Thursday Sep 19, 2024
Thursday Sep 19, 2024
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This is the day-to-day dilemma experienced by ordinary citizens of this country, whereas there are big businesses and crooks systematically evading tax and depriving the Government of billions of rupees, yet they survive without being questioned, investigated or penalised. They are being protected and nurtured by a phenomenon called the ‘secret political influence’ and also by the mafia link with the enforcement authorities. Politics and mafia mix well as both pursues short cut to wealth.
John Dickie, an authority on mafia, in his book ‘A History of the Sicilian Mafia: Cosa Nostra’ has defined mafia as ‘pursuing power and money by cultivating the art of killing people and getting away with it, and by organising itself in a unique way that combines the attributes of a shadow state, an illegal business, and a sworn secret society’.
KPI-UNP vs. SLFP-led governments
In Sri Lanka, economics crimes have been on the increase ever since the economy was liberalised when the UNP Government came into power in 1977. The open economic principles brought about massive economic activity and led to a number of mega construction projects. The skyscrapers of Colombo could be seen from afar, a cl
ear reflection on the success of JRJ’s economic policies. It also brought along with it the negative side.
The massive projects of the UNP era such as the Colombo Port (Jaya terminal), Bank of Ceylon Head Office, Rupavahini Corporation, ITN, World Trade Centre Twin Towers, the massive Mahaweli project (Victoria, Rantambe, Randenigala, Kotmale, etc), Hilton Hotel, the Parliament complex, Sri Jayewardenepura Hospital and Free Trade Zones are still economic milestones.
Mahaweli resources have been underutilised and Sri Lanka can still be made self-sufficient in food production if there is a focused political will. Foreign loans were obtained to produce direct economic benefits for people. Not once did UNP Governments resort to commercial borrowings.
The incumbent Government too has embarked on a massive economic development but experts argue that there is over-investment in infrastructure owing to an absence of a coherent strategy. The Port of Hambantota requires a permanent marketing office in Singapore/Hong Kong. The Port of Los Angeles is having a marketing office in Hong Kong (because two ports San Francisco and LA are competing) so why not station a qualified marketing officer in Singapore/Hong Kong/Yokohama/Cape Town and in Europe to promote Hambantota Port?
It would be prudent to reduce excess diplomatic staff (or close down unwanted embassies) and station personnel with combination of knowledge in marketing and shipping dedicated for promoting tourism, BOI (for FDIs) and Ports of Colombo and Hambantota in particular. These officers must be given a clear mandate with targets. This would surely bring results.
The real development
Government investment in industrial development is the real basis of development, as articulated by Minister Wimal Weerawansa. It will have a positive outcome on the electorate, generate employment and increase export revenue. Since business chambers were silent, Minister Weerawansa took the initiative to voice his concerns.
One notable achievement of the incumbent Government was the successful decimation of terrorism which has been a plague on both Sinhalese and Tamil people for three decades. All credit for that must therefore go to President Rajapaksa for his political leadership to achieve the historic patriotic victory.
Trimming the jumbo Cabinet
Late Prime Minister Sirimavo Bandaranaike castigated the UNP in the run-up to 1994 election. She said: “There are 83 Ministers in the UNP Government… The country is not aware that to maintain a minister with their salaries and enormous perks is all met out of public funds… this money could have been diverted to provide facilities for farmers, to provide healthcare and education and provide for the wellbeing of the poor” (interview with The Sunday Leader 19 June 1994).
Today we have 100+ ministers with security and back-up vehicles and some of the ministers do not really have any security threats. It looks like the ministers have been rendered ‘rent seekers’ for having to remain passive in the decision-making process.
Plugging loopholes
With the advent of open market economics, many crimes were attempted. Though the economic crimes originates from the time the economy was liberalised, it does not warrant criticism per se; what was absent at that time was laws to curb the market forces and plug the loopholes in the system.
International criminal organisations which engage in the drug trade, gun smuggling, fraud, counterfeiting, tax evasions, poaching, money laundering and other financial crimes, cyber crimes, computer and credit card frauds were ever poised to make use of such opportunities. No single individual obviously can be privy to such sophisticated crimes and it has to be a combination of masters of the game (the planners), the criminals (operatives) and the authorities (mafia link in the Police, Customs, etc).
When most people think of organised crime, their immediate perception is the Italian style ‘Godfather’ movies. In an article in the African Security Review (Vol. 11 No:1 2002), Noel Kututwa has described economic and organised crime as follows: The criminal activities are ‘organised’ and distinct from ‘isolated,’ the organisation is self-perpetuating, the motive is financial gain and could be political, the goals are particular activities which stifle outside competition, the top men (planners) are insulated from the criminal act, activities promote fear and corruption.
The Government of Sri Lanka loses billions of revenue from unreported business transactions. There has been an escalation of counterfeiting of money and this has a direct impact on the economy. If a systematic and holistic approach is adopted in collecting revenue legally due for the Government, it could obviate commercial borrowing from international financial markets at high interest rates. This would also enable the Government to reduce the budget deficit.
Since 9/11 the US and Western Governments have put in place a number of filters to check on the international terror networks as some terrorist organisations have been involved in massive economic crimes worldwide. It is imperative that the Government intervenes in checking the bona fides of money transactions and it would effectively put a damper on fundraising for terrorist activities.
In many advanced countries industrial espionage is also monitored, however in Sri Lanka we do not have such advanced technology to be protected from foreign industrial espionage surveillance. Our only national asset, if at all, is Micro Cars, which needs some protection from eyes from abroad.
Customs intelligence
We have had several attempts on the lives of Customs officers and other Government officers involved in investigating corruption. This would put a restraint on honest and dedicated investigators from going about their routine work if their lives are threatened.
News media exposes, on a weekly basis, massive-scale corruption and shady deals by top Government officials. We have established a Commission to Investigate Bribery and Corruption but no big sharks have ever been convicted.
With the advent of technology, economic crimes have become highly sophisticated, primarily in light of the advances in information and telecommunication technologies. It would be difficult for an ordinary police officer to investigate a sophisticated crime unless he or she has had specialised training. Investigating an economic crime would entail a lot of time and even with evidence, to secure a conviction depends on legal niceties.
There are a number of hurdles in the path of combating economic crimes. The main hurdle is the practical aspect of investigating a crime and the loopholes in our laws that allow a crook to circumvent the law. It is perhaps time the Law Commission looked into the entire gamut of economic crimes and recommended law reforms necessary to arrest this situation.
Lessons from other countries
Nigeria has had a resurgence of economic crimes as a result of its oil wealth and its economic boom. The Government of Nigeria established its Financial and Economic Crimes Commission with the intention of arresting the menace of economic crimes.
The Act defines an economic crime as “nonviolent criminal and illicit activity committed with the objective of earning wealth illegally either individually or in a group or organised manner thereby violating existing legislation governing the economic activities of the government and its administration and includes any form of fraud, narcotic drug trafficking, money laundering, embezzlement, bribery, looting and any form of corrupt malpractices, illegal arms deals, smuggling, human trafficking and child labour, oil bunkering and illegal mining, tax evasion, foreign exchange malpractices including counterfeiting of currency, theft of intellectual property and piracy, open market abuse, dumping of toxic wastes, and prohibited goods, etc.”
The Act also defines the meaning of terrorism though the ambit of the enactment is to investigate economic crimes. Nigeria has made advances in economic crime prevention and perhaps we can take a leaf out of that book.
South Africa also established an authority by an Act of Parliament (Financial Intelligence Centre Act No. 38 of 2001) with the purpose of assisting in the identification of the proceeds of unlawful activities and the combating of money laundering activities. The other objectives of the Centre are to make information collected by it available to investigating authorities, the intelligence services and the South African Revenue Service to facilitate the administration and enforcement of the laws of the Republic and to exchange information with similar bodies in other countries regarding money laundering activities and similar offences.
Press reports indicated that the UNP administration had ambitious plans to merge the Customs Department and Inland Revenue and to form a unified National Revenue Authority, but had to be shelved due to pressure from trade unions. The merger itself does not guarantee that it would enhance the revenue collection for the Government; what is important is the radical departure from our current system of revenue collection and to introduce a system where officers of Customs and Inland Revenue have the necessary wherewithal to investigate economic crimes without any political interference.
Enactments of new laws will remain only in the books, but ‘the will to pursue a case’ solely depends on the team sent to investigate a case. They should be adequately motivated and protected and incentives offered for successful prosecution of offences. Customs and the Inland Revenue Intelligence Unit should be reorganised and staff should be adequately trained to deal with high-tech crimes.
The Central Bank of Sri Lanka too should be actively involved in preventing economic crimes; it showed some genuine enthusiasm when pyramid schemes made their mark in Sri Lanka. Likewise, public awareness should be raised with regard to other scams so that unsuspecting citizens are saved from pitfalls.
Gambling and casinos are good money spinners for the economy, as is the income from tobacco and liquor sales and Sri Lanka cannot afford to do away with such enterprises. An effective economy requires that all business functions, though some may be morally repugnant, should reasonably be monitored and regulated. It does not mean that such industries should be banned, but there should be adequate checks and balances.
(The writer is a freelance journalist and a Government affairs consultant. He is a registered member of the American Association of Political Consultants.)
