“MML theory” and doing business
View(s):
Tourists travelling in the bullock cart. Sri Lanka needs to fast track projects that benefit tourism.
After sitting for an Interview Board in the morning hours at the Sabaragamuwa University, it was tiring and boring to drive back to Colombo the same day. I had already spent about five hours in the early morning to go there. Road was good, but curvy with lots of bends along the upward slope.
Apart from that the signs of landslides due to heavy rains during the past few weeks were clearly visible all the way by the roadside. I thought that such frequent landslides in Sri Lanka – some are with a cost to human lives and heavy damage, may not be a universal phenomenon in this modern world. I am sure that many countries adopt better physical planning and modern technological standards to avoid or mitigate the possibilities for such disasters.
In some places, there were boards with landslide warnings issued by the government agencies. After issuing such warnings, it looks as if the government has fulfilled its obligations and was released from the responsibilities; it can tell the people that warnings have been issued well in advance! But the question is that, after receiving the warnings what can the people do or what does the government expect them to do? To me such notices with landslide warnings imply the government’s failure rather than any achievement.
Uplifting from poverty
Instead of descending towards Ratnapura, I drove up in the Bandarawela direction. Since I didn’t have any scheduled work for the next day, I had already decided to stay there tonight and leave for Colombo tomorrow. My lodging place was a beautiful boutique hotel located on a mountain cliff, where I met “Deva” – the owner of the hotel.
The view of misty mountains and deep valleys from the hotel was stunning. As I was told, on days with clear sky one could see from the hotel as far as Hambantota, the southern boundary of the country. At the dinner table I had the opportunity to have a long chat with Deva particularly about his ambitious new tourism project in the Uva province.
Deva has selected a particular location in the Uva province for his new project not only because of its landscape, cool climate and scenic beauty, but also because of its highest poverty level compared to the rest of the country. It’s a massive project stretching over a 500-acre land with a large tourist hotel complex and big farms with agriculture production and dairy industry. The project can uplift thousands of families from poverty.
Along with a foreign partnership, he has already spent money in acquiring the land. According to his project planning, the investment has the capacity to generate about 15,000 job opportunities in the region and to create new supply chain networks for new economic activities and income opportunities in the area.
MML theory
Alas; in spite of all these ambitious plans, he has been struggling for over 12 years just to get his project off the ground! After spending millions, it is still on hold without reaching even the “starting” point of the business.
I expressed my surprise: “12 years! Unbelievable!”
He said: “Yes, 12 years; will there be any investor on this earth waiting for 12 years to start a business? If the investors cannot get their job done within a couple of weeks or months, they would leave to some other country; there are enough countries in the world to welcome them and facilitate their investment projects.”
“Because I am a Sri Lankan and living here, I am still waiting for this project to materialise in my home country.”
He unveiled his story: “It was about three years after the end of the war, that we started working on the project. As it is a temple land under the historical land tenure system, we had to deal with not only the politicians and bureaucrats, but also the religious and shrine leaders as well as the communities residing on the land and performing temple and shrine services. Though it was a complicated matter, we are done with all agreements.”
“What do I get?”
I reminded him of the point I was curious about: “So, you still didn’t say why you couldn’t start the project for 12 years, even after reaching the agreements”.
He replied: “It’s because of MML; whatever you do in this country, you must be subservient to MML theory.”
Then, I interrupted him: “What’s MML?”
He replied: “Mata Monawada Lebenne” or in English, “what do I get?”
It’s all about endless bribes and commissions from top to bottom, left to right, and front to back, at every level. It’s a 600-million-dollar project so one can imagine the massive amount of bribes or commissions that you must deal with.
Whatever you call – whether bribe or commission, it begins with 10 per cent of the investment at the outset; it means already you must have allocated 60 million dollars on the top of everything. Then, below that level, you have all national, provincial and local politicians, bureaucrats, religious and shrine leaders, community leaders; you name anybody, and everybody is a “stakeholder” and wants their MML share.
It took 12 years for us to go through all this process, but we still are far from being there at the end of the tunnel clearing our path to start the actual business. For the policy makers and other stakeholders, it is not about how much investment in dollars we bring to the country or how many jobs we create for people in this poor area; it’s all about “what do I get?”
Starting business
Among all the 12 areas covering the composite index of ease of doing business, “starting a business” is the only area in which Sri Lanka has performed well. This looks like misleading information, if we examine it through the case study of the above story. Anyway, “starting a business” is a fairly easy area to score so that three-fourth of the countries listed under the doing business index score well above 80 percent for this indicator.
In fact, starting a business in Sri Lanka too may not be a big issue, unless the investor is caught up in complicated land issues or unless he is willing to be submissive to all ‘underhand’ dealings emanating from regulatory complications. We need to understand that the investors who didn’t want to accept the requirement for ‘underhand’ dealings, did not remain here to be recorded in surveys, as they all must have left the country.
The complicated regulatory framework that applies to all areas of doing business opens the door for bribery and corruption so that there is a choice for policy makers: One of the options available is that they can simplify and rationalise the complicated regulatory mechanisms in order to promote investment, but at the expense of losing the opportunities for bribery and corruption. If not, the other option is to protect the opportunities for bribery and corruption, also by protecting the complicated regulatory mechanism and lengthy bureaucratic procedures.
Widespread corruption in the country which exists at all levels has hindered investment expansion not in the past and the present, but also for the future blocking the country’s economic recovery and progress; how unfortunate is it?
Independent flows
For a genuine evaluation of the prevailing business environment of the country, it is necessary to examine “independent” investment flows, and not those “negotiated” investment projects that we have secured. Independent investment flows entirely depend on the quality of our bureaucracy and the regulatory framework, and not on the negotiated initiatives.
We are in the process of adopting a new Anti-Corruption Act, while struggling to meet IMF conditionalities on corruption. It’s good, but I wonder if the country hadn’t any laws so far in order to deal with bribery and corruption as well as to enforce rule of law. And, one could also raise the question that, if the country has a poor record of implementing laws, would there be a difference in the future after passing new laws.
(The writer is a former Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).
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