Friday, 4 October 2013 00:00
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BEATING the drum on good governance to largely deaf years, the Asian Development Bank (ADB) in a recent report was adamant Asia and the Pacific’s economic gains must be matched by stepped-up efforts on governance so that growth benefits can be more evenly shared and development progress locked in.
Yet, the report admits that while most leaders acknowledge the need for good governance, they are rarely cheerleaders for it, resulting in Asia Pacific economies lagging behind their developed counterparts.
The report says since 1993, the region has made only modest advances in rule of law and the quality of bureaucracies. Corruption ratings in East Asia which declined sharply during the Asian financial crisis of 1997-1998 have yet to fully recover and a World Governance Index study in 2011 found that Asia ranked below Latin America in all areas including control of corruption, government effectiveness, political stability, regulatory quality and rule of law.
Sri Lanka is riding high on the bandwagon of countries that has chosen to ignore good governance. Just last month Government decided to pass massive tax concessions for a whopping US$ 4 billion project in Trincomalee without disclosing the parent company as yet another in a long line of transgressions on good governance and transparency that speaks volumes on the level of prevailing corruption.
Given that projects under the Strategic Development Program enjoy extensive tax breaks for 25 years including the withholding taxes for foreign borrowings for the project, it is essential that the Government reveals the parties behind the venture, Opposition MPs had said, pointing out that crucial revenue for public expenditure would be lost otherwise.
Clearly, the allure of Sri Lanka is the main draw behind FDI rather than clear policies, adherence to law and order, minimised corruption or reduced red tape. Many of the tangles that beset the country since 2009 have not yet been adequately straightened out but have rather been bypassed by a system of political patronage that can be seen in the way investment offers are handled.
From the infamous CATIC deal to delayed payments on the Krrish project, not to mention rushing legal amendments through Parliament to facilitate the setting up of casinos in Sri Lanka with Australian gaming mogul Kerry Packer, the Sri Lankan Government has chosen to largely ignore the checks and balances put in place for corruption-free, transparent and profitable investment for the country.
Recently a well-known British investor pulled out of Sri Lanka after the CEO of his boutique hotel used legal wrangles to control the business after he was fired. In an interview to a local paper, he clearly stated that he would not encourage any of his friends to invest in a country where their money would not be protected by the legal system.
In fact the Board of Investment (BOI), which was initially tasked with attracting FDI, has been all but sidelined with prominent ministers heading the way. Numerous attempts to make Government institutions such as Customs, the Inland Revenue Department and the Urban Development Authority (UDA) support the BOI to speed up projects have fallen by the wayside, with more and more personalised involvement replacing a streamlined process. This latest move shows that the Government has no interest in changing this trend.
Defence expenditure in Sri Lanka is also another murky sector that most people are too scared to question. As larger tracts of governance spending get swallowed by the shadows, the practicality of what the ADB points out will come at increasing cost to the people.
