Pay-offs demanded during MR regime kept top investors away from Sri Lanka: Eran

With restoring the rule of law and forming a clean administration by the Maithripala Sirisena Government, Sri Lanka is now on the radar of some top foreign investors, who had abandoned the idea of investing in the country during the previous regime, Deputy Minister of Highways and Investment Promotions Eran Wickramaratne said.

In an interview with the Daily FT, he said that investors like Volkswagen, a German car manufacturer, which didn’t invest in Sri Lanka as the previous Government was corrupt and expecting pay-offs, were now in negotiations to invest in the country.

“There is some recognition that this Government is providing a clean administration, particularly when it comes to investments,” he said.

Wickramaratne, who is contesting from Colombo District at the August 17 Parliamentary elections, accused the previous Government of taking very unwise economic decisions such as constructing the Mattala Mahinda Rajapaksa International Airport, which he termed an economic failure.

Speaking about former President Mahinda Rajapaksa contesting at the forthcoming polls, he said that Rajapaksa had never been a threat to the UNP.

Following are the excerpts of the interview:

By Shanika Sriyananda

Q: How do you view the present political situation, which took an unexpected turn with some former Ministers joining the UNP-led coalition for good governance?

A: After the election of the new President, quite unexpectedly the presidency of the SLFP was given to President Maithripala Sirisena. On one hand it was a good move, but he had a dilemma on the other hand. He had pressure from the SLFPers to make decisions in their interest and not in the interest of the country. Therefore, they forced those politicians who are undesirable to be in the nomination list, including the former President Mahinda Rajapaksa, several ministers and MPs whom the public would have rejected and had questionable actions in the past. Some of them may not have still ended up in the judicial processes. Since investigations are being carried out and information is there to prove the wrongdoing, they will be brought before the judicial process.

The President is not able to clean the stables of the SLFP on the nomination list. Therefore, they used their majority by forwarding a list which was unacceptable to the President. The political scene is highly defined now. You have the old team and old policies on one hand and then you have the new movement led by the UNP, other political parties and civil societies on the other hand. 

It was natural for those who are in the SLFP who stood up for good governance to quit the SLFP and to join the United National Front. As I always say about the SLFP, oil and water will not mix and that is why they joined our new alliance. 

Q: During the presidential election 6.2 million people voted for change. Do you think that the Government has been able to bring about that expected change?

A: The 8 January silent revolution was a move away from the old order. People wanted a change in the political culture of the country. People wanted rule of law, an end to corruption, transparency in government, an independent Judiciary, a more accountable and responsible government and better people in Parliament.

I think the change is to do with laws, frameworks and political culture. We have succeeded in changing the law and the framework. What we have not been able to do is change the political culture, which takes a long time to change. But we have begun the process. As soon as we came into power we strengthened the rule of law and brought the most senior person on the bench as the Chief Justice of the country. That was to give confidence to the Judiciary and to give the signal that the Judiciary is independent from the Executive. In the pursuance of fraud and corruption, the laws are insufficient and much needs to be done in the next Parliament. Mechanisms to deal with financial frauds were not there and we have to create those mechanisms to strengthen the process.

For the last 30-years, nobody of significance – a politician or an official – has been convicted on financial fraud. We put that process in place. And as we promised to remove the executive presidency, we did it through getting a two-thirds majority, where 215 MPs voted out of 225 for the 19th Amendment. It brought back the term limits of the presidency, which was removed by ex-President Rajapaksa. Nobody including Chandrika Kumaratunga nor Mahinda Rajapaksa could ever come back to the presidency.

The reason for that is in every democratic country where there is an executive presidency there is a term limit because when an individual or a family is in power over a long period of time, it creates anti-democratic tendencies. It has nothing to do with individuals but it has to do with concepts. We have created a balance between the Parliament and the president through the 19th Amendment. The president should appoint a cabinet of ministers on the advice of the prime minister. That is a shift and is nothing to do with Maithripala Sirisena or Ranil Wickremesinghe. This is about the framework of governance of this country. 

Q: The Government widely spoke about corrupt politicians in the previous Government and some of the ministers and top officials were questioned in relation to corruption and bribery but no action has been taken against them. Why?

A: Here we really have to apply the law and the Judiciary system has to take over. This is not a political witch-hunt. As you can see, many are being questioned and some have been arrested and some have been held. Other investigations are going on and some have avoided being taken into custody by using the judicial process to delay their arrest or questioning. The notion that nothing is happening is incorrect. Much is happening.

Q: You mentioned that some existing laws need to be changed in the next Parliament to deal more corruption and financial fraud. Could you expand on this?

A: Yes. We need to bring some laws to strengthen the process. For example, all investigative agencies like the Police, Bribery Commission and other agencies which work against corruption need to be combined. But there is no legal provision. For example when an investigation is being carried out, for them to share some of the information with other agencies for their investigators to use. As a result, there are long delays. 

We are dealing with existing mechanisms. We need to have enabling legislations to smoothen these things out so justice could be efficiently dispensed rather than having long delays. That is a task for the next Parliament but in the existing Parliament, we have done a lot of work in this regard. The anti-corruption stance taken by our Government is not a battle against a particular individual or political parties but to clean up the system. 

The shocking thing is that it is not just financial fraud but there have been many murders in this country which are now being probed. They include the murders, threatening and disappearances of journalists. We were told by the former President that he would, within a week, arrest the assassins of Lasantha Wickrematunge but that never happened. These cases will be independently probed to find out how these journalists were murdered and attacked. We must have rule of law in society. Various other murders will be probed through the judicial process when we come to power on 17 August.

Q: What is your comment about giving nominations to some of the UPFA candidates, including the former President, to contest?

A: If on 17 August our government is elected, all these process will be taken forward. Look at the other option. If the present Opposition forms a government, what will they do? Then the probes will be stopped, investigative arms will be curbed, the officials who are involved in investigations will be transferred, the judicial processes will be interfered with and everything will get reversed. 

If this silent revolution is to move forward, we need to make sure that a government led by the UNP is in power. Why are they putting all those former people in the nomination list? It is to make sure that using political power, they will be able to close all these inquires, by which they feel threatened. Otherwise there is no other reason that I see for them to want the same set of people nominated because all these people have been rejected by the people in January.

Q: Will the former President be a threat to the UNP’s vote base?

A: The former President has never been a threat to the UNP vote base. If you recall, he won the presidency for the first time very narrowly by 180,000 votes. The former President won the second term because the people of this country of every segment voted for him as they were happy to see an end to the war. It was a vote of gratitude towards the former President. Some of the credit of ending the war goes to him as well as Sarath Fonseka and other commanders in the armed forces, to all soldiers who fought, civil societies and even to the people of this country.

However, after ending the war, the people expected to see the benefits of the peace. They expected a united country. The previous Government defined a united country as being geographically united. We defined a united country in both ways – geographically united and united by all groups in the country. But there was a complete disunity among the different groups in this country. We want to see an end to that. That’s where they failed and that’s what we hope to restore.

Q: Are you satisfied with what you have done in your position as Deputy Minister of Highways and Investment Promotion?

A: I am not completely satisfied with what we have achieved. Our Government has achieved much in the first 100 days. What we promised to do within 100 days, especially relief to the common man in terms of bringing down the cost of living, we have achieved that. We increased income by increasing the salaries of Government servants by Rs. 10,000. Since people have more money in their hands, demand went up. Due to this there was a consumption boom. To sustain this situation, we have to do more. 

What is really needed is investment. The former regime ran the economy through debt. Sri Lanka has now been ranked in the first 25 countries in the debt crisis in the world published by the Jubilee Debt Movement in London. Our Government in the first four months of this year has borrowed 40% less than the previous Government borrowed in the same period last year. We need to attract more foreign investments. Since investors knew that this Government would be dissolved soon, they wanted to wait to see what would happen in the next five years.

We adopted a strategy. I went to Singapore as I wanted to understand why the 2,000 Japanese companies came to Singapore. We targeted them and explained the advantages of coming into Sri Lanka. One advantage is logistics. If you select any other South Asian country – India, Bangladesh and Pakistan – and ship it through Singapore or Colombo, there is a three- to five-day advantage to reach a European port. We sold that idea. We already had some Japanese companies come here and we have already got a couple of them signed here. We are trying to attract German companies to come here because the Germans went to India and have invested there. 

Q: It was reported that some top German companies have avoided investing in Sri Lanka as the previous Government was demanding commissions. Is it true?

A: Yes. Germans have a very clean system and very tough laws in terms of how corporations should behave. We find some German investments very attractive and we are in negotiations. A large German manufacturer is going to set up its manufacturing plant here soon. 

I received a letter from a Sri Lankan living in Germany who has been working in Volkswagen and Audi companies. In that letter he clearly states that this decision to come to Sri Lanka would have been made five to 10 years earlier, but it was not made because that Sri Lankan authorities were corrupt and they were expecting pay offs. That is why they have taken the decision to come now. Reading that letter I was very happy that there is some recognition that we are providing a clean administration, particularly when it comes to investments. 

Recently, David M. Cote, the Chief Executive of the Honeywell Corporation, was in Sri Lanka. This is probably the first time the CEO of a Fortune 100 company has visited Sri Lanka not on leisure but for a business discussion. A week later, I received a letter from him saying that they are interested in investing here. A company team is due to come here very soon. There is a very clear signal going out that Sri Lanka is open for business, can expect clean administration, rule of law is supreme and has been restored. I can see them coming to Sri Lanka. 

Q: Your Ministry has revealed how road projects have been overpriced. Can you explain and outline what actions were taken?

A: When contacts are signed, there is very little action that you can take because you have already agreed to certain terms. Even if a previous government has signed a contract, the Sri Lankan Government is legally obligated to honour those contracts. We as a Government have never defaulted on our contracts or international obligations. There are certain dispute resolution mechanisms that can be used if the necessity arises.

When we say that some roads have been overpriced, there are two components. One is that we feel that the unit price of certain things has been inflated. Second is that we have over-designed beyond our immediate requirement and the demand. If you over-designed and you are looking for a return in five to 10 years, then your return is going to come in 10 to 20 years. This is not a wise economic and financial decision. The past Government has made some very poor decisions similar to this. A stark example is that they have built an airport and put $ 250 million in phase one and they plan to put another $ 250 million in phase two.

I went to the Mattala Mahinda Rajapaksa International Airport and found the lady at the Immigration Counter had stamped only one passport that day and there were no regular scheduled international flights. This is the situation in an international airport. SriLankan Airlines was compelled to touch down, sometimes taking off from Katunayake and touching down at Mattala. It doesn’t make any economic sense and the cost is very high as landing wastage is very high when you are adding landing unnecessary within your own country. The cost of fuel to take off again is very high. So they have taken very unwise economic decisions similar to this in the past regime. 

The economic rationale of a port is sound. We have ideas about how to increase the return from the port. We will continue to build the port and we still have the capacity in the Colombo Port. As we build the logistics centre, in both Colombo and Magampura, it will be fully utilised. For the airport in Mattala, we have out-of-the-box ideas. We have ideas to increase income and minimise the losses of the poor investment decisions. Some of the other investments are similar but once you put the framework in place, people see a five-year horizon and the economy is going to change. 

Q: What is your view about the present economic situation in the country?

A: We are facing a poor situation due to debt crisis. We have a poor situation in terms of investment that the country has attracted so far, transparency, good governance and ease of doing business. If you look at these situations, the enabling environment has already been tackled and put in place. When it comes to the debt crisis, it needs skilful management, which we are doing carefully. 

The most important thing in a financial market is confidence and we have already created that. We have good international relationships and can get all the support we require internationally in dealing with situations. We will never put our financial institutions under threat. We are letting the financial institutions working without political interference.

We will have an investor-friendly policy which will help us to develop real economy that creates real jobs but not temporary employment. In road construction projects it will create temporary jobs but when we have investments which will put up factories, we will have sustainable job opportunities. Our whole focus will be on sustainable development strategies.

Q: What do you view as future economic challenges?

A: I think the single biggest challenge is introducing some reforms, including public sector reforms. Within this short period of time we have restored the dignity of the public sector. We don’t have ministers and politicians calling the senior officials and giving them constant directions now. We need to do lot more and we also need to increase remuneration in the public sector. We need to invest a lot more in training public sector employees locally and internationally to have a vibrant sector. We have to put more investments to provide the latest technology and enhance the work environment for the public sector, so people will have pride in the public sector.

We want to retain the best brains of the country in the public sector. Sri Lanka has been suffering from brain drain from a long time. This can be stopped if we properly reform the public sector. Our Government is committed to achieve it. Even economic growth is going to come through the private sector; we need to have a very efficient, fully-functioning, independent public sector.

Investment in education is one among other challenges. Sri Lanka’s biggest asset is its human resource base and we need to up-skill this resource base which gives an advantage in attracting value-added industries. This also requires a lot of political will. 

The third challenge is the unknown factor. We live in a globalised world and a globalised economy so we can face external shocks. But I am very optimistic about the future.

Q: What should the priorities be for Sri Lanka to draw higher foreign direct investments?

A: Many people have asked me whether there is a particular area or industry that Sri Lanka needs to focus on. My answer is that we don’t want to pre-determinate. What we want to do is to create an enabling environment, then the investors are going to take a close look at this country. They want to look at the competitors. Even the businessmen in India who have been visiting here have told me that the ease of doing business in Sri Lanka is far greater than in India. India’s issues are not to do with tariff but to do with non-tariff barriers. Some of the issues that India is facing, like cross border issues among its states, we will not face. We have very clear advantages on ease of doing business and therefore I think attracting investments will be easy.