Dr. Ameer Ali,
Murdoch Business School,
In the late 19th and early 20th centuries a group of Indian nationalists led by Dadabhai Nairoji and joined by R. C. Dutt, G. S. Iyer, G. K. Gokhale and P. C. Ray developed what came to be known as the “Drain Theory”, which systematically exposed how the British bled India of its wealth and enriched British treasury, which exposition later provided the theoretical backdrop to the rise of Indian nationalism and independence movement.
In a totally different context and in independent Sri Lanka, the latest revelation by the Minister of Justice, Wijeyadasa Rajapaksa, that around $53 billion stashed away in foreign countries over a long period, not by an imperial power or foreigners, but by locals, could be an interesting subject of research for a different theory of systemic drain. While the country is left bankrupt, buried in a sea of foreign debt, and currently waiting for the release of a pittance $2.9 billion assistance from the IMF, the minister’s revelation tells a sorry tale of state sponsored financial robbery.
There is a popular saying in Tamil, “uryil nei irukka oorellaam alainthaanaam”, meaning, when there is ghee in the pot hanging at the back of the house, the owner was looking for the same all over the village. There must be a Sinhala equivalent also. It is an apt description of the situation facing the country today. The difference is that billions of dollars are hidden outside the country and not in the backyard. The question is how did this situation arise?
Many experts have analyzed the causes for the current economic and financial crises, but in a few words, and with full credit to the aragalaya youth, it all happened because of a rotten system that allowed the country’s wealth to be drained away. The system’s managers and guardians made all necessary rules and regulations in paper to stop the drain, but when it came to implementation, there was planned incompetence. Even financial donations from foreign aid agencies and friendly countries appear to have vanished into tax havens and foreign bank accounts of politicians and administrators before those finds reached ashore. Is this just corruption or calculated system-oriented and systematically pursued financial drain?
The system no doubt also provided all necessary incentives to local business moguls, entrepreneurs, financiers and investors, all in the name of economic growth and in the expectation that profits so earned would be ploughed back into the economy to further local development instead of being stacked away. Incidentally, this development strategy for labour surplus economies was recommended by development experts in the 1970s and 1908s under the now defunct Lewis-Fei-Ranis model. Justice Minister’s revelation tells at least part of what actually happened under this strategy. But the corruption inherent in the local system made the situation worse.
The financial plight of this country was already deteriorating towards bankruptcy by the turn of 2020. That was the reason why the newly appointed CBSL Chief at that time, Professor Lakshman, sent an SOS to all patriotic Sri Lankans holding dollars abroad to bring their stock back without any question being asked. In desperation, the Professor was actually promoting money laundering. In doing so, he lost his academic objectivity and turned out to be another guardian of the system that was draining the national coffers and the economy along with it. His successor continued the same strategy.
Once again, credit must be given to the aragalaya youth for exposing the ideological bankruptcy of the system itself and called for systemic change. But President Ranil Wickremasinghe, the beneficiary of aragalaya mission, would have none of it except to kill the mission itself.
Having been pushed to the wall and without any pretense to cleanse the system, RW in his role as Finance Minister, heroically presented his 2023 budget with a fairy tale message of economic transformation towards an export-oriented Eldorado. While achieving his budget targets would depend very much on the availability of funds in general and IMF assistance in particular, his SLBC chief Dr. Weerasinghe had been honest in stressing that with or without IMF assistance, short- medium- and long- term reforms are an absolute imperative for economic stability and growth.
Without mincing words, it must be pointed out that such stock of reforms should cover not only the economy but the entirety of Sri Lanka’s polity. It therefore calls for SYSTEMIC CHANGE and nothing less, an ideal that seems to scare away not only RW, his coterie of ministers and politicians, but also, and regrettably, certain sections of the intelligentsia and opinion makers. Is it because that call, in their view, came from a bunch of irresponsible and politically romantic middle and upper class aragalaya youth, who had now been made to disappear from the scene, or, because it threatens the very fabric of power structure in this country with its allied economic and social stratification?
Whatever the reason be, further delay in IMF assistance would make RW’s budget targets difficult to achieve and economic revival slow and painful. As the proposed tax increases start biting and make life difficult to ordinary people, RW would be forced to rethink about his strategy. Already, the State Minister of Finance, Ranjit Siyambalapitiya has been reported to have said that those tax increases were not like “unchangeable inscriptions”, and had invited workable alternatives. In addition, forecast about global economic outlook for 2013 looks even gloomier now than when it was predicted a few months ago by the IMF. Given this pessimism and difficulties, CBSL Chief’s call for wholesale reforms requires added urgency. As part of those reforms is the need for measures to bring back the dollars hidden abroad. Would RW and his state machinery have the courage to initiate that recovery?
The forces that suppressed the youth must remember that they had only driven the movement underground and it is bound to reappear in some unpredictable form if the ruling system continues to remain unchanged, unjust and oppressive. In fact, on a broader canvass, the entire history of systemic change in Asia appears to have been the product of underground movements led by the young and educated, as brilliantly presented by Tim Harper in his thrilling account of Underground Asia (Penguin, 2021).
The ruling system has passed its use by date and lost its vitality after seven decades of existence. The new generation does not want to live with it. To fine tune that system as RW hopes to do with his budget and road map for international trade is futile and tantamount to driving a vehicle with an irreparable engine. His initiative for resolving the so-called national question is also an attempt to sidestep the real issue and prepare the ground for his reelection. At least according to one source of information, top level discussion had taken place to explore the possibilities for a presidential election in mid-2023.
In the meantime, the opposition’s call for an election alone is not going to solve the problem. Even though the youth demanded, “No 225”, that demand went beyond just the quantity and involved quality of our leaders and representatives. In passing, let the readers be reminded of a recent incident when the South Korean Disaster Relief Foundation’s Chairperson Cho Sung Lee castigated one of our ministers for his nonchalance towards punctuality, which speaks volumes about the leaders the system produces. True, punctuality has no equivalent single word in any Asian language. Yet, the three Asian tigers, Japan, South Korea and Singapore, which created an economic miracle in 1970s, acquired that cultural tenet from industrial West, indigenized it, and beat the West in its own game. This is why the aragalaya demand for systemic change is an all-inclusive project and involves a radical overhaul of Sri Lankan polity, its ideological foundation and culture. It should not be dismissed as yet another political slogan. An election without that overhaul would therefore be meaningless, and the systemic drain would only continue but under a new horde of politicians. A new constitution should the starting point for this long awaited change.