Widespread mafia activities delay recovery from crisis

by Prof. Tissa Vitarana

An increasing number of people in Sri Lanka are facing greater and greater hardships due to the massive economic, social and political crises. Both external and internal factors are responsible, mainly the shortage of both Dollars (Foreign Exchange) and Rupees facing the Government and the people. The high degree of fraudulent Mafia activities in the Government Service is aggravating the situation as divulged by COPA and COPE.

The lack of Dollars is leading to shortages and high prices of essential imports like fuel, gas, medicines. and food. The main cause of the Dollar shortage is the large accumulated debt of USS 52 Billion. As annual debt servicing amounts to about $ 7 Billion our foreign reserves have come down from S 8 Billion to near zero. This in turn is leading the government to take more loans from the IMF. World Bank and other multilateral lending institutions. This will add to our debt burden while failing to solve our immediate Dollar need. To meet this immediate need the government is resorting to Sovereign Bond Loans which carry very high interest rates and have to be paid in a short period. The final outcome will be that Sri Lanka will be caught in debt trap, from which it is hard to escape. The USA, UK and Japan have agreed to help but the amounts that they are willing to supply are not adequate to meet our needs.

 The Government’s reluctance to obtain oil and gas supplies from Russia at very low cost for fear of displeasing the USA is the height of folly. This would also have the advantage of being done using the currencies of Russia and Sri Lanka, the Rouble and the Rupee, without the need for US Dollars. The Chinese remain ready to help us. But they too are not being accommodated with any sense of goodwill. The Government seems to have opted to get our oil and gas needs at much higher cost from the Middle East. I fear that we shall get further into the debt trap and suffer both in the near and distant future.

The shortage of Rupees has led to the large scale printing of local currency notes, which has boosted inflation and increased the cost of living. The policy of the government to support and encourage the traders has led to a further rise in prices due to profiteering by middlemen. In contrast, the LSSP leader Dr. N.M. Perera, as the Finance Minister in the SLFP/LSSP/CP Coalition Government overcame the severe economic crisis of 1972/3, together with T.B. Illangaratna, he strengthened the Cooperative Movement, both producer as well as consumer. Thereby eliminating the profiteering of the middlemen. The farmer and entrepreneur got a fair price for his produce while the consumer got a fair deal. As essential food items were available at reasonable price the people did not go hungry. But regrettably the present government is not ready to intervene as Dr. N.M. Perera did and the outcome is that a majority of people are going hungry, If this situation continues there will be starvation and deaths. Therefore I appeal to the government to strengthen the cooperative movement and revive the Food Control Department.

The time has come for the government to take stern action to reform the Administrative Service so that the increasing Mafia activities by sections of the service, supported by some politicians which is increasing could be controlled. As the earlier Chairman of COPA, I was shocked by the extent of the frauds and corruption existing that led to a massive shortage of government income. For instance several of the largest companies, including one private bank, have not paid income tax for 6 to7 years. This was due to three Boards of Appeal being set up in the recent past in the Inland Revenue Department, each of which enables a company to avoid the payment for a period of 1 1/2 years or more. Thus this delay , I have no doubt, is the result of collusion between some of the officials and the companies. I recommended that there should be only one Board of Appeal and it should give its conclusions within 6 months, and that the lower amount the company considered reasonable (not less than half the tax that had been demanded) should be paid upfront on the due date. I regret to state that though more than a year has passed my recommendation to the Minister of Finance has not been implemented. In the 1972-73 crisis there was only one Board of Appeal and Dr. N.M. Perera acted firmly but fairly.

He was able to restore a balanced budget by 1974 and end his final year, 1975, as Minister of Finance by achieving a surplus, which was even appreciated by IMF. The foreign exchange reserve that had fallen was restored to nearly $4 billion, and Sri Lanka was able to overcome the crisis without getting further into debt, but was able to purchase 7 to 8 ships to handle our foreign trade. I must mention that the imperialist powers that did not raise a finger to help us to get through the crisis met the PM Sirimavo Bandaranaike, and said now that the economy has become stable they would help the with FDI, but on the condition that Dr. N.M. Perera and the LSSP were thrown out of the government. Though this was done. FDI did not come and the country did not develop, resulting in a massive defeat at the 1977 general election which enabled the pro- American JR Jaywardene (Yankee Dickey) led UNP government to come into power.

My COPA investigations showed that massive frauds and corruption are prevalent in every Department or institutions that we summoned. To give an example, in the Customs Department, Mercedes Benz luxury models were treated as dual purpose vehicle and given an HS code that was given to Ambulances, and a minimal duty was charged. This type of activity which is prevalent in nearly every Department and Institution, to a varying extent, has led to an officials-led matia arising supported by some politicians. Not surprisingly instead of achiewing growth in food production there has been a drop this year following the fertilizer fiasco. One can expect a further drop. Thus the food crisis leading to increased hunger, starvation and malnutrition will further increase, with the continuing shortage of fuel and chemical fertilizer. To make matters worse with the closure of private enterprises and job losses, there had been a significant increase of crime and drug trafficking.

The emigration of valuable professionals like doctors (with an estimated migration of 4000 this year) and of educated youth is resulting in a severe brain drain that would have a serious impact on the society as a whole. The socioeconomic crisis is bound to lead to further massive protests. Based on past experience it is very likely that President Ranil Wickramasinghe will come down hard, even using guns to crush any protest, leading to violence and bloodshed. Peaceful protests must be allowed.

Therefore it is essential that this Government be changed and a progressive government with a clear policy that would successfully meet this crisis be formed The LSSP is now a part of a new alliance of seven parties, named the Uttara Lanka Sabhagaya. It has been agreed that each member party would be free to come out publicly with its own policies, and if the need arises contest separately in constituencies where it is strong and the others are weak. This flexibility would enable us to contest several local bodies, and even at provincial and national level using our Key symbol. At the inauguration I made it clear that as an alliance we stood against racial religious and cast prejudice, as one Sri Lankan Nation. Unlike previous progressive alliances which were dominated by SLFP or SLPP, this danger will not exist with the new alliance.