{"id":23318,"date":"2013-07-27T17:46:53","date_gmt":"2013-07-27T21:46:53","guid":{"rendered":"http:\/\/dbsjeyaraj.com\/dbsj\/?p=23318"},"modified":"2013-07-27T18:14:32","modified_gmt":"2013-07-27T22:14:32","slug":"mahinda-govt-is-politically-unassailable-but-teetering-on-the-brink-of-imminent-collapse-administratively","status":"publish","type":"post","link":"https:\/\/dbsjeyaraj.com\/dbsj\/?p=23318","title":{"rendered":"Mahinda Govt is Politically Unassailable but Teetering on the Brink of Imminent Collapse Administratively"},"content":{"rendered":"

By<\/p>\n

C.A.Chandraprema
\n<\/strong><\/p>\n

Two events that occurred last week highlighted the strange position that the present government finds itself in \u2013 politically it is unassailable but administratively, it\u2019s teetering on the brink of imminent collapse. <\/p>\n

Kurunegala district parliamentarian Dayasiri Jayasekera\u2019s crossover from the UNP to the government last Wednesday came as no surprise. He and the leadership of his party were working at cross-purposes from the very moment he entered politics from the Kurunegala district in 2001. When he got the highest number of preference votes in the district getting over double the number of votes of his nearest rival, Akila Viraj Kariyawasam, he became a target of the leadership who would have preferred Akila to be number one.<\/p>\n

Now with Dayasiri gone, Akila does become the number one candidate in the Kurunegala district \u2013 he got about 50% more votes than his nearest rival Gamini Jayawickreme Perera who is unlikely to contest another parliamentary election due to his advanced age.<\/p>\n

<\/p>\n

The party leader\u2019s prejudice against Dayasiri and his unconcealed preference for Kariyawasam was so obvious, that privately, nobody in the UNP really blames Dayasiri for defecting. His was a blameless crossover in other respects too in that he resigned from parliament to obtain a public mandate at the forthcoming PC election. By taking the brightest rising star of the UNP in the Kurunegala district, president Mahinda Rajapaksa has infused some dynamism to what would have otherwise been a lacklustre election campaign. The UPFA would have won this election in any case, even if Dayasiri Jayasekera continued to remain in the UNP. But the president being a political animal, knows that it is always helpful to have the best and the most dynamic on his side rather than on the other side. From the time he came into power in 2005, he has managed to keep his government regularly infused with new blood from the opposition and this is the latest episode in an ongoing process. This latest defection shows that the Rajapaksa government is politically unassailable. But even as it was proved once again to be politically unassailable, the vulnerabilities of the present government were forcefully brought out in the COPE report that was also released last week.<\/p>\n

The COPE revelations<\/em><\/p>\n

The Committee on Public Enterprises report published on Tuesday last week, provides a glimpse of the underbelly of the government which the public does not usually get to see. What emerges from Communist Party leader D.E.W.Gunasekera\u2019s voluminous report on the internal workings of the publicly owned enterprises of this country is a frightening picture of inefficiency which could well derail the plans the government has for this country. Indeed it could derail the government itself. The most important shortcoming that was highlighted even in the Chairman\u2019s note to the COPE report was the need to enhance the quality of leadership of public enterprises through the appointment of professional, experienced and skilled personnel and in order to do so, the very first recommendation put forward in the COPE report was to increase the salaries of professionals in the public sector. The COPE report warns that if measures are not taken in this direction, it could result in a collapse of the public sector.<\/p>\n

This was a shortcoming in this government from the very inception. The government has still not recovered from the mess that was created by appointing a poorly qualified person as the Chairman of one of the most important public enterprises the Ceylon Petroleum Corporation. It\u2019s frightening to think that the same situation could prevail in other public enterprises as well. One of the most serious ongoing problems in all public enterprises as a whole was in the recruitment of professionally qualified accountants and auditors. Given the seriousness of the issue and the difficulty in increasing public sector salaries to attract the correct people for the job \u2013 an increase in the salaries of one category will result in cries for a salary increase for other categories as well \u2013 COPE Chairman DEW Gunasekera had suggested to P.B.Jayasundara that the treasury should have a pool of accountants and internal auditors who can be assigned to the public enterprise where their services are needed.<\/p>\n

Subsidies extorted from public enterprises<\/strong><\/p>\n

One thing to be said about this COPE report is that it has transcended the political stands and ideologies of its members, and revealed the stark truth behind the inefficiencies of public sector enterprises. The Committee on Public Enterprises was made up of people like D.E.W.Gunasekera, Chandrasiri Gajadeera and Sunil Handunnetti who come from a Marxist background and UNP parliamentarians Eran Wickramaratne, Sujeewa Senasinghe and Rosy Senanayake, but when it came to examining the reasons for the massive losses incurred by the Ceylon Electricity Board, Ceylon Petroleum Corporation and Mihin Lanka, they all concurred that “The greatest challenge faced by the public enterprises with a commercial basis is that they are required to compromise on catering to the national interest of the country whilst being engaged in a highly competitive dynamic business environment. The severe losses of the Ceylon Electricity Board, Mihin Lanka Ltd. etc. had been due to the under-selling of their services for not being able to pass the burden on to the General Public. If this situation is not addressed promptly, the institutions like CEB, CPC, Mihin Lanka Ltd. are on the verge of a collapse as entities which would in turn affect the banking sector in the country.”<\/p>\n

Readers will note that this view goes contrary to the public position taken by both the UNP and the JVP on the recent electricity tariff hike which was portrayed by them as a result the bungling and waste of the government and not by the inability of these institutions to charge a commercially viable rate for their services. UNP parliamentarians Eran Wickramaratne, Sujeewa Senasinghe and Rosy Senanayake have now indirectly acknowledged that what primarily ails the CEB, CPC and even Mihin Lanka is the need to perform a public service at a subsidized rate, and not so much the bungling and corruption of the government (even though that factor also accounts for at least a part of the present situation.) Similarly, the likes of DEW Gunasekera and Chandrasiri Gajadeera, despite their Communist Party affiliation, have indirectly accepted that these institutions should be run in a commercially viable manner and the actual cost of the service provided should be recovered from the public. There is much to be said in favour of such an approach. Very often what leads to increased efficiency and savings is increased cost. It was after the recent hike in the electricity tariff that many middle class people began taking a closer look at their electricity bills and wondering how they could be consuming so many units of electricity.<\/p>\n

The recommendation made by COPE in relation to these enterprises which have been forced to sell their services at subsidized rates is even more radical. What they recommend is that the Central Bank and the Treasury should cut off lending by the banks to these institutions in order to ensure that the banks do not collapse under the weight of the underperforming debts accumulated by these institutions. The implications of such a denial of credit would be that all these institutions will have to increase their rates. This is a process which has now been endorsed by the UNP and the JVP as well. <\/p>\n

COPE had also identified several causes for the losses in public enterprises and among them was unsatisfactory debt management with many institutions having a large amount of debtor balances outstanding for long period of time, with some of these monies owed being in a non-recoverable state. The government owned media institutions Associated Newspapers of Ceylon Ltd, Sri Lanka Broadcasting Corporation, and the Independent Television Network all had issues relating to the non-collection of debts owed to them. COPE recommended that a special debt collecting unit in each institution should be created, and stern action be taken against officers who make deliberate delays in the collection of outstanding amounts. If one reads between the lines, it is clear that COPE was of the opinion that uncollected debts in public enterprises could at least in part be due to corruption on the part of the staff of those institutions. Another cause for losses in public enterprises was identified as the release of employees as well as other resources such as vehicles to the line ministry contrary to the guidelines that the treasury had issued prohibiting this practice. Overstaffing in many public enterprises such as the Sri Lanka Transport Board and plantation companies and even the SLBC was seen as one of the main causes for the losses incurred by those institutions. The recommendation was that the excess staff be made to retire through a voluntary retirement system.<\/p>\n

<\/p>\n

Trade unions destroying public enterprises<\/strong><\/p>\n

Surprisingly, for a committee headed by the leader of the Communist Party, the COPE report has made the observation that trade unions play an adverse role in decision making in public enterprises. The COPE report observes: “The Committee is of the opinion that the role played by certain trade unions operating in some state institutions is such that they should be held responsible to a significant extent for the unsatisfactory performance of those institutions. Their influence in relation to recruitments is sometimes detrimental to the institution. The Water Supplies & Drainage Board has been unable to recruit more professionally qualified accountants due to the pressure of non professional accountants who demand a 50% quota of recruitments relating to accountants for the internal staff. Further, in most of the regional centres, there are no professional accountants other than the promoted staff. Therefore, the institution is faced with a serious difficulty in getting adjusted to the new accounting standards to be made effective from 2012 accounts.” <\/p>\n

In addition to the trade union pressure on the Water Supplies & Drainage Board the COPE report had also posed questions about the activities of a trade union in the Ports Authority which had collected money from the Galle Face Green and even sold monopoly rights to sell soft drinks on the Galle Face green without informing the SLPA. <\/p>\n

However the method recommended by the COPE to deal with trade unions that seek to control the institutions in which their members work may be a somewhat unrealistic. What COPE has recommended is that the heads of institutions and the board of directors should \u2018maintain cordial rapport with the trade unions\u2019 and get their support to run the organization smoothly. This would seem to suggest that these trade unions don\u2019t know what they are doing and that they should be advised that some of their demands will impact adversely on the institutions concerned. However, it is a well known fact that trade unions in this country do not care two hoots about the institutions their members work in or the general public they serve. The founders of the Marxist doctrine, Marx, Engles and Lenin laboured under the delusion that the working masses were a superior kind of human being who put the common weal before self. <\/p>\n

Perhaps in the 19th century and the early part of the twentieth century when capitalism was still in its incipient stages, the activities of trade unions and organized labour may have been seen as a cry for humanity in economic relations. But in later times, it was proved that organized labour and trade unions could be even more selfish than the most rapacious capitalist especially because of the idea that the struggle of the working classes had an almost religious sanctity before which the whole of society was supposed to bow in submission. Trade union leaders have long got used to the idea that merely couching their demands as a struggle of the working people justifies any social cost that very struggle may cause. But this view is not shared by those at the receiving end of trade union activity. <\/p>\n

The failed farmers\u2019 pension fund <\/strong><\/p>\n

The other capitalist sounding recommendations in the COPE report include the demand for a shift to a cost accounting system so as to implement the most appropriate course of action based on cost efficiency and capability and the need for a better performance audit on state institutions. This performance audit would be in addition to the traditional financial audit and will assess efficiency and effectiveness in the employment of available resources by public enterprises. COPE had cited the performance audit carried out by the Auditor General\u2019s Department in relation to the solid waste management in urban councils, as an example of a successful performance audit.<\/p>\n

One of the most frightening aspects of public sector inefficiency was portrayed in the collapse of the pension scheme for farmers insured under the scheme operated by the Agricultural & Agrarian Insurance Board. One would think that a politically vital constituency like the farmers would elicit the best possible services from the public sector. But the Agricultural & Agrarian Insurance Board shows up the inefficiency of the public sector in more ways than one. Of course the present government cannot be expected to shoulder the blame for the collapse of the farmer\u2019s pension scheme because it was set up in 1987 and every government since then is responsible for its collapse. One of the observations made by the COPE in relation to the Agricultural & Agrarian Insurance Board is that no representative of a licensed Commercial Bank had been appointed to the Board of Directors as required by law. The pension scheme that had been instituted earlier had become unviable because the premium was too low. Only about 1,230 farmers in the Anuradhapura & Polonnaruwa districts had been paid the pension in 2012 while there were thousands of farmers throughout the country who were eligible to receive the pension. Other eligible farmers had not been paid the pension because the ministry did not have the money. <\/p>\n

COPE was told that a new pension scheme with a higher premium was being contemplated and if the existing members were reluctant to join this new scheme, it had been decided either to form another scheme with an affordable premium or to refund their total contribution with a reasonable interest. That would in effect be a liquidation of the entire scheme. This entire mess had been due to the fact that when the scheme was first instituted, the premium had not been fixed at a viable amount. In relation to this mess, COPE had decried the lack of actuaries in the country.<\/p>\n

However, this country has a vibrant banking and insurance industry. There are functioning contributory pension schemes such as the one operated by the University Grants Commission for university lecturers which is doing very well and has earned the confidence of the university lecturers who were wise enough to join this scheme. Many lecturers who opted to remain on the Provident Fund scheme now regret not having joined the pension scheme.<\/p>\n

Despite this, the pension scheme for farmers failed as did the government\u2019s plan to introduce a pension scheme for private sector workers. These were instances of inefficiency which exposed the weaknesses of the government. Not a single government minister seemed to be able to explain to the public how the proposed private sector pension scheme was supposed to work. The way it was presented to the public was amateurish. Had the pension scheme for farmers been planned properly, there would be no reason as to why it would fail given the fact that it is a contributory scheme and not a hand out from the government. This scheme first instituted in 1987, was from the very beginning conceived as a contributory scheme which would pay for itself. But due to the inefficiencies of successive governments, the pension fund for farmers needed handouts from the treasury to keep afloat.<\/p>\n

This scheme finally gave up the ghost a couple of years ago because the treasury was no longer able to keep pumping money into the scheme. A contributory pension scheme need not cost the government anything because it is by definition a system that is supposed to pay for itself. Someone can make a political career for himself by simply instituting a workable system for a farmer\u2019s pension scheme, yet nobody has taken the initiative in this regard. There can be no question of this country ever becoming a wonder of Asia with an inefficient public sector teetering on the brink of collapse. But things are not beyond redemption. The COPE report observes that scrutiny by COPE over the past three years had helped improve the efficiency of certain public enterprises and that continued scrutiny would result in improved performance. COPE even had some special recommendations with regard to continued scrutiny by COPE which featured among other things on-the-spot investigations in selected public enterprises. These recommendations also included the evaluation of the suitability of board members and the senior management of public enterprises.<\/p>\n

Another Hedging type deal?<\/strong><\/p>\n


\nCOPE also scrutinized the Hambantota Port project. It was observed that the annual interest payable on the Hambantota Port Development Project was as follows:<\/p>\n

2012 \u2013 Rs. 2,208 million<\/p>\n

2013 \u2013 Rs. 2,479 million<\/p>\n

2014 \u2013 Rs. 2,233 million<\/p>\n

2015 \u2013 Rs. 1,987 million<\/p>\n

2016 \u2013 Rs. 1,742 million<\/em><\/p>\n

The need to earn more income from the port was stressed. It was observed that that six and 18 ships had arrived in the years 2011 and 2012 respectively. The explanation that the COPE had got from the Ports Authority was that the Hambantota Port was still a work in progress and that several agreements had been entered into with investors which would increase traffic to the port in the future and that the re-export of vehicles from Hambantota had already commenced.<\/p>\n

Another interesting examination made by the COPE was into the Sri Lankan Airlines deal to add more aircraft to its fleet. In this regard, the COPE had queried Sri Lankan Airlines as to why they had taken steps to increase the capacity by around 60% when no other airline in the industry had gone for capacity enhancement projects due to the prevailing global economic conditions. In reply to the query, Sri Lankan Airlines had stated that in the long run, the decision to increase capacity would be the right decision although it had led to the increase of the net loss in the short term. The JVP parliamentarian Sunil Handunnetti who was present when the Sri Lankan Airlines matter was taken up, stated that they (the opposition members present) were not satisfied by the reply given and that the position they took was that increasing the capacity of Sri Lankan Airlines cannot be considered a national priority at this point in time.<\/p>\n

UNP parliamentarian Eran Wickremeratne who was also present at the COPE meeting at which Sri Lankan Airlines was discussed says that he was not in the least satisfied with the replies given by Sri Lankan Airlines to the questions posed and that it was clear to him that they did not have a handle on the financial viability of the proposed expansion in capacity of the airline. He says that Sri Lankan Airlines was trying to do a marketing exercise with COPE as well, talking around the issue without getting down to the bottom line. They had mentioned services that were being shared by Sri Lankan Airlines and Mihin Air but had no figures about the proportion of the services taken by the two airlines separately. Because he was dissatisfied with the paucity of information provided to COPE, Wickremeratne had attended a meeting of the Parliamentary Consultative Committee on Aviation a couple of months ago and asked for a detailed breakdown of the performance of Sri Lankan Airlines with the services they share with Mihin Air being shown separately. They had promised to provide the information within one month but nothing had happened as yet.<\/p>\n

COPE had also enquired into the impact on the total cost due to the additional run of aircrafts to Mattala. The reply to this query was not included in the report. In any case, COPE observed that the financial position of Sri Lankan Airlines was extremely unfavourable and they were directed to pay special attention to this matter since the banking sector in the country was also under a threat due to the large borrowings of the company. The Committee was of the view that it was high time to focus attention on formulating a new aviation policy as far as the new trends and challenges faced by the industry were concerned. The bottom line here is that the opposition members who had spoken to Sri Lankan Airlines senior staff had not been convinced that the airline knew what it was doing when it came to increasing the capacity of the airline in a situation where airlines all over the world were struggling to remain financially viable. The government should watch out lest this become another hedging deal type fiasco. For its part, Sri Lankan Airlines should call a press conference and justify this expansion in capacity so that the public will get to know whether the decision they have taken is an informed one or not.<\/p>\n

COURTESY:SUNDAY ISLAND<\/em><\/p>\n

Tweet<\/a><\/div>","protected":false},"excerpt":{"rendered":"

By C.A.Chandraprema Two events that occurred last week highlighted the strange position that the present government finds itself in \u2013 politically it is unassailable but administratively, it\u2019s teetering on the brink of imminent collapse. Kurunegala district parliamentarian Dayasiri Jayasekera\u2019s crossover from the UNP to the government last Wednesday came as no surprise. He and the …<\/p>\n

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