Good Governance in Sri Lanka

04/17/2015 03:45 pm ET | Updated Jun 17, 2015

The World Bank Group's Worldwide Governance Indicators are: voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption. The defeat of Mahinda Rajapaksa at the Sri Lankan Presidential elections on January 8 is attributed to violations of these indicators, most notably the control of corruption. His regime was charged with nepotism, cronyism, abuse of financial transactions and conducting government business as if it were a "family company" (pavul samagama).

The new government led by Prime Minister Ranil Wickramasinghe (appointed by President Maithripala Sirisena who won the January 8 elections) has directed much of its energy towards investigating the charges against the Rajapaksa regime. Undoubtedly, state monies were squandered and pocketed by corrupt officials during the Rajapaksa government. Conclusive evidence of massive financial wrongdoing, however, is yet to be provided.

Some charges have turned out to be either exaggerated or false. A case in point is the allegation that the contractor from China commissioned to build the Colombo Outer Circular Road had reduced a sum of Rs.30 billion (about USD 225 million) from the cost of the project as a commission to be paid to powerful figures in the Rajapaksa government. The Chinese Embassy in Colombo has denied the charge.

The current government in Sri Lanka was elected into office came under the banner of good governance (yahapalayanaya) and anti-corruption. Upon assuming duties, the new Minister of Finance, Ravi Karunanayke, declared that his government was not looking at just "minimising corruption but at eliminating it fully." He further elaborated that "Corrupt officials will be severely dealt with irrespective of their political affiliation and status... We criticised the Rajapaksa regime while in the opposition and now it is our turn to practice what we preached." Is this what is happening in Sri Lanka today?

Cronyism and Corruption

A government that comes to power promising good governance and accountability is expected to uphold strong ethical standards in making appointments and in the conduct of its affairs in general. Circumspection is especially required in making appointments to the highest offices pertaining to the country's economic and financial well-being. Sri Lanka does not have a shortage of qualified, experienced individuals with exemplary records who can fill important positions. However, individuals facing charges of serious financial and legal irregularities have been appointed to some of the highest offices by Prime Minister Wickramasinghe. These appointments and subsequent outcomes have raised public concern over good governance and anti-corruption.

Finance Minister Ravi Karunanayake, quoted earlier in this article, faces court charges for alleged money laundering a few years ago, violating Sri Lanka's Central bank regulations and the Exchange Control Act. He is accused of facilitating the transfer of Rs.390 million (USD 3 million) to Sri Lanka by Raj Rajaratnam, the infamous Tamil Sri Lankan American, billionaire and founder of Galleon Group hedge fund. Rajaratnam, who was "convicted of conspiracy and securities fraud in one of the biggest insider-trading cases in the history of Wall Street" is currently serving an eleven year prison sentence in the U.S.A. A report by David Rose entitled "Crouching Tiger, Hidden Raj" published in Vanity Fair in 2011 revealed that Rajaratnam had links to the LTTE and provided funds to the terrorist organization.

Finance Minister Karunanayake had an order to be present in Court in Colombo on 29 January 2015 to face the money laundering charges. However, the presentation of the interim budget of the new Sri Lankan government was fixed for the exact same date! As Karunanayake could not be in the Parliament and the Courts at the same time, the court case was postponed. No other information on this court case can be found in the media. Questions raised by H.L.D. Mahindapala, the doyen of Sri Lankan journalism, on the implications of the Karunanayake case are pertinent here:

Will there be attempts to cover-up the case? As some of the key departments handling this case (example: Exchange Control) come under the Finance Ministry will there be pressure brought to manipulate/cook the evidence in courts? Is this going to be the first of many cases that are likely to recur in due course to undermine the independence of the judiciary?

Even more serious charges of legal and financial irregularity are involved in the appointment of Arjuna Mahendran as Governor of the Central Bank of Sri Lanka. Mahendran a Sri Lankan born Tamil and a citizen of Singapore, was given Sri Lankan permanent residency within 24 hours of his appointment, a privilege not available to many others awaiting Sri Lankan residency and dual citizenship. The activist group, Voice against Corruption has stated that it will file legal action against Mahendran in Singaporean High Courts for violating emigration laws of that country. Mahendran is also a close friend of Raj Rajaratnam. Indeed, many Sri Lankans are asking if Wickramasinghe's nomination of his friend Mahendran as the Governor of the Central Bank represents good governance or cronyism?

On February 27 Sri Lanka faced what is being called the "biggest ever public financial fraud committed" in the country's history by alleged blatant abuse of power by Arjuna Mahendran to help his son-in-law, Arjun Aloysius.

The story is that the Central Bank's 30 year treasury bond rate had suddenly changed from 9.5 percent to a high 12.5 percent as did its decision to accept bids of Rs.10 billion, ten times more than the earlier requested Rs.1 billion. Mahendran's son-law, who apparently had insider information gained high profits as the main bidder at the expense of banks and other financial institutions who made their bids according to the public information given by the Central Bank.

The "entire business community was shocked" by the alleged treasury bond fraud. Petitions and demands for financial accountability and demands for Mahendran to resign are mounting. The government appointed a committee to investigate the "insider trading" allegations and Mahendran has been put on leave. However, the public and the media are not kept informed of the progress of the investigation or when a decision on the case can be expected. Mahendran continues in the position of Governor of the Central Bank while the country bears the economic and social costs of the failure of good governance and corruption control.

Financial irregularities combined with the stoppage of infrastructural and economic projects begun by the previous government is contributing to the loss of confidence of investors, employment opportunities and economy stability. Recently, the government of Singapore refused to accept the Sri Lankan government's request to obtain a foreign loan of USD 1 .5 billion through the Singapore stock market on grounds that it cannot honor a Sri Lankan government document signed by two individuals facing charges of financial corruption, namely Sri Lanka's Finance Minister Karunanayake and Governor of Sri Lanka's Central Bank, Mahendran.

The current regime in Sri Lanka came into power pledging to dissolve Parliament in 100 days and to hold general elections. The 100 days have now elapsed, but the government is yet to announce the dates for parliamentary dissolution and the elections. Meanwhile, an unelected, interim government led by Wickramsinghe continues in office making appointments and policy decisions inimical to all the Worldwide Governance Indicators.

Human rights, corruption and other charges against the Mahinda Rajapaksa regime have received extensive international media coverage. Yet, there is hardly a word about the massive allegations against the current regime, even the Mahendran affair, despite their seriousness and international linkages. All governments everywhere must be held accountable to the same principles of good governance. There cannot be double standards on voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law and control of corruption.