Arjuna Mahendran:PM’s Asset or Albatross?
Posted on June 19th, 2016

by Rajan Philips Courtesy The Island

The name in the title notwithstanding, this article is not so much about an individual as it is about the politics and propriety of public institutions and the promise of good governance. The controversy over re-appointing the current governor of the Central Bank to a full six year term seems to be dividing the government and the parliament right down the middle, even though the division is clearly along party lines. Outside of parliament, there is a chorus of protests against the reappointment and persistent appeals to the President not to reappoint the governor when the current term runs out on June 30. And those who are protesting and appealing actively campaigned for Maithripala Sirisena in the January 2015 presidential election. A good number of them are also traditional UNP supporters, drawn from the upper echelons of society and familiar with the role and function of the Central Bank and its governor.

The controversy, if it is not resolved, will be the first standoff between President Sirisena and Prime Minister Wickremesinghe, who until now have been cohabiting happily like two peas in a pod. By itself the cohabitation so far has been a commendable achievement, given the uncompromising nature of our political traditions and culture. At the same time, the possibility that the central bank career of one individual could threaten Sri Lanka’s summit cohabitation is demonstrative of the silly depths to which the country has sunk in political cronyism. And political cronyism is one area where the Sirisena-Wickremesinghe government has much in common with the maladjusted Rajapaksa regime despite all the promises about good governance. The parliament, the cabinet and public institutions are all consumed by cronyism. The Central Bank governorship is one of many glaring instances.


Political preference always plays a role in senior appointments in public institutions – be it in the judiciary, the executive, or armed forces. But no harm is done so long as appointments are made from among a list of candidates who are equally qualified and competent, and there is no quid pro quo understanding between the appointing authority and the appointee. President Truman used to say that a President may expect a judge whom he appoints to the Supreme Court to give rulings favourable to the government, but it never happens that way. In fact, it must never happen like that and what is good for the judiciary should also be good for any public institution including the Central Bank.

Sri Lanka’s Central Bank is perhaps the youngest of the country’s major institutions. Established two years after independence, it has had 13 governors in over 66 years. In the past, the bank governors have generally tended to mind their business in a professional manner without getting muddied in politics. There were always criticisms of the bank from the political Left over differences in economic policy and direction, but the integrity of individual governors and the institution were never in question except for some early controversies. Everything changed over the last ten years involving the current and preceding governors, with cronyism creeping into the appointment of the bank governor.

Crony-business as usual

During the last years of the Rajapaksa government there were stories about a power troika and its Tuesday tea meetings. The troika apparently included the Defence Secretary, the Governor of the Central Bank and the Chief Justice. Their hold on power and weekly musings were cut short by the January 2015 election. The Secretary and the Governor resigned immediately without any fuss, but the Chief Justice had to be fired despite pathetic pleas and promises of favourable rulings. Replacements for the Secretary and the Chief Justice were found internally and based on seniority. But the replacement for the Governor was parachuted from Singapore at the Prime Minister’s choosing and insistence. It was not the PM’s finest moment of judgement, or an instance of good governance. The appointment was inappropriate even as it was a continuation of cronyism from the previous regime.

What was at issue was not the qualification or the competence of the new replacement, but the process of making the appointment. With only 18 months left in a six year term an interim appointment could surely have been made from internal candidates, pending a permanent appointment that would have followed the proper process for making such appointments. The promise of putting in place a due process and abiding by it was one of the key promises of good governance. It turned out to be the first promise to be flouted and that too within a fortnight of a historic election. It was as though the political and the personal risk taken by Maithripala Sirisena in leaving the Rajapaksa cabinet to become the common opposition candidate, Ranil Wickremesinghe’s selfless sacrifice of presidential aspirations, all the efforts of those who boldly campaigned against a vindictive regime, and the daring determination of the voting public – were all meant to make a favoured individual to become the governor of the Central Bank. Put another way, it was not a business-as-usual election and it was not meant to be crony-business as usual after the election.

To add injury to insult, rather than demonstrating extraordinary competence and flair in the performance of his duties the new appointee has turned out to be worse than business-as-usual even in comparison to his beleaguered predecessor. There have been serious allegations of conflicts of interests and even allegations of incompetence made by competent observers. Whether they are true or not, whether they have been proved in court or not, are irrelevant to the question of reappointment. What is relevant is that such questions have been raised and they are not going away.

Government ministers are getting it backwards in arguing that the governor should not be penalised when no court has found him to be guilty. And they are lying when they insist that the Supreme Court has cleared the governor of wrongdoing. The Court has made no pronouncement on the governor at all. Why should it? No one wants to punish the governor for anything that has not been proved. The question is whether he should be rewarded with a reappointment when there is so much controversy about him. Proving crime for punishment involves a much higher bar than the bar for selecting candidates for senior positions. And not being guilty of anything is not a qualification for appointment or reappointment.

The Prime Minister may have had the best of expectations in getting the present governor appointed in the aftermath of 2015 January election. He may have expected to have a trustworthy technical asset in his new appointee. Instead of being a technical asset, the governor has become a political albatross for the Prime Minister and a betrayal of the promises of good governance. He is also an unnecessary distraction to the positive purposes of the Sirisena-Wickremesinghe cohabitation. Our public institutions have been corrupted immeasurably over the last ten or twenty years by political cronyism. The corrupt processes cannot be reversed in a hurry, but only step by step. For institutional reform, the steps must start at the top – from the highest position in every institution. The Central Bank is no exception. One would only hope that the government will not sacrifice the institution by way of restructuring the bank to reappoint the current governor with diminished powers. That would be a travesty.

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