Pillars of bureaucracy

Presenting budgets, announcing all kinds of changes and setting up new institutions is the easy part. The more difficult exercise is the implementation. That was what young Arty, the intrepid entrepreneur, reflected on during a Thursday morning conversation. He had called to discuss the budget happenings.

He was absolutely spot on with his views. For instance, the Ceylon Chamber of Commerce (CCC), in a post-budget comment on Tuesday said that the “lack of implementation of budget proposals in successive national budgets has reduced the credibility of the national budget process and limited the reform process only to the speech”.

Even after the presentation of the August 2022 interim budget, the CCC said that the key will be in terms of implementation which successive Governments have failed to carry out thereby reducing the credibility of the fiscal framework and the effectiveness of budget proposals.

“There are pillars of bureaucracy that stifle budget implementation,” noted Arty.

“That is just part of it. The politicians also have to share the responsibility in the non-implementation of budget proposals,” I said, adding that having sustainable budgets are key to economic growth and development.

Take tax revenue for example. Every year the budget portrays an increased percentage in tax revenue……..after all, the Government needs money for rising expenditure. However, tax revenue has woefully fallen short of targets for many years now mostly due to poor tax administration. The 2023 budget speaks about an ambitious over 60 per cent increase in tax revenue. Ambitious indeed with most tax experts saying this is unlikely to be achieved.

A further negative in tax revenue collection is the collapse of multiple small and medium-scale businesses, with more to follow, due to the economic crisis. The bigger companies are barely managing to keep their heads above water. How can you garner more taxes in an economy that is driving companies to the ground?

“Have we ever examined the number of institutions set up and the number of times Finance Ministers have said ‘this proposal will help Sri Lanka’? If all these proposals were favourable to Sri Lanka and implemented then, we wouldn't have the worst economic crisis that the country has faced,” noted Arty.

“No doubt about it, Arty. The problem we have is budgets are unsustainable and mere populist methods to win the people as against ‘reality budgets’ though the 2023 budget is slightly different as it attempts to enforce some public sector reforms,” I said.

Rather than opening new institutions, which quickly become burdened by pillars and layers of bureaucracy and breeding centres for politicians to pack their supporters with jobs, Sri Lanka needs to examine closely why it has failed in the implementation of budget proposals – is it politics or something else? Under the new budget, 11 new institutions are to be set up.

Having delved into previous budgets, I have taken a few examples at random (unconnected to political affiliations) of new institutions being announced and the wish-list which have either not materialised or no one knows what has happened to these proposals:

Budget 2023: Agency for External Trade and Investment; New Economic Zones (haven’t we heard this before?); National Productivity Commission, International Trade Office; Department for Cinnamon Industry; Institution to Study History of Sri Lanka; Presidential Commission on Taxation (haven’t we heard this before?); Data Protection Authority; National Operations Centre; Microfinance and Credit Regulatory Authority; Laboratory for Excise Department and a Presidential Task Force to monitor and implement all budget proposals.

Budget 2022: Client Charter for every government institution; Integrated Results Based Management System; Three-wheeler Regulatory Authority (where is it?); Act on Rights of the Differently-abled; Green Agricultural Development Act; and an in-depth analysis and review on the procedures followed by the Board of Investment in attracting foreign investment.

Budget 2021: National Development Banking Corporation – merging the State Mortgage and Investment Bank, the Housing Development Finance Corporation and the Pradeshiya Sanwardhana Bank.

Budget 2017: Increase export earnings from tea to US$5 billion by 2020 (not achieved maybe due to the COVID-19 crisis); Scholarship scheme – to enable the undergraduate students of the 17 state universities who are the top three in the Faculties of Engineering, Medicine, Bio and Physical Science, Accountancy, Finance and Law to get scholarships at top universities around the world such as Harvard, MIT, Oxford, Cambridge to follow post-graduate studies up to PhD level; Office of the National Business Registry; Unique Craft Marketing Centre in Colombo; Investment Inflow Management Act; EXIM Bank; Four Free Trade Zones targeting new industries in Kalutara, Ratnapura, Puttalam and Vavuniya districts; and listing on the stock market non-strategic enterprises such as Hyatt, Grand Oriental Hotel, Waters Edge, West Coast, Manthai Salt, Hambantota Salt and Hilton during 2017.

Budget 2014: $150 million provided to SriLankan Airlines and $50 million to Mihin Lanka (which has been scrapped); turnaround in the fortunes of Ceylon Petroleum Corporation with reduced losses (what is the situation now?); and buying more ships for the Sri Lanka Shipping Corporation (if that was done, it would have helped in carrying crude oil).

These are, as I said earlier, a random selection of new institutions and new policies announced in previous budgets. Unfortunately, due to deep divisions between political parties, no Finance Minister is willing to continue the good proposals of his predecessor – even if they are beneficial to the nation and its people.

The only consistency seen in recent budgets is the focus on privatising or bringing in private management in the public-private partnerships’ model of a number of state institutions like SriLankan Airlines, Sri Lanka Telecom (a Malaysian entity already has a 49 per cent stake and the company has been doing well, so why change the status quo?), Ceylon Electricity Board, Ceylon Petroleum Corporation and Insurance Corporation among others.

Phew…..as I ended the conversation with Arty, I was drained and looked at the margosa tree for inspiration and to take a breather.

“Api giya sumane sakachcha kara wage, aya-weye apita kisi deyak nae (As we discussed last week, there was nothing in the budget for us),” said Kussi Amma Sera.

“Okkama wenne aya-weyen pita-ne (Everything happens outside),” noted Mabel Rasthiyadu, while Serapina added: “Api den balanna oney Aldoris eyage kaema wala mila wedi karaida kiyala (We should see whether Aldoris will increase the prices of his goods).”

As we eternally live in hope, let us hope the proposed Presidential Task Force (if it ever gets off the ground) to monitor and implement all budget proposals will fill this vacuum in budget-making and delivery.