INNOVATIONS IN YAHAPALANA ADMINISTRATION
Posted on August 23rd, 2017

KAMALIKA  PIERIS

The Yahapalana ‘regime change’  was intended to bring the island under western control and get the administration to run the way the west wanted. The existing government institutions were not suitable for this task, therefore new agencies were needed.

The first of these was the Cabinet Committee on Economic Management (CCEM), chaired by Prime Minister Ranil Wickremesinghe.  It was established on September 23, 2015 through a Cabinet decision. CCEM was empowered to make decisions on all economic matters, including military procurements. It was the central authority for all key economic policy decisions. All economic decisions first went to CCEM and thereafter to the Cabinet. In March 2017, the CCEM was given the right to engage directly with line ministries and the Board of Investment to fast track investment projects.   Influential persons in the CCEM included Charitha Ratwatte and R. Paskaralingam, a retired CCS officer who had served under President Jayawardene and President Premadasa. He would be around 90 years now.

The CCEM was like a parallel cabinet, said critics. Most financial and economic issues   no longer came before Cabinet.  They were discussed and decided by the CCEM and sent for rubber-stamping to the Cabinet of Ministers. A copy of the minutes of the CCEM meetings, usually very brief, were placed before the Cabinet of Ministers for approval.  Vital information such as full details of costs and including the terms under which the project was approved were withheld. In April 2017 it was stated that a separate Secretariat would be set up to service the CCEM. Ministers will be invited to attend when their subjects are discussed.

CCEM lacked transparency and it sometimes blundered. One such instance was when a particularly influential UNP minister pushed through a deal for a project for the manufacture of radial tyres in Horana. Even before formal approval was granted by the Board of Investment (BOI), ‘permission’ had been given to the company involved, and the company cleared the land marked for the project and had an opening ceremony.

In July 2017, President announced that he would create a National Economic Council (NEC) which   would rank above the CCEM. The NEC will be headed by the President and will consist of Prime Minister, Minister of Finance, Secretary to the President, Secretary to  Prime Minister, Secretary to  Cabinet, Secretary to  Ministry of Finance, Secretary to  Ministry of National Policy and Economic Affairs, Governor of the Central Bank and Secretary-General of the NEC.

The NEC would be an advisory body on economic policy reporting directly to the President of Sri Lanka. It will make recommendations to the Cabinet of Ministers on economic policy. The President may refer any economic matter to the NEC for its review and advice. CCEM will function under the NEC and will be required to follow policy guidelines and other matters it may lay down from time to time. The NEC will have its own staff under a Secretary-General appointed by the President. This Secretary-General would represent the NEC in the Cabinet Committee on Economic Management (CCEM) and other relevant bodies.

In November 2016, Yahapalana put forward the Development (Special Provisions) Bill .This startling Bill created a Super Minister, who was given the title, ‘Minister for National Policy and Economic Development’. This position was to be held by Prime Minister Ranil Wickremesinghe.

This Super Minister’s powers exceeded the powers of the President, Cabinet and the Provincial Councils combined. Any regulation made by the Super Minister must go before Parliament, but even if Parliament rejected the regulation, all actions taken by the Super Minister remained in force. This places the Super Minister even above Parliament, observed critics. He will enjoy legal immunity and have the power to veto cabinet decisions, as well.

This Super Minister is given the authority to designate any area of the country as an economic development area and to issue a Gazette notification to that effect. He also has the power to decide for what purpose land in that area can be utilized. If he declares it to be an agricultural area, non-agricultural activities in that area will be prohibited .

The Super Minister   has the power to register investors and those who are registered by him, are exempt, with regard to the utilization of land, from restrictions that apply to other investors. This  Bill states specifically that the Land Registration and Alienation Act will not apply to such investors. Not only will this give  exclusive privileges to  one group of investors but  it will also be an open invitation to corruption, said critics.

The Super Minister   will have under him a powerful Development Agency, which will coordinate all development plans of the state. The Agency could delegate its powers to ‘regional boards’. There are no limits on the delegation.  The Agency will be run by a Managing Director handpicked by the Minister. This Development Agency will di­rectly issue licenses to investors.  The Board of Investment (BOI) will need authorization from this Development Agency before ap­proving any investment project.

The Agency will also have the power to give directions to a number of important institutions including  Board of Investment,  Export Development Board,  Information and Communication Technology Authority,  Civil Aviation Authority,  Sri Lanka Ports Authority,  National Water Supply and Drainage Board and  Sri Lanka Tourism Promotion Bureau.

At present these institutes carry powers and responsibilities given to them by different Acts of Parliament. This Bill removes these powers. The institutes must now act according to the direction given by the Development Agency. If the Board of Investment wishes to develop a project, they must apply to the Development Agency to seek approval for such a project.

There is something else. At present the ministers under whose purview these institutions come under are responsible to Parliament regarding these institutions. The Minister for Trade is answerable in Parliament for matters pertaining to the Export Development Board. Once this Bill is passed, the ministers in charge of those bodies will no longer have control over those bodies.

Below the  Development Agency  came  several nested agencies. There would be a Policy Devel­opment Office (PDO) to formulate policy and monitor implementa­tion across the entire state machinery. It reports to the Minister of National Policy and Economic Affairs, but all policy drafts are presented to Cabinet for ap­proval. The PDO is not limited to formulating national policy on economic mat­ters, it can cover any subject and set the agenda for any public insti­tution and review their functions. The PDO can call for any information which they claim is related to economic development, from any individual, including private individuals. There are penal sanctions for non-compliance.

An Agency for Development will be created under the PDO to imple­ment government policy. It will have powers to direct other de­velopment-related institutions like the Board of Investment. It will have the au­thority to direct the activities of the Export Development Board, Urban Development Authority, Mahaweli Authority, Information and Com­munication Technology Agency, Sri Lanka Ports Authority, Civil Aviation Authority, National Water Supply and Drainage Board, and Sri Lanka Tourism Promotions Bureau.

The Development (Special Provisions) Bill   also proposes five regional Development Boards for economic development, namely Northern, Southern, Central, Eastern and Wayamba Development Boards.  They will be under the Agency for Development. The North Central, Sabaragamuwa and Uva Provinces will cease to exist.

Galle, Matara, Hambantota, Moneragala, Ratnapura districts  will be transferred to the Southern Development Board . Puttalam, Kurunegala, Kegalle districts   to Wayamba. Anuradhapura, Polonnaruwa, Trincomalee, Batticaloa , Ampara districts    to  Eastern Development Board. Matale, Kandy, Nuwara Eliya, Badulla  district  to the Central Development Board. Jaffna, Kilinochchi, Mannar, Vavuniya, Mullaitivu  districts to Northern Development Board. These Boards would function for three years, after which they  will cease to exist, leaving in its wake what would probably be complete chaos, observed critics.

There is to be an Agency for International Trade established under the  Minister for International Trade and Development Strategy.  The governing board will include persons from the private sector. This Agency has the power to give binding directions to the Department of Commerce, the Import- Export Control Department, the Tea Board and the Tourism Authority.

The Department of Commerce functions under the Minister for Trade and Commerce. The Tea Board functions under another minister. All these bodies will now have to take instructions not from their respective ministers but from the  Minister for International Trade and Development Strategy. It will be the Minister for International Trade and Development Strategy who determines the criteria for tax incentives, not the Minister of Finance. What happens to the responsibility of those ministers to Parliament, asked critics.

The Bill confers immunity on the Agency for International Trade. If   its officers cause any loss to a private citizen who applies to court and gets an award for damages, the Bill says that the damages will have to be paid out of the consolidated fund. This means that the taxpayers will have to pay for the misdeeds not only of government officials but also individuals from the private sector serving on this body, noted critics.

There will also be an Agency for Internal Trade to be managed by a Board. The officers in this Agency will also be immune from prosecution. This Agency will also take over WTO, UNCTAD, BIMSTEC, SAARC, ASEAN, and APEC. At present these organizations are administered by the Ministry of Foreign affairs.

All  the institutions set up by Development (Special Provisions) Bill    except for the Policy Devel­opment Office (PDO) will function for three years, only winding up just before the next election. The whole Bill seems to be designed to grab power from other ministers and concentrate power in the hands of a  single person. The country is heading for a dictatorship, said Chandraprema.

In accordance with the 13th Amendment, the Development (Special Provisions) Bill was sent to the Chief Ministers of the Provincial Councils. The Chief Ministers of Central, Southern, North Western, North Central, Uva and Sabaragamuwa vehemently refused to support the Bill.  It would  curtail the powers  of the Provincial Councils, they said. The Bill was thereafter re-named as ‘Sri Lanka Sustainable Development Bill’ and presented  to Parliament in January 2017. This is the Super Ministry Bill under another name, said critics. The Bill had not yet come up for debate in Parliament.

Ravi Karunanayake ,then Finance Minister  set up a Private Public Partnership (PPP) division  under the Treasury,  with World Bank funding.  The purpose was to secure private sector support for public services,   and to   operate state-owned enterprises in a businesslike manner.

A division with a  large cadre of staff was created  for this Partnership in May 2017. Persons  were recruited for the positions of Coordinating Secretary, Back Office Manager, Director Investment, Director Economic and Financial, Director Legal, Director Transaction and Risk, as well as executives for the  Business, Investment, Economic, Financial, Legal, Promotional, Transaction Management and Risk Management sections. Bradley Emerson, the controversial former CEO of CIMA, Sri Lanka was appointed as CEO ‘at a massive salary’. Emerson was also Director General, Department of Fiscal Policy, also appointed by Karunanayake.

Normally applications for recruitments for departments under the Finance ministry are called under the signature of the Secretary to the Treasury. For the PPP applications were called by Private Secretary, Minister of Finance. This was considered most unusual.   When Mangala Samaraweera took over as Minister of Finance, in May 2017, the PPP division was closed down and a high-powered ‘National Agency for Public Private Partnership’ was created with Former BOI Chairman Thilan Wijesinghe as its Head.

The Central Bank of Sri Lanka is a semi autonomous body responsible for the conduct of monetary policy in Sri Lanka. It also has wide supervisory powers over the financial system and management of the public debt of Sri Lanka. As soon as Yahapalana took power, the Central Bank was taken out of the Finance Ministry and placed under the Prime Minister. There were objections  but the transfer was made.

Yahapalana   government wished to take away the powers of the Central Bank  and moved quickly to do so.  Yahapalana announced that a new unit would be set up under the Finance Ministry to oversee some of the functions of the Central Bank, including the printing of currency notes.  The Exchange control department, the EPF, Staff Training College and the Public Debt department would be taken out of the Central Bank and put under independent agencies.

A new debt management unit was to be set up at the Finance Ministry for transactions in government securities, to be extended later to other instruments including corporate debt security.  Prime Minister Ranil Wickremesinghe said the Central Bank’s task is to raise money to pay the loans, settling the debt could be done by a separate office. Central Bank insiders said taking away debt management from Central Bank   means taking over most functions of the Central Bank. Managing debt is one of the primary functions of the Central Bank.

The function of regulating and supervising banks had been traditionally assigned to the Central Bank. The Ministry of Finance, under Ravi Karunanayake   is attempting to take this away from the Central Bank, said critics in 2016. An advisory group on bank regulation was to be set up in the Ministry, under a retired Deputy Governor of the Central Bank. Critics observed that the Ministry and the ‘advisory group’ lack the skills and the funds for bank regulation.

The bank supervision function would    also be taken away from the Central Bank  and assigned to a parallel agency set up in the Ministry specifically to undertake bank supervision., said the media. Leave bank supervision to the Central Bank, said critics. It is best to let a Central Bank handle this rather than give it to an outside authority.  

The Ministry of Finance is planning to rate financial institutions and give them a rating based on color coding like the coding used in traffic lights on the road, reported the media. Accordingly, good commercial banks will be given ‘green coding’, while those in emerging risk category will be given the color coding of ‘amber’ and the hopeless cases would be given ‘red coding’. At present, all commercial banks and other financial institutions are subject to rating by rating companies. Such ratings are released to the public domain to help investors and depositors to make informed judgments. So this is nothing new, said critics.

An advisory group would also be formed within the Finance Ministry to assess the solvency levels of banking and financial institutions  and a   National Payments Gateway would be set up outside the Central Bank, announced the government . Both these functions are preserves of the Monetary Board, assigned to it by law, to be implemented through its operational arm, the Central Bank, observed critics.

Former Central Bank Deputy Governor W.A. Wijewardena said that the Finance Minister was trying to interfere with the responsibilities of the Monetary Board of the Central Bank. Never before has the Central Bank been compromised as much as now  and never before have the functions of the Central Banks been undermined like this by a Finance Minister,  he said.

Yahapalana attempts to  take away key functions from the Central Bank came under strong criticism from many including the Bank’s own officials. Central bank authorities  warned that such interference  will  put monetary management into a chaotic situation. According to the Constitution, only Parliament shall have full control of Public Finance. What is the purpose of a Central Bank when its departments are handed over to private companies, they asked.

The independence of a Central Bank is vital for a country’s economic stability,  said the  economists. The  economies that have performed well are those that have strong, independent Central Banks.  A strong Central Bank  can make sound assessment of the economy, give sound advice and take correct action to curb inflation. Economists  also  stressed the need for an independent Central Bank. It is of vital importance, they said, that all sections of the community protest against any moves to undermine the independence of the Central Bank of Sri Lanka .

The government announced in its 2017 Budget that it would set up a National Payment Platform (NPP) to be managed and controlled by the Information and Communication Technology Agency (ICTA). Yahapalana clearly had plans for ICTA. Within a month of Yahapalana taking over, ICTA was transferred from Ministry of Telecommunication and Digital Infrastructure  to the Foreign Ministry.  The media was       watching. ‘We’ve been wondering what changes the new government would bring to ICTA,’ they said.

They did not have to wait long. Reshan Dewapura who had headed ICTA for twelve years was   removed and Muhunthan Canagey, a young Tamil entrepreneur, founder of several software companies, was appointed its CEO. ‘Controversial businessman Muhunthan Canagey is to assume duties as the Chief Executive Officer of the Information and Communication Technology Agency’ reported Asian Mirror.

We now return to the subject of the payment platform. The  National Payment Platform is intended to facilitate persons, businesses and government to make peer-to-peer payments, including fund transfers and online payments for goods and services, using computing devices, including mobile devices, said the government . This would include the collection of taxes and other levies by revenue collection agencies of the government. The National Payment Platform will bring in savings for the government by reducing cash movement and the cash float in the market and thereby increasing efficiency.

The Central Bank  opposed  this. ‘This is dangerous stuff, said a Central Bank official. No country allows a payments gateway to be managed by private parties. The payment system is the responsibility of the Monetary Board of the Central Bank. This NPP must be designed and handled by the Monetary Board. The reason is that, when we make an electronic payment we should be satisfied that the payment reaches the person or institution we intended to,  say an account in Nigeria or somewhere.

Treasury and private sector experts did not think that ICTA could deliver this project, either. ICTA has very limited powers under its Act  and ICTA’s ability to implement and monitor the National Payment Platform (NPP) was doubtful. ICTA might jeopardize the National Payment Platform, experts warned. Critics observed in November 2016 that ICTA had not yet produced any tangible results.

ICTA   it appears, had around September 2015, awarded the National Payment Platform contract to Transact Lanka, a mobile payments and funds transfer service provider,  without following due tender procedures. According to ICTA, eight companies initially agreed to test the NPP software but that number reduced to three companies, Transact Lanka Pvt Ltd, Payment Services Pvt Ltd and Total Pay Pvt Ltd.

ICTA remained silent after that, but Transact Lanka, issued a media statement on September 2015, saying ICTA has awarded and granted it permission to operate the Lanka Government Payment Service (LGPS) Web Portal to enable citizens to make cash-based payments for all government related payments, including customs duties, port charges, revenue license and taxes.

On July 12, 2016, 10 months after ICTA had   selected Transact Lanka, the Cabinet approved the introduction of a NPP to facilitate digital commerce and online transactions, with the Central Bank facilitating its implementation.  The media reported that Central Bank Deputy Governor P. Samarasiri, closely associated with former Governor Arjuna Mahendran and the Treasury bond scam, had been appointed to oversee the implementation of the NPP. It was unclear, said the media, whether  Samarasiri had pursued the matter or held discussions with ICTA officials. How was Transact Lanka   selected in 2015,   if Cabinet approval was given in July 2016 on a budget proposal made in November 2016, asked critics.

A National Payment system should be operated by the Central Bank, said bankers. The Payments and Settlements Act No. 28 of 2005  specifically says the Central Bank shall be the authority responsible for the preparation of a plan for a national payment system. Therefore ICTA cannot do this,  without the knowledge of the  Central Bank .

Payments need a settlement agent explained  bankers.  ‘Settlement’ means transferring the payment from one bank to another, providing liquid funds to the  bank if it is short of funds and making  sure the payment goes where it should. The Central Bank is the best suited for this. It can effect payments among banks just by debiting the account of the paying bank and crediting the account of the recipient bank. It can provide liquid funds, and it has safeguards to mitigate risks involved in payments. It has the necessary audit trails to prevent frauds. A commercial bank or another agency is unlikely to perform this job effectively, efficiently and speedily.

The Central Bank pointed out that Sri Lanka already had an advanced digital payment system, the Real Time Gross Settlement System ( RTGS) owned and operated by the Central Bank. Sri Lanka was the first country in the region to implement Real Time Gross Settlement Systems (RTGS) in 2003 and is far ahead of other neighbouring nations.

Central Bank  also had LankaClear, the agency for clearing cheques and operating a nationwide payment system. It is operated by banks under the supervision and part ownership of the Central Bank. It has now upgraded and modernized its service. It is now in the process of introducing a system of sharing Automated Teller Machine or ATM system of banks. It is  LankaClear which is best placed as the agency for operating a national payments system “There is nothing wrong with the existing Lanka Clear driven National Payment system. It is fully secured, highly confidential and trustworthy.

LankaClear also  operates  LankaPay, a trusted National Payment Network. This became the first entity in Sri Lanka to obtain the certification of Payment Card Industry Data Security Standard (PCI-DSS), version 3.2. This certification is at the zenith of international data security standards in the payment card industry.

Central Bank had other achievements in this area and it drew public attention to them through an official statement. The statement said that  Central Bank ‘s  Nationwide T + 1 Cheque Clearing launched in 2006, was 1st in South Asia and 2nd in the world. The nationwide Same Day Electronic Fund Transfer launched in 2010 was 1st in South Asia. BankCSIRT (Computer Security Incident Response Team) launched  in 2014 and CITS Online mode launched in 2016 were    1st in South Asia, as well.

There was also  ‘LankaSecure’, launched in 2004. This was a Scripless Securities Settlement System (SSSS) and Scripless Securities Depository System (SSDS) to facilitate Government securities and Central Bank securities for settlement and the recording of ownership. ‘LankaSign’, launched in 2009,  was  the Only Commercially Operating Certification Authority (CA) in Sri Lanka. Central Bank has invested sufficiently in the needed digital infrastructure  and  has the trained staff necessary  for these functions. Central Bank should be asked to set up the  national payment system in collaboration with ‘LankaClear’. ICTA can provide the technical expertise if necessary, said  critics.

The Central Bank, now under Governor  Indrajit Coomaraswamy, spoke up in August 2017. Central Bank said it has not given power to ICTA with regard to the digitalisation of country’s payment operations. No private company has been given approval to operate the NPP, and no legal agreement has been signed so far with regard to this. Central Bank  has been raising concerns over the ICTA’s role in NPP for several months, saying it should be properly regulated and cannot operate independently as  ICTA wanted, Central Bank  said. Central Bank had asked for more information when ICTA presented the NPP proposal to the Central Bank in May 2016, but ICTA  had not responded to date.

Any payment platform. NPP or otherwise,  needs to be regulated as is done in other parts of the world, since they have a significant impact  on the financial stability of a country, said Central Bank . The regulator’s role is important. The regulator must ensure that the platform and associated systems contain the required security measures to protect the interests of the public and to maintain the stability of the financial system as a whole.

Central Bank observed that ICTA had publicly stated that its NPP was  merely an open platform dealing with messaging via mobiles phones on Internet, with payment requests included.  Central Bank observed that such services, which offered payment messaging, will also fall under the scope of a payment transaction, and therefore be subject to regulation by Central Bank   Further, as the NPP constitutes an amalgamation of payments and settlement systems, it will inherently need to be under the regulation and supervision of  Central Bank

The government intended to use ICTA to break the monopoly of the Central Bank and hand the  national payment system  over to the private sector, accused critics. UPFA’s Bandula Gunawardene    filed a FR violation petition over this ICTA managed National Payment Platform in November 2016.  But Gunawardene need not have bothered.

The National Payment Platform (NPP)   collapsed as soon as Ravi Karunanayake left the post of Minister of Finance and Mangala Samaraweera took over. ICTA CEO Muhunthan Canagey,  was asked by the President to resign. Sri Lanka’s controversial National Payment Platform (NPP) developed by the Information and Communication Technology Agency (ICTA) has been suspended, reported the media in August 2017. the Finance Ministry  has ordered an investigation into the matter.  Government had not authorised any private company to operate the National Payment Platform (NPP)   said  Harsha de Silva,  Deputy Finance Minister, in Parliament .

4 Responses to “INNOVATIONS IN YAHAPALANA ADMINISTRATION”

  1. Susantha Wijesinghe Says:

    KAMALIKA !! PASKARALINGAM CANNOT BE 80. HE WAS IN SERVICE WHEN I WAS A SCHOOL BOY, AS MY LATE FATHER ALWAYS REFERRED TO HIM. SO THAT MEANS THAT HE IS VERY MUCH OLDER THAN ME. MY FATHER, A CCS, RETIRED FROM THE GENERAL TREASURY, AS ASSISTANT OR DEPUTY CONTROLLER OF ESTABLISHMENTS, AND HE WAS MY FATHERS SENIOR. HE JUST CANNOT BE YOUNGER THAN ME. JUST IMPOSSIBLE. IAM 83.8 YEARS. HE HAS TO BE TOUCHING THE 90s. MY FATHER DIED IN 1971. PLEASE DO ANOTHER CHECK.

  2. Christie Says:

    ඉන්දියානු අදිරදයේ කොලනියක් වන තිස් ලක්ශයකට වඩා වැඩි ඉන්දියානු කොලනිවාසීන් විසින් පාලනය කරන ඉන්දියානු යටත්විජිතයේ මුල් වැසියෝ එකිනෙකා කුලල් කාගනිති. ඇයි සින්හල අපි අපි කුලලල් කාගන්නේ කියා විපරම් කර බලාන්න. අපි බනින්නෙත් ගරහන්නෙත් සින්හලයන්ටය. මම කියන දේ ගැන සිතා බලන්න. ඔබේ අදහස් දක්වන්න.

    Ceylon the Indian Colony run by three million Indian colonists. They are doing well. We are fighting among ourselves like the oppressed in any society.

    Please think why do our leaders behave like that they do and why do we blame them one or the other. How come we are divided. Please think of what I am saying and respond.

  3. Christie Says:

     Influential persons in the CCEM included Charitha Ratwatte and R. Paskaralingam, a retired CCS officer of 80 years, who had served under President Jayawardene and President Premadasa.”

    Well Paskaraligam served under Sirimawo and Chandrika. He was an influential person because he was married to a rich woman from Flower Road. I remember when Paskaralingam was working under Sirimawo the head of the Ministry he was working was a cousin of Sirimawo. Paskaraningam used do all the Peons work for this guy who was appointed to the post because he was a cousin of Sirmawo. I know he was working under Chandrika too. He was a very influential Peon then and now.

  4. SA Kumar Says:

    B(P)askaraligam & his brothers work fpr Premadasa as well

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