The Pathfinder Presidential Manifesto

Setting a challenging standard-December 9, 2014

The Pathfinder Foundation has indeed done something commendable.
Before commenting further, I have to disclose an interest, that I had the
privilege of being associated with the institution many years ago at its
formative stage.

With that confession behind me, I must state that the Policy Agenda the
Pathfinder Foundation has placed before the public and political parties
through the pages of the Daily FT on 28 November is indeed a welcome
step towards forcing and challenging political parties to be realistic in the
preparation of their manifestos for the forthcoming presidential election.
Too often manifestos are a crappy mishmash of unaffordable lies. Pathfinder

has presented some vital issues which must be dealt with by any
responsible and serious candidate at the Presidential election.
While not boring readers with a repetition word for word, it would be
important to mention and critically comment upon some of the issues
raised by Pathfinder. The Manifesto opens with the statement that the idea
is to stimulate discussion. The document is devoid of dogma, focused on
practical, pragmatic and implementable reforms. The spirit inherent is one
of constructive engagement. The blueprint is one aimed at transforming a
low productivity agro based traditional economy into a modern one based
on higher productivity and higher technology and services in a global
environment.
Propitious circumstances
Pathfinder bases its ideas on an unprecedented set of propitious
circumstances available in our country just now, unavailable in the last half
century. We probably had an opportunity like this at independence in 1948,
which was frittered away by irresponsible petty power politics of language
and race bigotry. The present set of circumstances are: The annihilation of
the LTTE, the rise of India and China and Sri Lankas crucial positioning at
the crosshairs of that transformation, rapid globalisation with the focus on
Asia , which is destined to be the future power house of the global
economy, among others.

Macroeconomic fundamentals, biz climate

Pathfinder starts with macroeconomic fundamentals. A sustainable medium
term budgetary framework with sustainable debt dynamics to transform Sri
Lanka from a begging bowl nation, living on foreign aid and irresponsible
commercial borrowing , to one which has to face up to the discipline
imposed by rating agencies and the international capital markets.
Second improving the business climate. Statist policies have reached their
limit. Transparent, predictable, business-friendly policies must be reflected
in the manifesto. Deregulation is essential; over-regulation by an
overstaffed, bloated and underemployed public service should be done
away with. Statist adventures like military camouflage businesses
operating on taxpayer subsidies crowd-out private enterprise. A fast, cost
effective and efficient legal process unlike the present functional anarchy
which prevails in the Halls of Justice would be a sine qua non.
Bribery and corruption, rule of law
Elimination of bribery and corruption is another obvious step. Returning to
the Rule of Law rather than the present Rule by Law is basic. A foreign
policy regime which is not driven by alcohol-driven assault and battery but

based on pragmatic national interest in todays rapidly-evolving globalised

dynamic power structures would be vital.
On the factors of production, Pathfinder decries the State domination of the
land market. It is about time we had the courage to accept that land reform
was a disaster in terms of agricultural productivity. Land just was
transformed into a State monopoly like in the times of the ancient kings
and is unproductive. Government agencies, the Railways, the Postal
Department, the military and other Government agencies sit on prime land.
Labour, capital markets
On labour, the rigidities brought about by over-regulation in an environment
of an ageing work force, and issues relating to a low birth rate below
replacement level, with a high export of migratory labour, should be
recognised and addressed.
On the financial and capital markets, prudential and robust regulation on
good governance criteria must be improved, and things like pump and
dump rackets must be eliminated. Confidence of investors must be
restored if IPOs are to flourish. Pathfinder calls or the promotion of venture
capital and the encouragement to angel investors.
Exports, FDI, SMEs, microfinance
In the area of exports and Foreign Direct Investment, Pathfinder draws
attention to the small Sri Lanka domestic market which makes the
promotion of export markets essential. The success of the Indian FTA and
the potential of the one with China is another factor which Pathfinder draws
attention to. The fact that much will depend on what is covered by the
Negative List in the China FTA is not referred to.
The much-vaunted Maritime Silk Route and Sri Lankas strategic location is
referred to; the other side of this coin is that the String of Pearls naval
bases are a strategy which predated this, and that MSR may be just a
benign rebranding, is ignored.
Pathfinder also repeats the mantra of the SME miracle, without referring to
the drawback created by the lack of prudential regulation for micro finance
institutions, which are outside the banking, finance companies and
cooperative sector, resulting in a plethora of diverse Ponzi-type pyramid
schemes, robbing depositors of their hard-earned savings.
The cradle for SME is in the micro sector and it is a huge constraint that
there is a reluctance to regulate the microfinance industry which is said to

finance up to 80% of women who are involved in income generating

activities. It is these entrepreneurs who must be supported to graduate to
the SME level.

Agriculture and land

The large proportion of the population involved in agriculture, with low
productivity, notwithstanding subsidised water, guaranteed purchase price
and exemption from taxes and other support measures is highlighted by
Pathfinder.
Land consolidation is required to help agro industry to recover from the
deprivations of land reform and to re-establish a credible agro commerce
business. Land laws are a constraint and should be amended.
HR, education
The crisis in human resource development, which has resulted in the
process of education and training not producing skills which the labour
market requires, has to be addressed, according to Pathfinder.
Freedom in education far beyond free education, which was introduced in
the 1930s, is the need of the hour. This will give parents and students the
right to make value choices of their education options, instead of being
force-fed a State system. This includes the preschool, primary, secondary
and tertiary levels.
Apprenticeships are the most robust market-oriented method of providing
cutting-edge technical skills; the German Dual System should be more
robustly introduced throughout the sector.

Reform of SOEs, social protection

Pathfinder highlights the need for reform of SOEs as a priority. The strategy
of converting them into stock companies and listing them on the stock
market is one way of improving performance and increasing compliance.
The reform of a bloated public service and improving service delivery with
an autonomous, accountable management system is seen as a priority.
Pathfinder refers to the weaknesses in the existence social protection, the
need for better targeting with an exit strategy and concentrating on the
really poor and marginalised has to be emphasised. Emerging global trends
such as urbanisation, climate change which provide opportunities for the Sri
Lankan economy to latch on to and draw benefits from is also pointed out
by Pathfinder.
Analyse manifestos
It is indeed a timely intervention by Pathfinder to raise these issues which
should be an integral part of the manifestos of all presidential candidates.
But it would be a pity if the process stops at this. Next steps would be to
analyse the respective manifestos based on this criteria and see whether
the issues which Pathfinder says faces the country are being addressed. It is
only then that the voters will be able to take a long hard look into the reality
of election promises put forward by the candidates.
Further, the spending proposals for taxpayers money in the manifestos
must be compared with the present reality on State revenue and debts of
the Government and so called private (but State-controlled) banks which
borrow internationally and lend to Government entities, also factoring in
any new revenue proposals in the manifesto. This might be a futile exercise
as manifestos rarely contain revenue proposals; they only refer to spending
largesse!
But the reality that the numbers dont add up should be highlighted. The
proposal is that the Pathfinder manifesto should be used as a benchmark to
evaluate the presidential election manifestos. This is logical next step.
Further, where Constitutional reforms are concerned, the Report of the
Committee on the National Question commissioned by the Government in
2006 and subsequently abandoned should be used as criteria in order
review the viability of the proposals.
The proposals by the Ceylon Chamber of Commerce submitted to this
Committee would be of special importance for the promotion of business

and job creation. Pathfinder should get together with civil society
institutions like the OPA and the Ceylon Chamber of Commerce and media
institutions like the Daily FT and commission experts to comment on the
presidential election manifestos compared with the proposals in the
Pathfinder Manifesto and other available benchmark documents. This would
enable the voting public to have educated analysis of the proposals and
provide a reality check.
Good governance
Sri Lanka is at a stage of its development at which good governance in a
liberal democratic environment is fundamental. It is important that the
presidential election manifestos are analysed from this aspect, whether
whatever is proposed will result in good governance in a liberal democracy.
Lets examine the fundamental requirements for an accountable, liberal,
democratic system of government. Strange as it may seem, the most
fundamental factor which is required to ensure a democratic system is two
sets of restraints: One restraint, among the people, and the other, between
the people and the state.
These restraints rest on four basic features, all essential.
Capacity to tolerate dissent
First of all, a democracy needs citizens who have the capacity to tolerate
dissent. Dissent, that is, which operates within the law. There must be
space for what has been described as a loyal opposition. Loyalty of the
citizen to the democratic political process must override their loyalty to
their own particular political point of view. Citizens must accept the
legitimacy of a government run by and even for their opponents. They must
have the confidence that they, who oppose, the present administration, will
in time have their own turn in government. While the legitimacy of dissent
is accepted, the use of force must be ruled out.
Democracies need guardians
Secondly, democracies need guardians. Those who hold positions of
political, bureaucratic, judicial or military and police power, must act within
the law, recognising the need to comply with constitutional limitations
placed on their behaviour and that the citizens have the right to challenge
excesses or abuse of power, through recourse to an independent judiciary.
The role of an independent media to draw attention and communicate such
abusive behaviour is also essential.

The guardians are different, from those who are referred to as bandits, in
that the guardians use their powers not for their own material or political
advantage, but act according to law, observing the legal limitations on their
authority, and act in favour of a nation of the benefit of the nation as a
whole and not in a partisan manner.
One may, perhaps, contra distinguish a statesman from a mere politician
in this context. Unfortunately, throughout the history of mankind, power
and wealth have been conjoined! The idea that the two should be separate
is a relatively new and revolutionary concept, not yet totally and universally
accepted.
Concepts of constitutional law such as the Rule of Law and the Separation
of Powers, and the Independence of the Judiciary and Fundamental Human
Rights and Freedoms, have all evolved in the context of empowering and
institutionalising, this separation of power from pecuniary wealth.
Fundamentally, the loot, shoot and scoot tendency in undemocratic
regimes is the very antithesis of this concept of guardianship.
Properly-functioning markets and state
Thirdly, democracies need properly-functioning markets, supported by a
well-functioning state. By a functioning market, analysts definitely do not
mean, the abuse of power by the state to turn ordinary citizens assets into
a ruling classes private wealth. So-called entrepreneurs who build their
fortunes on such blatant theft are no more legitimate than the politicians
who connive with them.
Properly functioning markets support prosperity. A social system which is
able to ensure a decent and reasonably secure standard of living is also
most likely to ensure a stable society. This enables citizens to place trust in
the rational economic behaviour of their fellow citizens and in a stable and
predictable economic future.
Most importantly, effectively functioning markets loosen the connection
between financial prosperity and political power. Effectively functioning
markets make it possible for people to regard the outcomes of elections as
important, but most importantly, not as a matter of life and death either for
themselves or for their families. This lowers the temperature of politics to a
bearable level, rather than to one of basic survival.
A commonly-accepted legal regime
Fourthly, democracies need a commonly-accepted legal regime; most

importantly, constitutional laws and conventions. Such laws enacted and

implemented in accordance with accepted procedures shapes the rules of
political, social and economic activities within the state.
A country that lacks the Rule of Law is permanently on the verge of
anarchy, chaos or tyranny. As succinctly stated by Lord Bingham, former
Lord Chief Justice of England, described as the greatest English Judge since
World War II, the Rule of Law implies that All persons and authorities within
the state, whether public or private, should be bound by and entitled to the
benefit of laws publicly made, taking effect (generally) in the future and
publicly administered in the courts.
Survival of a democratic system
The four principles enunciated above, should make it abundantly clear that
being a democracy is more than just being an electocracy, each adult, one
vote, periodically! Or even: One person impersonates an adult, by a rigged
vote, on a regular basis!
The survival of a democratic system requires and entails a complex web of
rights, obligations, powers and most importantly constraints. Basically a
democracy is the political expression of free individuals acting in concert,
otherwise it simply cannot exist.
Fundamentally, those who have won an election do not have the right to do
as they please. That is not democracy, but merely an electocracy, an
elected dictatorship! Without the four fundamental requirements of true
citizens, honest guardians, functioning markets and just laws there cannot
exist a liberal democratic system of governance.
Such a rules-based liberal democratic system is a bulwark against corrupt,
abusive and autocratic governments. Liberal democracies are on average
richer than non-democracies. They are less likely to go to war and have a
better record for fighting corruption. More fundamentally, a liberal
democratic environment gives citizens the space to speak their minds
freely and shape their own and their childrens futures.
Decline in democracy
In the second half of the 20th century, principles of liberal democracy have
taken root in some very challenging political and social environments
post-Nazi Germany; post-colonial India, which had the worlds largest
population of poor people; and post apartheid South Africa.
The process of decolonisation created a host of new democracies in Asia

and Africa. In countries such as Greece, Spain, Argentina, Brazil and Chile,
autocratic regimes were replaced. By the year 2000, Freedom House, a
think tank, classified 120 countries as democracies. But in the 21st century
although more people than ever before, estimated to be 40% of the worlds
population, live in countries which will hold free and fair elections,
democracys global advance has come to a halt and may even have gone
into reverse.
Freedom House estimates that 2013 was the eighth consecutive year in
which global freedom declined. Many nominal democracies have slipped
towards autocracy, maintaining the outward appearance of democracy
through elections, the veneer of an electocracy, but devoid of the rights,
restraints, institutions and laws that have shown to be an equally important
aspect of a functioning liberal democratic system.
A welcome start
The Pathfinder Election Manifesto is a timely and welcome start of a
process, but only the first initial step. The challenge will come when the
presidential candidates manifestos are published and they have to be
critically analysed on the basis of the Pathfinder Manifesto and other
benchmark documents to consider whether they will usher in a liberal
democratic system which will ensure good governance.
Without that step, publishing a set of proposals alone, while, as said, is an
important first step, would be, at the end of the day, an exercise in futility.
(The writer is a lawyer, who has over 30 years of experience as a CEO in
both State and private sectors. He retired from the office of Secretary,
Ministry of Finance and currently is the Managing Director of the Sri Lanka
Business Development Centre.)
Posted by Thavam