A fam­ily af­fair

The Pak Banker - - Front Page -

THIS morn­ing ( Satur­day), a large scor­pion was found in the sit­ting room; the other day, a snake slith­ered be­fore me as I was walking in our house in Sri Lanka. Last night, we sat through the big­gest storm I have ever wit­nessed as rain sheeted through, and light­ning tore across the sky to the ac­com­pa­ni­ment of loud thun­der­claps.

And yes­ter­day, as were walking down the beach, we saw thou­sands of man­grove plants scat­tered about. Ap­par­ently, they have been up­rooted by a storm in an­other part of the is­land, and de­posited along our coast.

Ba­si­cally, we have learned to ex­pect the un­ex­pected when we come to spend much of the win­ter in Sri Lanka. De­spite the oc­ca­sional nasty sur­prise, we have a won­der­ful time, es­pe­cially when we learn of the dread­ful weather in Eng­land.

But what has been a real sur­prise – and far more im­por­tant than the oc­ca­sional snake or scor­pion – is the per­for­mance of the Sri Lankan econ­omy. When the civil war ended over three years ago, con­ven­tional wis­dom held that Sri Lanka would ben­e­fit from a huge peace div­i­dend. Tourism would boom; for­eign in­vest­ment would flood in; and the coun­try would take off.

Un­for­tu­nately, this op­ti­mistic sce­nario has not un­folded ac­cord­ing to th­ese rosy fore­casts. While the stock mar­ket has in­creased by 200 per cent in value, and the econ­omy has grown by 17 per cent since the war ended, for­eign di­rect in­vest­ment (FDI) has not been of the mag­ni­tude that was ex­pected. The government claims an in­flow of one bil­lion dol­lars in the last year, while ac­cord­ing to the UN, the fig­ure was a third of this. If ac­cu­rate, this would be the low­est FDI in­flow since 2005.

And while the num­ber of tourists rose by 30 per cent, the ma­jor­ity of them are on tight bud­gets that take them to low-end guest houses. Nev­er­the­less, the bulk of for­eign in­vest­ment has been in new ho­tels, or in adding ca­pac­ity to ex­ist­ing fa­cil­i­ties.

One thing this government has been good at is build­ing new roads and up­grad­ing ex­ist­ing ones. Since we be­gan spend­ing lots of time here, the trans­for­ma­tion in the in­fra­struc­ture has been phe­nom­e­nal. While it used to take around six hours to reach our bit of the is­land from the air­port, we can make it in un­der five now. And once the ad­di­tions to the mo­tor­way are com­pleted, we should be able to get home in three- and-a-half hours.

The rest of the is­land has ben­e­fited from this huge im­prove­ment as well. But the re­turns are hard to quan­tify: the Colombo-Galle mo­tor­way is a 100-km long road built to in­ter­na­tional stan­dards through some spec­tac­u­larly beau­ti­ful coun­try­side. Although its open­ing has re­duced the driv­ing time from the cap­i­tal to the coastal city from three hours to one, it is used by very few ve­hi­cles. Per­haps drivers are put off by the 400 ru­pees toll, and the ab­sence of places to take a break and re­lax.

If the eco­nomic vi­a­bil­ity of the mo­tor­way is ques­tion­able, then the new port at Ham­ban­tota is ab­so­lutely dis­as­trous. Af­ter a Chi­nese com­pany built this mod­ern fa­cil­ity with a loan from Bei­jing, it was dis­cov­ered that there was a large rock block­ing the chan­nel. Now this im­ped­i­ment is be­ing blasted, but this has de­layed the open­ing of the port.

In this same south­ern province, a new air­port is near­ing com­ple­tion near the mod­ern cricket sta­dium, both con­structed by the Chi­nese. Not far away is a brand new con­fer­ence cen­tre. All th­ese de­vel­op­ments are lo­cated in Pres­i­dent Ra­japakse’s home base, and are fi­nanced through Chi­nese loans, but econ­o­mists and op­po­si­tion fig­ures have been highly crit­i­cal of their util­ity.

When I went to the new cricket sta­dium to watch Pak­istan play Kenya in the cricket World Cup last year, there were more se­cu­rity staff than spec­ta­tors. Built in the mid­dle of the jun­gle, I could ac­tu­ally see a wild elephant in the dis­tance through my binoc­u­lars. For much of the year, this great fa­cil­ity stands empty, as does the state-of-the-art con­fer­ence cen­tre.

One rea­son for­eign in­vestors are re­luc­tant about in­vest­ing in Sri Lanka is the stran­gle­hold the rul­ing Ra­japakse fam­ily have over po­lit­i­cal and eco­nomic power. Ac­cord­ing to a Reuters report, the fam­ily con­trols 70 per cent of the an­nual bud­get.

Basil is in charge of the eco­nomic af­fairs di­vi­sion; Gotabaya is the pow­er­ful de­fence sec­re­tary; and one brother is speaker of the as­sem­bly. For good mea­sure, the Pres­i­dent’s son has re­cently been elected to par­lia­ment, and is re­port­edly look­ing af­ter government projects in the Tamil north.

Ac­cord­ing to the Reuters report, for­eign in­vestors are ner­vous about so much po­lit­i­cal and eco­nomic con­cen­tra­tion in one fam­ily. Basil was quoted as de­fend­ing what he called “the peo­ple’s dy­nasty”, terming it ef­fi­cient in reach­ing de­ci­sions. But there has been a def­i­nite blur­ring be­tween the bound­aries be­tween state and pri­vate in­vest­ments. For in­stance, the Pres­i­dent’s brother-in-law is run­ning Sri Lanka Air­ways, and the air force is op­er­at­ing a domestic air­line.

In the north, there are com­plaints from the Tamil com­mu­nity about the mil­i­tary’s involvement in a large num­ber of busi­ness ac­tiv­i­ties, rang­ing from bak­eries to golf cour­ses. This has made it hard for the lo­cals to com­pete, and eco­nomic ac­tiv­ity re­mains sti­fled.

An­other is­sue, ac­cord­ing to Reuters, is the ab­sence of any sig­nif­i­cant steps to heal the deep scars left by 25 years of bloody civil con­flict. Power has still not been de­volved to the Tamils, and they have lit­tle say in devel­op­ment mat­ters.

Fi­nally, there are charges re­lat­ing to hu­man rights abuses that are al­leged to have taken place in the last days of the war. Ac­cord­ing to some es­ti­mates, as many as 40,000 Tamil civil­ians were killed, vic­tims of the Tigers’ tac­tics of us­ing them as hu­man shields, and the army’s in­dis­crim­i­nate shelling.

Thus, de­spite the ap­par­ent po­ten­tial of Sri Lanka as a re­gional pow­er­house, un­re­solved po­lit­i­cal is­sues and eth­nic ten­sions con­tinue to ham­per growth. Above all, the rul­ing fam­ily needs to re­con­sider its over­whelm­ing pres­ence on the po­lit­i­cal and eco­nomic hori­zon: there are times when too much power can be coun­ter­pro­duc­tive.

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