Conspiracy against renewable energy

By Gamini Abeywardane

The story of a severe drought in the year is much in news these days. Ours is a country too dependent on hydro power and the next immediate possible problem is a shortage of electricity. Some of the coal power projects that had been planned had to be shelved in the face of mounting opposition from environmentalists and other interested groups. These are practical problems that any country will face, but then, what is the solution to our energy problem?

In case the drought continues and the weather gods are not in our favour, food shortages will be the first thing to hit us followed by the energy shortage. Where the power issue is concerned we have been talking too long about inadvisability of continuing to depend on hydro power and the need for going into other sources of energy.

Many researchers have, with scientific data and statistics pointed out clearly and well in time, the country’s future requirements of energy as the economy grows and how to meet that. All calculations on the right mix of various energy sources such as hydro, thermal, coal and renewable energy had been done several years ago, but the question remains whether proper attention has been given to these suggestions and proposals.

Hydro electricity is weather-dependent while both thermal and coal power are expensive and also not environmental friendly. And in this situation, the virtues of renewable energy are many and especially in a country where sunshine and wind are abundant, it is one of the most viable forms of energy. However, why no concerted effort has been made to use renewable energy, more specifically solar power despite sunshine throughout the year, is a question that begs an answer.

Even in countries like the US there have been arguments to say that there is a national conspiracy to prevent renewable energy from becoming the primary source of energy. In the US the conspirators are said to be the fossil fuel industry which continues to rake in exorbitant profits on oil and gas while it refuses to make any significant investment in renewable energy.

Main stream news media too has been accused of being subservient to the corporate interests and abstaining from doing any serious coverage on the viability of renewable energy.  The members of the Congress have been accused of being addicted to the big buck they receive from big oil and other traditional oil sources to make any worthwhile renewable energy legislation for the good of the country.

According to the US Department of energy, the amount of solar energy that hits the surface of the earth every hour is greater than the total amount of energy that the entire human population requires in a year. While the facts remain so, if we know that it works why don’t we use renewable energy in place of heavily polluting oil, gas or coal?

The primary reason is that the cost of renewable energy is still relatively high compared to fossil fuels although the gap is closing as the cost of natural gas and oil continue to rise. The price to install photovoltaic panels on the average home is quite high and affordable only for those who are well off.

But the common experience is when some product is mass-produced its price per unit should plummet. The one million dollar question is why solar power and wind power products are not promoted in a serious manner with appropriate duty concessions and mass produced.

With diesel mafia and connected interest groups being powerful in the energy sector the situation in Sri Lanka cannot be much different from the US and it’s time for us to have a fresh look at this energy issue  and formulate a stronger national policy on renewable energy and promote specifically solar and wind power. With impending drought and energy issues at the door step there cannot be a better time to do so.

 

 

 

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Reforms, protests and the future

 

Question remains how we can go ahead with some reasonable reforms in the face of growing protests. The government also has to be cautious and methodical in dealing with these issues. Sadly the actions of the government in this regard have not been in that direction.

By Gamini Abeywardane

Reforms are vital to any country or society. It’s because everything has to change with times. As a country grows and population multiplies priorities have to change. It is through reforms that we adjust ourselves to face tomorrow’s problems.

As much as they are vital the reforms are often resisted by the people concerned irrespective of whether they are necessary for wellbeing of the people at large or not. Today we see in our country a wave of protests over a wide spectrum of issues in areas ranging from transport to health and education. Hardly a day goes by without some protest or threat of strike over something.

Take the education sector for example. There is an imbalance between what is produced and what is in demand. Our state higher education sector over the years has been producing the graduates with lessor skills who are often not employed by the private sector of the economy.  Private sector higher education institutions affiliated to foreign universities have come forward to bridge this gap. Those who are able to afford made use of the opportunities and nobody has protested.

However whenever the government steps in to reform the state owned university system either by reducing the intake of students into areas where there is no demand or by effecting other changes whereby students would be directed to technical skills which are in demand, usually there is a lot of pretest.

In the field of medical education the opportunities are limited in the government universities despite many students obtaining high marks in relevant subjects at the university entrance exam. Still there is a shortage of doctors if we go by the WHO standards on doctor patient ratio. However, any attempt to award medical degrees through the private sector higher education institutions is much resisted by doctors and medical students almost as a matter of policy although issues about standards are often cited by those who are opposing.

In the transport sector any attempt to discipline the bus operators, the three wheeler drivers or the motor bike riders despite their massive contribution to fatal road accidents are often resisted in an organized manner with transport strikes. Despite massive losses and unutilized potential for future development in the railway department any idea of modifying it is resisted in the most severe manner as all employees are complacent with its current status whatever the burden it adds to the economy.

The same situation prevails in all other state institutions that require reforms. If there are issues with the way the reforms are done, the employees concerned have a moral right to oppose. It would also be justifiable for other political parties to take up these matters at the right platforms. But what is often happening today is opposing the very idea of reform looking at things from a narrow angle.
However the fact remains that we as a country cannot go forward without these important reforms. Successive governments who understood these issues have often postponed such reforms for reasons of political expediency. Now we have come to a situation where we cannot afford to postpone these reforms any longer.  

Question remains how we can go ahead with some reasonable reforms in the face of growing protests. The government also has to be cautious and methodical in dealing with these issues. Sadly the actions of the government in this regard have not been in that direction. Taking some haphazard steps and retracting in the face of mounting opposition will only allow protestors to earn some brownie points in the eyes of the people. It’s much better to study the issues properly and take informed decisions than doing half-right things in a hurry.

Our future success as a nation will to a great extent will depend on our ability to implement these social and economic reforms. The best approach to achieve these reform targets is to create sufficient public awareness before trying to implement them, so that most of the negative public reactions can be avoided. Protestors will protest, but public at large will not sympathise with them if such public awareness is created beforehand.

 

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Luxury cars and need for frugality to begin at the top

By Gamini Abeywardane

Supplementary estimates presented in parliament to buy expensive duty free vehicles for ministers and state ministers amidst hardships caused to people by floods and the explosion in the Army’s central armoury sparked a lot of public antipathy and generated much public discussion on the subject. Despite public criticism most parliamentarians, irrespective of their political philosophies seem to be united when it comes to their own salaries and perks.

There seem to be a point in what critics are saying. Simply, should we spend so much for the comfort of our elected representatives who have come to serve us, when people themselves are going through untold hardships? On the other hand, the argument by the parliamentarians who justify their claim for better vehicles is that given the amount of travelling and the terrains they have to pass through such vehicles are not luxuries but essential facilities for performance of their duties.

However, the question that baffles most right thinking people is whether such expensive brands of vehicles with option to change for new ones within relatively a short period are absolutely necessary when country and people are going through hard times and when its economy is not doing well. Aren’t these well maintained high quality vehicles suitable to be used for longer periods?

The matter becomes even worse when such high spending on luxury vehicles for parliamentarians is proposed soon after jacking up the tax on motor vehicle imports making it more difficult for ordinary people to purchase cars.

What is happening in our country is quite different when compared to the situation in India where politicians including the country’s President and Prime Minister are seen using homemade Indian cars. Perhaps India being a larger country their parliamentarians need to travel longer distances in order to serve their constituents. Despite all that we have seen Indian leaders using Ambassador cars made in their own country. Isn’t this quite in contrast to the extravagant lifestyles of our parliamentarians?

We really do not know whether the public criticism of the expenditure of parliamentarians will make any real impact on what is going on. However, the public attention received through the media should encourage the politicians to rethink on the need to cut down whatever the expenses that can be cut down. Unless it is done, we can never cut down the public sector expenditure or influence the public servants to spend less. The example should be set by the politicians and the leaders at the upper level.

 

 

 

 

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Blackouts and politics of power sector

The country has just witnessed one of the worst blackouts in its recent history. Too many islandwide power failures at unusual intervals have even aroused suspicions of sabotage. Politicians are engaged in leveling allegations against one another making political capital out of the unfortunate happenings. Country as a whole suffered a huge economic loss while the people had to undergo many hardships.

At the root of all this is the unresolved power crisis. For too long we depended on hydroelectricity and when consumption increased power shortages and power cuts became the order of the day. Major reforms in the power sector became impossible due to lack of funding and opposition from various quarters. Finally the problem became too acute compelling the government to urgently look for other sources of power and coal power plant at Norochcholai was one such solution in a hurry.

The machines at Norochcholai have stopped due to technical problems over thirty times up to now. There are allegations of corruption and use of substandard components in the commissioning of that plant and most of the blame in this regard has been heaped on the previous government.

At the same time, one should not forget that attempts by many governments to build such power plants had to be shelved in the face of mounting opposition by environmental groups and other politically motivated activist groups in the past. Despite whatever its negatives, the addition of 300Mw of power from Norochcholai averted major power cuts in the last few years.

Several privately owned diesel power plants also entered the power sector making use of the severe shortage of power. These are all temporary solutions, but there have been allegations of the Ceylon Electricity Board (CEB) purchasing power at high prices. Thus, there seem to be an electricity mafia involving politicians, CEB officials and the businessmen. At the centre of all this is the unresolved power crisis in the country and the politics behind it.

The only way proposed by economists, power sector experts and multi-lateral aid agencies such as the World Bank and the ADB to resolve this issue is to restructure the CEB which is an inefficient entity with colossal debts amounting to billions of rupees which has already become a burden on the treasury. In order to increase efficiency of the CEB and to resolve its debt issue, it has been proposed that three of its main functions – generation, transmission and distribution, should be separated.

Restructuring will also require a huge amount of capital and it goes without saying that private capital has to be infused into the system in some way. Like in many state owned loss making institutions the very word ‘private capital’ is anathema to CEB workers who have vehemently opposed these restructuring plans. All major political parties are aware of the situation, but when in opposition they also try to make political capital out of these issues by opposing the restructuring moves.

If we are to avert any future catastrophes in the power sector only way out is to seriously look at these restructuring plans and implement whatever is suitable from the country’s point of view with infusion of private sector capital where necessary. Country is already seeing the positive results of such restructuring in the once maligned telecom sector and there is no reason why same norms cannot be applied to the power sector. 

 

 

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Creating private sector pension fund, a timely move

BY Gamini Abeywardane

Among the measures announced by Prime Minister Ranil Wickremesinghe in his medium term economic plan for the country is the proposal to set up a state sponsored pension fund for the private sector. The fund to be set up by amalgamating the Employees’ Provident Fund (EPF) and the Employee’s Trust Fund (ETF) is to be managed by a board consisting of professional investment managers as well as trade union representatives.

The idea at once seems to be a timely one because most developed countries have such funds which are paying higher returns to the contributors by growing and enhancing the fund’s value through prudent investments. It has been proposed that the independent and professional persons would be appointed to manage the fund and they would be made accountable to the constitutional council thus eliminating room for political or bureaucratic interference with the day to day management of the fund.

This kind of independence is a salutary measure as there are enough examples in the past where questionable investments have been made both by the EPF and the ETF putting people’s money into peril. There were also allegations that such funds were used during the previous government to buy shares in some of the respectable financial institutions and private banks with the idea of appointing political cronies into the managing bodies of such institutions opening avenues for political interference.

Currently there is no law to ensure that professional managers are appointed to the governing bodies of these funds and often government in power appoints them according to their political preferences the same way members are appointed to the boards of other state owned entities. Only a small percentage of the funds are invested in the stock market and a major part is invested in the government securities. In a situation of this nature question of professional fund managing does not become much relevant as the funds are invested in the safest manner without much emphasis on high returns.

If the two retirement funds are to be amalgamated as proposed and converted into a pension fund prudent management and high returns would be necessary in order to pay continuing pensions that are commensurate with the cost of living. The introduction of private sector pensions will one way reduce the competition for state sector employment. Like in some of the developed countries people with higher income will be able to contribute to more than one pension fund paving the way for a comfortable retirement with adequate income.

The fear that this amalgamation could lead to mismanagement is not altogether unrealistic. That is why it is essential to have top fund managers with integrity at the board level to manage it. When there are massive amounts of money available there is always room for corruption. This can be curtailed by including independent persons with suitable background who are not strictly fund managers and trade union representatives also in the board of management.

With proper fund managing it will also become possible for the pension funds to invest in highly profitable ventures both in and outside Sri Lanka ensuring a higher growth for the funds. If the funds are managed properly there would not be much opposition to the idea of channeling more money into profitable and nationally important ventures by way of investment which would ultimately help the economic development of the country.

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South Asia Grows Strongly but Fiscal, Financial Weaknesses Remain

WASHINGTON, October 4, 2015 – Led by a resilient India, South Asia is expected to maintain its lead as the fastest-growing region in the world, with economic growth forecasted to accelerate from 7 percent in 2015 to 7.4 percent in 2016, a World Bank report said.

According to the twice-a-year South Asia Economic Focus, this positive performance hinges on solid growth in services, domestic consumption, and a gradual rise of investments. Limited exposure to the financial turmoil and an improved external position have given most South Asian countries important policy space.

Given India’s weight in the region, its performance greatly influences the projections for South Asia as a whole. Improved investor sentiment and resilience to external shocks are expected to increase India’s growth rate to 7.5 percent in fiscal year (FY) 2015 and further to 7.8 percent in FY2016.

Thanks to low food and commodity prices, as well as a slowdown in the growth of administered prices, inflationary pressures have eased markedly in South Asia. Yet the pace of disinflation varies depending on the price index considered. Revisions to national accounts, together with new comparable data on purchasing power around the world, also raise questions regarding the measurement of prices in the region. According to the report, South Asia could actually have cheaper prices, faster growth and bigger economies than previously thought.

“While the region is now in a position of strength, structural constraints holding back export and investment growth do persist. To keep the momentum and accelerate job creation, governments should enact reforms easing infrastructure bottlenecks and paving the way to greater competitiveness”, World Bank South Asia Chief Economist Martin Rama said. “Fiscal space remains limited while financial sector vulnerabilities persist.”

Rapid growth has not yet translated into significantly higher government revenue generation and improved fiscal balances.  Budget deficits are expected to remain at 6.5 percent of Gross Domestic Product (GDP) in 2015, the highest among all developing regions. Tax collection remains well below estimates, and has even deteriorated across major South Asian economies.

“Mobilizing revenue is critical for the region to develop its infrastructure and deliver better social services, while creating a financial cushion to address potential shocks in the future,” said Annette Dixon, World Bank South Asia Vice President. “In some cases introducing and rolling out modern tax instruments holds the key to higher revenue, but containing exemptions and special regimes are crucial across most of the region”. 

Many South Asian countries show potential for accelerated growth in the short to medium term. However, the transition in Afghanistan, the earthquakes in Nepal, and revisions to national accounts in Sri Lanka, have resulted in all three countries experiencing slower growth than previously expected.

 In Afghanistan, the political and security transitions have led to a weaker outlook, with growth estimated at 1.9 percent for 2015. Fiscal vulnerabilities remain high and will require a large revenue effort and sustained levels of aid. Future prospects hinge critically on improvements in security and forceful implementation of reforms.

Bangladesh has seen an increase in domestic economic activity since April 2015.  GDP is expected to grow by 6.5 percent in 2015 and next year, supported by healthy agricultural production along with a recovery in services and domestic demand. But instability, depressed export growth, an only modest rebound in remittances, and continued weakness in private sector credit growth, remain matters for concern.

Economic activity in Bhutan is expected to gain momentum with real GDP growing at 6.7 percent in 2015. This solid performance is driven by new hydropower construction and innovative tourism measures, such as “Visit Bhutan 2015.” Private sector development is key to reduce the country’s vulnerability to donor finance and address rising youth unemployment.

In India, GDP growth is expected to accelerate to 7.5 percent this year and 7.8 percent in 2016 lifted by cheap oil prices and limited exposure to the global financial turmoil. However, delays in the adoption and implementation of key reforms could affect investor sentiment. A weak trade performance and financial sector vulnerabilities could also hold back GDP growth.

In Maldives, economic growth continued its recovery from the 2012 dip, and inflation has slowed down, but the economy remains undiversified, primarily depending on tourism and fisheries. Growth is expected to be 5.0 percent in 2015 and 3.9 percent in 2016.

Nepal has begun to recover after the loss of life and economic devastation from the April and May earthquakes. From an expected 5 percent, GDP growth is expected to drop to 3.4 percent this year and to tick up to 3.7 percent in 2016. Although macroeconomic fundamentals remain strong, weak execution of public investment slows down both infrastructure development and post-disaster reconstruction.

In Pakistan, gradual recovery to around 4.5 percent growth by 2016 is aided by low inflation and fiscal consolidation. Increases in remittances and stable agricultural performance contribute to this outcome.  But further acceleration requires tackling pervasive power cuts, a cumbersome business environment, and low access to finance. 

In Sri Lanka, growth is expected to increase to 5.6 percent in 2016 due to higher public sector wages and higher disposable incomes. However, the looser fiscal stance behind this strong domestic demand is also putting pressure on the external balance. Maintaining the growth momentum will require higher tax revenue, rationalized public spending and greater competitiveness.

The live link : www.worldbank.org/en/news/press-release/2015/10/04/south-asia-grows-strongly-fiscal-financial-weakness-remain

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Fears of CEPA: How realistic are they?

Indian Prime Minister Mody with Sri Lankan Prime Minister Wickremesinghe

The point to remember is that we can never evade competition in a global village where countries are getting interconnected culturally, linguistically and economically, faster than ever before. The best palace to learn how to face such competition is one’s own neighbourhood and that is why we see regional economic and trade blocs being formed everywhere. Our own SAARC is one such thing formed with much foresight and we can only face global competition by growing as a region and not by trying to survive alone.

By Gamini Abeywardane

From the day it was officially discussed, the Comprehensive Economic Partnership Agreement with India or CEPA as it is popularly known has been a sticking point in Indo Lanka relations. It was more so despite its economic relevance because of possible political and sociological implications. The sensitive issues involved have been bloated excessively by parties that are likely to be affected in both countries who have often looked at things from a micro point of view ignoring the larger benefits for the two countries.

Their only concern has been whether as a group or individually they would be adversely affected due to the possible competition when the trade and economic barriers are relaxed between the two countries. The opposing groups include a section of professionals, traders as well as manufacturers. When there is competition obviously everyone will have to work harder for survival. On the other hand there are definite advantages for both countries coming out of such an economic partnership.

On the positive side the key consideration is the opening of the vast Indian market to Sri Lankan goods and services. While the fears are reasonable the key to survival and future success as a nation is our ability to improve quality and competitiveness of our products and services and face up to the challenge. In the long run if we do not open and remain closed we will never learn to face competition and find it hard to survive in the global race.

Opening of the Indian market to Sri Lankan products would definitely mean that European, US or any other investors who are setting up in Sri Lanka will have the opportunity of accessing the vast Indian market. In other words Sri Lanka would become a gateway to India. For this to happen the ground situation in Sri Lanka should be more attractive to investors. The recent change of government and the two major political parties getting together has provided a promising environment for such investments. 

 

The point to remember is that we can never evade competition in a global village where countries are getting interconnected culturally, linguistically and economically, faster than ever before. The best palace to learn how to face such competition is one’s own neighbourhood and that is why we see regional economic and trade blocs being formed everywhere. Our own SAARC is one such thing formed with much foresight and we can only face global competition by growing as a region and not by trying to survive alone.

To make things even more complex on both sides of the divide there are political groups that thrive on narrow nationalistic sentiments and our country has no shortage of such groups. That is why the subject of CEPA surfaced in the local media creating a furore with comments from various political quarters alongside with Prime Minister Ranil Wickremesinghe’s recent visit to India.

A negative picture was painted as if finalizing such a trade pact with India was imminent instilling unrealistic fears into the minds of some people. Much in debate were the fears over opening up of trade in services. Some politicians were talking about a scenario where local market would be flooded with foreign lawyers, accountants, doctors and business executives rendering most our people unemployed.

However, it is not in the national interest to exaggerate only negative factors to stifle a future trade and investment agreement of a serious nature which will certainly benefit our country and the entire region.  The history will determine the place of those politicians who mislead the masses crying in the name of nationalistic sentiments while the actual motive is their own parochial political ends.

In any comprehensive trade pact when relaxing borders with regard to trade in goods or services, obviously progress will have to be made gradually and systematically over a period of time in a manner that will not be detrimental to the interests of any country. The way trade and investment flow has behaved with partial relaxation in the last few years will have to be taken into consideration when finalizing a more comprehensive arrangement.  

   

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Lanka’s growth figures good news for investors despite concern about political instability

By Peter Kohli

The Sri Lankan economy grew by 6.4 % in the first quarter of 2015, equaling that of the previous quarter. Manufacturing was up 6.5%, the service sector was up 7.5%, while agriculture barely registered any growth.

But the overall numbers should be good news for investors despite growing concern about possible political instability. Ever since the presidential election last January when Maithripala Sirisena won the election, thereby ousting long-time president Mahinda Rajapaksa, Sirisena has not enjoyed a majority government in parliament and is therefore unable to pass any reform legislation.

In fact, Prime Minister Ranil Wickremesinghe faces a no confidence vote in the next few days which, if successful, would mean immediate elections. This uncertainty has taken a toll on the markets, and the benchmark index Sri Lanka Colombo Stock Exchange All Share Index CSEALL is down nearly 3.5% YTD.

In a recent interview with CNBC, Sri Lankan Finance Minister Ravi Karunanayake, when asked whether the no confidence vote was an indication that the population was tired of the stagnant economy said, “Considering the fact that the economy we inherited is public debt driven, corrupted and without a focus, it is the incumbent president and the prime minister who have given Sri Lanka a new lease of life."

The consensus of opinion is that the former president, bitter over his defeat, is behind this no confidence vote. The current government is pro-West and I hope survives the vote. (www.nasdaq.com)

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What ails our Public Administration

By R.M.B SENANAYAKE

It all began in 1956 when a new breed of parliamentarians emerged. They were from rural backgrounds and drawn from Ayurvedic physicians and vernacular school teachers. They were committed to the traditional indigenous culture and had little understanding of western institutions like liberal democracy. But now they would have to participate in its working.

They soon distorted the functioning of liberal democracy and our democracy became a popular democracy instead of a liberal democracy with checks and balances on the exercise of power.

They lacked any administrative experience and did not appreciate the difference between politics and administration- a distinction drawn in the West to demarcate the sphere of the politician from that of the administrator who belonged to a politically neutral permanent public service. The administrators were more educated and more sophisticated in their ways than the rural politicians.

The new politicians criticized the bureaucracy not for the red tape and slow methods but their class background calling them "a bamunu kulaya" (a caste of Brahmins).

These politicians were elected to the national Legislature and their duty was to be law-givers and not be part of the Executive. The Executive was however drawn from the Legislature and there was little difference between them and the Ministers. No qualification was required to be a Minister except the favor of the Party Leader who would be the Prime Minister. In the Presidential form of government the Ministers are not drawn from the Legislature but appointed from those who have administrative and management experience.

The new MPs wanted to exercise power particularly at the level of their electorate. So they intervened on behalf of their constituents with the district administration. Their constituents and political supporters wanted jobs in the government and the public sector which was looked upon as providing job security and pensions for life.

Those who were already employed in the government service wanted promotions and transfers. So these politicians interfered in the procedures for promotion and transfers in the public service. So the permanent administrators found it difficult to stick to the laid down procedures for transfers, promotions and discipline in the public administration.

The administrators found it difficult to resist these politicians. Some administrators themselves cultivated the political influence which was provided by the MPs. *Can there be an efficient administration if there is such interference by outsiders in the day to day decision making *according to laws and regulations? The theorists of Public Administration in the West would clearly say no.

They themselves did not face this type of problem. They only faced the problem of politicians seeking to influence appointments and recruitment to the public service. So they isolated the appointments and recruitments to the public service by setting up an Independent ‘Commission’ to lay down recruitment and promotion procedures and monitor their working to ensure they took place on proved merit and seniority rather than political influence. The independent Commission called the ‘Civil Service Commission’ managed to take out the recruitment of staff to the public service from the spoils system.

The West did not have the problem of political interference in internal promotions and transfers. The Ministers were expected to supervise the public departments to ensure that they functioned according to law and served the pubic impartially and fairly. They were not expected to interfere in the internal administration of the departments within their purview. Any organization cannot tolerate interference by outsiders in the internal management of such organization.

The hierarchical principle required that orders and commands must flow from the top to the bottom layers of the Department following the lines of authority. In the early years since Independence and right up to 1956 there was no flouting of the hierarchical principle. But the MPs and Ministers appointed after 1956 found it useful for them to convey orders to lower levels, listening to tales carried to them by the subordinate employees in the hierarchy such as clerks and peons. The Ministers listened to such tale carrying which is a bane in our society. The late Felix Dias Bandaranaike was the only Minister in my experience who confronted the official with the tale carrier. Hence there was hardly any tale carrying by subordinate officials and employees in the lower rungs against their bosses. The usual allegation was that the superior officer was working for the other political party and against the ruling political party.

Tales were concocted and some Ministers believed them and got rid of the officials against whom such allegations were leveled without giving them even a chance to explain their side of the issue. So sudden transfers to outlandish stations was the penalty these officials had to face for doing their duty. Soon the superior officers gave up their duty of supervision of the subordinates and their work and preferred to ignore their transgressions. *So efficiency disappeared* as no organization can act if the superior officers are not allowed to carry out their decisions. They also need to be protected by an independent Commission against those interfering in the internal administrative management of an organization. Last week a newspaper reported that the Chief Minister of the Uva Province distributed the letters of appointment to some new recruits called Development Assistants. He probably wanted to impress on the new recruits that they were being appointed by his favor.

Aren’t appointments to the public service a function of the provincial public service Commission? Why then should the Chief Minister distribute letters of appointment to new recruits? In fact the Chief Minister referred to the need for a politically neutral public service on the occasion. Was his action then proper? Of course this practice was adopted by the SLFP which is responsible for all such pernicious practices. But why should the so-called "yaha palanaya" government perpetuate such wrongful practices.

Theorists of Public Administration refer to several principles of Public Administration which must be followed to ensure efficiency. They recognize that Politics and Administration are two distinct categories and that we have to design the agencies of government in such a way as to separate them in order "to get administration out of politics". But when we turn to the actual work of government this is not easy. Public officials exercise discretion which involves the use of judgment.

But when officials exercise discretion hey have power. If the politicians are allowed to exercise their influence in an administrator’s decision making it means the administrator is exercising his power on the instructions of the politician. This, to a large extent is what is a happening in our public administration today. But the politician may take a partisan view rather than an objective view of the circumstances.

Apart from the need to avoid bias it must be noted that most decisions today are technical and require the consideration of several factors and the administrator may have to select the best or the least harmful decision. *The politicians may want to influence the decision regardless of these technical factors* which may be based on chemistry, medicine, mathematics or some other science.

So in such decision processes political influence can be harmful as for example in the effects on the environment. There may be no one to take up the environmental aspects. If the administrator has the freedom to decide without being influenced by the politician he could take a more balanced and objective view. The Nazis and the Communists ran one party states and eliminated liberal democracy. Just because the single party candidate of the Communist Party contested elections the Party claimed it was democratic.

There are several principles that should be followed for the efficient functioning of an agency or department. There is the principle of hierarchy, the principle of unity of command, span of control, the principle of co-ordination etc. No subordinate should be placed in a position where he has to follow several superiors violating the principle of hierarchy. Today our public administration is riddled with transgressions of the principles of good public administration.

A functioning democracy here liberty of the subject prevails must have a politically neutral public service and politically neutral administrative decision-making, This requires a politically neutral public service appointed on merit and allowed to function without interference by politicians. If not this talk of ‘yaha palanaya’ is mere eyewash. Let the so-called "yaha palanaya " Government practice the principles of good governance without playing lip service to good governance. 

(Courtesy: The Island)

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Is India's growth exaggerated?

Many experts say the economy is still waiting to gather momentum

Last week, India announced growth figures which would make the world envious.

Asia's third-largest economy grew 7.5% in the three months ending in March, higher than the previous quarter and above expectations. Forecasts were for growth of about 7.3% for the period compared with a year earlier.
But the new growth figures have come at a time when Indian companies are at their weakest in two years. Earnings are flat and profits are down. Most major industries, including infrastructure and automobiles, are struggling. Historically, says Business Standard newspaper, when India's growth has hit 7.5% at constant prices, corporate revenues and profits have soared above 14% on average. So how does the economy grow so fast when corporate growth is so slow?
A month after the government declared a new way of calculating GDP, India baffled experts in February when it announced 7.5% growth between October and December compared with the same period a year earlier. The latest figures again raise questions about the new way.
Some critics say the government is raising GDP figures to meet fiscal deficit targets, and trying to present a rosier picture of the economy. Economists such as R Nagaraj say the new and higher figures "seem quite at odds with other economic indicators such as growth in bank credit, the index of industrial production and corporate performance". Even the government's Economic Survey earlier this year found the new growth figures "somewhat puzzling" when compared to the falling savings, investments and exports.
India's government has defended the new way of calculating GDP by saying it is using an improved database for the private sector, in place of the earlier, smaller sample of large firms with high paid-up capital. It also said it had taken into account half a million companies which had been used for the first time in the series.
India's economy is a complex beast. There's a thriving "underground" or black economy which evades taxes, while more than 90% of India's workers are employed by small businesses which employ less than 10 workers.
"The new methodologies are very convoluted. So far, the increase in GDP does not appear to be reflected in the performance by companies and the markets. So either the government was getting it wrong all these years or they are presenting a far sunnier picture of the economy than it actually is," says analyst Paranjoy Guha Thakurta, who has been sceptical about the figures.
Economist Arvind Virmani calls this India's "growth puzzle". He says this can be explained by the "extremely dualistic nature of the Indian economy". On the one hand, the country has a small organised sector comprising mainly large state-run companies. On the other, it has a large, unorganised and informal sector, catering exclusively to its vast domestic market.
Dr Virmani says the collapse of global demand and excess capacity in goods and services have had a negative effect on globally integrated industries in all countries. "In India it means certain high quality, high skill segments of the organised, corporate sector. Thus Indian corporate sector growth is likely to lag, rather than lead India's growth recovery." (BBC Asia)

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IPS Head says sensible import of Knowledge Workers okay

 by Sanath Nanayakkare

Dr. Saman Kelegama, Executive Director of the Institute of Policy Studies making a strong case for sensible liberalization of professional services recently said import of high quality Knowledge Workers is an option available for Sri Lanka, to deal with its current skills gap and to readily supply the talent pool today’s businesses need.

Kelegama made this remark addressing leading professional figures from diverse sectors who come together to share their thoughts at an interactive seminar held on the theme, ‘Liberalization of Professional Services, Challenges & Opportunities, Risks & Safeguards’, at the CA Sri Lanka auditorium last week.

"We do have world class professionals and knowledge workers in many sectors, but the numbers are lacking. So we might as well develop a mechanism with necessary safeguards to benefit from this option enabling knowledge transfer in the process, Kelegama said.

Providing actionable insights on tertiary and vocational education development in the medium and long term, he stressed the need to empower the youth through education reforms leading to flexible pathways to degrees.

He pointed out that the General Agreement on Trade in Services (GATS) could be used effectively in this regard which is a treaty of the World Trade Organization (WTO).

"If we make a clearly defined GATS binding, it can serve as an impetus to attract Foreign Direct Investments (FDIs) to Sri Lanka even without tax incentives. For GATS to work out beneficially, the regulatory framework has to be put in place," Kelegama noted.

"Our skills gap worsened over time due to several reasons; the professional brain drain between 1980s and 1990s, the setting up of new establishments related to healthcare, education, leisure sectors etc. which demanded more high quality professionals. Further, the global economic growth is driven by technological change. This required the service sector to be optimized to deliver superior performance.

Illustrating that import of knowledge and skilled workers is not new to Sri Lanka, he noted, "Now there are Chinese cooks in some restaurants that serve real ethnic Chinese food. Cricket coaches have come from other countries that play the ‘gentleman’s game’. Foreign doctors have worked here. And dating back to olden times, the Dawson Tower in Kadugannawa reminds us of the work done by the British royal engineer, he said.

"It’s reported that we need 15,000 construction industry personnel and we have only 11,000. A large number of doctors and nurses are required too. The US has the HB1 visa and Australia has the temporary business resident visa to redress this issue. For a developing country like ours, GATS framework could be the best choice, he said.

All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. However, upon accession, members may introduce temporary exemptions to this rule.

Resource panel comprised Arjuna Herath, president, CA Sri Lanka, Saliya Pieris, Deputy President of the Bar Association of Sri Lanka, Reyaz Mihular, Managing Partner of KPMG and Dr. Ruvaiz Haniffa, Immediate Past Secretary of the Sri Lanka Medical Association.

Ranel Wijesinha, past president, CA Sri Lanka,and the Confederation of Asian and Pacific Accountants, who is also the founder of the Thought Leadership Forum was the moderator of the interactive session.

When the floor was opened for questions and there was absolute silence in the audience, Ranel said, "Now, this goes to show the fundamental characteristic of Sri Lankans. They keep quiet during the Q and A and start raising their fears and concerns at the cocktails."

That witty yet true remark did the trick and got everyone talking making it an animated and honest and candid discussion. One professional went on to say,"We’re beginning to sound like a small secret society trying to further our interests. We must consider the consumers’ point of view in this regard too. In this transforming economy, we must also take their opinion on board about their service providers."

Courtesy: The Island:  http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=127403

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