To Ruin Or Rule The State: Bi-Partisan Corruption, Development “Aid” & The Bailout Business
By Dilini Kalupahana –December 6 2017 
Ranil Wickremesinghe seems ‘resolved to ruin or to rule the State’. Rather than ‘Zero Tolerance for Corruption’ after regime change in 2015, the Good Governance regime is knee-deep in corruption rackets with a network of business cronies that operate a revolving door – from politics to business andvice versa. Instead of investigating off-shore money trails and apprehending the looters of the wealth of the Sri Lankan nation to pay down some of the staggering national debt, a political culture of profligacy, immunity, and immunity for financial crime by politicians and their business networks have been systematically promoted and institutionalized in the name of “Parliamentary Privileges”. Good Governance politicians are routinely bribed with Duty Free car permits in the name of coalition-politics, while corruption investigations into cases of the previous Rajapaksa regime that was defeated due to cronyism and rent-seeking, or those named in Panama Papers leaks who ‘pumped and dumped’ at the Colombo stock market, are stalled or dead in the water.
Since war ended in 2009 Lanka’s Debt burden has risen exponentially and the people have been denied a peace dividend due to bi-partisan Political Corruption (UNP and SLFP), and ironically ‘Foreign Aid’ funded Development projects, which primarily advance the strategic security and business interests of big bi-lateral “aid donors’ – China, India, United States and Japan. The Chinese Hambantota white Elephant infrastructure projects, such as port, airport, stadium and convention center are just the tip of the ice berg of what Development Economists term aid induced “Dutch Disease”, of which more will be said later. The aid induced debt trap has not however, diminished Lankan politicians’ enormous appetite for bi-lateral loans packaged as ‘aid’ and expensive international technical “experts” who often provide dubious economic analysis, diagnostics, and euphemisms to explain debt in the global south; Asia and Africa.
“Policy instability”, a phrase frequently used to explain low foreign investment (FDI) economic growth in Sri Lanka, and the growing debt trap is a euphemism that explains nothing, really. At this time, the root cause of Lanka’s debt crisis, policy instability and failure to attract Foreign Investment (FDI) to generate economic growth despite its strategic location on the busiest Trade route in Asia-rising, is high-level financial Corruption and reputation damage to the financial sector and economy, including lack of transparency and a level playing field for investors, foreign and local. Again the Bond Scam at Central Bank is the tip of the ice berg.
Bi-partisan Corruption
Bi-partisan UNP-SLFP/JO Corruption is at the root of many of the political, economic and social ills in the country at this time, including lack of a peace dividend, widening economic inequality and a growing urban-rural divide; just go to the Galle Face Lux Condo- Shangri-La strip and then a village in the northeast and feel the difference. Decent jobs, a living wage, absence of meritocracy and inclusion are collateral damage of a political culture of bi-partisan corruption networks and money politics. However, the economic diagnostics and policy documents prepared by various international developments consultants and the Millennium Challenge Corporation (MCC) that is writing economic and trade policy for the Prime Minister’s office, including the Vision 2025 and the Budget 2017 that waxes eloquent about blue-green development fails to mention political corruption and rent seeking – the elephant in the room -as the root cause for lack of FDI and growth in the real economy.
As Sri Lanka wallows in debt caused primarily by bi-partisan corruption and poor financial governance by the two dominant political parties, the UNP and SLFP (including Joint Opposition), UNP thieves appear to be protecting SLFP thieves, while all parties try not to embarrass their respective foreign aid donors. Hence, the National Audit Bill which would help to recover funds skimmed from various development projects and stored in off shore accounts by UNP and SLFP politicians and their crony networks, in order to pay down some of the national debt has not been passed 3 years after the Good Governance regime came to power. Rather taxes on the common people have been increased on the behest of IMF.
White Elephant Infrastructure and Fake Development ‘Aid for Trade’
Former head of the Reserve Bank of India Raghuram G. Rajan and Arvind Subramanian, both respected economists, have argued in a widely read paper that; “one of the most important and intriguing puzzles in economics is, why it is so hard to find a robust effect of aid on the long-term growth of poor countries, even those with good policies” (2006). They suggested that aid inflows have systematic adverse effects on a country’s competitiveness, as reflected in the lower relative growth rate of labor intensive and exporting industries, as well as a lower growth rate of the manufacturing sector as a whole. They provided evidence suggesting that the channel for these effects is a real exchange rate overvaluation caused by aid inflow.
But one of the more insidious aspects of aid induced Dutch Disease is indexed in increase in aid-related corruption, rent-seeking, and lack of economic development policy ownership by ‘aid’-dependent countries that results in building of white elephant infrastructure such as in Hambantota, and development disasters such as the Uma Oya project, that fail to meet local people’s development needs and priorities in an environmentally sustainable manner. This is primarily due to marginalization of local and national expertise, and lack of transparency, accountability by aid donors to local civil society in the development aid enterprise.
