Transparency and Accuracy of Central Bank and Treasury Data 21 Transparency International Sri Lanka

SRI LANKA GOVERNANCE REPORT 2009 First Published in Sri Lanka in 2009 © Transparency International Sri Lanka 28/1, Bullers Lane Colombo 07 Sri Lanka Tel: (94) 11 2501474, 2592287 Fax: (94) 11 2506419 E-mail: [email protected] Web: www.tisrilanka.org ISBN: 978-955-1281-28-1 Cover Photo: Ananda Jayasekara Editors: Arjuna Parakrama, Nilhan de Mel, Ramsey Ben-Achour, Bettina Meier Coordinator: Aiman Rasheed Every effort has been made to verify the accuracy of the information contained in this report, including allegations. All information was believed to be correct as of November 2009. Nevertheless, Transparency International Sri Lanka cannot guarantee the accuracy and the completeness of the contents. Nor can Transparency International Sri Lanka accept responsibility for the consequences of its use for other purposes or in other contents. Contributions to the Governance Report 2009 by authors external to Transparency International do not necessarily reflect the view of Transparency International or Transparency International Sri Lanka. Table of Contents Foreword 01 Introduction 03 Governance in Times of War and Peace 07 Suzie Beling Transparency and Accuracy of Central Bank and Treasury Data 21 Transparency International Sri Lanka Governance Crisis in the Financial Services Sector 25 Transparency International Sri Lanka Perceptions of Sri Lanka in Governance Indices 35 Gareesha Wirithamulla Interview with the Chairman of the Bribery Commission 45 Nilhan de Mel The Decline of Media Freedom in an Age of Fear 49 Ananda Dharmapriya Jayasekara Failing to COPE: Parliamentary Oversight in 2008/2009 57 Ramsey Ben-Achour The Politicization of Public Administration in Education and Foreign Service 61 Nilhan de Mel Interview with the President of the Clean Hands Alliance 67 Aiman Rasheed Post Conflict Challenges of Governance 71 Frances Bulathsinghala and Arjuna Parakrama “There is a cancer that must be removed in order to facilitate the advancement of this nation; it is none other than waste and corruption. You and I need to commit ourselves to the eradication of corruption and fraud not only in the public sector, but also in the private sector.” President Mahinda Rajapaksa Keynote address at the Institute of Chartered Accountants of Sri Lanka 23.11.2009 “Power tends to corrupt, and absolute power corrupts absolutely.” Baron Acton (1834–1902) Foreword Transparency International Sri Lanka’s (TISL) mission is to enhance integrity and curb corruption in all sectors. We do this by engaging all stakeholders in constructive dialogue, with the aim to devise joint strategies to overcome institutional, legal, and attitudinal obstacles to good governance. We strongly believe that a collective effort is needed to reduce corruption and mitigate the negative effects that it has on our society. Policy makers, the business community, and civil society must work hand in hand to strengthen Sri Lanka’s governance framework, and create an environment that does not tolerate the abuse of power and corruption. Much work needs to be done. As in previous years, the Governance Report 2009 aims at stimulating the debate on governance in Sri Lanka by providing an overview of key events that occurred between November 2008 and October 2009. In addition, it includes detailed analysis on a wide range of selected topics. Without a doubt, the end of the armed conflict was the hallmark event in the past year. To bring about lasting peace, however, governance issues need to be urgently addressed. Other important events in the past year include the crisis in the finance sector and the deterioration of media freedom. While this report cannot be exhaustive, it does attempt to cover the most important trends and developments and, in so doing, to provide fact-based information that is needed to support a constructive debate on governance. Indeed, Sri Lanka needs more space for open debates—debates that are based on accurate and relevant information. We hope that the Governance Report 2009 contributes to this goal. The chapters of this report have been written by both TISL staff and external subject experts. I wish to express my gratitude to the authors of the articles, who delivered excellent texts despite working under tight time lines. A great thank you goes to the editorial panel—Prof Arjuna Parakrama, Nilhan de Mel, Ramsey Ben-Achour, and Bettina Meier—that has with great dedication and diligence ensured the quality and accuracy of this report. Thanks to Aiman Rasheed for competently co-ordinating the process of writing. And finally, a big thank you to the external reviewers Nelum Gamage, Chandra Jayaratne, Dr Saravanamuttu, and the many other experts who wished to remain anonymous. J.C. Weliamuna Executive Director -1- -2- Introduction: Post-War Governance Requires Real Changes of Attitude and Process Definitions of “governance” are notoriously slippery. It is clear that an all-encompassing mandate under the rubric of governance is often counter-productive because it leads to vagueness and impracticability. The UN-supported trend to be more inclusive and integrative in describing this concept, however, is gaining wide acceptance because it seeks to address the inter-related concerns that confront us in the complex societies that we live in today. We no longer have the luxury of artificially separating the economic from the social and political. This is especially true in terms of governance, as the consequences and ramifications of each impinge so crucially on the others. The UNDP’s policy document on good governance and sustainable development provides an excellent over-arching framework and lens through which the diverse yet related essays in this Report should be viewed. “Governance can be seen as the exercise of economic, political and administrative authority to manage a country's affairs at all levels. It comprises the mechanisms, processes, and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations, and mediate their differences. Good governance is, among other things, participatory, transparent, and accountable. It is also effective, equitable, and promotes the rule of law. Good governance ensures that political, social, and economic priorities are based on broad consensus in society and that the voices of the poorest and the most vulnerable are heard in the process of decision-making over the allocation of development resources. Governance has three legs: economic, political, and administrative. Economic governance includes decision-making processes that affect a country's economic activities and its relationships with other economies. It clearly has major implications for equity, poverty, and quality of life. Political governance is the process of decision-making to formulate policy. Administrative governance is the system of policy implementation. Encompassing all three, good governance defines the processes and structures that guide political and socio-economic relationships. Governance encompasses the state, but it also transcends the state by including the private sector and civil society organisations.” TISL’s 2009 Governance Report seeks to progress beyond minimalist and exclusively statist definitions of governance. Indeed, it is important to grasp the multiple, yet inter-connected, foundations of good governance which include issues of participation, transparency, accountability, gender sensitivity, and anti-corruption to name but a few. The report attempts to address these issues in pro-active and people-empowering ways, as opposed to the usual passive defaults that are demonstrably inadequate due to hierarchies of power and hegemony in fraught contexts such as Sri Lanka. -3- Thus, the chapters in this report describing the year’s performance of COPE, the Central Bank, and the Bribery Commission share a common underlying theme. That is, accountability must not be confined to specialists and privileged interlocutors who are able to demand information from responsible and crucial state regulatory institutions. Instead, accountability should be pro- actively transparent towards all sections of society. The analysis of post-conflict governance in the North and East articulates the view that, irrespective of the motives of government, legitimacy can only be derived through meaningful participation and ownership of projects, which must include serious input into decision-making and periodic review. This also applies to the analysis of governance concerns regarding the politicization of the education and foreign affairs ministries. The relationship between fundamental rights/freedoms and good governance is less clearly defined in the literature, though it is implicit in the chapters discussed above. It needs to be stressed that in the Sri Lankan context specifically, but also in general, an enabling environment or safe space for dissent, difference, and discussion is a key pre-requisite of good governance. This is because the mere existence of avenues for participation, redress, and so on will do nothing to enhance accountability and transparency if other forces and realities deter the general public from asking questions and seeking remedies. In situations where there is no safe space, public discussions will yield no tangible results in relation to holding government officials accountable, and in ensuring that government processes are transparent and user-friendly. Many of the contributors to this report have identified this mismatch between the existence on paper of good practice

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