Economic implications of the 18th Amendment

By Azhar Razak

Although certain sections of the government claim the implementation of the 18th Amendment last week could lay the foundation towards an accelerated economic growth derived from the political stability, a senior economist from the main opposition party says it could pave the way for a more politicised and autocratic economic culture.

“The Sri Lankan economy is certainly going to face dire consequences by the implementation of the amendment as it would make regulators such as the Central Bank of Sri Lanka to be completely managed by politicians and questions being asked over its independence,” economist and UNP MP Dr Harsha de Silva told The Bottom Line.
He charged that since the Constitutional Council, which earlier had a say in the appointment of the three non-executive board members to the Central Bank’s Monetary Board, is now replaced with the parliamentary council set up, the President would now get exclusive powers to appoint all five members to the board.
“Earlier although the non-executive board members are appointed by the President on the recommendation of the Minister of Finance, the approval of the Constitutional Council was also required for the appointment of these non-executive board members. However, since the Constitutional Council has now been repealed, additional approvals would no longer be needed in future with the President having powers to appoint anyone as he wishes,” de Silva explained.
He added that the 18th Amendment only required the President to seek observations from the Parliamentary Council, which does not necessarily mean he has to abide by the decisions taken by the council.
The Central Bank has a unique legal structure in which the Central Bank is not an incorporated body. In terms of the Monetary Law Act, the corporate status is conferred on the Monetary Board, which is vested with all powers, functions and duties and the Monetary Board is responsible for making all policy decisions related to the management, operation and administration of the Central Bank.
Meanwhile, heads of universities and academics who met at a recent discussion stated that the 18th Amendment to the Constitution could lay the strong foundation that is required to accelerate economic development in the country. Speaking to journalists, University Grants Commission chairman Professor Gamini Samaranayake said Sri Lanka suffered from both political and economic instability since independence due to the war.
“We believe that the 18th Amendment would give the long felt political stability to achieve the economic stability that is required to accelerate the country’s development process while ensuring the People’s right to appoint a president according to their wish,” Samaranayake pointed out.
He said Sri Lanka was able to record average growth rates of around six percent even during the war and with the political stability it derives from the implementation of the 18th Amendment, it could well mean that we could be heading towards ‘double digit growth rates’ in the future.
“In the past 40 years, although Sri Lanka tried to reduce inflation, unemployment, etc to single digits it had failed in the attempt due to the lack of political stability. Around 47,000 graduates were recruited to the Public Service in 2005. The 18th Amendment is a must for the country’s economic development and that is why even the entire private sector supports it,” Strategic Enterprise Management Agency (SEMA) Financial Service Cluster Director, who is also a senior economic advisor to the President said.
The 18th Amendment was also supported by the Vice Chancellor of the Open University Sri Lanka, Professor Upali Vidanapathirana and the Vice Chancellor at the University of Colombo, Professor Kshanika Himburegama, at the press briefing held at the Sri Lanka Foundation Institute.
One of the objectives of the 18th Amendment to the Constitution is to replace the Constitutional Council by a Parliamentary Council consisting of five members of which three are ex-officio (The Speaker, the Prime Minister and the Leader of the Opposition).
The other two members will be separately nominated by the Prime Minister and the Leader of Opposition to include ethnic groups not represented by the three ex-officio members.
President Mahinda Rajapaksa had earlier said that the Constitutional Council in the 18th Amendment to the Constitution will better assure the supremacy of the Parliament as there will not be a presidential representative in the proposed council and will only consist of parliamentary members.

http://www.thebottomline.lk/2010/09/12/biz_feature3.html

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