The Economic Crisis

A good deal of the commentary on the separatist crisis has skirted the economic question which now threatens to loom over all the other aspects of this crisis. The following article by Tisaranee Gunasekara is one of the few that address this particular crisis facing GOSL. Many of those who have been promising an "imminent" military victory seem to be overlooking the economic problems facing the country which can stump their expectations even if they are well founded. Some 'patriots' have even claimed victory over the LTTE, a clear case of counting chickens before they are hatched.

The clearest manifestation of the economic crisis is the inflation and the rise in the cost of living. Except for about 10 percent of households who can maintain their extravagant living style the rest of the country is forced to tighten their belts. Income from tourism seems to have declined, foreign aid disbursements seem under threat, and export income seem barely keeping pace. The only steady source of income seems to be remittances from workers to the Middle East, however questionable the social and ethical implications of this trade may be. There seems to be pretty little basic development going on, except when it is underwritten by some aid donor.

The article traces the origin of the crisis since MahindaR came to power. One source of the crisis is the extravagant political style, actually political bribes to maintain the President in power. These include the jumbo cabinet and jumbo foreign trips to India, Pakistan, China, Italy (Vatican), Jordon, Geneva etc. The salaries and perks of the politicians seem to be the only thing that has been rising (other than the cost of living). These are one source of the economic crisis. More information on this aspect is given in the article.

Then there is the cost of the current military strategy. Tisaranee sees one reason for this in the 'high-tech' strategy which the military has been using. While the LTTE has only a few light planes the SLAF has a fleet of jets and helicopters, all used in bombing expeditions with questionable results. The naval assets of the SL Navy far exceed those of the LTTE but still GOSL has not been able to wipe out the LTTE 'navy'. All these seem to indicate a misuse of the available military resources. The SL Army said to have 100,000 troops with the "surge" now process said to increase this number to 300,000. The LTTE probably has less than 10 percent of this number, with a high proportion of child soldiers. Yet GOSL has still to make a significant advance in the Vanni heartland. As the present writer has shown the current gains in the East are of doubtful value when the main game of defeating the LTTE is concerned.

According to Tisaranee GOSL was banking on a short and swift campaign to eliminate the LTTE. If this was their real intention the seem to have adopted the wrong strategy by getting bogged down in a war in the East far away from the centre of LTTE strength in the Vanni. Even in the East clearing the Toppigala jungle is proving to take longer than expected. The only people who seem to have bought the story of the short rapid victory are the patriots. Some of them are already claiming victory over the LTTE. Others a little more cautious are willing to wait till the end of the year. But whether the financial crisis will let them wait that long is questionable.

Tisaranee makes here usual charge against the regime that it is deliberately targeting Tamil civilians. My impression is that its intelligence is so weak that it cannot tell the difference between a civilian and a terrorist in civilian clothes. A lot of the civilian deaths have occurred because of the choice of the East as the venue for military operations. If the emphasis has been shifted to the Vanni there would have been fewer civilian deaths as most of the Tamils still left there are hard-core LTTE. While the civilian deaths have been cited as the reason for the curtailment of aid flows it is clear that the fundamental error is to rely on these aid flows. GOSL seems to need these aid flows just as an addict would need his drugs. In both cases what they are seeking is not doing them any good in the long run.

Finally the article sees the tide turning against the regime even in the Sinhala heartland. According to Tisaranee when Sinhala villagers of Thunmodara asked for adequate shelter "Minister Chamal Rajapakse retorted that the government cannot build palaces for them". Generally GOSL has not shown much interested in Sinhala victims of ethnic cleansing compared to the haste with it is trying to settle Tamils displaced by the conflict in the East. With the JVP also turning against the Government the increasing financial crisis will make the population to buy the superficial remedies advocated by the JVP. The SLFP defectors are trying to set up a different branch of the SLFP perhaps in collusion with the UNP. The financial crisis will give an opportunity for all these anti-Mahinda movements.

Victor Gunasekara

Posted as Blog ID 7.50 of ACSLU.


The Chain of Errors

By Tisaranee Gunasekara

Asian Tribune : 2007-07-01

"Do we really have to pass through every sort of horror before we can open our eyes?" Tim Parks (Hell and Back: Selected Essays)

Crises do not spring forth, out of the blue, fully formed; nor do they happen without any forewarning. The Lankan financial crisis was in the making for many months, and the pre-warnings were there in plain sight. In fact the first intimation of a fatally flawed approach to matters economic and financial came early in the tenure of President Rajapakse. His extra large cabinet may have been a political imperative but the Presidential proclivity to overspend, on himself and his pet projects, was not. Mr. Rajapakse took an unprecedented fifty man entourage on his first trip to India and followed this extravaganza with a trip to Pakistan in the company of an equally large delegation. A couple of months later came the announcement of a massive pay hike for the executive, the legislature and the judiciary, with the President getting the largest raise. A financial monster was born.

Friday midnight, fuel prices went up again, as did the price of Shell Gas. Others hikes will follow. The Central Bank has ceased releasing its quarterly economic figures. The allocations to provincial councils have been slashed drastically while the President is said to have turned down requests for extra funds by some ministers because of financial un-affordability. The financial crisis is no longer deniable even by an unbelievably sanguine President whose grasp of reality often seems inadequate.

Unfortunately whether appropriate remedial measures will be taken, in time, is far from certain. Going by past practices the likeliest outcome is that some development expenditure will be curtailed while the real white elephants – such as Mihin Air – and wasteful expenditure by the ruling class will remain. To bridge the resultant gap, more burdens will be heaped on the public, in the name of patriotism.

The Genesis

Unless we understand how we got here, it is unlikely that a way out of the present morass can be found. Though gross financial indiscipline, starting at the very top, is its most visible component, there were other factors which contributed to the creation and exacerbation of the current financial crisis. Among them was our inability to understand that the war will be neither short nor easy – an inability sourced in the sin of hubris. When Mavilaru operation commenced, the powers that be seemed to think that the war will be over – more or less – in a very short period, ranging from six months to one year. Those of us who warned that the Tiger is not a paper Tiger and the war is likely to be a prolonged one were deemed to be lacking in patriotism.

This unrealistically optimistic analysis made financial discipline seem unnecessary. Bogged down in the mistaken belief of a short victorious war, the regime acted in a manner that was financially irresponsible – it indulged its members and supporters while at the same time shifting to a heavily capital intensive method in its prosecution of war.

There was indeed a need to increase defence expenditure. Still in doing so affordability should have been a consideration and the possibility of a long war should have been factored. The contrary happened. The massive hike in defence expenditure was made on the basis that the war was going to be a short one; affordability thus did not become a factor. The regime was also playing to the gallery nationally, trying to create the impression of a tough government fighting a no-holds barred campaign against the terrorist enemy. In so doing the government got into a habit of not counting the cost – financially or politically. Tactics such as the intensive use of MBRLs and incessant air raids were in no way cost effective. Still they were adhered to, even in the absence of reliable reports of how much actual damage they did to the enemy. Perhaps the real effect on the enemy mattered little, because they made a good show on television and boosted the President's image as the saviour of the nation.

The belief in a short victorious war was in part sourced in the Sinhala supremacist ideology of the President and his allies. The Southern extremists believed that the war could not be won in the past because successive governments acted with too much restraint, for fear of creating civilian casualties and antagonising international opinion. The Rajapakse administration seemed to share this belief - that the Tigers could be beaten easily by a regime which liberated itself from "humanitarian considerations" and followed a strategy of total war in which unbridled terror was met with unbridled terror. This militarist error was compatible with – nay was inevitable given - the Rajapakse worldview which denied the very existence of an ethnic problem. Devolution and other political measures to win over civilian Tamils were thus deemed unnecessary. What was needed was an all out military campaign against the Tigers. This simplistic perspective made inevitable an underestimation of the enemy and the subsequent financial – and political – mismanagement of the war.

Armies – most Armies – tend to retaliate against civilian populations seen as the "enemy". It is up to political leaders to ensure that the Army is prevented from giving into its natural inclinations. The political leaders must be capable of realising that permitting the targeting of civilians – irrespective of the nature and the magnitude of the "provocation" by the enemy - would be profoundly counterproductive and may have a direct bearing on the final politico-military outcome of the war.

Clearly the Rajapakse administration lacked this capacity. If the regime took effective countermeasures after the killing of parliamentarian Joseph Pararajasingham on the Christmas Eve of 2005 and the killing of five students in Trinco in early January 2006, the subsequent calamities could have been avoided. Unfortunately instead of taking effective counter-measures the regime tried, rather clumsily, to cover up. This encouraged other human rights violations while gradually tarnishing the image of Sri Lanka on the international stage. The resultant aid curtailment has contributed to the worsening of the financial crisis.

As the recent arrest of two Tiger leaders in the UK demonstrates, the West is not all that pro-LTTE; in fact it is willing to move against the LTTE. When the IC expresses concern about human rights, that concern is not for the Tigers but for civilian Tamils. In each of the cases taken up by the international community, the victims were not Tigers but unarmed, civilian Tamils. If one's worldview equates Tigers with Tamils, this distinction would not matter. But if we are sincere when we claim to be fighting to liberate Tamils from the yoke of the Tiger, then we can neither permit nor justify crimes against civilian Tamils, particularly if there is a general impression that the culprits belong to our camp. If this simple fact could be grasped we can increase the international isolation of the Tigers while winning ourselves more friends and more financial support. Failing to do so can de-legitimise our necessary war against the Tigers and make it financially unsustainable.

Stupidity is counterproductive; it helps the enemy rather than oneself. The Tigers have suffered greater damage at their own hands than at the hands of their enemies. Sadly we seem to be heading in the same direction – as our present, self-created financial crisis demonstrates. This is what Hannah Arendt calls "terrifying negative solidarity", a state of mind entailing a loss of common sense, indulgence in thoughtlessness and adherence to slogans heedless of their consequences. Such a state of mind and actions dictated by that consciousness helps the enemy rather than oneself. In the last one and a half years we have travelled a path downhill, paved by easily discernible and thus entirely avoidable errors. Continuing in the same manner, along the same degenerative route, would be an act of unpardonable, criminal stupidity.

Dissenting Times

A course correction would require an attitudinal change. The regime's indifference towards the opinion of the international community is being hailed by some as a sign of its independence.

Two recent incidents involving Presidential siblings demonstrate that this celebrated indifference extends to national opinions as well. Justifying the expulsion of 376 Tamils, Defence Secretary Gotabhaya Rajapakse infamously said: "We can't arrest 300 people and detain them. What is the best option? So you can tell them, if you don't have any legal business in Colombo ... we don't want to detain you, you go back to your homes. In fact this operation was much better. We could have put all of them in detention" (Khaleej Times – 12.6.2007; emphasis mine).

Confronted by Sinhala villagers of Thunmodara asking for adequate shelter, Minister Chamal Rajapakse retorted that the government cannot build palaces for them. Juxtapose the remarks of the two Presidential siblings and the impression is of a regime (or should one say a ruling family?) that is dismissive of its own citizens. This Rajapakse discourse announces a mental universe characterised by thinly veiled contempt not only towards interfering foreigners but also towards born and bred Sri Lankans.

The regime's indifferent attitude leads it into ham-fisted actions, oblivious to the inherent dangers. The decision to set up a Special Economic Zone in Sampur and Mutur East is one such disaster in the pipeline. When the Lankan Army launched operations against the LTTE in these areas, they were billed and hailed as efforts to liberate the Tamil residents from the murderous yoke of the Tiger. Now these very same Tamil residents have been banned from returning to their traditional villages by their liberators. The government has declared a 675 sq. km High Security Zone and tens of thousands of people will loose their land and their dwellings in consequence. They are being promised alternate accommodations, but given the callous manner in which the regime is treating the displaced Sinhala villagers of Thunmodara, the fate that is in store for the displaced Tamils of Sampur and Mutur East is all too imaginable. Quite apart from the injustice of the action, are we determined to give the LTTE more and more politico-propaganda weapons and increased opportunities to solve its severe manpower problem? Already some of the affected people have begun to protest the move using democratic means. Hopefully the regime will not drive them into the LTTE's corner by treating them as terrorists and responding to their democratic and peaceful protests with violence.

Take the recent ill-judged attempt to reinstitute the criminal defamation law – did the regime think it could get away with such an undemocratic measure? Has it no understanding of reality? Does it not comprehend the distinction between the viable and the unviable, the doable and the undoable, the sustainable and the unsustainable? The President must understand that patriotism no longer suffices as a protective barrier against criticisms and a cudgel against critics. He must realise that he no longer enjoys a carte blanche in the South and the government and the country are entering a new phase of increased dissent. From the Supreme Court to the village of Thunmodara in the Sinhala Buddhist heartland, there are signs of disaffection and dissent, of anger and disillusionment. If the latest pronouncement by the Chief Justice is anything to go by, then he seems to be headed the Mangala Samaraweera route - from valuable ally to implacable enemy. A regime change is unlikely given the lacklustre leadership of Ranil Wickremesinghe and the consequent organisational disarray in the UNP. Instead the crisis will become more malignant and more pervasive, seeping into every sphere, affecting every activity; progressing from the unmanageable to the irresolvable.