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Learning from the lessons of recent events

On enhancing and sustaining good governance


Including a flashback to a pre-presidential election thought of 2005,
with reflections on a statement made in Parliament by a former Finance
Minister, 40 years ago

Wednesday, 27 September 2017


Flashback 2005
My question to all peoples representatives in the legislature and key public
officials is this. Was the legislation referred to by the former Minister brought to
Parliament? Was it passed? If not what statutory measures exist through either
the existing codes or specific statutes which will act as a deterrent to the type of
actions and resultant risks to the country? In lighter vein, the money wasted on
this project could have funded millions of bags of free fertiliser and millions upon
millions of glasses of free milk! However on a serious note, if that money was
ploughed into rural roads, buses, access to safe drinking water, electricity, rural
schools and hospitals almost 30 years ago which was even before we opened
the economy or knew what privatisation meant even to bash the bad ones
around, we could have bridged income as well as digital divides and reduced the
regional disparities about which there is so much natural concern today. Then the
pledges of todays political parties, about fertiliser or milk would have been
relatively redundant. Ranel Wijesinha, November 2005.

We invest considerable time and money and rightfully so, to sustain the
environment we live in, and the enterprises we work with. However, I submit,
that we should be investing far greater time and mind, to address the challenges
to what I will phrase Enhancing and sustaining good governance.

We have a challenge
Ours is a challenge of formidable proportions. A challenge to individuals and
institutions - whether in corporate governance or in State-Owned Enterprise
governance, in the governance of self as public officials, professionals, nominees
in supervisory or regulatory bodies in banking, securities, insurance, health,
education, utilities, accounting and auditing standards, product and service,
quality and safety standards, or as individuals engaged in enterprise or
philanthropy, in advisory bodies, religious or social societies or charities and much
more.

That challenge is now taking centre-stage


The challenge I refer to is now taking centre-stage and will gain further
momentum. The people of our land today, are empowered to discuss and debate
any matter, in any fora, at any time, at any place, in any medium. I therefore
chose to share my reminiscences about a cautionary thought I articulated almost
12 years ago, in a 2005 publication in the print media.
It was based on a real life example of 40 years ago, just as the country began its
journey as an open or market economy. The value of that thought and the time I
invested then, in researching and writing it, will I hope, be appreciated at least
now.

Our collective purpose should be to help build, rather than to break


I have a purpose in investing time to search my e-archives and to request the
print media to republish the article. While reflecting upon the repeated news in
the print and electronic media, about those who have been found wanting, and
while being only human to empathise with their families, my purpose is to
highlight the need for us all, to be conscious of our responsibilities, in whatever
roles we play.

Our responsibilities also include enhancing the awareness of those who we work
with, and doing so proactively. We need to help build a better nation, not
overnight, but incrementally and progressively. We cannot be irresponsible in
contributing to the breakup of a nations fabric, by design or by default. I remain
positive, that each small contribution, by like-minded people, will collectively
help. If the social media used to showcase all what is undesirable, is also used
positively, as a medium to showcase examples of the good we do, or can do, this
task will have greater life and meaning.

A possible Government media and communication

strategy on:
The role of public officials and Government nominees
In enhancing and sustaining good governance
The above should be placed on the national agenda and there clearly is a role for
the eminently capable Minister of Finance and Media Mangala Samaraweera to
consider conceptualising content for media and communications on what I will
term The role of public officials and government nominees in enhancing and
sustaining good governance. This is a specific project for an overall media unit.
Key public officials and Government nominees, who are performing their roles
well, can be interviewed, showcased and invited to share thoughts with others.

Ideas are a dime a dozen; those who implement them are priceless
I do not think we need to consult Saatchi and Saatchi of London, BCG of Berlin,
McKinsey of New York or the now defamed Bell Pottinger. There are local
agencies, and also representatives of global agencies, with indigenous, home-
grown, creative talent and capability. That talent should be leveraged. I hope this
thought will be considered and implemented. I believe it is necessary that I reflect
briefly on the following, which will provide any reader with a basis for my readily
apparent but justifiable, anxiousness.

Strategy workshops and a robust media unit


I will reminisce but not in detail, about my suggestions for a proactive Media Unit,
going back to the 1994 general elections. I had a healthy debate with Dr.
Wickrema Weerasooriya when I was requested to see him with content I had
developed. I will not also elaborate on the repeat of the suggestion for a robust
media unit, at the workshops I conducted in 1996, as an independent honorary
consultant at the invitation of Ranil Wickremesinghe and Karu Jayasuriya, at
Sirikotha and the JSS auditorium. All this was gratis time.

Almost 10 years later in 2006, I proposed, the Restructuring and repositioning of


a robust media unit in a series of interactive workshops I conducted, again as an
independent, and once again, on a gratis basis. On this occasion, it was to develop
the Panditharatne Commission Report with a team of handpicked people.

Learning outcomes for law makers and ourselves


As I invest time once again, to search and locate my 2005 article, I do
so because I believe that this example of four decades ago, yet has learning
outcomes and thoughts and indeed, possible next steps, for all of us whether
we are law makers, the peoples representatives, public officials, professionals in
public institutions, in private practice, or in private enterprise. The article of 30
November 2005, is reproduced in full, below:

Political will, courage and commitment to close a hole in the nations balance
sheet

The following are extracts of the address made in Parliament, on the Urea
Fertiliser Project, by the then Minister of Finance and Planning Ronnie De Mel, on
21 December 1977.

I decided to intervene at this stage of the committee discussion on the Votes of


the Ministry of Industries and Scientific Affairs, to draw the attention of this
House and through this House of the country to a matter with far reaching
financial and economic consequences, not only to this Ministry but to the entire
country and also to the generations still unborn and on which we have to take
immediate action. I refer to the Urea Fertiliser Project. I am not bringing this
to the notice of the House merely in a spirit of criticism of the last Government,
but as I want this to be a lesson for the future, a lesson and a warning to our
chairmen and directors of corporations not to repeat this mistake, a lesson for the
General Managers of our Corporations not to make this mistake again...

We propose to introduce legislation very soon to make chairmen and directors


of corporations personally liable for their actions in those corporations. Their
property will be sequestered if they do this type of thing. I do not think most of
the present chairmen and directors would like to continue if they know what they
are in for. They will make it a point to study their projects a little more carefully
when they know that they will be personally held liable and that they will be
charged and surcharged for any losses or lapses on their part.

Every worthwhile financial and technical consultant advised them not to go


ahead with this project. Several countries, to which the Government applied for
aid, including Iraq, advised them not to touch this project even with a barge pole
because it will never be feasible in this country. But the last Government went
ahead with this, notwithstanding all the advice given by the technical and
financial consultants who would have given them advice. The World Bank told
them not to go ahead with this project. Several aid group countries, whom they
appealed to, refused to give them aid because the project could never be made a
worthwhile project in this country. But they went ahead regardless of all this
advice.

The following summary extracted from the detailed address to Parliament of then
Minister Ronnie De Mel in December 1977, with direct quotations made by him
on specific aspects of the fertiliser project, will provide further clarity on why this
State-Owned Enterprise (SOE) had to be closed down:
The original proposal to start a fertiliser factory in the country would have
cost Rs.90 million. Due to a tug of war between several Ministers, that
project was shelved.
The project was revived during late Dudley Senanayakes Government
from 1965-70. The then Minister of Industries, Philip Gunawardena, was
to complete the project at a total cost of Rs. 346 million.
That Government fell and the United Front Government which took office
in 1970 abandoned the project after what they called a detailed inquiry
by a committee which was headed by the then Minister of Posts and
Telecommunications, C. Kumarasuriar. The reason given was that the
costs were too high viz Rs. 346 million.
However they revived the project and called for tenders again the
usual game. By that time it was only the SLFP that formed the
Government because the other partners of the United Front had left the
Government. They accepted a tender at a total cost of Rs. 1,168 million.
They entered into a contract with a successful tenderer. Today, with
further inflation the costs have been revised, and the present revised
estimate is Rs. 2,000 million. What was Rs. 90 million in my time, what
became Rs. 340 million and was considered too expensive in Phillip
Gunawardenas time in Dudley Senanayakes Government, has now
become Rs. 2,000 million.
Now we will go into the project itself. That is the most shocking story of
all. The project is based on naphtha as the feedstock, not on natural gas,
which is the normal feedstock for any worthwhile fertiliser project. We
have no natural gas here. So, actually we should never have started this
type of project. Naphtha is a by-product of the Petroleum Corporation
based on crude oil something that is imported. Being an oil by-product,
the, cost of naphtha has been increasing steeply from Rs.797 per metric
ton in 1975 to Rs. 1,600 at pre-budget prices. It will be nearly double at
post-budget prices.
At the same time, the international price of urea fertiliser has dropped
considerably because all over the world the oil-producing countries are
having their own fertiliser factories fed with their own natural gas or
naphtha as a by-product of their own oil.
Fertiliser factories are springing up all over Pakistan, Saudi Arabia,
Qatar, Kuwait, the United Arab Emirates, and Bahrain because they
have the raw material in their own countries, their own oil and their own
natural gas. And the price of urea fertiliser which stood at 330 dollars in
1974 steadily dropped and now stands at 110 dollars c.i.f., Colombo. So,
you will see that the raw material has gone up four times in price. The
finished product has gone down by 70% it has become one-third of its
previous price.
What is the position today? The installed capacity of our so-called Urea
Plant is 310,000 metric tons. What is the total annual requirement of urea
in this country? Only 100,000 metric tons. In other words, the plant is
geared to produce three times the annual requirement of this country.
Where were they going to sell this urea? Were they going to eat this
urea? This was pointed out to the last Government but they brushed
aside all these things. I understand the commission was in the region of
Rs. 50 million apart from the commission on the import of crude oil,
which was going to be an annually recurrent commission. As I said, the
entire capacity of the plant is 310,000 metric tons while the domestic
consumption is only 100,000 metric tons. Even the projected consumption
in 1985 is supposed to be 150,000 tons. Thus, this plant will not work at
more than 50% capacity even if it supplies all the requirements of Sri
Lanka.
I will now give you the projected figures on this factory prepared by my
Ministry of Finance and Planning. The annual loss is going to be Rs. 400
million in the first year. It will rise to Rs. 500 million in three years time. It
will go up to Rs. 600 million in if you commit yourselves to this factory.
What a tragic waste of money, what a reckless way to spend hard-
earned foreign exchange resources of this land! I would request the
Minister of Industries and Scientific Affairs to immediately go into the
question of cancelling the contract, because even if you pay a penalty of
Rs. 100 million it is still worthwhile. Pay a penalty of Rs. 100 million and
cancel this contract because you will be saddled with a loss of Rs. 500
million every year, if you do not do so. I wish that my friend the Minister
of Industries and Scientific Affairs would go into this matter very carefully
I am prepared to give him all assistance and get out of this contract
which is a dead loss to this country, a dead loss for all time.
End of extracts from the Hansard
What I like in particular, is Minister De Mels message to public servants: I am
calling upon all chairmen of corporations, all directors, all general managers to
note this: Please do not think you can get away with this type of nonsense in the
future because we are going to make you personally responsible. We will
sequester your property and your assets if you do this type of thing in the future.
That is all I have to say, sir.
My question to all peoples representatives in the legislature and key public
officials is this. Was the legislation referred to by the former Minister, brought to
Parliament? Was it passed? If not what statutory measures exist through either
the existing codes or specific statutes which will act as a deterrent to the type of
actions and resultant risks to the country, examples of which we just discussed? In
lighter vein, the money wasted on this project could have funded millions of bags
of free fertiliser and millions upon millions of glasses of free milk!

However on a serious note, if that money was ploughed into rural roads, buses,
access to safe drinking water, electricity, rural schools and hospitals almost 30
years ago, which was even before we opened the economy or knew what
privatisation meant even to bash the bad ones around, we could have bridged
income as well as digital divides and reduced the regional disparities about which
there is so much natural concern today. Then the pledges of todays political
parties, about fertiliser or milk would have been relatively redundant.

I thought it useful to share the above with readers, given that the CPD seminar on
the Open Economy & Privatisation Myths, Realities, Risks and Safeguards
(scheduled for 3 November 2005 at 5:30 p.m., at the Auditorium of the Institute
of Chartered Accountants of Sri-Lanka, with over 150 registrants), was abruptly
cancelled. That was a great pity since several aspects of this case would also have
been discussed from a multi-stakeholder perspective.

Just as the State Timber Corporation of Sri Lanka, a Harvard case study of many
years ago used in Asian Business Schools until the mid-nineties, this and several
other Sri Lankan cases, are good learning tools, for European business schools
to which I have been invited to contribute Sri Lankan cases some years ago or to
Harvard Business School, Asian, Latin American, or any business school anywhere.

My preference, however, would be to see how politicians of all political parties in


my own country, Sri Lanka, professionals who advise politicians, consultants who
advise big, medium or small private sector enterprises, can enhance their
awareness through writings or presentations such as these.
We can then build a more aware political, business, chamber and corporate
leadership as well as a strong public sector working in harmony with a vibrant
private sector. Then, we might just be able to transform our dreams to deeds and
rhetoric of all quarters, to tangible reality, for the benefit of society.

However, what is uncertain today is whether our people will be deprived of that
learning experience through selective intervention of the State as we witnessed
on 2 November 2005, a Black Wednesday for the Institute of Chartered
Accountants of Sri Lanka.
Posted by Thavam