Major reforms pose a big challenge for new Sri Lankan government

Billed as a platform for ending corruption and nepotism at the highest levels of government, the presidential elections of January 2015 ended the controversial 10-year executive presidency of Mahinda Rajapaksa. The former president enjoyed enormous popularity in the aftermath of the country’s civil war and during the economic revival that followed, but was subsequently criticised for his gradual drift towards authoritarian rule.

Election Results

Elections in 2015 signified a new era for democracy in the South Asian nation. A swift 100-day programme sought to amend the constitution, particularly around term limits and the executive presidency, though political haggling caused delays, most notably in the dissolution of parliament. Parliamentary elections in August 2015 brought a fresh five-year mandate for the coalition government spearheaded by Prime Minister Ranil Wickremesinghe. While the administration’s first budget proposal in November was greeted by a generally positive response, only time will tell whether Sri Lanka has the political will to implement challenging structural reforms to its economy and take its place on the international stage.

History

Sri Lanka’s first inhabitants were hunter-gatherers who likely crossed a land bridge from India and formed the first definitive settlement around 28,000 BCE. The land bridge, which subsequently disappeared around 5000 BCE, allowed humans and human ancestors to come and go, with early Stone Age tools found on the island dating back as far as 125,000 years.

By 900 BCE, megalithic culture, as well as both Indo-Aryan and Dravidian languages, began to emerge in proximity to India, while Anuradhapura, an ancient city in the island’s interior, began to grow as a population centre. In the first century AD, an extensive irrigation system developed that proved one of the most advanced in South Asia.

Buddhism came from India, in the third century BCE, which is considered the real origin of Sinhalese culture. Buddhist scholars of the era recorded much of the early history of Sri Lanka, and politics and religion have remained intertwined throughout the island’s history. In AD 371, when the Tooth Relic of Buddha arrived in Anuradhapura, the city was one of the largest in South Asia.

The Anuradhapura Kingdom frequently fought with other dynasties on the island, including kingdoms in South India, in a series of power struggles, and was later abandoned for a new location in Polonnaruwa, which survived for two centuries. Following its abandonment, Sinhalese culture shifted south, founding the major dynasties of Kandy and Kotte, while Tamil Kingdoms, notably Jaffna, proliferated in the north. By the 13th century, a vast jungle interior and the spread of malaria to the country’s dry zone forced a separation that would divide the country up until its civil war.

While Arab traders had been in Sri Lanka before the seventh century CE, the Portuguese arrival in 1505 – on the trail of an increasingly lucrative spice trade – ushered in a significant shift in Sri Lanka’s affairs. With the demise of Jaffna and Kotte at the hands of the Portuguese, the Kingdom of Kandy served as the central resistance and protector of the Buddhist faith from within the country’s interior and hill country for three centuries.

In 1602 the Dutch arrived, ousting the Portuguese by 1658 and obtaining a monopoly on the island’s spice trade from Kandy in exchange for notional Sri Lankan autonomy. The Dutch would remain in power for 140 years, until 1796, when they ceded power to England.

In 1802 Ceylon became an official colony, and by 1815 the British had conquered Kandy, abolishing the island’s monarchy in the process. This would be the first time in history the entire island was dominated by a foreign power. By the 1830s, drawn by plantations, settlers were arriving, and often importing Indian-born Tamil plantation labour to grow crops of coconut, coffee and rubber. In the 1870s the island’s entire coffee crop was destroyed by fungus, forcing a shift to tea, which in time made the country the second-largest global exporter behind India.

Independence

While Ceylonese participation in government began at a relatively early stage, it was not until the beginning of the 20th century that the country’s Buddhist and Hindu populations began to call for greater representation. Constitutional changes in the 1920s and 1930s gradually allowed more Sinhalese power-sharing and full universal suffrage until Sri Lanka gained self-government in 1946, followed by full independence on February 4, 1948 – one year after India.

A new constitution in 1972 effectively made Sri Lanka a republic, and changed the country’s name from its former title of Ceylon. In 1978 the country established its executive presidency under a new constitution. During this period, increased spending on welfare brought with it improvements to health care and education, indicators which remain strong to this day. However, a wave of nationalisations and nationalist policymaking contributed to the overall slowdown of the economy, which had lasting implications. Sri Lanka lost much of its tea market in the UK, while large swathes of its Burgher population migrated to Australia.

Early challenges arose that would breed later ethnic divisions. Under the British, Tamils were favoured for government jobs and university postings, and quickly became more proficient English speakers, causing resentment from the country’s Sinhalese population. The rise of nationalist politics under successive administrations played on the fear that Sinhalese religion, language and culture could be overshadowed by the Indians to the north and Sri Lankan Tamils, who shared certain aspects of cultural identity. A Sinhala-only bill overtly disenfranchised the Hindu and Muslim minority population, while making Sinhalese the official language of the country. Further legislation around university admittance and a new constitution strongly favouring a Buddhist state had the effect of inciting further unrest.

Civil War

By mid-1970, several communist Tamil youth groups began advocating a separate Tamil state called Eelam, or “precious land”. These groups formed the origins of the Liberation Tigers of Tamil Eelam (LTTE), often referred to as the Tamil Tigers. What began as a number of small clashes between Tamils and Sri Lankan security forces eventually escalated into full-scale massacres, including an event known as “Black July,” where as many as 3000 Tamils were killed in Colombo. The majority of Tamils either left the country or migrated to Tamil-majority areas, while funding arrived from both Tamil populations overseas and the Indian government at the time. The 1990s, in particular, were wrought with a number of high-profile attacks, including the assassination of Indian Prime Minister Rajiv Gandhi in 1991 and Sri Lankan President Ranasingha Premadasa in 1993.

In 1996, 50 people were killed in a bombing at Sri Lanka’s Central Bank in Colombo, and in 2001 the rebels attacked Bandaranaike International Airport, destroying multiple commercial and military aircraft. At the height of the war, the LTTE was labelled a terrorist organisation by the US, Canada, Europe, Australia and India, which helped to effectively limit the group’s ability to secure financing from supporters living abroad.

Despite numerous peacekeeping attempts, including Indian participation in 1987 and a ceasefire brokered by Norway in 2002, Sri Lanka’s civil war would drag on for 26 years until May 2009, killing over 100,000 people. Continuous delays and failed agreements are largely attributed to disputes around the potential nature of future power sharing between the two sides.

The final years of the war, following the presidential victory of Mahinda Rajapaksa, incurred a substantial death toll and both sides were accused of war crimes by the international community. Around this time, the government ordered non-governmental organisations and independent journalists to leave the region, a move which had the effect of severely limiting the emergence internationally of conclusive third-party observations for the remainder of the conflict.

Tsunami

On December 26, 2004, an earthquake registering 9.1 on the Richter scale hit off the west coast of Sumatra, triggering a series of tsunamis that decimated the region. It was the biggest natural disaster to hit Sri Lanka in recorded history, causing, in some places, swells upwards of 90 feet. As many as 40,000 people were killed by the event and over 500,000 were displaced.

The outlying damage to agricultural lands, homes, ecosystems and infrastructure was estimated to cost over $1bn, and an effort to fully rehabilitate the eastern and southern coasts, the primarily affected areas, remains a challenge to this day. The government has since embarked on a number of efforts to guard against future catastrophe, including the creation of early warning systems and tsunami evacuation routes.

It has also endeavoured to restore many of the island nation’s natural barriers, most notably its mangrove forests. Around 76% of Sri Lanka’s mangrove forests have been lost due to human development over the last 100 years. In May 2015 it became the first country in the world to comprehensively protect all of its mangrove forests, including job training and replanting projects.

A New Government

The post-war years were characterised by a sense of euphoria and renewed optimism. Former President Rajapaksa easily won his second term in 2010, and heavy government spending on reconstruction and development projects helped to bolster the economy in the initial stages. However, following 10 years of heavy-handed government by his administration, Sri Lanka turned over a new leaf in January 2015 with the unexpected election of Rajapaksa’s former health minister, Maithripala Sirisena, as the country’s fifth executive president.

The previous Rajapaksa administration, which had enjoyed strong support following the end of the civil war, was increasingly criticised for its autocratic approach in the areas of human rights and media freedom, with accusations of nepotism and corruption. While it maintained favour among Sri Lanka’s Sinhalese Buddhist population, it was unanimously voted against by the country’s Hindu and Muslim minorities, as well as a coalition of parties including members of Rajapaksa’s own Sri Lanka Freedom Party (SLFP), who all backed Sirisena, the common opposition candidate. Widely praised by Western governments and media outlets, the new administration declared a fresh era in Sri Lanka’s transformation, promising that it would be characterised by inclusive governance, transparency and reconciliation with its minorities, as well as a new emphasis on economic reform.

The coalition backing the president included members of the SLFP and its rival, the United National Party (UNP). The subsequent appointment of Prime Minister Ranil Wickremesinghe of the UNP led to the establishment of a minority government which, in turn, resulted in a period of delays during 2015, following on from the dissolution of parliament. Loyalty splits between the SLFP supporting Rajapaksa and Sirisena were brought to the forefront after the former president expressed his intention to return to politics, with the potential of running for nomination as prime minister.

Fresh parliamentary elections took place in August 2015, with the UNP retaining a working majority with 106 seats, under the support of various SLFP parliamentarians. While this is short of the 113 required for a full majority, it provides a manageable level of stability going forward. In the weeks that followed, substantial alterations were made to the country’s ministerial profile, totalling more than 50 cabinet appointments split between the political parties. A number of newly created ministries, such as the Ministry of Public Enterprise Development, geared towards restructuring the country’s state-owned enterprises, occupy nascent roles and will require time to fully develop.

Constitution

Under Sirisena’s 100-day programme, the coalition immediately went about passing the 19th amendment to Sri Lanka’s constitution on April 28, 2015, which implemented a two-term limit for the president, previously abolished by Rajapaksa, while reinstating the Constitutional Council, which provided oversight of appointments to commissions, including the police, judiciary and public-service commissions, effectively making these independent. This was considered the passing of a significant litmus test for the president under a deeply divided parliament, being one of the pivotal pre-election promises.

The administration also put forth moves to incorporate a 20th amendment, which would reform the electoral system and increase the number of seats in parliament, however this stalled because of opposition from a number of smaller parties fearing reduced representation. The amendment was unable to go through before the parliament was dissolved. However, in late 2015 a cabinet sub-committee was formed, chaired by the prime minister, with the intention of abolishing the executive presidency, drafting a new constitution and furthering amendments to the electoral system.

Corruption

In 2015 Sri Lanka placed 83rd in Transparency International’s (TI)’s Global Corruption Perception Index, among 175 countries surveyed, with a score of 37 out of 100. Regionally this compares to China, the Philippines, Thailand, India and Mongolia, and is slightly below the average for the Asia-Pacific region. Recent years have only brought marginal changes to Sri Lanka’s ratings. In a 2013 report by TI, 64% of the respondents in Sri Lanka felt that the police were corrupt or extremely corrupt, 51% of respondents in Sri Lanka believed that political parties were corrupt or extremely corrupt, and 33% of those surveyed perceived the public service and civil servants to be corrupt or extremely corrupt.

Following the 2015 elections, there is cause for optimism on this front. As part of President Sirisena’s 100-days programme, he vowed to clamp down on corruption, a major source of criticism under the former administration. Estimates were that during 10 years in power, as much as 60% of national expenditure allocated to ministers and officials could be traced to the Rajapaksa family, a key drawback to an expanded all powerful executive presidency. Perhaps the most high-profile arrest occurred in April, when police took the former president’s brother into custody. Basil Rajapaksa was arrested for wrongdoings while head of the Economic Development Ministry, though no official sentence was given.

In addition, officials have opened a criminal investigation into corruption worth “billions of dollars” at the state-run airline, particularly around an aircraft purchase from Airbus in 2013. Similar investigations are under way around airports and highways across the country.

Human Rights

Accusations of human rights abuses during the country’s long civil war have lingered since its culmination in 2009. This has at times proven costly. In August 2010, the EU temporarily withdrew preferential trade concessions after an investigation by the European Commission found that there were “significant shortcomings in respect of Sri Lanka’s implementation of three UN human rights conventions relevant for benefits under the scheme.” The revoked status remains in place at the start of 2016.

The UN Human Rights Council issued a resolution in 2014 calling on the UN Office of the High Commissioner for Human Rights (OHCHR) to investigate war crimes committed by both sides of the conflict. The mandate was rejected in full by the previous Rajapaksa administration. In the lead up to the mandate, there had also been reports of harassment of potential victims, witnesses and representatives of civil society that might help the OHCHR go about their investigation, a trend that ultimately led to many world leaders boycotting the Commonwealth Summit in Sri Lanka in 2013.

The new government of President Sirisena has engaged more constructively on suitable options for accountability and reconciliation, while moving forward with a series of their own prosecutions. It has also established a new Office of National Unity and Reconciliation to spearhead the effort on the domestic front. Nonetheless, on previous reports to the Human Rights Council, the OHCHR has emphasised the failure of domestic institutions to conduct credible investigations, mostly due to the readiness of the country’s criminal justice system.

In September 2015, the OHCHR released the report outlining the findings of the 2014 mandate, a resolution co-sponsored by the Sirisena administration. It highlighted a number of violations and gave specific recommendations to the government. The call for an ad hoc hybrid special court that incorporates international judges and lawyers remains a particularly contentious issue with the current government and general public.

Foreign Relations

Sri Lanka remains integrally tied to both the US and Europe, its two biggest trade partners, though these relations were strained under the Rajapaksa administration due to Western pressures around human rights and corruption. This inherently fostered deeper cooperation with China, which financed a number of major development projects, making it the country’s biggest creditor for infrastructure.

Following President Sirisena’s election victory in the early stages of 2015, several projects were put on hold, causing some level of ongoing tension, though most have restarted in 2016. This comes alongside a number of high-profile state visits in the US, Europe and India, interpreted by many to be a rebalancing, or realignment, of foreign policy.

At the end of 2015 Sri Lankan officials expressed interest in significantly expanding free trade agreements, most notably with the US, with accession to the Trans-Pacific Partnership becoming a potential target for the mid-term.

As a former colony, Sri Lanka is part of the Commonwealth of Nations. It is also part of the South Asian Association of Regional Cooperation (SAARC), a regional block comprising India, Nepal, Bhutan, the Maldives, Afghanistan, Pakistan and Bangladesh. While SAARC remains one of the least integrated regions in the world, largely due to political complexities, there is significant scope for improvements and increased bilateral trade volumes, most importantly with India, which is by far the largest economy in the region.

Sri Lanka has a Comprehensive Economic Partnership Agreement in place with India, which has been active for more than a decade. Nonetheless, while the agreement has brought improved economic cooperation between the two countries, a broader economic integration framework has remained elusive in the Indian-Sri Lanka relationship, and there remains significant scope for deeper integration. This has been attributed both to a lack of political leadership on the issue during the Rajapaksa period and public ambivalence about the potential economic benefits of more concerted integration with India.

Outlook

Sri Lanka has emerged from a long internal conflict into a new stage in its political and economic transformation. The elections of 2015, largely heralded as a win for inclusive governance, provide a fresh five-year mandate for an administration committed to economic revolution.

However, with the post-war euphoria behind it, a number of structural challenges remain that will determine the efficacy of the country’s trajectory going forward. Reconciliation with ethnic minorities is likely to prove crucial to long-term hopes for a prosperous and cohesive state. Resolving polarities in economic standing between the country’s north and east can help to minimise the creation of greater tension going forward.

Without the mandate of a full parliamentary majority, political gridlock also remains a challenge. The state’s involvement in large swathes of the economy – coupled with powerful trade unions – could present potential stumbling blocks to a number of liberalising economic reforms that Sri Lanka is likely to need if it is to increase the competitiveness of its offering in international markets. In terms of state finance, meanwhile, Sri Lanka remains heavily in debt and has a low revenue base. These are fiscal challenges that the new government will be required to navigate in order to avoid a balance of payments crisis.

While the uncertain nature of politics in 2015 instigated a wait-and-see approach within Sri Lanka’s private sector, its long-term impact is expected to be positive, bringing improved stability and a more encouraging environment for foreign investment. In 2016 the country should begin to see the benefits of policy reform implementation.