Latest COPE report identifies miscreants and mismanagement

The details of massive corruption and fraud in public institutions laid out in the Committee on Public Enterprises (COPE) report which was submitted to Parliament in early 2007 created a furore in the eyes of the public.

COPE Chairman Wijedasa Rajapakse said there was a crucial difference between this report and the previous ones. "Most other reports say there had been some corruption and some mismanagement," he said. However, the latest has specifically identified the mismanagement and culprits. COPE began its investigation in August 2006 and prepared a report in four months on 26 government institutions which alleges mismanagement of over a staggering Rs.150 billion.

Rajapakse made these comments while addressing the 4th Key Persons' Forum for 2007 this past week, presented by the Small & Medium Enterprise Developers (SMED), a project of the Federation of Chambers of Commerce and Industry in Sri Lanka (FCCISL) and Friedrich Naumann Stiftung.

Rajapakse described Parliament as a 'glorious talk shop' where real work is done behind the scenes by the various oversight committees which were established to create transparency and accountability in government. Parliament is responsible for every cent of public funds and has to approve all expenses. Corruption affects all societies but is significant in the South Asian region because allegations of mismanagement and fraud are abundant. Oversight committees have the authority to look into matters by the powers vested through standing orders of the Parliament but are vastly limited when compared to other nations which have statutes.

Rajapakse said a majority of the corruption takes place in institutions which provide essential services and commodities to the public such as the Ceylon Electricity Board (CEB) which is accumulating a monthly liability of Rs.1.5 billion. Others include the Board of Investment (BOI), state banks, and the Water Board. The Water Supply and Drainage Board is accruing losses of Rs.1.8 billion a year on water wastage. Similarly, over Rs.460 million was earmarked for the installation of a computerized system but over three years, a mere 10% has been completed.

Rajapakse expressed serious doubts on the role of the BOI as serving their purpose to the country. Out of the US$11 billion dollars worth of goods imported to Sri Lanka annually, the BOI brings in US$4 billion. While the Customs Department has 5000 employees to inspect cargo, the BOI has 38 to 40 employees to inspect their enormous volume of goods. "The BOI is defunct because it is humanly impossible to inspect the goods," he said. The excesses which the BOI imports end up in the Pettah market, sold at extremely low rates due to non payment of duties, taxes or levies. Rajapakse pointed out that local businesses end up collapsing because it is impossible to compete with Pettah prices. "If the local industry is ruined, have we achieved anything?"

Over the last 13 years, around 98 institutions have been privatized but none has benefited from it. The logical reason for privatization is if an institution is running at a loss. Take the case of Lanka Marine Services Limited (LMSL), a subsidiary of the Ceylon Petroleum Corporation (CPC) which had monopoly rights for bunkering. LMSL was earning profit when 90% of its stake was sold. Its valuation was determined to be Rs.1.2 billion and was agreed to be sold without the monopoly rights. When the agreement was signed, the monopoly rights were inserted, making the actual value Rs.2.4 billion, double the amount it was sold for.

Moreover, LMSL had 5 acres of property on Bloemendhal which then President Chandrika Bandaranayake Kumaratunga executed the deed for the land which was also valued at Rs.1.2 billion. Rajapkse said the estimated value of the land today would be Rs.64 billion. "This caused over a Rs. 65 billion loss to the country and it violated all the guidelines approved by the Cabinet," he said. "This was an illegal transaction."

By far the greatest disaster detailed in the COPE report was the privatization of Sri Lanka Insurance Corporation (SLIC) in 2003. "The auditors assessed the value of the shares without having the figures for the previous year," Rajapakse said, adding that the auditors had 'other interests.' The assets were simply not reflected in the accounts and COPE estimates that SLIC should have been valued at Rs.15 billion. COPE is now waiting for the recommendations from the subcommittee.

Rajapakse surmises that civil society is lethargic and therefore, responsible for condoning and even encouraging mismanagement. The public elects representatives to perform a job according to rules and norms but adopts the attitude that if a politician'does something good, its okay for them to take 10 or 15%.' However, he pointed out that during the COPE proceedings and under intense scrutiny, some institutions were compelled to make changes. The CEB dissolved their Board and the CPC Chairman resigned. Despite these changes, what occurs most regularly when politicians are accused of corruption or malpractices is they cross over.

Rajapakse explained that after the COPE report was submitted to Parliament, they were in a state of confusion and did not know how to proceed. "They must find a solution," he said. "All members of Parliament are responsible with regard to public funds." The notion that solving fiscal problems is solely the responsibility of the ruling party is incorrect and misguided. Furthermore, he said the time when Ministry's Secretaries used to be intellectuals is long gone. Secretaries who are essentially chief accounting officers have become so ineffective that only a mere 10 – 15% actually know what they are doing. Most are unaware of their responsibilities laid out in the constitution.

Other countries have effective systems in place which get useful work and results from their politicians. In Sri Lanka, there are no proper methods for scrutinizing the financial control of the government. Take the budget for example. Rajapakse called it 'a bureaucratic budget, not a political one' where one month is wasted debating the budget in Parliament after it is approved. "There should be pre-budget debates, not debates after the fact," he said. Arguing and debating is an exercise is futility once the budget has been drawn up. Ideally, economic experts should meet with the Treasury Department and form a tentative budget to be debated on and thereafter, a final version should be prepared.

Levels of corruption which have been soaring in Sri Lanka can be decreased but will never be completely eliminated because it 'spreads like cancer.' Democracy is maintaining the rule of law which Sri Lanka is lacking. In the absence of democracy, dictators emerge. Rajapakse's main concern is the system because as he said, both parties, regardless of who is in power will continue to make the same mistakes. The key is to change the system through the introduction of reforms.

Furthermore, the weakened democratic system is the main cause of the ethnic conflict.

"When the rule of law is maintained, nobody is above the law and nobody is below the law." Problems will always arise when people feel they are victims of inequality.

Rajapakse said he has recommended that oversight committee hearings be made open to the media and even broadcast live as is done in so many other countries. He also recommends that ministers appear before Parliament and explain their actions.