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Sri Lanka Equity Forum » Stock Market Talk » WALKING WITH THE DINOSAURS PART III - By Dr. Nalaka Godahewa


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Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics

Mar. 30, 2015 (LBT) - Lanka Business Today ( Editorial Board recently came with an article series where former Securities and Exchange Commission Chairman Dr. Nalaka Godahewa who turned around Sri Lanka's Capital Market with a 'Clear Vision' shared his experience working in both the private and state sector of Sri Lanka's US $ 78 billion economy.We decided to share the same article series for the interest of over 20 million populace in Sri Lanka and over 10 million readers across the globe who reach Lanka Business Today on a daily basis.


This is the continuation of the story ……..

“It's not given to people to judge what's right or wrong. People have eternally been mistaken and will be mistaken, and in nothing more than what they consider right and wrong.”
― Leo Tolstoy, War and Peace

I couldn’t agree more with Leo Tolstoy. Yes, it is not up to us to judge anybody, as none of us are perfect ourselves. Even Bible the most read book on earth says “Do not judge, or you too will be judged. For in the same way you judge others, you will be judged, and with the measure you use, it will be measured to you” ( Matthew 7:1-2). So while making my observations about two of the most powerful people in the former government, I will try my best to limit expressing my opinions about them. But please remember it is easier said than done.

When I assumed duties as the Chairman of 4 tourism related institutes that came under the preview of the Ministry of Economic Development, the Minister in charge was Hon Basil Rajapaksa. The Secretary to the Ministry was Dr P B Jayasundara. It was a powerful new ministry. The objective of this ministry was to drive the implementation of the ambitious post war economic development vision of the President. Basil Rajapksha was emerging as the most powerful minister in the cabinet. Every body already knew that Dr Jayasundara was the most powerful bureaucrat in the government.

One question that many people raised at the formation of this new ministry, was why Minister Rajapaksa had selected Dr Jayasundara to be his secretary. It was too much of asking from a person who was already burdened with the responsibility of managing the affairs of the Ministry of Finance and Treasury. Many were of the view that a dedicated secretary would have better served minister Basil Rajapaksa.

Within a few months of working with Dr Jayasundara, I realized how politically sharp Minister Basil Rajapksha was in making that decision against the advice of many of his close associates.

Dr Jayasundara had been the treasury boss for more than 15 years and was in full control of the system. Both President Chandrika Bandaranayake and Presdent Mahinda Rajapksha had given him an absolutely free hand to run economic affairs of the country. Over the years Dr Jayasundra had acquired far more powers than any of his predecessors. He was by all means more powerful than any of the cabinet ministers. Every Minister was at Dr Jayasundara’s mercy to get their respective budgets allocated. Even what is allocated in the budget would not be released without his approval. Minister Basil Rajapaksa understood this reality well. He have thought it is better to make this powerful bureaucrat him self-responsible for the success of the Ministry of Economic Development, than being dependent on him. Isn’t there a famous proverb about keeping your friends close and keeping some others even closer?

Both Minister Basil Rajapaksa and Dr. Jayasundra were very clever people in their respective areas. Both of them knew what they were doing and both of them were very hard workers. The President relied heavily on the Basil to manage the political affairs and on Jayasundara to manage the economy. I used the word ‘managing’ here, which I felt more appropriate than the word ‘advising’. Another family member later told me that President depended too much on these two, which eventually backfired.

These two powerful men also had similar weaknesses. They loved to be surrounded by mediocre people and resented those who could think and act on their own. Their communication was mostly one-way and they rarely entertained different opinions in public. Those who were found to be too smart or two vociferous were quickly sidelined and moved out from the Ministry. This weakness was well exploited by a few cronies close to them. These people thrived on carrying tails to the bosses and ensured anyone with potential is projected as a treat or an enemy so that he or she will be kicked out of the ministry sooner or later. Eventual result was that the bosses lost the services of many clever people and were left with a group of yes men and women.
Despite the personal brilliance of Minister Basil and Dr.PB, it is this non-tolerance of other views, that affected the efficiency both at Ministry of Economic Development and Ministry of Finance. These two Ministries controlled almost 60% or more of the economy and their indirect influence extended to other ministries as well. A lot more could have been achieved if more people were given opportunities to take responsibilities.
Despite many other claims, the real manager of the war was the former Secretary of Defense Gotabaya Rajapaksa who was quite different to the two personalities I mentioned here. Gotabaya would accommodate other good people and made full use of them. The reason why army commander Sarath Fonseka, navy commander Wasantha Karannagoda, air force commander Roshan Goonethilake and many others could thrive during the 2005-2009 period was due to Gotabaya’s ability to accommodate other good people and give them responsibilities. The war council chaired by the President and coordinated by the Defense Secretary provided the policy direction for the war. All relevant functions were represented in the war council. The heads of three forces, police, intelligence, PR, international affairs, military procuments, civil defense forces and many other relevant parties participated in the war council. Every body could contribute to the strategy. Everybody knew the plan. Everybody did their utmost to deliver the results. Thtas why we were so successful in fighting the war.

Modern success stories all over the world are as much about teamwork as they are about individual brilliance. We saw individual brilliance as well as team work in ending the war

When the war ended and focus became the development of the economy, we needed a an economic council similar to the war council. As in the case of defeating terrorism, President Mahinda Rajapaksa had already articulated the vision. Just like he entrusted the responsibility of fighting the war to his brother Gotabaya, he had assigned the other brother Basil this new challenge. President had also allowed his most trusted Ministry Secretary to join his brother and drive this. But there was no economic council. There was no think tank. A few people ran the economy in isolation. Apart from Minister Basil and Dr PB, only other key decision maker was the Governor of the Central Bank Nivard Cabraal.

Nivard was responsible for managing the monetary policy where as PB was responsible for managing the fiscal policy. One can be critical of them. But rather than being critical it may be better to compare their achievements with the performance of the current regime. The Asian Development Bank (ADB) has downgraded the country’s GDP growth forecast to 7% this year compared to the 7.4% improvement recorded last year. ADB’s Senior Country Economist Tadateru Hayashi said last week that Sri Lanka’s economic growth would slow to 7% this year and the has predicted growth for the year was likely to see a shift from investment to consumption in 2015.

Turning back we see a lot that has been achieved by the Rajapaksa regime on the economic development front, during the last 5 years. But there were many things that went wrong too.
Minister Basil Rajapaksa spent too much time and energy promoting the Divi Naguma program. But can it be compared with the Mahaweli development of minister Gamini Dissanayake or Gam Udawa Hosing Development of minister R Premadasa during JR Jayawardana presidency ? On the other hand Gamini and Premadasa had limited responsibilities as ministers. Minister Basil Rajapaksa had a bigger responsibility assigned by President Mahinda Rajapaksa. The task assigned to him was developing the whole economy. Perhaps this big picture got lost due to too much emphasis on the Divi Naguma program.

We cannot deny that the whole can, and should, always grow bigger and better than the sum of the individual units. However, there is a definite limit to how far you can go in papering over cracks created by under prepared individuals within a team. It becomes even more difficult if such under-prepared individuals are in leadership positions.

Part IV will be about how I was moved to SEC during 2012 market crash. This was posted sometimes back and will be reproduced with necessary improvements.

Courtesy -

Part I -

Part II - 
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