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To Be Realistic, There Are Only Two Options

By Kumar David –

Prof. Kumar David

There are only two political options (for want of a better word, though “trepidation” highlights another side of the matter) worth taking seriously – the President Ranil Wickremesinghe (RW) led outfit and the National Peoples’ Power (NPP) public face of the JVP. The RW-outfit may manifest itself in many forms such as a UNP-Sajith (SJB) alliance under some tactical leadership plan that may or may not include a Rajapaksa rascally rump. Whatever be their specific expositions, there are only two “camps” that matter up to and including the next election cycle. Let me call them the RW-outfit and the JVP-outfit – the Sinhala “kandauru deka” captures the sense better. All other options (Champika, Sarath Fonseka, small left, and ethnic minority platforms) will have negligible electoral impact if they do not align with one of these big outfits. This is in respect of a presidential election; in parliamentary or provincial polls ethnic minority platforms will, of course, have a substantial impact in the areas of domicile of their communities. 

It is necessary to state these encampment options prior to dealing with programmes and strategies. I will call the broad manner in which each camp presents itself to the people its National Strategy and this includes an ‘ideological orientation’, economic development plans, foreign trade priorities, and relationships with the IMF and ADB/IMRD to escape the stranglehold of debt. Approaches will need to be formulated by each side for state-owned enterprises. Foreign policy, especially in respect of India and the US is absolutely crucial. When I say ‘ideological orientation’ I am referring to democracy, militarisation, curbing Sinhala-Buddhist excesses and the democratisation of state-power. All this is a big canvass and strategists, planners and scholars will contribute to this discourse in the next twelve months. I will only make a simple start here; not in any particular order.   

RW is a capitalist-roader in the sense that he subscribes to the view that “by letting market-forces run their course, to enhance their own gain capitalists, will as though by an invisible hand, promote the public good”. (Adapted from Adam Smith’s ‘Theory of Moral Sentiments”). Faith in the free-market with minimal state intervention is gospel among modern bourgeois ideologues and that RW belongs here is no surprise. Unconstrained by other pressures this is where RW will lead the nation as JR did and Felix tried. However, I refrain from calling RW a neo-liberal (neo-conservative extremist) despite his penchant for using the military to subdue political dissent because he is influenced by liberal intellectuals in this personal and political entourage. The obscenity of outright dictatorship is best practised by Generals (gorillas); vide Chile, Pakistan, Argentina, Burma, and Indonesia and so on and so on.  A military regime in Sri Lanka will not fail to string-up RW alongside the left, the intelligentsia, the liberals and the feckless Fourth Estate. Having said this it is frightening to observe that Netanyahu and his simple majority in Parliament are driving Israel (of all countries) in a neo-fascist direction less than 70 years after the fall of Nazism. I will deal with extremism and global threats to liberal values in my next essay in September – I intend to write less than weakly from now on.   

The other camp, the JVP/NPP; how shall we designate it? It is not Stalinist in the sense that it harks to the discredited Soviet-style all-embracing central plan, it no longer subscribes to any variant of Maoist dementia (Cultural Revolution); it acknowledges that 1971 and 1989-90 were wild excesses unrelated to real world possibilities. This is what the JVP now is not; but what is it? It, itself doesn’t know yet, but the demands of approaching electoral challenges will force the JVP/NPP to define and declare its programme; to define its ideology, to publish an economic programme and to declare what it proposes to do about pesky minorities and pestilential Sinhala-Buddhism. 

Allow me to move to a few economic topics. It’s a no brainer that exports need to be an engine of growth. There is a huge amount of experience in other developing countries (Korea, Mexico and South Africa to quote at random from three continents) and indeed in Sri Lanka in the past before Rajapaksa era sleaze snuffed it out. Both the private sector and government agencies were coordinated in the past and this needs to be revived. It may already be on the move behind the scene, but why behind the scene? Participants, product lines (industrial, fruit, marine products etc.), benefit from agreements between countries and future plans should be made explicit. If we intend to give the invisible hand a leg up (sorry, bad pun) let us make it more visible.  Neither the RW-camp nor the JVP-camp have published or made their proposals explicit.

Moribund state-owned enterprises need an action plan and this is likely to be contentious between the two camps. There are rotting corpses like Sri Lankan Airlines that it is universally agreed must be cremated. Mahinda’s recklessness and Gota’s witlessness have brought it to the crematorium and the point now is quick disposal. But there are other cases which are complicated, the CEB for example. The government, for social and political reasons, offers electricity at heavily subsidised prices to low income households. The burden has to be borne by the CEB which does not receive corresponding compensation on imported fuel costs (coal, furnace oil and diesel). Therefore, on the books it appears that the CEB is a huge loss making enterprise but this impression is incorrect. This ambiguity is true though to a lesser extent in the petroleum corporation and the railways. A distinction has to be made between culling white elephants like Sri Lankan Airlines and other state-owned enterprises for each of which separate plans must be prepared.

A crucial matter for heavily indebted countries like Sri Lanka is debt restructuring. I will summarise a Reuters report datelined June 2023 about a deal to restructure debt owed by Zambia to other governments and private creditors around the world. The biggest slab, $6.3 billion owed to China’s Export-Import Bank, underlines the importance of Beijing’s agreement to support the plan. The agreement calls for Zambia’s debt to be rescheduled over 20 years with a three-year grace period during which only interest payments will be made. Private creditors too are expected to likewise restructure the $6.8 billion owed to them. The exercise is viewed by the Group of 20 wealthy nations as a test case. I will make no further comment but ask whether the RW-side or the JVP-side is actively following up the Zambian example

The most significant advantage of the Zambian plan will be a sharp recovery of the value of the Kwacha against international currencies. This will impact prices of imported goods and domestic production. Here in Sri Lanka prices of essential goods and inflation are driving the poor and the middle-classes to desperation. The one matter about which every political actor agrees is prices of food and essentials (medicines, cooking fuel, school uniforms and so on) must be addressed. A debt restructuring programme supported by the IMF and other multilateral agencies is essential. Is it unrealistic to imagine the value of the LKR appreciating to 200 to 250 to the US dollar within a year?

The government (Central Bank and Treasury) from all reports is in thick of it. The RW-camp therefore is involved, but I doubt if JVP/NPP policy makers are giving their minds to these concerns. Since the JVP/NPP is a contender for state power there will be persons of intellectual ability and professional experience who will be willing to cooperate, but the trouble is that it is foolishly dragging its feet.

There are several such policy matters deserving a short discussion in a draft programme. For example a new constitution, inflation targeting, price control of essentials, state-owned enterprises, sovereign wealth funds, and energy policy. I will devote the rest of this essay to energy pricing and policy because a draft programme for the electricity sector is before parliament right now.

The Ceylon Electricity Board is called a huge loss-making enterprise. How fair is that allegation? For social and political reasons the government provides low income households with heavily subsidised electricity. The average generation price is far higher. If the government hands out electricity to low income households at X rupees per kWh but the average generating (net of cross subsidy from affluent customer) is say Y rupees (average generation costs depends on coal, fuel oil and diesel prices), and if the energy so handed out is Z billion kWh per year, the CEB will unavoidably incur a “loss” of (Y-X)*Z billion rupees annually. If Y is 20, X is 5 and Z is 20, it will appear that the CEB is a public sector enterprise “loosing” Rs350 billion per annum. This of course is bollocks! Will the energy ministry make available a detailed breakdown of X, Y and Z? Given the data a child can do the calculations on the back of a postage stamp.    

 The term that echoes across the government’s thought processes is “privatisation”; anything that moves or breaths, grab it, privatise it. While there is a case for handing over some failing state enterprises to private management, the experts on the government’s lobby have little knowledge of the concept of Public Goods. There are some things which by their intrinsic nature belong to the public domain, to the people; scenic beauty, forests, the courts of law, the military, the police, a nation’s communications backbone and the transmission grid and system control infrastructure. The concept of Public Goods has not been discussed or understood in Sri Lanka or for that matter in many countries.

A related matter pertains to privatisation of the electricity distribution systems which like the transmission backbone and system control facilities should remain under public ownership. In the UK for example where the distribution system was privatised, terrible complications have arisen. Once a private owner acquires control it has the right to sell onward into markets where it is chopped, spliced with bits and pieces of other financial assets and sold onward into a maze. Since the financial crisis of 2008 these instruments called ‘derivatives’, and other speculative and ‘leveraged’ financial products have become prominent and it is no longer easy to say where ownership lies. In simple words if we privatise into this fog it’s a maze where ownership of our distribution assets is murky with loss of control and inability to repossess. In the UK, chasing up who owns the now privatised one-time Regional Distribution utilities has become a nightmare.

I need to bring this discussion of electricity sector options into line with my opening theme that there are only two realistic political options – liberalism and the left. True RW liberalism bears the blemish of potential military excesses and the JVP is haunted by its rebellious past. Nevertheless the public and trade unions will be increasingly enthused by the upcoming elections than by these theoretical abstractions as the months pass; let’s wait and see how things pan out in the months ahead.

The privatisation of the Central Electricity Generating Board (CEGB) has turned out to be another of that Thatcher woman’s ideologically driven blunders to rival her privatisation of British Rail. Throughout Europe the railways are state-owned and excellent. Western Europe’s SNCF, Deutsche Bahn, Trenitalia, as well as the networks in Eastern Europe are state-owned. It is in the UK alone that that Thatcher woman careened from Hayek driven blunder to blunder. In Lanka Privatisation seems to be the government and Minister Kanchana Wijesekera’s buzzword; so it seems Lanka is treading the same road? In context, I also do wish people would stop talking about renewable energy projects solar and wind in MW (power) and deal in expected annual MW-hours (energy). What’s the use of a 1000 horse-Ferrari in your garage if your fuel tank is empty?

To tie up these threads to my opening theme, the government hopes that people are so fed up with the CEB and presumed CEB corruption that that it believes there will be overwhelming support for privatisation. That may be incorrect. When all the facts as I have outlined here come into focus in the public mind, I believe that support for privatisation of public goods such as the CEB’s key assets, the telecommunications backbone and the petroleum industry will evaporate.

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