With no end to Lanka’s constitutional crisis, protectionism and liberalism collide as...

With no end to Lanka’s constitutional crisis, protectionism and liberalism collide as Sirisena-Rajapaksa seek to consolidate power

Colombo Correspondent,
Ranil Wickremesinghe. Photo: Reuters

A week after the sacking of the UNP-led coalition government of Ranil Wickremesinghe who was then replaced by former Sri Lankan president Mahinda Rajapaksa, the former’s chances of regaining ground appears remote in the face of determined opposition by President Maithripala Sirisena and the new premier.

Even as the constitutional crisis continues, it is becoming increasing clear that Sirisena and Rajapaksa (who, besides being appointed PM also took charge as the finance minister) could put Wickremesinghe and the UNP in a Catch-22 situation by presenting a populist interim financial plan (or a vote on account until a full budget is prepared). Should the vote on account be defeated, parliament would be dissolved and fresh elections called for. The Sirisena-Rajapaksa camp expects the Sri Lanka PodujanaPerumana (SLPP) to perform well in any forthcoming elections since it won a record victory in the February’s local bodies elections. Besides, the SLPP has the backing of the Sinhala Buddhist majority at a time when Rajapaksa’s electoral machinery has whipped up calls to “save” Sri Lanka from being “sold to the West”.

Alongside taking immediate steps aimed at sweeping tax concessions and cutting the prices of fuel and essential items, Rajapaksa has tapped into people’s grievances against the right-wing, pro-Western, neo-liberal UNP-led regime which was tilting towards an ultra-capitalist framework much to the chagrin of Sirisena and his SLFP which is a left-of-centre socialist party. On his part, Rajapaksa has promised removal—and reduction of—certain taxes, a wide range of protective mechanisms for local business and has plans afoot to free the economy from depending on the West and a give shape to a new foreign policy.

The fear among Sri Lanka’s business circles that foreign investments, which were being wooed by the UNP-led government, would be now be effectively stalled, has not affected either Sirisena or Rajapaksa. The two share a common ideology that supports an agrarian and locally-driven economy as opposed to privatisation, increased reforms and trade agreements with other countries which the UNP was focused on.

With Sirisena declaring to foreign envoys this week that he would not mind even if the GSP plus tax concessions for Lankan goods in Europe were removed, Sri Lanka is fast wrapping itself in a sheath of closed economy protectionism that existed before the UNP introduced the open economy in 1977 after defeating the SLFP.

History is repeating itself in Sri Lanka with local politics getting caught once again between the ideologies of UNP with its open market policies and the import substitution and protectionism that the SLFP has traditionally been known for.

Observers point out that at the core of what might evolve into an intricate political issue is an even more intriguing economic problem, made still more complicated by corruption, wastage and short-sighted economic policies that fail to find middle ground between the two extremes of liberalism and socialism. Those who defend the UNP, which oversaw the economy under the now-dismantled UNP-SLFP coalition government, explain that the tedious business of restructuring the economy, especially amid allegations that the Rajapaksa era marked by massive loans for signature projects such as the Mattala airport that do not accrue any income. A common accusation against the previous Rajapaksa regime was that the emphasis on skill development was a gimmick aimed expanding the vote base.

In this backdrop, the Rajapaksa-led finance ministry’s announcement on November 1 that it was confident of meeting the budget deficit target of 4.9 percent by sharply reducing expenditure and simultaneously declaring wide-ranging changes in taxes spanning several sectors, is being viewed with skepticism by economic analysts.

The price of petrol has been cut by Rs 10 and diesel by Rs 7. While farmers will now enjoy interest rate waivers and a cut in fertilizer prices, the professional classes were wooed by reduction in income tax.

“Sri Lanka is heading towards an isolationist set of policies ranging from economy, trade and bilateral relations with the rest of the world,” an analyst said, as Sirisena and Rajapaksa adopted a stance last seen during the Rajapaksa regime when the Western world was shunned for allies such as China and Pakistan.

Interestingly, with the US, Canada, EU and UK and India issuing statements urging for democracy and constitutional norms to be respected, giving the general impression that they do not recognise Rajapaksa as the new PM, the Pakistan envoy followed China and met Rajapaksa on November 1.

Pakistan High Commissioner Dr Shahid Ahmad Hashmat met Rajapaksa and Speaker Karu Jayasuriya and reiterated his country’s support “for continuation and consolidation of democratic process in Sri Lanka”, the Pakistan mission said in a statement. The current political situation in Sri Lanka was discussed at the meeting with the high commissioner expressing hope that the ongoing political situation will be overcome peacefully in accordance with the Constitution and aspirations of Sri Lankan people, the Embassy said.

By keeping a conspicuous distance from Rajapaksa, India has given the impression that that it was unhappy about the changes in Sri Lanka, especially in the backdrop of Wickremesinghe’s recent visit to New Delhi. India had inked over 15 agreements with Sri Lanka in the past three years for new development projects.

Sirisena, who has insisted that he acted in accordance with the Constitution in appointing Rajapaksa as the new PM, has the support of some legal experts while there is also support among the legal fraternity that following the 19th Amendment the president no longer commanded the power to sack the PM.

Meanwhile, after Sirisena told his party’s election organisers that he would not remain as SLFP president “even for an hour” should Wickremesinghe re-emerge as stating PM, former defence secretary Gotabhaya Rajapaksa met the deposed prime minister. Reports indicated that the meeting was Gotabhaya was “very civil” towards Wickremesinghe and yet persuaded upon him to vacate Temple Trees. Wickremesinghe has been refusing to vacate the official residence of the prime minister even as Rajapaksa has sought to take recourse to diverse methods to evict him.