Columns

• President’s much-awaited changes just quid pro quo between SLFP and UNP
• More changes among ministers, deputies and state ministers likely as Sirisena shows who the boss is
• Amid new flood catastrophe, public debt soars to more than Rs. 9,387 million; PM appoints economic experts to study the debt situation

By Our Political Editor

Exactly a week before last Monday’s Cabinet re-shuffle President Maithripala Sirisena told two United National Party (UNP) ministers rather assertively “people must know I am the President of Sri Lanka”. Even if he did not elaborate, the message was loud and clear — he makes the decisions.

The two ministers were emissaries of their party discussing matters related to the reshuffle. That naturally included a choice of names and positions. As revealed earlier, the duo also sought a delay in the proposed ministerial changes until Prime Minister Ranil Wickremesinghe returned from China. That request saw a meeting between the President and the Premier hours ahead of the latter’s departure to Beijing. Accord was reached. Sirisena called off his self-imposed ban on chairing Cabinet meetings until the reshuffle took place.

When Wickremesinghe returned from Beijing, the two leaders met again, at least on two occasions. This time it was over last-minute changes. Thus, the much anticipated reshuffle took place last Monday. In essence it was a quid pro quo between the Sri Lanka Freedom Party (SLFP) and the UNP and was therefore not a full-fledged reshuffle as earlier expected. This is notwithstanding the entire Cabinet, Deputy Ministers and State Ministers being summoned for the reshuffle at the Presidential Secretariat last Monday. The SLFP succeeded in having its bete noire — Finance Minister Ravi Karunanayake and Foreign Minister Mangala Samaraweera — removed by Sirisena from the portfolios they held.

Allegations against them, if any, have neither been revealed to the public nor formally investigated. Yet, in the past months it was known that there would be a swap of the two Ministries. Behind-the-scenes diplomacy has been underway to persuade at least one minister to agree to the shift on the grounds that it would be a “promotion.” Spearheading it was a UNP minister backed by a colleague. Not surprisingly, the two UNP ministers, sought additional subjects to be assigned to their ministries. This drew a rather strong response from a leading political figure who said, “This is not a buffet.” He was of course alluding to the fact that ministers can’t just go and help themselves to what they want and underscoring the fuller backdrop in which the changes have been made. President Sirisena, who returned to Sri Lanka from a two-day visit to Australia on Friday night, is yet to sign a Gazette proclamation assigning the subjects. He has told aides before departure to Canberra that he would make no additions but re-assign the same subjects that existed.

However, the likelihood of at least two additional institutions coming under the Foreign Minister was not ruled out yesterday.
Last afternoon Sirisena had a meeting with Prime Minister Ranil Wickremesinghe. It came ahead of a planned private visit by the latter to the United States. Also present were Ministers Kabir Hashim and Malik Samarawickrema.

President Maithripala Sirisena Swearing in new Foreign Minister Ravi Karunanayake and new Finance Minster Mangala Samaraweera during Monday’s Cabinet reshuffle.

Ahead of the reshuffle, Karunanayake who learnt he was being moved out as Finance Minister had a hurried meeting with Prime Minister Wickremesinghe. He is learnt to have asked the reasons for his ouster, why he was singled out and what the allegations against him were. He declined comment on the meeting but said yesterday, “I have supported the drive against corruption. I was doing my best.” The new Foreign Minister said despite the shift in portfolio, “no one can change my resolve to serve the people and my country. I will continue to do so without fear and with dedication.”

It was no easy task when it came for the UNP receiving its part of the quid pro quo. If the SLFPers sought the removal of the Finance and Foreign Ministers, the UNP in turn were seeking changes in two other portfolios – Ports and Shipping (Arjuna Ranatunga) and Petroleum Resources Development (Chandima Weerakkody). The UNP leadership was livid with Ranatunga for allegedly ‘placing stumbling blocks’ over the Hambantota Port project. Together with his brother Dhammika, Chairman of the Sri Lanka Ports Authority (SLPA), they have been challenging a string of cabinet memoranda submitted by Development Strategies and International Trade Minister Malik Samarawickrema and Special Assignments Minister Sarath Amunugama.

If the UNP ministers charged that they were placing obstacles to prevent the expeditious conclusion of the project, Ranatunga has insisted that issues were being “raised in the national interest since he was answerable to the nation.” That he had the backing of President Sirisena was clear. In fact, Sirisena has now put a total halt to the signing of the Concession Agreement with the Chinese firm China Merchants Port Holdings Company Limited (CM–Port), a legally binding document to take forward the project. He wants all the controversial issues that have surfaced so far, some of them not advantageous to Sri Lanka, to be resolved first. Hence, he picked on one of his trusted loyalists Mahinda Samarasinghe to be the new Minister of Ports and Shipping. As one senior SLFPer backing Sirisena declared, “He (Samarasinghe) is not a ‘yes’ man”. What he meant was that Samarasinghe will not be a mere rubber-stamp to the UNP-run administration. “He will heed the wishes of the President on any issue. He will not cross the line.” Thus, Sirisena took over a portfolio which had remained within the purview of the UNP and gave it to the SLFP. He acquiesced to the UNP, but also kept the Ministry within his tight grip. The UNP leadership did not object. A balancer appeared to be the inclusion of Tilak Marapana as Minister of Development Assignments.

The removal of Chandima Weerakkody as Minister of Petroleum Resources Development had been the talking point for many weeks now. He was an outspoken critic of any deal to develop the Trincomalee tank farm project with India. He wanted the Ceylon Petroleum Corporation to take over the oil tanks. His public utterances became a major irritant to the UNP leadership who wished to rope in India after the Hambantota Port project with China raised apprehensions in New Delhi. Weerakkody’s repeated public remarks also embarrassed the SLFP leadership, for there were periodic references to President Sirisena.

There is little doubt that the Hambantota Port project was mishandled with little or no input from the Foreign Ministry or other issues relating to national interests being weighed in. As revealed earlier, the firm to whom the award of the project is to be made was one of two companies recommended by the Chinese Ambassador in Sri Lanka. It was selected by the Cabinet Committee on Economic Management (CCEM). The Cabinet of Ministers later approved it together with a Framework Agreement. Thereafter, a Concession Agreement too was approved. However, in a change of mind, the matter was revisited and things have now been put on hold. It is amidst this process that Government leaders became alive to growing concerns in the Indian capital. The New Delhi Government was highly disturbed over the issue. For Sri Lanka, the issue was heightened by events of the past. Damage control became necessary. That was how a Memorandum of Understanding (MoU) with India was worked out to jointly make investments to develop the Trincomalee Port, establish a petroleum refinery and other industries there.

In the late 1970s, the state-owned Ceylon Petroleum Corporation (CPC) called for worldwide offers to develop the tank farm as a commercial venture. Multinational oil giants like Shell and Chevron did not respond. The nationalisation of the US oil giants operating then in Sri Lanka, Shell, Caltex and Mobiloil in the 1960s probably acted as a deterrent. An offer arrived from Coastal Corporation, a US firm that was actively trading in oil in Singapore. The CPC and the Coastal Corporation signed an agreement to develop the tank farm.

There were immediate protests from India. New Delhi was apprehensive of any US access to Trincomalee that would pose security threats to them at a time when the Cold War was at its height between the US and the former Soviet Union. The then Indian Foreign Secretary Romesh Bhandari was despatched to Colombo by late Premier Indira Gandhi as special envoy for a meeting with the late President J.R. Jayewardene. After discussions, Jayewardene was to direct that fresh offers be called.

A three-member Tender Board comprising G.V.P. Samarasinghe (then Cabinet Secretary), General Sepala Attygalle (Defence Secretary) and Daham Wimalasena, Chairman CPC once again recommended that Coastal Corporation be awarded the tank farm project. Amidst mounting Indian protests, Jayewardene sent Finance Minister Ronnie de Mel and Wimalasena to New Delhi. They met Premier Gandhi and the Indian Defence Minister Jagjivan Ram. However, an apprehensive New Delhi opposed any American presence in Trincomalee — a move that was to see the birth of a separatist insurgency in Sri Lanka with support from Ms Gandhi’s Government.

These issues notwithstanding, India has granted Sri Lanka a credit line of US$ 45.27 million for financing the rehabilitation of the Kankesanthurai Port in the northern Jaffna peninsula. The port which adjoins the Palaly military base and the Northern Area Navy headquarters was not operational until it was cleared after the military defeat of Tiger guerrillas in May 2009. The guerrillas bombed cargo and naval vessels inside the port blocking access to the quays. The rehabilitation will include dredging shallow areas while making provision for more ships to dock there.

Sirisena naming Arjuna Ranatunga as the new Minister of Petroleum Resources Development, it is clear, is much to the dislike of the UNP leadership. There were fears whether he would oppose the tank farm project much the same way he did with the Hambantota Port issue. However, SLFP ministers argued that he would not defy President Sirisena and would heed his wishes. Chandima Weerakkody has been placed in charge of the relatively unimportant Ministry of Skills Development and Vocational Training, hitherto held by Mahinda Samarasinghe.

The other ministerial changes appear marginal. S.B, Dissanayake, Social Empowerment and Welfare Minister has, in addition, been given Kandyan Heritage. He had confessed to friends, weeks earlier, that he was set to receive this additional subject. Labour and Trade Union Relations Minister John Seneviratne was given an additional subject – Sabaragamuwa Development. It is interesting to note that only some provinces have ministers in charge of development. They are Patali Champika Ranawaka (Western Province), S.B. Nawinna (Wayamba Development) and Sagala Ratnayake (Southern Development). All other provinces have not been placed in charge of ministers. Media Minister Gayantha Karunatilleke sought a change.

He is learnt to have been offered Public Administration but was not in favour. Hence, the subject of Lands was given to him, a portfolio that was garaged with his UNP colleague Tourism Minister John Amaratunga. He has now denied that he sought the subjects of the Government Printer and a few other institutions, that were under the Media Ministry, be brought under his new Lands Ministry.

Some of the Deputy Ministers and State Ministers were also expected to be shifted around last Monday. The only change was Fisheries Minister Mahinda Amaraweera being additionally made Minister of State for Mahaweli Development. However, Sirisena who spoke to Ministers, Deputies and State Ministers before the reshuffle said that within a week (after his return from Australia), there would also be a reshuffle of deputies and state ministers. He said that since 1994 he had experienced ministerial changes. There would be some who would be unhappy but such changes, he said, were necessary. Sirisena is also proposing to effect a reshuffle of Ministry Secretaries.

Whether the measures proposed by Sirisena would be delayed due to devastation caused by prevailing torrential rains remains a question. Flooding and landslides have caused more than a 100 deaths with dozens reported missing. It came in the aftermath of a prolonged drought. It was only weeks earlier the Government finalised a relief package to affected families with a two million US dollar assistance from the World Food Programme (WFP). It will go to 6,250 poorest and “most vulnerable households” in the districts of Moneragala, Kurunegala, Vavuniya and Mannar. The WFP had proposed cash assistance amounting to Rs 10,000 a month with the condition that those families should be headed by women. The assistance programme will be implemented by the Ministry of Social Empowerment and Welfare with the assistance of District Secretaries, Grama Niladharis and Samurdhi Officers among others.

The severe drought until last week and the heavy rains this week will no doubt cost the Government substantial amount of money both in terms of rehabilitation as well as compensation payments. This is at a time when the economic situation is worrying and concerns are rising over public debt.

After a lengthy discussion over the public debt situation at a meeting of the Cabinet Committe on Economic Matters (CCEM) Prime Minister Wickremesinghe who chaired the meeting, appointed a Committee to study and report on the debt situation, growth momentum, export-oriented economy and how to plan next year’s budget “to ensure value for money.” The Committee is chaired by Treasury Secretary R.H.S. Samaratunga, includes Central Bank Governor Indrajit Cumaraswamy, R, Paskaralingam, Advisor to the Ministry of National Policies and Economic Affairs (under the Prime Minister), Charitha Ratwatte, Advisor to the Prime Minister, Mangala Yapa from the Ministry of Development Strategies and International Trade and Sarath Rajapathirana, Economic Advisor to the President. At a meeting of the CCEM it was observed that Sri Lanka had to borrow extensively due to “the low domestic private savings, persistent budget deficits and persistent current account deficit in the balance of payments.” It was revealed that the Central Government debt had increased to Rs 9,387 billion in 2016. During that year, “the outstanding debt stock of the country comprised 57 percent of the domestic debt and 43 per cent of the foreign debt. Domestic debt consisted of short-term debt that accounted for 18 percent and medium to long term debt comprised the balance. The foreign debt stock of Sri Lanka consists of both loans obtained on concessional terms and non-concessional or commercial terms.

“In addition to direct borrowings of the Central Government, the funding requirement of the Government has also been met through a number of other sources in the recent past. By end 2016, debt raised by such corporations amounted to Rs 827 billion. It was reported that Sri Lanka’s high level of debt necessitates immediate fiscal adjustments to ensure a sustainable level of debt. Therefore, it was reported that enhancing revenue and increasing public expenditure efficiency by rationalising recurrent expenditure, while maintaining productive capital expenditure at a reasonable level, are crucial measures to be followed until a sustainable level of debt is reached.”

It is clear that the new Finance Minister, Mangala Samaraweera, would have to work closely with the CCEM in not only formulating the next (2018) budget, but also any other fiscal measures he may want to introduce. In doing so, he also will have to deal with public enterprises that are bleeding the country’s resources. One such venture is SriLankan Airlines, the national carrier.

In April, this year, the state owned banks – Bank of Ceylon and the People’s Bank – approved the issue Letters of Comfort for the tune of US$ 35 million on the grounds that it was until talks with the US-based TPG (Trans Pacific Group) for a Public-Private partnership is concluded. The company was then conducting a survey of all SriLankan Airlines assets. The TPG has since declared it was not interested in going ahead with the project. Now, the Government has made soundings to other airlines.

The Letters of Comfort from the two state banks are US$ 32.50 million for SriLankan Airlines and US$ 2.5 million for Mihinair, now owned by the former. Public Enterprise Development Minister Minister Kabir Hashim sought ministerial approval to obtain the Letters of Comfort so the airline could raise funds through another bank using the document as a guarantee. The Letters of Comfort valid for a year beginning May 1, 2017 Hashim told ministers, is until a final decision is made on the public-private partnership (PPP) and “financing from the shareholder is finalised.” The pull-out by TPG has now caused a serious uncertainty and raised worries over more funding from the Government becoming necessary to sustain the loss-making national carrier. He said that the Cabinet Committee on Economic Management (CCEM) also granted approval for a loan facility of US$ 65 million from the two state banks.

On its part, the SriLankan Airlines has suffered a loss of more than US$ 30.2 million from flights departing Colombo when the runway was under repairs. Similarly, the loss as a result of a curtailment of arrival flights, was more than US$ 18.5 million with the total loss being US$ 48.6 million. Enterprise Development Minister Hashim told ministers recently that SriLankan Airlines “continues to make losses as a result of having to absorb the interest cost on the current loans outstanding.” He has lamented that “the company does not have any other source of funding or an alternate method to manage its funding requirements.”

Besides economic woes, the Government is also preoccupied with political issues, particularly the formulation of a new Constitution. An SLFP subcommittee met last Monday to discuss the draft Steering Committee report. There is no change in the party’s position that the Executive Presidency should be retained particularly on the grounds that an abolition would inevitably require a national referendum. It was decided to further discuss all issues and formulate their response. The subcommittee meeting was followed on Monday night with a Central Committee session chaired by President Sirisena.

The Steering Committee itself was embroiled in a heated debate after members of the ‘Joint Opposition’ raised objections to the deletion of the word “unitary” when a reference is made to the State. “JO’ leader Dinesh Gunawardena said yesterday that the issue met with strong objections from some members prompting a debate for two consecutive days. Tamil National Alliance (TNA) leader Rajavarothayam Sampanthan insisted that there was no need to retain the word “unitary.” If the pro-Maithripala Sirisena SLFP member Dilan Perera concurred with the move, there was no comment from Minister Susil Premajayantha. However, SLFP sub-committee Chairman Nimal Siripala de Silva insisted that the word should remain.

The much-hyped Cabinet reshuffle, which is clearly a quid pro quo between the SLFP and the UNP, is now over. Highly placed sources within the Government claim that further changes are not ruled out. This is on the basis that some ministerial changes which President Sirisena sought from Prime Minister Ranil Wickremesinghe are yet to be made.

Sirisena has conceded in his speech after the reshuffle that disappointments were to be expected. That appears to be a mild understatement. All in all, the events that led to the reshuffle and last Monday’s event itself have drawn clear lines between the two principal partners in the Government — the SLFP and the UNP. How that will impact on ‘good governance’ in the weeks and months to come will remain a critical question. Thus, President Sirisena has one more burden to bear as he faces the many challenges, with some promises unfulfilled and others partially done.