First Published in Sri Lanka in 2009
Transparency International Sri Lanka
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Cover Photo: Ananda Jayasekara
Editors: Arjuna Parakrama, Nilhan de Mel, Ramsey Ben-Achour, Bettina Meier
Coordinator: Aiman Rasheed
Every effort has been made to verify the accuracy of the information contained in this report,
including allegations. All information was believed to be correct as of November 2009.
Nevertheless, Transparency International Sri Lanka cannot guarantee the accuracy and the
completeness of the contents. Nor can Transparency International Sri Lanka accept responsibility
for the consequences of its use for other purposes or in other contents. Contributions to the
Governance Report 2009 by authors external to Transparency International do not necessarily
reflect the view of Transparency International or Transparency International Sri Lanka.
Table of Contents
Governance in Times of War and Peace 07
Transparency and Accuracy of Central Bank and Treasury Data 21
Transparency International Sri Lanka
Governance Crisis in the Financial Services Sector 25
Transparency International Sri Lanka
Perceptions of Sri Lanka in Governance Indices 35
Interview with the Chairman of the Bribery Commission 45
Nilhan de Mel
The Decline of Media Freedom in an Age of Fear 49
Ananda Dharmapriya Jayasekara
Failing to COPE: Parliamentary Oversight in 2008/2009 57
The Politicization of Public Administration in Education and Foreign Service 61
Nilhan de Mel
Interview with the President of the Clean Hands Alliance 67
Post Conflict Challenges of Governance 71
Frances Bulathsinghala and Arjuna Parakrama
There is a cancer that must be removed in order to facilitate the
advancement of this nation; it is none other than waste and corruption. You
and I need to commit ourselves to the eradication of corruption and fraud
not only in the public sector, but also in the private sector.
President Mahinda Rajapaksa
Keynote address at the Institute of
Chartered Accountants of Sri Lanka
Power tends to corrupt, and absolute power corrupts absolutely.
Baron Acton (18341902)
Transparency International Sri Lankas (TISL) mission is to enhance integrity and curb corruption
in all sectors. We do this by engaging all stakeholders in constructive dialogue, with the aim to
devise joint strategies to overcome institutional, legal, and attitudinal obstacles to good
governance. We strongly believe that a collective effort is needed to reduce corruption and
mitigate the negative effects that it has on our society. Policy makers, the business community,
and civil society must work hand in hand to strengthen Sri Lankas governance framework, and
create an environment that does not tolerate the abuse of power and corruption. Much work
needs to be done.
As in previous years, the Governance Report 2009 aims at stimulating the debate on governance
in Sri Lanka by providing an overview of key events that occurred between November 2008 and
October 2009. In addition, it includes detailed analysis on a wide range of selected topics.
Without a doubt, the end of the armed conflict was the hallmark event in the past year. To bring
about lasting peace, however, governance issues need to be urgently addressed. Other important
events in the past year include the crisis in the finance sector and the deterioration of media
freedom. While this report cannot be exhaustive, it does attempt to cover the most important
trends and developments and, in so doing, to provide fact-based information that is needed to
support a constructive debate on governance. Indeed, Sri Lanka needs more space for open
debatesdebates that are based on accurate and relevant information. We hope that the
Governance Report 2009 contributes to this goal.
The chapters of this report have been written by both TISL staff and external subject experts. I
wish to express my gratitude to the authors of the articles, who delivered excellent texts despite
working under tight time lines. A great thank you goes to the editorial panelProf Arjuna
Parakrama, Nilhan de Mel, Ramsey Ben-Achour, and Bettina Meierthat has with great
dedication and diligence ensured the quality and accuracy of this report. Thanks to Aiman
Rasheed for competently co-ordinating the process of writing. And finally, a big thank you to the
external reviewers Nelum Gamage, Chandra Jayaratne, Dr Saravanamuttu, and the many other
experts who wished to remain anonymous.
Introduction: Post-War Governance Requires Real Changes of
Attitude and Process
Definitions of governance are notoriously slippery. It is clear that an all-encompassing mandate
under the rubric of governance is often counter-productive because it leads to vagueness and
impracticability. The UN-supported trend to be more inclusive and integrative in describing this
concept, however, is gaining wide acceptance because it seeks to address the inter-related
concerns that confront us in the complex societies that we live in today. We no longer have the
luxury of artificially separating the economic from the social and political. This is especially true in
terms of governance, as the consequences and ramifications of each impinge so crucially on the
The UNDPs policy document on good governance and sustainable development provides an
excellent over-arching framework and lens through which the diverse yet related essays in this
Report should be viewed.
Governance can be seen as the exercise of economic, political and administrative authority to
manage a country's affairs at all levels. It comprises the mechanisms, processes, and institutions
through which citizens and groups articulate their interests, exercise their legal rights, meet their
obligations, and mediate their differences.
Good governance is, among other things, participatory, transparent, and accountable. It is also
effective, equitable, and promotes the rule of law. Good governance ensures that political, social,
and economic priorities are based on broad consensus in society and that the voices of the
poorest and the most vulnerable are heard in the process of decision-making over the allocation
of development resources.
Governance has three legs: economic, political, and administrative. Economic governance
includes decision-making processes that affect a country's economic activities and its
relationships with other economies. It clearly has major implications for equity, poverty, and
quality of life. Political governance is the process of decision-making to formulate policy.
Administrative governance is the system of policy implementation. Encompassing all three, good
governance defines the processes and structures that guide political and socio-economic
Governance encompasses the state, but it also transcends the state by including the private
sector and civil society organisations.
TISLs 2009 Governance Report seeks to progress beyond minimalist and exclusively statist
definitions of governance. Indeed, it is important to grasp the multiple, yet inter-connected,
foundations of good governance which include issues of participation, transparency,
accountability, gender sensitivity, and anti-corruption to name but a few. The report attempts to
address these issues in pro-active and people-empowering ways, as opposed to the usual passive
defaults that are demonstrably inadequate due to hierarchies of power and hegemony in fraught
contexts such as Sri Lanka.
Thus, the chapters in this report describing the years performance of COPE, the Central Bank, and
the Bribery Commission share a common underlying theme. That is, accountability must not be
confined to specialists and privileged interlocutors who are able to demand information from
responsible and crucial state regulatory institutions. Instead, accountability should be pro-
actively transparent towards all sections of society. The analysis of post-conflict governance in the
North and East articulates the view that, irrespective of the motives of government, legitimacy
can only be derived through meaningful participation and ownership of projects, which must
include serious input into decision-making and periodic review. This also applies to the analysis of
governance concerns regarding the politicization of the education and foreign affairs ministries.
The relationship between fundamental rights/freedoms and good governance is less clearly
defined in the literature, though it is implicit in the chapters discussed above. It needs to be
stressed that in the Sri Lankan context specifically, but also in general, an enabling environment or
safe space for dissent, difference, and discussion is a key pre-requisite of good governance. This