Be Alert!

Tuesday, 12 August 2014 00:01 - - {{hitsCtrl.values.hits}}

The mandate of the External Resources Department

Fast on the heels of the National Secretariat for NGOs issuing a circular purporting to limit the activities to their legitimate mandate, which has been discussed in this column earlier, the Director General of the Department of External Resources has placed a notice in the newspapers – under the alarmist caption ‘Be Alert…’ and subtitled ‘Notice to all Government officials, civil society organisations and general public’. This advisory on alertness comprises nine paragraphs. The first starts as follows: ‘Due diligence on the utilisation of funds received from foreign funding agencies, INGOs and any other sources to all Government agencies, local institutions, civil society organisations and general public.’ Functions and duties of External Resources Dept. When considering the implications of this first paragraph of this ‘Be Alert’ notice, it is worthwhile to fortify ourselves on the nature of the functions and duties of the Department of External Resources. The Department is a subject and function assigned to the Ministry of Finance and Planning, of which the Minister is the President. The Secretary to the Ministry is the Chief Accounting Officer and responsible to Parliament and the people for the public funds voted by Parliament and expended by the Minister. The website of the Department of External Resources (ERD) says that the ERD is responsible for mobilising and coordinating foreign assistance to Sri Lanka. The Vision of the ERD is ‘to be well-equipped with knowledge and expertise required to mobilise and manage external finances for accelerated economic growth of Lank as the country elevates to higher middle income status.’ The Mission: ‘Mobilise external financing at least possible cost in support of Sri Lanka – the Emerging Wonder of Asia; Development Policy Framework of the Government of Sri Lanka’ while maintaining the long-term debt sustainability of the country.’ Under a caption of ‘What we do and our Goals,’ a series of bullet points are provided among them – conduct consultations with donors to identify development strategies and priorities, coordinate annual country aid programming activities with donors, prepare project pipelines for donor funding, coordinate formulation of projects proposed for donor funding by facilitating the conduct of feasibility studies… and coordinator of activities of donor missions from the fact-finding stage to the appraisal stage, negotiate foreign aid and make arrangements for the signing of loan/grant agreements and make them effective. All these tasks are to be done in consultation with line ministries agencies, the National Planning Department and to what is referred to but not further defined as an ‘Advisory Committee’. The website of ERD also goes on to specify the ‘Activities involved’: Coordinate fulfilment of any conditions connected to with the negotiation and signing loan agreements, conduct loan negotiations with donors, obtain government approval and authority for signing agreements, fulfil conditions prior to effectiveness of the loan agreements, conclude banking arrangement and arrange advance procurement activities, initiate action on setting up of PMUs, obtaining donor concurrence for procurement and submission of reimbursement claims to donors.

Overseen by non-existent ministry? The ERD website also states that the department oversees implementation of donor-funded projects by – coordinating activities connected to review missions fielded by donors, maintaining a database on monitoring of donor-funded projects, participating in steering committees set up by line ministries to monitor implementation of donor-funded projects, reviewing implementation of projects jointly with donors and participating in monitoring meetings conducted by the Ministry of Policy Development and Implementation. This is a curiosity as such a ministry by that name does not exist as far as the information currently provided by the Government of Lanka in available public documents shows! So the ERD has to attend meetings conducted by a non-existing ministry, according to its own website! The website goes on to provide for various methods of overseeing implementation of donor funded projects by- managing foreign training opportunities provided by donors under Technical Cooperation agreements, (this is an interesting power – as the standing joke in the public service is that any training offered to the country is offered to any on outside the ERD, only and only if – there is no one within the ERD, who is interested on a priority basis!! Implementation of donor funded projects is further overseen by the ERD by managing foreign experts and overseas volunteers provided by donors, administer the budget on donor funds re lent to the private sector through the banking system. The ERD further manages the Governments External debt database by-maintaining a data base on foreign loan/ grant commitments, disbursements and repayments for various users, providing information on servicing of foreign debt and publishing information on foreign aid and foreign training placements provided by donors. This description, summarised from the ERD website is quite exhaustive and complete. Other than the obvious errors and mistakes pointed out, one salient feature which this list brings out is that the ERD is at the interface between donors, the Government of Sri Lanka and implementing Government agencies. The only reference to a non-government institution is where the ERD empowers itself to ‘Administer the budget on donor funds re-lent to the private sector through the banking system’. This is the only exception to a total commitment of the ERD by the wording of its own mandate on its own website – to donor, Official Development Assistance (ODA) funds channelled to Government and Governmental implementing agencies. Therefore the inclusion of the general public in the ‘Be Alert’ sub title can be justified only on the basis of a caution to the public not to participate in any scheme by which ODA is being utilised without being channelled through official channels. Private remittances by individuals to their families or friends do not by any stretch of imagination come within the remit of the ERD. In paragraph 2 of the Be Alert notice, the ERD says that it ‘takes its best efforts to ensure optimum use of foreign aid/grants received from foreign parties’ – surely this must be restricted to ODA from foreign governments or IFIF or INGOs and again cannot catch private remittances?

Duplicity, confusions and complexities In paragraph 3 of the Be Alert notice, there is an interesting spin – the necessity of implementing all development programs aligning with national development programs to ensure consistency, continuity and transparency while avoiding duplicity’. The dictionary meaning of the word ‘Duplicity’ is – dishonest behaviour that is intended to make people believe that which is not true’. The ERD seems to be admitting that may be historically or even currently, – there is or has been ‘duplicity’ in the ‘implementation of national development programs’. This is some confession! As Britain’s war time Prime Minister Winston Churchill famously told the US Congress: “Hitler says he will wring Britain like a chicken by its neck. Some chicken, some neck!” Or maybe the word intended to be used is ‘duplication’? This gives the sentence a whole new meaning! Paragraph 4 – refers to projects funded by foreign agencies (again not individuals) ‘adopting their own procurement procedures, governance structures, accountability mechanisms, etc., creating confusions (sic) and complexities.’ The ERD ends the paragraph by saying that the ‘country’s well-practiced financial procedures and annual budgetary process being followed will avoid such ‘confusions and complexities’. One can only submit that a cursory reading of the Auditor General’s report on an average development project or departmental accounts will not support this line of thinking! Micro financing Paragraph 5 refers to ‘micro financing’ in three places. This seems a welcome recognition of the work microfinance plays in economic development and poverty alleviation. But unfortunately, it has been deliberate policy of the Government to refrain from legislating to close the legal lacuna which applies to microfinance programs run by institutions which are not banks, finance companies and cooperatives. This has given an opportunity for criminal elements to operate various Ponzi or Pyramid schemes, which robs the gullible and unprotected public’s money. With interest rates being kept low, small investors are seeking sources of higher interest return, and promoters of Pyramid scheme are having a field day in Lanka just now. All because the law prohibiting the taking of deposits by institutions, which are prohibited from doing so explicitly, is not implemented strictly and the word ‘finance’ is being permitted to be used contrary to the provisions of the Finance Business Act by virtue of a paper notice, which purports to permit this until the Micro Finance Law is enacted! A reference is made to the nation’s strong tradition dating back decades in microfinance and small group savings and lending – but this history is being betrayed by permitting a legal lacuna to exist and permitting unscrupulous elements to exploit that lacuna to cheat investors of their money using Ponzi or Pyramid schemes. The ERD claims that this is being done with funds from foreign agencies, but as far as is known in the public domain, none of the Ponzi schemes or Pyramid schemes which have been dealt with under the law, had access to any foreign donor funds. This is a basic untruth! Paragraph 6 goes onto deal with this deposit taking issue-and advises ‘Government agencies not to sought (sic) donor assistance for’ such activities which local funds from the Consolidated Fund are available, unless the National Planning Department and the ERD has given clearance. Beyond ERD mandate Paragraph 7 provides advice which is clearly beyond the mandate of the ERD. The position taken in that paragraph, is that ‘any private sector agency/NGO or individual being a recipient of foreign aid’. This reference must be to ODA from foreign governments, IFI or INGO, surely it cannot apply to individual remittances? The rest of the paragraph recites all the laws which the ERD purports to claim which applies to foreign funds coming into the country. This is the law of the land as it exists. What mandate has the ERD to recite or even ‘Alert’ the general public about it? Clearly the legal limits of the mandate of the ERD are completely being exceeded in this paragraph? The last sentence reads: “Accordingly recipients of foreign aids (sic) should disclose necessary information… Is the reference to HIV AIDS!? It cannot be as the sentence goes on to causing the disclosure of ‘details of funds received, purpose, expenditure report, etc.’ One is reminded of the crack the Syrian people had when President Hafez Assad was succeeded by his son Bashir: ‘What is the similarity between the Presidency of Syria and HIV AIDS? Answer – they are both sexually transmitted!’ Paragraph 8 ‘advises’ the general public ‘to refrain from participating in such programs’ without prior consultation with ‘grama niladharis, divisional secretaries, district secretaries and chef (sic) secretaries for assess (sic) such activities are legitimate’. Paragraph 9 restates the obvious on ODA, foreign loans and grants have to be routed through the Consolidated Fund. But the weekend newspapers headlined a story that a cabinet minister, no less, had communicated with the Government of Saudi Arabia and requested funds in violation of the ERD’s pious ‘Be Alerts’! So, at the end of the day, this ‘Be Alert’ notice of the ERD goes well beyond its legal mandate, sticking the department’s nose into areas concerning other Government agencies. The ERD has no authority whatsoever to interfere with private remittances, which are allowed by law and expended, if for example to finance the construction of a dwelling, complies with all the laws and regulations relating to that exercise. Giving rise to needless fear This notice just puts needless fear into the thousands of Lankans working abroad who wish to remit funds to their relatives and friends to improve their living conditions in these difficult times. This fear will affect the country’s foreign exchange reserves. It is strongly recommended that the ERD confines itself to its legal functions, instead of trying to expand its mandate beyond its legal remit and hold consultations with non-existing ministries, as indicated on its own website! Also when drafting and/or translating notices to the public, as this ‘Be Alert’ notice claims to be, it would be advisable to have a competent person prepare the draft, instead of having innumerable ‘unintended consequences’ by downright incorrect use of words and abuse of the language! But then a senior British Law Lord, on retiring after 30 years of service on the Bench, declared at his farewell function that all his experience has convinced him of one thing and one thing alone, the only law that is fundamental, universal and applies all the time is the Law of Unintended Consequences! Ill-advised, mis-drafted notices such the one we are considering will have a negative effect on ordinary law abiding citizens, working abroad, to remit funds from to their relatives in Lanka to live off or develop assets, etc. Rumours are alive, already, on the alleged risks to Resident and Non Resident Foreign Currency accounts. Although there have been official denials of any such possibility, there is a real credibility issue here. One is reminded of that famous episode from the British TV comedy ‘Yes, Prime Minister’ where the Cabinet Secretary, Sir Humphrey Appleby, cautions the Prime Minister, Rt. Hon. Jim Hacker MP, who orders him to issue an official denial to quash some rumour spreading among the public on a government policy, that the ‘British Public, in their wisdom, through long practical experience, have learnt to accept anything as the absolute truth, only when it is repeatedly, officially denied by the government!’ The PM’s Principal Private Secretary, Bernard Woolley, is shown chortling in the background! Pathetic level of incompetence The Sinhala ‘Vimalasiliwathwanna’ original ‘Be Alert’ reads quite differently to the English ‘Be Alert’ notice which is being discussed. What the Tamil translation says is not known. One can fairly presume, given the current track record, that it must be going on another ‘frolic of its own,’ causing further confusion and confounding the public, among others it is supposed to ‘Alert’! To what a pathetic level of incompetence has public administration in this ‘Emerging Wonder of Asia’ fallen? The Lawyers Collective in Sri Lanka has also critiqued this ‘Be Alert’ notice, calling it ‘misleading’. They describe it as ‘another intimidatory tactic of the Government manipulated outside the legal framework to create suspicion in the minds of the general public on the pro-democratic position taken by the NGOs as well as their contribution to uplift socio economic status of the masses’. (The writer is a lawyer, who has over 30 years of experience as a CEO in both State and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)