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National planning: The need for consistency

Mar 5, 2012 1:30:03 PM - www.ft.lk

The need for a National Policy Council
John Exter, founder Governor of the Central Bank of Sri Lanka, once wrote that whatever the machinations of politicians, economists, bureaucrats, businessmen, gangsters, voters and others who think that they could manipulate the market for their own benefit, ‘finally the market will win’.

This basic truth has been proved over and over again. Bubbles, economic and otherwise, are pumped up, greeted with unending hosannas by that special breed of sycophants, we Sri Lankans excel in being, and in time, blow up in their collective faces, with disastrous consequences, for the proverbial ‘ordinary man’, as can be witnessed at the present time.
This has led some perceptive analysts to forward the proposition that ‘planning is dead, economic development is generated by well regulated markets, responding to credible and consistent policies’. However, politicians and their advisors love to think that they could, by sudden, ill-thought policy initiatives dominate or manipulate markets to answer to their beck and call.
This weakness requires that there should be a mechanism which would place the planning process in a framework which would encourage consistency, so that sudden unsustainable shocks like: the increase in power prices, petroleum prices, bus fares, gas prices, the sudden change in the exchange rate, food prices, interest rates, all at the same time, do not crate crises which people cannot cope with.

India’s Planning Commission
A possible example in India’s Planning Commission comes to mind. Sri Lanka has a National Planning Department (NPD) in the Ministry of Finance, but this institution has never had the clout needed to be proactive, its role is mostly post-active, after a policy is announced, trying their best to provide a credible justification for the mostly harebrained schemes conjured up by the politicians and their sycophants.
May be when Dr. Gamini Corea originally set up the NPD and published the first plan, it had some credibility, so also when people like Godfrey Gunatilaka, lately of Marga, headed it.
India’s Planning Commission has been described by India’s first Prime Minister Jawaharlal Nehru, as a ‘precious gift’ to India. Soon the Planning Commission will publish its 12th National Plan for India, targeting the five years beginning April 2012.
The National Plans published by the Commission has placed the Indian economy in a straight jacket, which has on the positive side helped India to avoid the huge sudden changes and shocks, flip-flops in policy which have plagued other countries, with populist democracies.
On the negative side, it is argued that, the Planning Commissions rigidity has held back the Indian economy in that it has been unable adjust fast enough to the changing local, national and global scenario.
Indeed cynics maintain that whole communication and information technology, business process outsourcing, computing and mobile telephony technologies took off in India solely due to the reason that there was no politician, economist or bureaucrat connected to the Planning Commission who understood those sectors and since they had no comprehension of it, there was no way they could put it in a planning straight jacket and bring it under the ‘License Raj’!
Thus were born the global giants like Infosys, Wipro and Tata Computer Services! On the other hand, the rent seeking politicians and their acolytes were clever enough to comprehend the potential for financial gain in the grant of 2G Spectrum licenses for mobile connectivity. The result is that former Telecommunication Minister A. Raja whiles away the time in Delhi’s Tihar jail and the Supreme Court has cancelled hundreds of licenses issued by his Ministry!
India’s economic crisis of 1991, which led to an unprecedented reform of the India’s permit Raj and closed economy, should have seen the demise of the Planning Commission. Indeed cynics say that India reforms not due to any plans put forward by the Planning Commission but solely in response to economic crises!

Reason for survival
One reason the Planning Commission in India has survived, is due the fact that the economic planner who led and implemented the 1991 reforms, is India’s Prime Minister today, Manmohan Singh.
The Head of the Planning Commission since 2004 is Economist Montek Singh Ahluwalia, who served under Manmohan Singh in the 1990s when the reforms were implemented. He is said to be the PM’s right hand man on economic affairs. In 1985, when the 7th Plan was published, the aim was to eradicate poverty in India by the year 2000! One would think that an institution which has failed in that task so miserably would have been dead and buried a quarter of a century later!
But, notwithstanding these failures, it is still probably the most powerful organ of the Government of India, next to the Prime Minister Office, North Block, which houses the Finance Ministry and the South Block which houses the External Affairs Ministry. Not to mention the house on Race Course Road, New Delhi, out of which Congress Party Chairperson Sonia Gandhi operates.
This is notwithstanding the fact that today India has a booming private sector and the proportion of State spending that can be ‘planned’ by the State in the classical sense has reduced drastically. The share of the economy controlled by the bureaucracy has also withered.
Coalition governments at New Delhi and State governments in the hands of opposition parties has led to excessive politicisation of the Indian body politic with political expediency only often being the controlling factor in policy decision making. Yet the India Planning Commission survives, why?
The boss, Montek Singh Ahluwalia, and his closeness to the Manmohan Singh is one reason. The Planning Commissions reports are yet the best repository of data on the Indian economy and long term national priorities. The nation and world needs accurate data.
Recently the Economist newspaper announced that it would cease forthwith to quote the statistics issued by Argentina’s INDEC, the national census bureau, as they are no longer truthful! Credible national statistics is one specialty of the India’s Planning Commission.
Also in Dr. Ahluwalia’s words, the Commission has the ‘power to put things on the agenda, to push and persuade’. But politicians may not always accept the Planning Commission’s advice, when there could be negative political fallout.
For example Dr. Ahluwalia strongly supported opening up of the retail trade in India to the Walmarts and Tescos and Carrefours of the world, but the Government politicians chickened out, in the face of sustained political opposition from coalition partners! Cynics say, like Sri Lanka today, India can only reform when faced with an economic crisis, as in 1991!
India has brought in the private sector to find away to make the Planning Commission more relevant. Arun Maira, a successful businessman who at one time headed Boston Consulting, currently a member of the Commission, has expressed the view that the Planning Commission should not only talk to political leaders, but also directly ‘talk to the people’ of India, initiating a public debate about the dire need for reform if people’s lives are to be improved. A valid point, but will insecure politicians tolerate such evangelism, if they feel that the advocacy by a state institution will have a negative political fallout?

National policy
Policy, meaning a country’s national policy, has to be consistent and predictable. Policy which flips and flops upsets anyone who is trying to plan his life, let alone a business or an investment.
The dictionary meaning of Consistency, (Oxford Advanced Learners 8th edition), ‘always behaving in the same way or having the same opinions, standards, etc.,’ says it all. The average politician in South Asia can be described as a person, who suddenly changes his or her opinion or policy – a person who takes a U-turn, not based on any logic but just for personal or political gain. A U-turn is in turn explained as ‘a complete change of policy or behaviour, usually one that is embarrassing’.
There is a pithy Sinhala saying which is much more evocative, to explain contradictory inconsistency: ‘Raata Migel, Dawalta Daniel!’ Migel by night, Daniel by daylight! In Parliament, some time ago, a Sinhala MP married to a Tamil lady was opposing a Bill to facilitate the use of Tamil for official business, when the Prime Minister of the day, intervened to say: ‘For the Honourable Member speaking now, of course, it has to be Sinhala by day and Tamil by night’!
There are numerous examples, other than the present series of consecutive economic shocks, which conclusively establish that inconsistency in national policy is the norm. They are in the area of Constitutional reform, visas on arrival for leisure-seeking foreigners and regulation of microfinance, land laws for the north and east, private medical education, plastic boxes substituted for polythene sacks for transport of fruit and vegetables, acquisition of property of cultural or historical value, expropriation of underutilised and underperforming assets, economic fundamentals, etc.

Constitutional reform
Let us consider just one in detail, on Constitutional reform. This nation has gone through a convoluted, painstaking, expensive process of Constitutional reform consideration, including visits to India by some worthies, to examine the Panchayat system of government, numerous meetings of All Party Committees and sittings of all manner of councils, public advertisements for proposals, reports upon reports and advisory committees sitting ad nauseum, spending horrendous amounts of taxpayers’ money , resulting in a final document of proposals, put together by the Minster in charge, in which, is was forlornly hoped, that some sort of consensus would have been reached.
When lo and behold out the blue, like a thunderbolt from hell, comes an amendment to the Constitution, which no lesser person than Rohan Edirisinghe, lecturer in law at the University of Colombo and a Director of the Centre for Policy Alternatives, has gone on record saying that he ‘has significant problems with the process through which the Amendment was introduced. It was rushed, not consultative and couched in secrecy. Few outside Government even had access to the proposed Amendment before it was sent to the Supreme Court. The Amendment goes against the President’s own ‘Mahinda Chinthana’ of 2005 and 2010, it completely undermines existing provisions to the Constitution with severe implications for, inter alia, the conduct of democratic elections. The cumulative effect of the proposal totally undermines the de-politicisation of democratic institutions.’
The legality of the matter, on the need for a referendum to get the consent of the voting public for the change, was canvassed before the Supreme Court and the petitioners have placed arguments before Court asking for a referendum on the amendments, which have been overruled and the Court has decided that a referendum is not required.
Further, civil society and political parties burnt the midnight oil to prepare their positions for the Government’s consideration in the original APRC process, hoping against hope that this time around it would be seriously considered, not just thrown aside and some other proposals foisted upon the unsuspecting public.
Connected to this is the inconsistency on the LLRC report. The LLRC has made some recommendations. No serious credible steps have been taken to implement those recommendations, except a belated few like the military appointing their own tribunals to inquire into allegations against themselves. At the UN Commission on Human Rights at Geneva, Sri Lanka is under pressure to take credible action on the report’s recommendations.

Consistent and predictable policy framework needed
Investors, business persons and entrepreneurs need a consistent and predictable policy framework. It is with the intention of achieving this that the Ceylon Chamber of Commerce, in its proposals to amend the Constitution in response to an invitation from the Government for proposals to resolve the National Question, submitted in August 2006, made the following proposal:
Proposal No. 27: The National Policy Council. The chamber proposed that a National Policy Council be set up, consisting of the President, the PM, the Leader of the Opposition, the Minister of Finance and no more than 15 others, of whom the Chief Ministers of the Provinces will nominate one each and the balance appointed by the President, on the recommendation of the Constitutional Council from among those who have distinguished themselves in the fields of business and finance, law, economic development, social development, human development, science and technology. The President shall chair the council, while the PM will be deputy chair.
The function of the council would be to advise the cabinet of ministers on policy and planning and coordination of policies at all levels of government. The council shall have access to all memoranda submitted to the cabinet and the provincial boards of ministers and the right to make observations to the cabinet and provincial boards of ministers on the memoranda.
A National Policy Secretariat will be constituted, as a Government department, to support the council and will be headed by a director general, who will act as the secretary to the National Policy Council. The council will submit a report to Parliament every quarter on the performance of its functions. The report will be made public.
In practice the intention would have been that once a memorandum was tabled before cabinet or the provincial boards of ministers, it would be taken up for consideration only after the National Policy Council observations had been given and that there would be a balancing and ironing out of policy inconsistencies through this process.
A planning commission on the lines of the Indian Planning Commissions, it is understood, was also considered by the chamber, but the sentiment was that in the Indian system had a rigidity which held back India from being an early participant in the emerging globalised economy.
If Sri Lanka is to develop to its full potential, as a partnership between private investment and the Government, we need policy consistency; policy inconsistencies are a destructive nuisance, which hinders economic progress by impeding investment decisions by entrepreneurs.
(The writer is a lawyer, who has over 30 years experience as a CEO in both government and private sectors. He retired from the office of Secretary, Ministry of Finance and currently is the Managing Director of the Sri Lanka Business Development Centre.)