An Open Appeal to the Sri Lanka Aid Consortium

by Victor Rajakulendran, Sydney, Australia

Ambassadors and Representatives of Financial Institutions,

You will be travelling down to Sri Lanka soon to participate in the Sri Lanka Development Forum, formerly called the Paris Aid Group, to be held from 29-30th of January at the Lighthouse Hotel in the port city of Galle.

The Sri Lankan Treasury Secretary, P. B. Jayasundara has been quoted in the Sri Lankan media as having said that the government has in the pipeline US$1.5-1.7 billion worth of projects ranging from water, health, education, roads and power to seek funding from the Consortium.  Because Sri Lanka secured $1.1 Billion in foreign aid last year, which included around US$300-400 million earmarked to rebuild areas affected by the December 2004 tsunami, the Sri Lankan government is hopeful of securing assistance for its projects during the two day forum, according to Jayasundara.

At the last Development Forum on May 16, 2005, the first ever held in Kandy, the main focus was on the post-tsunami recovery process.  More than 150 representatives from over 50 countries and donor agencies, including ambassadors and other dignitaries, took part. Donors made commitments and pledges exceeding US$3 billion in the form of grants and a moratorium on debts in view of the tsunami reconstruction process.

The Post-Tsunami Joint Operational Management System (P-TOMS) agreed up on by the two parties to the conflict and the donors, before the Kandy forum, to guarantee the equitable distribution of the Tsunami development aid was first tangled in a court proceeding and, later, was totally scrapped after President Rajapaksa was elected to office.  As a result, while houses have been built even for people not affected by the tsunami in the south, more than 90% of the houses affected by Tsunami have not been completed in the North-East, the Tamil homeland, according to World Bank figures, despite the fact that more than 70% of the death and destruction due to Tsunami was in the North-East of the island.

Furthermore, this year's donor conference comes at a time when the Norwegian-brokered ceasefire agreement exists only on paper.

With an uncertain political climate in the South, the Sinhala extremist forces clamouring for war and the security forces obliging by taking over LTTE-controlled areas in the East, the donor community has immense responsibility to ensure any foreign aid given to Sri Lankan government is spent appropriately. 

Sri Lanka, also, has a long history of investing aid money provided by the donor community in projects which have delivered very little in terms of long term peace-building.

Late last year, Transparency International, the leading global anti-corruption movement, was alarmed at the severe deterioration of the corruption situation in Sri Lanka.  Sri Lanka was ranked 78 in the Corruption Perception Index (CPI) [1] in 2005. But it dipped to 84 in 2006. Sri Lanka used to be ranked above all other nations in the South Asian region. Its ranking has now dropped below that of India.

The growing problem of corruption in Sri Lanka's state-run institutions was highlighted in a report presented to the Sri Lankan parliament this year by the Committee on Public Enterprises (COPE) [2].  COPE’s findings, while shocking, do not surprise many. The committee, which looked into 23 institutions including the Central Bank and Board of Investment, found gross waste and corruption existed in these institutions. COPE ndicated that many of these institutions operated without a corporate plan. According to the report, Sri Lanka’s Central Bank, the nation's premier banking institution, “failed, neglected and acted in a lethargic manner in relation to the recovery of a sum of rupees seven thousand million”[2].

Although Sri Lanka ratified the United Nations Convention against Corruption, it is yet to implement most of its international commitments.

Faltering peace initiatives, particularly after President Rajapaksa got elected to office, have seen Sri Lanka’s defence budget for 2007 ballooning out of proportion to the rest of the budget, to US$1.4 Billion. This is an increase of 46% over the previous year. While the massive expansion in military spending spells doom for the peace process that is backed by the International Community (IC), the real impact would be felt by the Tamil civilians living in the North-East of Sri Lanka.

As many analysts have pointed out, successive governments are using Sri Lanka’s military expenditure to support the rural economy in the South. According to Dr. Ken Bush, consultant to the OECD, the rural poor in the South are more dependent on military remittances than on poverty alleviation programs or overseas remittances. The nexus between defence expenditure and the economic dependency of the people in the key electorates of the south does not bode well for peace initiatives.  In other words, if the war stops and troop numbers are reduced to pre-war levels, these rural economies will collapse and plunge the Singhalese peasants into poverty.

This coming year, Sri Lanka will be spending more than 23% of its income on defence-related expenditures.

Like in the past, Sri Lanka is once again looking to the international donors to balance the books. While borrowing would fund a proportion of the deficit, the government hopes the rest will be received in the form of aid. Considering this fact, there is a need for donor nations and institutions to exercise greater responsibility in making decisions regarding providing aid to Sri Lanka.

When it comes to allocating aid to Sri Lanka, therefore, I also humbly urge you to take into account the possible disparity in aid distribution in Sri Lanka and its potential to further exacerbate the suffering of the people in the North-East, who are already affected by the war and tsunami.  

Any approach which does not take into account the above mentioned issues has the potential to create further conflicts, rather than contribute to peace.

Given the civil conflict within Sri Lanka and the failing institutions within the Sri Lankan state, Sri Lanka cannot be expected to be accountable for billions of dollars worth of foreign taxpayer funds. Therefore, donor nations and institutions should establish an internationally monitored, transparent mechanism to facilitate development and the equitable distribution of aid to all parts of the country.

Under-utilisation of aid provided to Sri Lanka due to bureaucratic delays, ethnically polarised decision-making, and political interference have denied much needed aid in the past to the North-East region of Sri Lanka. By establishing independent mechanisms, donor nations could be in a position to ensure that the aid is delivered to the intended recipients, irrespective of the situation on the ground.

In the past, to attract significant foreign aid to funds its war projects, when the Sri Lankan administration has always projected itself as a peace-loving one and suggested that a negotiated solution to the ethnic conflict is nearer than ever before when the time for the Development Forum draws near. Similar claims are now being made again.

International donors can no longer ignore their role in ensuring that the foreign aid is used for socially responsible projects. 

In concluding, I strongly urge the donors, both bilateral donor nations and the financial institutions, to ensure that donor funds are not used to fund the war effort of the Sri Lankan state against the Tamil people.

References:

1. Sri Lanka’s ranking slides down: Cause for Alarm: TI

2. Gross waste and corruption in state-run institution: COPE