Institutionalising corruption and nepotism: Office for International Trade

The establishment of the OIT, as currently proposed, poses a serious threat to Sri Lanka’s domestic industries and economic stability

Sri Lanka’s world record for corruption, nepotism and bad governance is now being elevated by the proposed setting up of an Office for International Trade (OIT) in the Economic Transformation Bill (Part (iv) Chapter XXII Clause 99 - 131. The transfer of State or National powers in the vital area of international trade to non-accountable politically appointed Board of private individuals in the OIT is indeed serious in that it has a pervasive effect on goods, services, employment, production, agriculture, phytosanitary and technical aspects health, investment, economic sovereignty, and a gamut of other factors affecting the day-to-day lives of the people.

This article attempts to show in facts and context, the background and details of this setting up shop for corruption and nepotism. To do so, it examines the actual origin of the OIT, compares the OIT with the Public Service appointed “A” Grade Department of Commerce (DOC) whose entire functions, are now vested with the OIT and exposes the OIT as arsenal for the successful practice of corruption and nepotism at an international scale.

OIT and the defunct AIT (Agency for International Trade)

The OIT is presented today by the Government, as part of an Economic Transformation Bill in line with IMF obligations. However let us not be deceived! Its origin lies as the Agency for International Trade under Development (Special Provisions) Bill that subsisted in draft form during 2016-2019. This proposal of the present President who as Prime Minister headed Cabinet Committee on Economic Management was rejected due to public outcry and opposition in Parliament.

The AIT was initially headed by a Managing Director designate, an academic of a research organisation and after his demise by the present head of the OIT which also functions at a provisional level. Its members were private sector persons and a few ex-officio Government officials. It was provisionally established pending legislation, to do the work of the DOC during “Yahapalanaya” times. This was under the newly created Ministry of Development Strategies and International Trade which gazetted all the functions of the Department of Commerce (DOC) except Trade Fairs under its wing.

The DOC meanwhile remained under the Ministry of Industry and Commerce and the AIT functioned in so far as they could in adhering to the then PM’s desire to negotiate Free Trade Agreements with China, India, and finally signing the Singapore Sri Lanka Free Trade Agreement. The latter was a subject of litigation and widespread criticism for blunders and errors. The AIT was eager to learn but unable to carry out DOC work that was gazetted under its own Ministry, due to lack of trained technical personnel, accountability, expertise and conflict of interest as seen in its current version of it in the OIT.

Notably, a few AIT private sector members at the time, obtained individual preferences for their garment industries and legal cases in the discussions of AIT meetings attended by the Minister of International Trade and Development Strategies (MODSIT), who presided over this ensemble!

In hitherto unprecedented circumstances, the DOC at the time, continued its customary work (albeit ungazetted) under the Ministry of Industry and Commerce. The DOC discharged its habitual functions with distinction including the obtaining of the EU GSP+ concession, removal of the fisheries ban, establishment of the Trade Information Portal, drafting and passing through Parliament of Anti-Dumping, Countervailing and Safeguard Legislation, trade representation abroad, successful participation of Sri Lanka’s WTO Trade Policy Review, leading negotiations at APTA, BIMSTEC, signing the WTO Trade Facilitation Agreement, negotiating and implementing EU Sri Lanka Trade Development Project, removal of USA Countervailing Duty on Sri Lanka rubber products exports, etc. etc. (Ref. Annual Performance and Accounts of the DOC to Parliament 2015-2019)

Proposed OIT form and function

The OIT is a newly created corporate Board that is entirely taking over the functions and purpose of a responsible Public Service Commission appointed permanent executive service of the Department of Commerce (DOC). After President Wickremesinghe assumed office in 2022, he has set about systematically dismantling the DOC, depriving it of the financial allocations in the Appropriation Budget of 2023, and finally abolishing the DOC as per Cabinet Decision dated 4 March 2024 on the Economic Transformation Bill. However, by the end of May 2024, President Wickremesinghe has decided to “maintain” the DOC under the Ministry of Trade while entirely transferring 99% of its functions to the OIT. (Note to the Cabinet No: PS/NC/SAD/283/2024 of 30th May 2024)

Clearly the stage is set for some skulduggery! It seems a politically appointed OIT must hold and exercise all the functions of a Public Service Technical Meritocracy as the DOC.

The recruitment of the Head of OIT is by the President for a contractual term of four years. The OIT is run by a Board of seven; of which six are “appointed members” and Chairperson/Ambassador appointed by the President (with Constitutional Council) and an ex-officio representative of the Treasury. In contrast, the origin of the specialised service of the Department of Commerce goes back to the early 1930s. It is similar to scientific/legal/technical services where the specialised human resource capacity remains within the one Organisation/Department (e.g. Legal Draftsman, Attorney General’s Department, Government Analyst Department, Irrigation Department, etc.)

The broad areas of “knowledge and experience in international trade which these Presidential political appointees are deemed to have under the OIT are nothing like the Public Service Commission recruitment Scheme to the Department of Commerce which is based on island wide competitive examination process, First or Second Class Degrees in specialised subjects relating to international trade and business. A postgraduate degree in the relevant field is, (i.e., Economics, Business, Commerce), is also required for the promotion to class – 1 position. There is continuous performance assessment, efficiency bar, training and foreign representation for these permanent cadres who are recruited at around graduation and accumulate further qualifications and on the job training and exposure until retirement as Head of Department. 

There is no sustainability or long term accountability of the OIT Chairperson/Ambassador and politically appointed Board since they could be hired and fired by Presidential decree during the four years that could at his discretion be only extended for another single term. Therefore, the decisions by majority taken by the Board would lack continuity, technical reliability and professional integrity. 

In comparison, the Director General of Commerce is a professional trade practitioner in permanent, accountable pensionable service, appointed by Cabinet after an approx. over a 30 year period of service ranging from Assistant Director, Deputy Director, Director in the DOC. 

The OIT Chairperson/Ambassador designate can be removed by the President if “he has failed to comply with any directions given by the Board”4(c). In effect he is a petty pawn of the political authority. His/Her appointment requirements are very general and basic requiring “knowledge and experience in the field of international trade”. But his functions are wide ranging, technical, needing depth of multilateral and regional trade expertise, international diplomacy which were formally discharged by a team of trained veteran professionals of the Department of Commerce.

The oversight on the OIT Chairperson/Ambassador remains confined to the President and Board appointed by the President, whereas the Director General of Commerce as Accounting Officer is subject to non-political official level monitoring and obligation to the Chief Accounting Officer i.e. Ministry Secretary and Public Service Commission and the Legislature to whom Annual Performance and Accounts and Work Plan for the year are submitted annually. This is in addition to the continued surveillance of the Auditor General.

The OIT, a newly created corporate Board, is entrusted with the functions and objectives of the Department of Commerce (DOC) whereas a separate Government Ministry or Department of technical career professionals to exclusively handle foreign trade and commercial policy is the norm in many trading nations in the world, e.g. International Trade Administration (ITA) Department of Commerce of the USA, Department of Foreign Affairs and Trade Australia, India, China, Thailand, Republic of Korea, etc. etc.

The staff of OIT that could be drawn from the Public Service on a temporary/permanent basis is at the behest of the politically appointed Board. And they should have the “right attitude” (as per the recommendations of the Minister of Trade & Commerce Cabinet Memo No: 23/1216/627/019 dated 26/06/23 Report of the Officers Committee Reviewing DOC). It is also this politically appointed Board that is in charge of recruitment of staff and experts from elsewhere that may not allow for the exercise of objective professional competence in the interest of the State over vested crony nepotism and business interests.

A case in example of the future aspect of the OIT Chairperson/Ambassador could well be, pliant, paid up, obedient, vassal of the political authority who enters into FTA negotiation at the behest of the President and vested group interests. This would be in contrast to a permanent accountable, public officer as DG Commerce who could allow only professional training and experience to guide the negotiation of Free Trade Agreements in the national interest.

The Office of International Trade (OIT) aims to establish Free Trade Agreements (FTAs) with RCEP mega block, China, an Economic and Technology Cooperation Agreement (ETCA) with India, Bangladesh, Malaysia, etc. This involves the reduction of duty for thousands of tariff lines in Sri Lanka’s imports. Decisions involving revenue sensitive measures that will also affect local domestic production are tantamount to transfer of financial authority to non-accountable individuals in an OIT Board since these FTAs are signed and sealed and entered into before they are passed in Parliament under the Revenue Protection Ordinance.

The OIT as an arsenal of corruption

Issues of Conflict of Interest on the part of OIT Chairperson, EC – Board, etc. are decided upon by the President himself who is the sole authority to decide on these matters. It is the President who is the sole authority to “satisfy himself of the matters so disclosed” as to the financial or other interests of the OIT Board members, its Chairperson that are “likely to affect prejudicially the exercise, performance and discharge powers, duties functions of members”.

The subjective and value judgement nature of above Chap. XXIII para 106 relating to issues of conflict of interest and corruption must be seen in the context of a probable scenario check; e.g.:

Hypothetical case study: A head of a responsible Public Service Department is requested by “political authorities” to certify Spices/Areca Nuts imported via illegal transshipment, container switching from Vietnam, Thailand, Indonesia as produced in Sri Lanka for export under India, Sri Lanka and Pakistan Free Trade Agreements so that traders could utilise illegally, duty reduction at the border. “Political authorities” range from Presidents, Finance Ministers, Trade Ministers and a host of other businessmen affiliated with political masters. The Secretary of the Ministry who is appointed by the President favours the politicians’ request. However, the Officer does not accede. Instead, she/he enlists the support and services of the Indian Revenue Board to visit the DOC and conduct on site investigations for several weeks, prosecute the importers, list the errant trader/exporters and submit the files and evidence to Attorney General Department, get the genuine Spices Trade Association in Colombo to work/lobby to get Cabinet Approval to remove Spices from 5 ways in which it was clandestinely imported (i.e. Temporary Import for Export Purpose, Entrepot, Hub, Import License, etc.) inter alia the Cancellation of Certificates of Origin that were issued for some arecanuts/pepper.

The proposed Chairperson/Ambassador OIT could never keep his position by serving the country in the above manner whereas executive public servants are appointed by the Public Service Commission and subject to objective disciplinary inquiry of the Establishment Code.

There is a risk that Certificates of Origin of FTAs could be issued for products that do not meet the criteria under existing and future Free Trade Agreements, jeopardising duty-free export opportunities for genuine Sri Lankan products. Therefore, the establishment of the OIT, as currently proposed, poses a serious threat to Sri Lanka’s domestic industries and economic stability. Considering the mafia of political/business interest that prevail in Sri Lanka, it is crucial to address these concerns before irreversible damage is done to our nation’s economy.

OIT Fund: Corruption/abuse of privilege

All departments run on monies allocated by the General Treasury and all receipts are duly credited to the Consolidated Fund of the Ministry of Finance. The OIT runs on a Fund of its own to which Parliament votes sums of money from time to time (Ch. XXVI para 120). However, OIT is allowed to “accept development assistance from multilateral agencies, whether in cash or otherwise, from persons or bodies of persons within or outside Sri Lanka and apply them in the exercise, performance and discharge of its powers and functions under the Act” under intimation to the Department of External Resources.

The question is could the OIT discharge its functions without being compromised by such donations? It is an Institution making multilateral and bilateral trade policy and decisions on behalf of Sri Lanka, exercising trade representation, trade negotiation and implementation, engaging in commercial and trade remedies, statutory approvals, etc. It is a fact that the private sector is very generous with “donations” to get their work done. The OIT Fund tends to formalise this process in a compromising and corrupt commercial backdrop.

Lack of transparency

All OIT employees are enjoined to “strict secrecy in respect of all matters connected with the affairs of the OIT “Ch. XXVII para 124 of the OIT. This is unprecedented in the Department of Commerce and the Public Service where transparency and consultation with stakeholders on all matters relating to international trade and Government decisions are regularly shared with the media as well. In fact many stakeholders including the Professional Services have complained that the recently concluded Sri Lanka/Thai FTA by the OIT designate, was not shared with them prior to signing the Agreement.

Selected remunerations and honorariums

Remunerations of the members of the OIT Board, its Chairperson/Ambassador are determined by the President in consultation with the Minister of Finance (Chap. XXIII para 110). In such situations there is a disparity between the remuneration of the Board and the rest of the technical executive staff as seen in most Boards and Corporations. This engenders a lack of team spirit and general cooperation. In contrast, all DOC officials are subject to a common Public Service Salary Structure across the board as befits qualifications, seniority and grade.

The DOC obtains services of all experts in Government on gratis basis since it is in the Public Service. Such services are free from bias and not in expectation of special payments as is the practice of the proposed OIT (Chap. XXIII para 111).

Establishment of International Trade Offices

OIT plans to establish International Trade Offices abroad providing an opportunity for this politically constituted outfit to appoint friends and family in Sri Lanka Missions abroad. Unlike in the Foreign Service which has more general and less specialised functions, no outsider private party has been posted to the 25 Commercial Posts abroad in major Commercial Centres of Sri Lanka Embassies abroad, to date, due to reasons of financial accountability, and vested commercial interests and the possibility of working as paid agents for selected business ventures.

In contrast, the official Trade Commissioners from DOC as public servants in the permanent accountable cadre of the Government, assigned to our Diplomatic Missions abroad are obligated to serve all Sri Lankan businesses, organisations, government and private entities on economic and trade related matters irrespective of favour across the spectrum of Small and Medium Enterprises in particular.

Conclusions

This analysis has shown the somewhat dubious origins of the OIT, the high level politicisation of its Board, composition and direction, the array of devices it holds to promote vested interests, conflict of interests, abuse of privilege and corruption. A comparison with the Public Service DOC has shown OIT’s utter lack of accountability, sustainability, capacity and responsibility. Coupled with its Presidential appointments, Presidential immunity and the dismal record of previous Presidents in Sri Lanka, the OIT sets the stage for global deal making and corruption in the conduct and practice of the country’s international trade.

(The writer holds a BA (1st Class) UoP, MSc, LLB (University of London), PGDip. In Economic Development (UoC), PGDip. Int.Trade GATT (Geneva).