An effective Finance Commission a prerequisite for genuine devolution

Friday, 2 October 2015 00:00 -     - {{hitsCtrl.values.hits}}



Good governance activist Chandra Jayaratne has written to President Maithripala Sirisena calling for an effective Finance Commission as an essential prerequisite for genuine devolution. Following is the full text of Jayaratne’s letter to President Sirisena


President Maithripala Sirisena,

President of Sri Lanka,

Presidential Secretariat, 

Janadhipathi Mawatha,

Colombo 1.

Dear Mr. President,

An Independent, Representative, Professional and Visionary Finance Commission Discharging its Accountability with Efficiency, Economy and Effectiveness Is Key to Achieving a Balanced, Inclusive and Equitable Socio Economic Development of the Provinces and the Country

Your commitment to ensuring peace, harmonious co-existence, and embedding shared positive societal values and norms amongst all citizens, and associated commitments for growth and development led sustainable prosperity and happiness to be shared by all citizens, where ever they may live in the country, have been clearly articulated in following speeches you delivered since assumption of office;

  • Independence Dayi
  • Occasion that marked 100 days since election as Presidentii
  • Ranaviru Dayiii
  • Ceylon Chamber of Commerce Economic Summitiv
  • Meeting with the Diplomatic Communityv
  • Within the next few days, you and the Government led by you, will accept further commitments arising from;
  • The adoption of the new UN Sustainable Development Goals 2016-2030vi
  • The resolution on promoting reconciliation, accountability and human rights in Sri Lankavii

The above commitments of the Government, especially in removing inequalities in national resource allocations led disparities in provincial value addition and household incomes, to be delivered will require change management led new leadership approach to socio-political and economic governance of Sri Lanka. 

You have already taken steps, through the establishment of a National Unity Government, to lay the necessary foundation for the desired overall political governance structure to be in place. It is now essential that the necessary foundations for the socioeconomic development governance framework to also be in place, through essential restructures and change management initiatives. 

Socio-economic policies and implementation leadership focus must ensure that the Government now reaches out and removes the inequalities and reduce the twin gaps in provincial level, resource allocations led growth/value addition and household incomes. The ineffective structures and decision making processes in place, which directly impact on these governance objectives and the associated implementation barriers and challenges in assuring inclusive and equitable growth and per capita incomes, must be removed by restructure and change managementviii. One of the key governance institutions for immediate restructure and change management is the operations of the Finance Commissionix.The network alliances, grass root connectivity, links with international donors & financiers, investors, professional institutions of the Finance Commission needs strengtheningx.

Upon due reflection, you will realise that an independent, representative, professional and visionary Finance Commission , discharging its accountability with efficiency, economy and effectiveness is key to achieving a balanced, inclusive and equitable socio economic development of the provinces and the country. You will also accept that the structure, organisation, composition, focus, consultative processes, network alliances, professionalism of decision making and implementation framework and transparent public communications, in regard to the operations of the Finance Commission will require significant change from the past, for the vision and commitments to be realised.

It is recommended that you and the Government give immediate consideration to the under noted recommendations, in regard to the restructure and operational change management of the Finance Commission, as critical drivers of achieving the vision and commitments of the Government;

1.Impress upon the Constitutional Council the critical importance of three eminently qualified persons, with independence, integrity, and no conflicts of interests, being nominated as members of the Finance Commission, ensuring such nominees are men/women of highest capability (knowledge, skills, values and attitudes) and track records of achievement, with capacity to perform their set roles of responsibility and duly discharge accountability of office;

2.Appoint an Advisory Committee, to meet an internal resource gap within the Finance Commission, comprising of five retired senior public service officials (e.g. former secretaries of ministries, Central Bank deputy governors, Government agents/district secretaries and senior public servants with rural development, local Government and treasury management expertise) with a dotted line accountability to the Finance Commission, to link with the Finance Commission once a month and engage with it in an advisory role; and support the Finance Commission in discharging its accountability for transparent good governance in the achievement its constitutional mandate/terms of reference; and also function in a support capacity similar to an Audit Committee of a corporate entity;

3.To strengthen the network alliances, grass root connectivity, links with international donors and financiers, investors, business, CSOs, and professional institutions of the Finance Commission, establish a twin external ad hoc support committee to structure for network , advice, information, strategic input, consultation and critique comprising of

a.A Committee (A) to network, advise, think tank support, critique, invest, seek aid, assist in funds mobilisation, engage in CSR, etc., comprising of representatives of 

i.UNDP and Other Affiliated International Organisations (e.g. FAO, WFP, WHO, UNICEF, etc.)

ii. Commonwealth Secretariat

iii.International financial institutions (e.g. World Bank, ADB, JICA, AIIB, etc.)

iv.Diplomatic community members of key donor countries (e.g. India, China, Japan, EU, UK, USA, Norwegian, Canadian, Australian, etc.)

v.INGOs (e.g. ICRC, Oxfam, CARE, USAID, Asia Foundation, Zoa, Daikonia, IDRC, etc.)

vi.Three representatives of the Joint Chambers of Commerce and Industry

b.A Committee (B) to network, advise, think tank support, share experiences, identify needs, risk assessment, critique, evaluate outturns/outcomes, facilitate operations and planning, establish grass root contacts, invest, engage in CSR, etc. comprising of;

i.Provincial governors

ii.Provincial chief ministers

iii.Civil society organisation representatives, one representative for each province selected by way of active engagement in the provinces

iv.Provincial chambers of commerce representatives, one representative of each province selected by way of active engagement in the provinces

v.Representatives of independent professional organisations (e.g. OPA, CEPA, ICASL, FUTA, Economists Association, GMOA, Institute of Engineers, Environmental Association, Irrigation and Water Management,)

Government Services Trade Union representatives

4.Ad hoc Committee (A) above to meet with the Finance Commission in pursuit of set objectives, four times an year, for the undernoted specific purposes;

a.To review the Annual report of the Finance Commission on socio economic outputs and resultant outcomes of the provinces achieved in respect of the prior year

b.To make submissions to the Finance Commission on

i. key resource needs and resource gaps identified in assuring a balanced, inclusive and equitable socio economic development of the provinces 

ii.available resources by way of aid, grants, investments, loans and other transfers

iii.technical and operational advice

c.To review, critique, comment and provide advisory support in developing its outline background information, assumptions, rationale, allocations basis, contingency and scenario options and validation checks for assurance of achieving a balanced, inclusive and equitable socio economic development of the provinces

d.To review critique, comment and provide advisory support on the actual allocation recommendations for the ensuing year, sources of funding and expected socio economic outputs and resultant outcome of the provinces and associated risks/contingency plans

5.Ad hoc Committee (B) above to meet with the Finance Commission six times an year for the undernoted specific purposes;

a.To review the Annual report of the Finance Commission on socio economic outputs and resultant outcomes of the provinces achieved in respect of the prior year

b.To make submissions on key resource needs and gaps identified in assuring a balanced, inclusive and equitable socio economic development of the provinces, investment proposals, render technical and operational advice and identify potential investments and resource development initiatives

c.To review, critique, comment and provide advisory support in developing its outline background information, assumptions, rationale, allocations basis, contingency and scenario options and validation checks for assurance of achieving a balanced, inclusive and equitable socio economic development of the provinces

d.To review the interim half year report on socio economic outputs and resultant outcome of the provinces achieved in respect of the current year

e.To review critique, comment and provide advisory support on the actual allocation recommendations for the ensuing year, sources of funding and expected socio economic outputs and resultant outcome of the provinces and associated risks/contingency plans

f.To review post audit reports of key capital investments and revenue spends in the provinces and the socio economic outputs and resultant outcome of the provinces, the lessons learnt and follow up strategic future action plans

6.The Government and the Commission to review the desirability of expanding the mandate of the Commission to include the following additional terms of reference, in relation to its present and future needs;

a.To assist the provincial councils to raise new sources of revenue and manage the effectiveness, efficiency and economy of its spends both revenue and capital;

b.To assist the provincial councils to develop provincial legislation consistent with the constitutional mandate;

c.To assist the provincial councils to develop strategies to enhance the net value addition at provincial level and household incomes; generate new employment and self-employment opportunities; generate new livelihood and human development and livelihood empowerment options within the province and assist in strategic planning and implementation of such action plans;

d.To assist the provincial councils to develop strategies to enhance safety, health, education, sports, leisure, transportation, sanitation, housing and communications options within the provinces;

e.To assist the provincial councils to identify needs and develop proposals for socio economic development of the province and assist in strategic planning and implementation of such action plans;

f.To assist the provincial councils to develop and place proposals seeking, funds and other resources for socio economic development, from the centre, private sector as well as inflows in the form of aid, grants and transfers channelled through the centre 

g.To assist the provincial councils to raise funds from the local debt markets for socio economic development, with the concurrence of the centre and with or without guarantees by the centre;

h.To assist in setting up provincial level zero based and flexible budgeting processes and setting management by objectives and other best practices of governance in enhancing the return on spends and investments;

i.To assist the provincial councils to prepare and balance provincial budgets and funds flows; effective management of approved debt portfolios; fiscal consolidation 

j.To assist the provincial councils in the management of cross cutting projects, local debt market leverage funds mobilisation and resources management and project implementation and project management of projects involving collaboration/alliances amongst two or more provincial councils; 

k.To assist the provincial councils in provincial level natural resources management, mining and exploitation of natural resources and assurance of environmental sustainability, with the concurrence of the centre, including collective activities of one or more provinces

l.To compile and publish an annual report of the Finance Commission and also assist the provincial councils to produce their annual reports in a standard format, demonstrating the effectiveness, efficiency and economy of spends and use of national resources, the resultant value addition and realisation of socio economic objectives and resultant outcomes and present these reports in the respective legislatures for review, critique debate and adoption;

7.The Commission to closely liaise with the Centre and recognise 

a.the limitations of the centre in raising revenue ;

b.the need to comply with limitations placed on the centre in terms of the Fiscal Responsibilities Act and constitutional mandate;

c.the resources of the centre available for disbursement to the provinces, having met the demands on spends covering civil administration, pensions, defence, debt servicing and other committed expenditure and settlement of liabilities;

d.the need to manage essential subsidies and transfers as well as safety net payments, provisions and contingency reserve allocations;

e.the need to minimise pricing variances due to provincial taxation and levies, in respect of public utility services and food items and consumables;

f.the need for disaster management and prevention, of the ecology and environmental protection commitments and sustainability of natural resources;

The Finance Commission with the service support of the Auditor General and with the concurrence and facilitation of the chief ministers of the provinces should be empowered to arrange provincial level post audits of revenue and capital spends in excess of set limits, systems audits and efficiency, effectiveness and economy audits; thereby assisting in the enhancement of productivity, service quality/delivery, and minimisation of waste and corruption; risk assessment and mitigation;

8.The Finance Commission to upgrade its management information systems capability and install necessary systems support for implementation tracking and also be of assistance to the provincial councils in enhancing their systems capability and capability in extracting management information to control, track implementation status and enhance outcomes from the provincial level spends;

9.The Finance Commission to facilitate transparent information dissemination and exchange by and amongst provincial councils and ensure right to information commitments are fulfilled in respect of its own operations as well as assist the provincial level and ensure transparent information dissemination and right to information response processes are in place; 

10.The Finance Commission to facilitate use of information communications technology services for its own and provincial level needs in improving management efficiency, effectiveness and economy and in the transparent communications; with such initiatives including inter and intra provincial councils, service delivery and management control and implementation tracking services:

11.The Finance Commission should be assured by the Centre of adequate resources, management capability and funding for its operations 

It is believed that above principal restructures and change management initiatives, along with associated enhancement of operational processes, systems and procedures, including the participative contributions from the support professionals team and ad hoc Committees, in a backdrop of committed, independent capable persons of high achievement and integrity leading the Finance Commission, will provide you and the Government with avenues to assure the realisation of the challenging vision and commitments set out at the outset above, especially;

  • to ensure peace, harmonious coexistence, and embedding shared positive societal values and norms amongst all citizens;
  • growth and development led sustainable prosperity and happiness being shared by all citizens, where ever they may live in the country;
  • Resolving the national question and assuring that there will be less chances of socio-political upheavals, rebellion, insurgencies and war emerging in the underprivileged provinces;
  • Eradication of poverty and achievement of sustainable development goals;
  • Balanced growth and lessen the disparities in provincial level net value addition and household incomes.

Yours sincerely,

Chandra Jayaratne

cc. Prime Minister and Minister of Policy Planning and Economic Affairs

Minister of Finance

Secretary Ministry of Finance

Governor of the Central Bank

Auditor General,

Secretary Finance Commission

Speaker of Parliament 

Leader of the Opposition

Leader of the House

Secretary of the Constitutional Council

Presidential Advisor on Good Governance

Provincial Governors and Chief Ministers

Chairmen of Chambers of Commerce 


i To end the war against terror, our heroic troops were able with their guns to silence the guns of terrorism. However, the biggest challenge we face today, is that of bringing together the minds of the people of the North and South, and through a process of reconciliation bring about co-existence and national understanding, and thus take our great Motherland forward as a land rich in human affection and understanding.

The greatest challenge we have today is to unite the minds of the people from the North and South for a national reconciliation framework.

In future an enormous responsibility for all the political leaders is to ask what went wrong in the 67 years since independence from Britain and how we can rectify the failures without pointing fingers.

Working with speed towards the eradication of poverty, narrow the gap between the rich and poor and bringing constitutional changes to establish a truly democratic country.

ii “We must greatly value this new trust we have won which will provide us with cooperation for national development, especially for development of national resources and effective participation in international affairs. In order to build a strong democratic and equitable nation it is necessary to promote unity, friendship and coexistence among those who follow different religions such as Buddhism, Hinduism, Islam and Christianity and also among communities such as Sinhalese, Tamils, Muslims, Malays and Burghers, and by this means ensure reconciliation and brotherhood that will eliminate mistrust, doubt and fear among people. The developed countries of the world that are democratic and give an important place to freedom, have many different races, religions, languages and are multi-religious and multi-ethnic societies. It is therefore necessary for us to understand that while protecting the historic dignity and respect of the Sinhala Buddhist people, it is also necessary to ensure the brotherhood, friendship and coexistence among all communities and move towards a just society that will ensure the rights of the people. Let us think anew and creatively. Let us produce unique strategies for the new era. We must understand clearly our responsibilities and accountabilities. Sometimes we don’t clearly understand these factors. Particularly, politicians and Government officers must clearly understand their responsibilities and accountabilities making everyone and everything accountable to the people and society.”

iii Though the damaged buildings, destroyed roads and other physical resources were being re-built there was no reconciliation process during the post-war period to rebuild the broken hearts and minds. Therefore, as the new Government we clearly state that our policy is that of development and reconciliation. We cannot fulfill our expectations for reconciliation only through development. The reconciliation process includes investigating the truth, carrying out justice, eliminating the fear and mistrust and building trust among every community and re-building physical resources which were devastated by the armed conflict. Hence, with the experience of the war, we must understand the requirement of priority for the reconciliation process. Today, we all consider this great day as a day which saw the dawn peace in our land. A day that we all respect as well as a day which opens a new chapter in our country’s development and reconciliation. As I mentioned before, all must unite for development and reconciliation in the country. We must all carry out our responsibilities together to defend the unitary status and territorial integrity on behalf of our nation and country.

iv We must make sure that whether it’s the implementation of national development plans, the state sector, the private sector or even our setting up our own policies, it has to be done with social justice, and transparency in mind. If there were certain times when there were setbacks in meeting these goals, I’m sure you can understand the reasons as to why that had happened

v We are keen to promote harmony among the people so that their energies could be diverted towards promoting development, peace, democracy and in protecting and promoting core values such as tolerance and understanding, including respect for other cultures.

We believe that a nation cannot afford to sit back and relax until the economic freedom is achieved. Hence our central focus will be on the eradication of extreme poverty and re-affirmed commitment to sustainable development

vi Sustainable Development Goals

  • Goal 1 End poverty in all its forms everywhere 
  • Goal 2 End hunger, achieve food security and improved nutrition and promote sustainable agriculture 
  • Goal 3 Ensure healthy lives and promote well-being for all at all ages 
  • Goal 4 Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all 
  • Goal 5 Achieve gender equality and empower all women and girls 
  • Goal 6 Ensure availability and sustainable management of water and sanitation for all 
  • Goal 7 Ensure access to affordable, reliable, sustainable and modern energy for all 
  • Goal 8 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all 
  • Goal 9 Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation 
  • Goal 10 Reduce inequality within and among countries 
  • Goal 11 Make cities and human settlements inclusive, safe, resilient and sustainable 
  • Goal 12 Ensure sustainable consumption and production patterns 
  • Goal 13 Take urgent action to combat climate change and its impacts
  • Goal 14 Conserve and sustainably use the oceans, seas and marine resources for sustainable development 
  • Goal 15 Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss 
  • Goal 16 Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels 
  • Goal 17 Strengthen the means of implementation and revitalise the global partnership for sustainable development

vii Welcomes the Government’s commitment to a political settlement by taking the necessary constitutional measures and encourages the Government of Sri Lanka’s efforts to fulfill its commitments on the devolution of political authority, which is integral to reconciliation and the full enjoyment of human rights by all members of its population; and encourages the Government of Sri Lanka to ensure that all Provincial Councils, are able to operate effectively, in accordance with the 13th amendment to the Constitution of Sri Lanka;

viii Dr. Laksiri Fernando in the article titled ‘Balanced Provincial Development and the Private Sector’ wrote thus” Provincial disparities constitute one of the major challenges of economic development in Sri Lanka and perhaps were largely responsible for the socio-political upheavals that the country has been encountering both in the north and the south during the last three decades.

Rebellion, insurgencies and war emerging apparently in the underprivileged provinces in fact have enhanced the disparities, by retarding economic development, instead of resolving or ameliorating them.

The Government has an admirable target of doubling the per capita income in the country by 2016 and equally important is the closing of the per capita income gap at least by half between the western province and the other provinces. This should be done not by neglecting the western province but by giving extra assistance and stimulus to the other provinces. Doubling of the income and halving of the gap could be the policy.Such a policy requires cooperation between the centre, the provincial councils and the private sector

ix Finance Commission.

154R. (1) There shall be a Finance Commission consisting of -

(a) the Governor of the Central Bank of Sri Lanka;

(b) the Secretary to the Treasury; and

(c) three other members to represent the three major communities each of whom shall be a person who has distinguished himself, or held high office, in the field of finance, law, administration, business or learning.

(2) Every member of the Commission shall, unless he earlier dies, resigns or is removed from office, hold office for a period of three years.

(3) The Government shall, on the recommendation of and in consultation with, the Commission, allocate from the Annual Budget, such funds as are adequate for the purpose of meeting the needs of the Provinces.

(4) It shall be the duty of the Commission to make recommendations to the President as to -

(a) the principles on which such funds are granted annually by the Government for the use of Provinces, should be apportioned between various Provinces; and,

(b) any other matter referred to the Commission by the President relating to Provincial finance.

(5) The Commission shall formulate such principles with the objective of achieving balanced regional development in the country, and shall accordingly take into account -

(a) the population of each Province;

(b) the per capita income of each Province;

(c) the need progressively, to reduce social and economic disparities; and

(d) the need, progressively, to reduce the difference between the per capitaincome of each Province and the highest per capita income among the Provinces.

(6) The Commission shall determine its own procedure and shall have such powers in the performance of its duties as Parliament may, by law, confer on it.

(7) The President shall cause every recommendation made by the Finance Commission under this Article to be laid before Parliament, and shall notify Parliament as to the action taken thereon.

(8) No Court or Tribunal shall inquire into, or pronounce on, or in any manner entertain, determine or rule upon, any question relating to the adequacy of such funds, or any recommendation made, or principle formulated by, the Commission.