Columns

The failure of the no confidence motion on the Prime Minister is a fresh opportunity to usher in political stability, strengthen the government’s capacity and efficacy and enhance economic development. Failure to achieve a policy consensus and common program for the next eighteen months would certainly be suicidal for the coalition partners and a severe setback to the economy at this critical juncture.

Common economic policy
Although the two main parties that formed the unity government in 2015 have very divergent views on economic policies, it is in their interests to arrive at a common economic program and implement it effectively. Without such a consensus on economic policies, the economy is unlikely to grow adequately, the problems of the economy would aggravate and cause severe hardships to the people. Economic sluggishness would reduce the country to one of the few backward countries of Asia.

Government’s weaknesses
Despite the boast of the coalition that for the first time in the country’s political history, the two main parties of the country had come together, there was no agreed agenda. The fundamental prerequisite of a coalition is an agreed policy program that is strictly adhered to. Most conspicuous was the lack of a consensual economic policy.

The unity government had the seeds of failure within it from its commencement especially in economic policy implementation as it did not have an agreed economic policy agenda. The first articulation of economic policy of the government by Prime Minister Ranil Wickramasinghe on November 5th 2015 proved to be his personal policy statement rather than one agreed by the government. No sooner it was announced members of the government openly opposed its policy agenda. To make it worse even the finance minister’s 2016 budget a few days later was in contradiction with the principles of the Prime Minister’s Economic Statement.

Admission
It is interesting that President Sirisena recently admitted that this lack of a common agenda was the cause of its failure. This realisation after half the government’s tenure was over is astonishing. Nevertheless the implication of this admission is that an agreed economic program even at this late stage is imperative. The need of the hour is a new alignment of MPs who can work together single mindedly on an agreed economic agenda. However irresponsible utterances and actions of ministers and government MPs do not lend much hope of such an agreed economic policy.

Alternative
In fact it appears that there would be a glimmer of hope if a new unity government is formed by the dominant party with support of responsible ministers of the other party with a manageable and effective cabinet of less than 30 ministers. The seriousness of the economic situation requires members of other political persuasions to support such an agreed economic agenda for the next one and a half years.

This is an unrealistic and vain expectation in the country’s political culture and milieu where the dominant motivations are to remain in power in whatever possible way and enjoy the bountiful benefits of office. Political survival rather than national interests are the dominating motivation of parliamentarians.

Weaknesses
The most fundamental weakness of the coalition was the lack of an agreed common program and a commitment to it. The two main constituent parties of the unity government had fundamental differences in economic policies. There was a need for compromise and consensus on economic policies as well as other aspects of governance. This blatant weakness was clear to the President only after the defeat of the no confidence motion when he admitted that the biggest flaw in the coalition was the lack of a common program.

What is of paramount importance for the future of the country and especially the economy is a policy consensus, especially on the economic program for the next eighteen months. Despite the President’s admission of this vital need the confused political context is not likely to ensure such a common economic agenda.
A second serious weakness that we pointed out in last week’s column, was the unwieldy large cabinet with economic areas bifurcated among several ministries that hampered implementation of a coherent policy. Complementing this weakness was the yoking together of unrelated ministries, as was the case of higher education and highways.

A third mistake was in the allocation of departments and enterprises in inappropriate ministries, for presumably political reasons. The classic instance was the removal of the Central Bank from being under the Finance Minister. This was utterly illogical and ill-conceived. It was perhaps the only country where the Central Bank which among its main functions is responsible for monetary policy, was not under the finance ministry. This has been now corrected, but the state banks that should also come under the purview of the finance ministry are now under the minister of public enterprises, the former minister of highways and higher education.
A new allocation of ministries is needed to resolve these irrationalities that hamper the economy’s efficiency. Readers could judge whether these improvements have been made in the new cabinet that is scheduled to be announced before the new year.

Collective responsibility
A cardinal principle of parliamentary democracy is collective responsibility. When a policy decision is arrived at by the cabinet, irrespective of whether a minister agreed or not with the decision made, the principle of collective responsibility of the cabinet is vital for effective governance. The lack of collective responsibility vitiated the implementation of economic policies vital for economic growth. There have been a series of instances when policies are proposed by one section of the government and disposed of by another.

Achievements
Nevertheless the unity government had some significant achievements. It restored law and order and the rule of law. It restored democracy and freedom to citizens. These are substantial and significant achievements for those who value freedom and individual rights. Their significance is captured by Amartya Sen in his phrase “Development as Freedom”.

Economic impact
Apart from these achievements for human development, they have a significant economic impact. They are incentives for investment, encourage foreign investment, provide a healthy environment for the development of tourism and international trading relations. In 2017 tourist arrivals increased and are expected to increase this year. Exports expanded owing to the reintroduction of GSP plus status by the EU. Unfortunately these achievements have had limited impact on people and the adverse weather conditions caused considerable hardships to the rural community and increased food prices.

Imperatives
A consensus on economic policy and an agreed 18 month economic implementation program are imperative. A leaner cabinet with a rational distribution of line ministries, adherence to the principle of collective responsibility of the cabinet and effective implementation of policies are undeniable imperatives for economic stability and growth.

A genuine unity in the new government formation is as much essential for the survival of the coalition partners as indeed for the economy. Will the new coalition seize this opportunity for economic reorganisation or will it be a missed opportunity with grave political and economic consequences?