Situation Report

Strong indications that the Government is introducing tighter controls in the country's defence and security establishment emerged this week. The first is through Emergency Regulations promulgated by President Mahinda Rajapaksa on July 30 this year. At first it was thought to be one that was intended to deal with Sri Lankans who are aiding and abetting the Liberation Tigers of Tamil Eelam (LTTE) in the procurement of military hardware. Some of their identities had surfaced during investigations by law enforcement agencies in different countries. They include United States, France, Italy, Thailand and Kampuchea. These aspects were reported in The Sunday Times (Situation Report) of August 5, 2007.

It has now come to light that there is greater and more significant meaning to these Emergency Regulations (Restriction on the Procurement of certain Items) Regulations No: 5 of 2007. It was explained in Parliament on Tuesday by Basil Rajapaksa, Senior Advisor and brother of President Mahinda Rajapaksa.

Delivering his maiden speech during the debate on the extension of the State of Emergency, he said, "with a view to excluding intermediaries in arms purchases and to get maximum financial benefit by that effort, we have established a company called 'Lanka Logistics and Technology Limited.' This has resulted in getting financial benefits as well as the facility of preserving information regarding war within the establishment. At the same time, we have been able to establish a long term supply routes (sic) as well."

He added: "This has not been limited to words, but action has been taken to promulgate Emergency Regulations in this regard. We have gazetted a special regulation excluding the possibility of intervention by citizens of Sri Lanka in arms purchases to the Security Forces. We expect to legislate it in the near future. All the arms to be purchased are listed in this. Accordingly no citizen or company in this country would be able to intervene as an intermediary in arms purchases. These Emergency laws will prohibit such intervention. Therefore, these regulations would prevent such action even in the future."

Parliamentarian Basil Rajapaksa has made an important policy announcement on behalf of the Government. That is in clarifying the real aim of the new regulations. If not more, it is as good as coming from the Prime Minister, Ratnasiri Wickremanayake, who as Deputy Minister of Defence, is answerable to the House on defence and security related matters.

This clearly means the Government will hold the monopoly over the procurement of all military hardware for the Security Forces and the Police. Thus, the private sector has been debarred from dealing with the Government on any of the military items listed in the regulations. Thus, they will not be able to function as local agents for principals abroad and negotiate with the procurement units of the Armed Forces or the Police.

The sole monopoly for the procurement of military hardware has thus come solely under the State owned Lanka Logistics and Technologies Limited. In the light of the interpretation given by Mr. Rajapaksa in Parliament to the July 30 Emergency Regulations, it would be pertinent to show below the "LIST OF PROHIBITED ITEMS AND EQUIPMENT." The Gazette notification says that Accessories (Both Commercial and Military) cover (1) All types of Military Switches (those used for booby traps, IEDs), and (2) ISF Electric and ISF Percussion Igniter Switches. They are listed as follows in three different categories:

All type of Weapon Systems/ Weapons/ Ammunition 81 MM Mortar, 82 MM Mortar, 60 MM Mortar, 40 MM Rocket Propelled Grenades, 40 MM Grenade Launchers, All Types of Machine Guns, All Types of Automatic Rifles, Pistol, All Types of Firearms, All Types of Artillery, Naval and Air Defence Guns, Anti-aircraft guns and accessories, All Types of Missiles/Rockets, All Type of Grenades, All Types of Armoured Vehicles, Naval Ships and Military Aircraft.

All types of Radar and Radar Spares, All Types of Parachutes, Night Vision Devices and Beta Lights.

Miscellaneous Items and Spares

Armoured Vehicle Spares, Submerged Vehicles or under water vehicles, Explosive Detection Equipment, Digital Jamming Devices, Infra-red Illuminators, GPS Equipment inclusive of Aviation GPS, Laser Designators, Laser Range Finders (Subject to Ministry of Defence approval), Radar Range Finders (Subject to Ministry of Defence approval) and Thermal Image Devices (Subject to Ministry of Defence approval)."

The new Regulations will force out of business private sector enterprises who have both been acting as agents for the above items manufactured or marketed by foreign suppliers. Most of them have been in the trade since the separatist war intensified in 1983. In the past years some such companies have obtained assistance of military personnel, officials and politicians to make gigantic profits.

If the methods they used were clearly unethical, their functions as business entities were not illegal. Now, they will no longer be able to negotiate with the Armed Forces or the Police. Thus, the companies that are duly registered as suppliers with the Ministry of Defence may become ineffective if they have already not. So will such registration procedures. That is not all. If the companies try to engage in any business, they will be violating the law. Any person who contravenes the provisions of the Regulations shall be guilty of an offence.

The Regulation states: "Any person who has committed an offence under these regulations shall on conviction after trial by the High Court of Sri Lanka holden in Colombo or the High Court established under Article 154P of the Constitution for the Western Province, holden in Colombo, be liable to rigorous imprisonment for a term not less than three months and not exceeding five years and to a fine of not less than five hundred thousand rupees."

Here are the other provisions of the Regulations:

" From and after the coming into force of these regulations, no person who being a Sri Lankan National, whether resident within or outside Sri Lanka shall, procure, or cause to be procured, aid or abet the procurement of, or provide financial assistance for the procurement of, military equipment, which equipment amounts to prohibited Items. A list of prohibited items is contained in the Schedule to these regulations.

Provided, however, the Secretary to the Ministry of the Minister in charge of the subject of Defence may in exceptional circumstances enlarge the list contained in the Schedule hereto if it appears to him that it is necessary to do so in the interest of national security, the preservation of public order and the maintenance of supplies and services essential for the life of the community.

Provided further, the Secretary to the Ministry of the Minister in charge of the subject of Defence may in exceptional circumstances in the interest of national security, prohibited (sic) items which in his opinion are similar to, or resemble very closely, in its appearance, operation or effect, any of the items specified in this Schedule to these regulations.

Taking over the monopoly role in procurements will be Lanka Logistics and Techonologies Limited, a wholly state owned limited liability company. The Cabinet on April 20 last year approved the incorporation of this company as a legal entity under the Companies Act. The new company came into being on July 27, 2006, with its primary objective being described as "the procurement of goods and services inclusive of research and development and allied activity."

Defence Secreratary Gotabhaya Rajapaksa is the prime mover for the formation of this state owned enterprise. Both he and Treasury secretary P.B. Jayasundera, in their official capacity, hold 100 shares each. The authorized share capital of the company of one million rupees is divided into 100,000 shares of ten rupees each. The three Armed Forces Commanders and the Inspector General of Police hold one share each.

In a memorandum to the Cabinet on the setting up of this company President Rajapaksa, as Minister of Defence, declared that its primary objective is to "procure equipment and services to the Army, Navy, Air Force and Police and any other State institutions from time to time in terms of the policy guidelines, regulations and other direction as stipulated by the Government with regard to procurement such as guidelines on tender procedures."

A detailed critical appreciation of the merits and demerits, may earn me more dubious accolades like "traitor" or a "terrorist acolyte." Yet, some of the ramifications have to be explained in the national interest. Firstly, there is some variance in the objectives of the Emergency Regulations of July 30 and the primary objective spelt out to the Cabinet. The former will invalidate tender procedures in military procurements for two reasons - there will be a State monopoly on procurements and secondly the private sector is debarred from doing any business. Thus, it becomes the sole responsibility of Lanka Logistics and Technologies Ltd.

The procedures that Lanka Logistics and Technologies Limited will follow are not publicly known. Undoubtedly, it would want to, as a state enterprise, strike deals on a Government-to-Government basis. But there are markets in which such transactions will not be possible. Though not a regular supplier, one such area is the United States from where there will be competitive offers from different sources. This is if any procurement is to be made from that country. Of course, such procurements may be affected if US President George W. Bush signs into law the Appropriation Bill for 2008 passed by the Senate and the House of Representatives. An amendment to this by Senator Patrick Leahy sought a ban on all forms of military assistance to Sri Lanka. Even in the case of the People's Republic of China, one of the regular suppliers of military hardware such a situation could arise if there is more than one contending state agency involved. It is thus clear that decisions on the best supplier would lie entirely in the hands of Lanka Logistics and Technologies Ltd. In other words the final say will remain in the realm of a select handful in the state owned company. This is against the previous procedure of procurement through tenders. It has already been publicized that Sri Lanka diplomatic missions abroad would be involved in assisting the state owned company. Hence, selections would thus be an exclusive process within the Government owned company itself.

Since the advent of the separatist war, military procurements have largely been through the tender process. Suppliers, including agents of foreign principals were required to register with the Ministry of Defence. Exceptions to this rule came in the run up to the string of military offensives code named "Operation Riviresa" in 1995 to seize control of the Jaffna peninsula from the Tiger guerrillas. Tender procedures were waived and Armed Forces commanders were allowed to make "crisis purchases" of military needs to facilitate the Jaffna offensive. This was done to overcome the time taken for tender procedures to be executed thus delaying military offensives. The move gave rise to widespread allegations of corruption where some of the equipment purchased at high cost was obsolete and ineffective.

According to Basil Rajapaksa, the sole monopoly of military procurements by Lanka Logistics Limited would have the "facility of preserving information regarding the war within the establishment." No doubt the remarks are well meant. But the question remains whether a high degree of secrecy over procurements could be maintained simply because all procurements become a state monopoly.

Under the hitherto existent process of tenders for military procurements rival suppliers were always equipped with information over each other's activities. They include details of the bids made by each other, the prices, specifications etc. Quite clearly such information is obtained by them from sources within the establishment though I need hardly deal with the modus operandi used. That is how on occasions unsuccessful bidders approach the media with all the official information to complain they are left out despite all their qualifications. Thus they make out, sometimes convincingly, how payment of fat commissions to influential parties within the system has edged them out.

There is also another aspect which the Government will find difficult to control. There are local agents for foreign manufacturers of military hardware and those marketing them. Such agents function discreetly but effectively. This is by providing commercial intelligence to their foreign principals on the key players who should be approached on a particular deal and how the rivals are making their bid. With little effort there are instances where individuals and even companies that have made enormous profits through this course of action. The only assets they need are the right contacts. But those in favour of Lanka Logistics and Technologies could argue they will take measures to prevent even the most discreet middleman from getting involved in military deals. It remains to be seen how the system will work.

Another area where tighter controls are being enforced relates to the media. It was only this week the Director General of the Media Centre for National Security (MCNS), Lakshman Hulugalle declared that anyone critical of the military is a "traitor to the nation as such people undermine the lives of armed forces personnel." On the opposite page our Political Editor deals with this aspect. In this backdrop, there is increasing evidence that measures to curb the media from receiving information from the military are being adopted. The idea is to make the MCNS the only source and ensure media reports are based on information provided by it.

On October 4, Major General Upali Edirisinghe, Director General - General Staff (DGGS) at Army Headquarters sent out a directive to all their establishments. Signed on his behalf by Lt. Col. R.G.U. Rajapaksa, it was titled "Discussing/Divulging military related information with retired service personnel/media." This is what the directive says:

"Reference: Intimations pertaining to the issue circulated earlier. Irrespective of constant reminders and re-iterations it is revealed/brought to the notice that serving military personnel are yet of the habit of discussing/divulging military related information with retired service personnel/media which is being capitalised by the enemy as well as people with vested interest to counter/undermine the determined efforts by the military and the successes achieved.

"In certain instances serving officers have discussed issues of high military sensitivity with retired service personnel which has found its way to media which has resulted with negative impact to the ongoing operations. In this context it is re-iterated once again that all military personnel be appraised and made aware to restrain themselves from involving in such acts which are detrimental to the service as well as troops in the field who are constantly faced with lives threat (sic) from the enemy.

"Further all commanders are to speak to all officers under their command to explain the negative aspects iterating the need not to engage in loose talk/discussing military related issues at all times including the retired service personnel. "If any approach is made by any media personnel/institution for clarifications, verifications, updates of what is happening in the field such should be compulsorily channeled to the Director Media for response.

"All addresses are to confirm after initiating action listed to appraise the officers. Please acknowledge receipt." Needless to say this new directive casts serious aspersions on all retired officers of the Army, some of them clean, honourable, distinguished officers who have always upheld noble military traditions. In one clean sweep suspicions are cast on all retired officers and their integrity is brought into question when serving officers are asked not to speak with them on matters military. Is it not an insult to them? There are numerous instances where serving officers, particularly those at the middle level, seek the help of retired senior officers for presentations, when attending seminars and for formulation of various reports. To obtain such assistance, the serving officers need to inevitably brief them on the issues in question.

Does that mean all retired officers rush to the media or speak to others in such a way it reaches the enemy? If in fact the worry of Army Headquarters was that a particular officer had divulged sensitive information to a retired colleague, it would have been prudent to deal with those concerned. Stern disciplinary action could have been taken. Asking serving officers not to discuss matters military with retired colleagues may suggest that all are suspect. Is this not an exercise in futility? How could serving officers thus expect any co-operation from those retired? Are they deemed to be suspect soon after they shed their uniform? The fact that the intelligence of retired officers is being insulted by this move shows the gross lack of professionalism in dealing with this aspect.

It is clear from these new developments that a concerted effort is being made to keep all news related to defence and security related matters "within the establishment" and let only the Media Centre for National Security (MCNS) speak. Whether it would widen further the credibility gap of the Government remains the critical question. Quite clearly a process of isolation has begun. It began with the media and has now extended to the retired officers. What next?

State company gets monopoly over arms deals