Analytical brain for government to end half-baked decisions in Sri Lanka

ECONOMYNEXT – Sri Lanka is setting up an analytics unit to make evidence based policy decisions which will reduce policy errors and reduce opportunities for corruption in areas like price controls, Economic Reforms and Public Distribution Minister Harsha de Silva said.

"The whole idea is to create a brain for the government of Sri Lanka," de Silva told reports.  "I want to create unit where data will come, they will get crunched, will get analysed and then something will come out – option 1 2 3 4.

"Those will go the political decision maker and they will decide.

"If we are making decisions without analysis, most of the time we will be wrong. Sometimes you may be right. But most of the time you will be wrong."

The analytics unit had already provided a price formula for liquefied petroleum gas, which has been submitted to court for approval. Sri Lanka Supreme Court had earlier given a ruling on LPG pricing, making it a legal issue in Sri Lanka.

"In my view all prices should be market determined," Minister de Silva said. "But if price controls have been put for some reason, why should the minister decide the price?

"Why should the cement price be decided by the minister? Why should the price of petrol be decided by the minister? Why should he minister decide the milk price? Why should the minister decide the gas price?

Corruption in Discretion

Reporters pointed out that it is lucrative for a minister to decide the retail price of a private company which is one reason politicians are eager to impose price controls.

In order to get a price hike, the affected firms have to go behind a minister.  For a one off consideration a minister can also lift price controls.

The minister can also punish firms he does not like by imposing new price controls. As a result price controls and ministerial discretion are lucrative for politicians.

"Lucrative I agree," de Silva said. "But there is no basis other than being lucrative for the person who has the discretion to make the decision.

"So we set up the analytics unit to help make decisions."

De Silva convenes the ‘cost of living committee’ of the government made up of several ministers.
Critics say corruption in the government machinery started to escalate in the 1970s mostly due to the controlled economy with multiple state interventions, where many economic decisions, ranging from imports to domestic trade and even transport or sale had to be approved by bureaucrats.

Sri Lanka closed the economy from 1971 when the Bretton Woods system of soft-pegs collapsed and the central bank printed money instead of hard pegging or floating like Singapore, and Japan did.

Even junior state workers had to be bribed to get most mundane documents passed in the controlled era.

Both exchange controls, import controls as well as price controls from inflation come from the money printing of the central bank. Some price increases come from the Federal Reserve, to whose currency the rupee is soft-pegged.

Permanent currency depreciation by the central bank ensured that prices that went up did not come down, raising the ‘cost of living’ lowering living standards and generating political unrest.

There have been calls to reform the central bank also criminalize certain actions of its domestic operations department that is making the rupee collapse.

Policy Making

De Silva said in a private company the paper has to be prepared after analyzing information and submitted to the Board for approval. 

But in Sri Lanka it did not happen in government.

"Let’s say there is a committee of ministers," de Silva said. "There are three of four ministers, someone says one thing. Another says something else, and then a decision is made. There is no analysis.

"Or when you put to cabinet or put to parliament there is no analysis. Either someone will be slander someone. There is will be some gossiping, then some unrelated issues will be discussed.

"But there is no analysis."

In a private company a wrong decision is a loss to shareholders.

But interventions by the government, which operates through coercive power and can enforces decisions by threat of violence of the police or jails as well s fines and has wide impact, the cost of failire is borne by the entire society.

Public Service

Critics say Sri Lanka had evidenced base policy making when the country had permanent secretaries before the 1971 constitution broke the independent civil service commission.

Polices were made after a green or white paper. Then public consultations followed, before the policy was finalized.

De Silva said before price formulae were finalized the affected parties were consulted.  In devising a price formula for milk powder, affected parties were consulted.

The British colonial administrations copied the ‘scholar-bureaucrat’ or mandarin system from China and took to Whitehall and went on replicate the system throughout the entire Empire.

The systems were preserved in countries like Singapore and Hong Kong and to a lesser extent in Malaysia.

From the 1978 constitution secretaries are appointed by the President making both ministers and secretaries political and leading to complete breakdown of the system.

The constitution council has gone some way to address the problem but ministry secretaries have not been touched.

According to article 41 (4)  "Every such Secretary, officer or member of the staff shall cease to hold office upon a new President assuming office."

Impermanent secretaries now lose office as soon as a cabinet is dissolved, giving almost a constitutional guarantee that there will be no continuity in either institutions, practices, or individual units, like the analytics unit of the Ministry of Economic Reforms and Public Distribution.

Under Sri Lanka’s constitution as it now exists there is no certainly that analytics unit or even the ministry of  Ministry of Economic Reforms and Public Distribution will exist in a few months from now.

According to Article 52 (3) "The Secretary to a Ministry shall cease to hold office upon the dissolution of the Cabinet of Ministers under the provisions of the Constitution or upon a determination by the President under Article 43 or 44 which results in the Ministry ceasing to exist." (Colombo/Aug16/2019)