.
Q: Do you think people will believe that the UNP will abolish the presidency if it comes to power?
A: This is the first time that the UNP has said that it will abolish the presidential system. Our candidates are not tainted with it. We will form a coalition of parties and others in the civil society to make that change. The UNP has a new set of Parliamentarians who are committed to see the reform process. I think there is every reason to give us a chance. We will work on the changes unilaterally but we will work on the changes with other parties too. Therefore I believe it has a very good chance of succeeding.
Q: Is this slogan of abolishing the presidency just another political gimmick?
A: Today a Presidential Advisor or a Presidential family member has more power than elected representatives of the people or even Cabinet ministers. Is this an acceptable system? Can you imagine these powers in the wrong hands? Even the Members of Parliament have realised the problem with it. We are calling upon the present President to do it. But if he is not going to do it, we are saying we will do it. It is certainly not a political gimmick.
Q: What do you think about Opposition Chief Whip John Amaratunga taking part in a foreign tour using Government money?
A: There is a question that Chief Opposition Whip himself needs to answer. He is aware of all the details and all the circumstances. But I can answer for myself and say that I will never do what he did. Voters of Colombo and those who supported the UNP in Colombo will never accept the fact that I participated in a trip with the President going overseas at the Government’s expense. That is something I would not even contemplate.
Q: Will he cross over?
A: I don’t think that fact that he was on a tour meant that he was trying to join the Government. It is certainly a question you should pose to him rather than to me.
Q: Is it true he has demanded certain positions in the Government?
A: I don’t think the Chief Opposition Whip will stoop to such things as asking the Government for any positions.