Governance and prosperity

By Sunil Karunanayake
Our regular columnist on corporate and macro-economic issues assesses the importance of good governance in the development of the economies of poor countries.

The recent 50 percent price hike in railway fares, removal of VAT on Liquid Petroleum Gas and diesel and threats by certain road users against legislation to curb offences have given definite signals on the key issues of governance. Sri Lanka Railways has been pathetically deteriorating during the past few decades from the vantage positions of technical competency and discipline it held earlier.

Focus on revenue with little or no emphasis on eliminating wastage or reducing unproductive expenditure resulted in leading indirect taxes to a vicious circle of price hikes.

Though railway price hike is not welcome news every citizen will have a natural expectation of a better service. Today large numbers of workers who throng the city from the outstations are subject to absolute misery due to the poor railway services. Govenments over the years have failed to provide a good service through this convenient mode of transport. Poor productivity and high costs are a foregone conclusion in this scenario.

The railway is still resourceful and owns good workshops and warehousing facilities in key locations. Railway workers also showed their true potential by reconstructing the tsunami damaged track in record time A developed railway will take away much of the pressure from road transport which now accounts for the bulk of the human and cargo movement.

Interestingly a silent monument to this sad situation stands in the heart of Galle Road, Colombo 3 where one could see the dilapidated remains of the once proud possession of Shaw Wallace and Hedges, a leading agency house of the pre-land reform era. These buildings vested under government in the aftermath of the land reform euphoria today are a pathetic sight with its frontage being occupied by beggars making it an eyesore.

Another example is the former Carson’s office complex at Vauxhall Street, yet another plantation land mark now owned and occupied by the JEDB. Though not in the same state as the former this too reflects the poor governance which is today a major cause for most of country’s unresolved issues. Similarly, the Kompanna Vidiya railway station now renovated and cared for by a well-managed public quoted company reflects a complete transformation from the neglect it was in.

The executive (state), legislature and the judiciary form the pillars of the governance. Ever increasing cost of living, crisis in educational institutions, poor healthcare, rising unemployment, poverty are mostly the symptoms of the disease of bad governance which keeps certain countries poor for ever leading to unrest.

Many theories have been put forward to explain the difference between rich and poor countries. Some have argued that certain geographical factors decide this fate and this has been supported by explaining the fortunes or misfortunes of the countries around the equator, while another theory uses the efficiency of institutions which are characterized by guarantee of basic rights allowing individuals to take part in economic life, limiting actions of elites, politicians and other powerful groups to create and take advantage of uneven playing fields.

The arguments for governance as a principal factor determining the fortunes of a nation now seems to be gaining more ground. With the introduction of the “Concept of Corporate Governance” and the relevant disclosures in financial statements it is abundantly clear that companies with good governance policies are better managed and satisfy the stakeholder aspirations better.
Good governance is not a magic word.

It’s the sum product of its three main elements and a strong public sector is a necessity. Growth must come from private enterprise, which comprises every individual who could add value and not only the business units.

(The writer could be reached at -

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