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Sri Lanka: From Mahaweli to Millennium Compact

The new degeneration of an old debate


by Rajan Philips

Sometime towards the end of 1969, Dr NM Perera made the longest speech in his long parliamentary vocation, opposing the Mahaweli development agreement between the then Government of Ceylon and the World Bank. The speech was a well-researched critique that was based on BH Farmer’s equally well-researched critique of the Gal Oya development scheme, Sri Lanka’s first multipurpose irrigation project in the modern era. The government of course was a UNP government and Dudley Senanayake was Prime Minister. Mr. Senanayake was manifestly taken aback by NM’s withering attack, because the UNP was set to showcase the Mahaweli agreement as a singular achievement in the general election, that was coming up in early 1970.



NM Perera and the United Front Opposition were out to scupper the PM’s elections plan. The government had able defenders in parliament - in CP de Silva, Philip Gunawardena, JR Jayewardene and the Prime Minister himself. Yet, the Prime Minister persuaded GG Ponnambalam to leave his hospital bed for added reinforcement and make a pointed intervention in parliament. True to form, Ponnambalam declared that he had just read through the agreement and found nothing in it that would be detrimental to national interests. That led to a spirited exchange between Ponnambalam on the government side, and SA Wickremesinghe and Colvin R de Silva on the opposition side.

I remember and say all this because I was a university Engineering student at that time in Peradeniya, and concurrently followed the news reports of the debate in parliament before rivetedly reading it first hand in Hansard at the Kandy Public Library. Three years later, I began working in the first of my Mahaweli projects in Ukuwela and got drawn to that small universe of Sri Lankan heavy construction industry in irrigation and hydropower projects. Many years later I added Urban Planning as a complementary aside to my engineering, with interest in the David Harvey school of Geography, and a new professional focus on urban transportation and transportation engineering. So, when I opened my not so small mouth on the Millennium Challenge Compact, the unnecessarily controversial (provisional) agreement between the governments of Sri Lanka and the US, there was more than political cynicism behind my mischief. I was also, and still am, professionally curious to see if Sri Lanka would walk away from the MCC Compact with two straightforwardly beneficial projects and, if so, why? By the way, and just to correct the most recent distortion in the matter, there are no two compacts in the MCC, Land Compact and Transport Compact – but two PROJECTS, the Transport Project and the Land Project under one COMPACT.

Quite apart from my personal trajectory and curiosity, there is much to be said about the massive changes that have taken place in Sri Lankan politics and everything else, over the 50 years after NM Perera made his longest parliamentary speech on the diversion of the Mahaweli Ganga. For starters, the UNP (government) lost the 1970 election, and lost it badly in the number of parliamentary seats though not in the popular vote. The impressively victorious United Front (government) did not walk away from the Mahaweli agreement that they had politically savaged from the opposition and throughout the election campaign. There were initial reviews and implementation changes that ensured significant location agency participation in different projects, viz., the Mahaweli Development Board, State Engineering Corporation, the State Development and Construction Corporation, and Ceylon Development Engineers - Sri Lanka’s only private firm in heavy construction at that time. If the extent of local participation was a definite plus, the main negative fallout was the delay to the implementation of the plan and its individual projects.

Chickens came home to roost in 1977, when the UF government which broke up to become an SLFP government that was left to face its own election and found it had nothing to show for its Mahaweli achievements. None of the projects was entirely complete and there was no diverted water to send to the farmers in the North Central Province. So, the government made the political decision to send water through the irrigation tunnel in Bowatenna even before the tunnel construction was complete. That was to please the farmers downstream, but was insultingly not enough and the government of Mrs. Bandaranaike paid a shattering price in the July 1977 elections. Thus, the waters of Mahaweli turned the wheel of Sri Lankan politics a full circle in seven years. The losers in 1970 became the biggest parliamentary winners in 1977. Dudley Senanayake was dead by then, his death in 1973 itself becoming a political watershed moment, and the benefiting winner was JR Jayewardene.

Prime Minister Jayewardene became President Jayewardene and he accelerated the Mahaweli scheme with a vengeance as one of his three signature initiatives, the other two being the Second Republican Constitution and the open economy. Practically every project under the scheme was started simultaneously, the funding for each was arranged on a bilateral basis with different donor countries who sent their own firms to undertake the projects with minimal participation by the local engineering industry. This was quite a departure from the multilateral aid scheme that Dudley Senanayake had negotiated with the World Bank and because of which, or in spite of which, he lost an election. The implications of accelerating the Mahaweli scheme were significant.

On the negative side, the old discipline and framework for undertaking engineering projects based on open tender, pre-qualification and price, were broken up for good. The country is still picking up the corrupt pieces with the two main political alliances taking turn in accusing each other of corruption and winning elections. On the politically positive side, aggregate results were achieved in extending the irrigation network and significantly increasing rice production. The UNP was finally able to make the political economy claim of achieving self-sufficiency in food production while opening the economy at the same time. That political success provided the material basis for the UNP’s uninterrupted 17-year rule till 1994.

To digress a little here, there is apparently a 20/25 year cycle in Sri Lanka’s political fortunes according to some political watchers. The Senanayakes held sway between 1931 and 1956. Then it was the Bandaranaikes from 1956 to 1977, followed by the singular Jayewardene and his executive legacy from 1977 to 2005. Since then, it has been the Rajapaksa yugaya, a new phase in which has just begun. There might be interruptions in government, as in March 1960, 1965 to 1970, and 2015 to 2019, but the main cyclical swing apparently persists. The ten-year Kumaratunga presidency (1995-2005) might seem an outlier decade.

The Debate

Let us turn to the old debate and its new degeneration. Who was right and who was wrong in 1969? NM or Dudley? Were the people right or wrong in massively throwing out the UNP in 1970 and even more massively throwing out its successors seven years later? The old debate over Mahaweli was the debate between two competing visions for Sri Lanka, its polity and its economy. It was not about the legality or the constitutionality of the Mahaweli agreement. To the extent, NM based his criticisms on BH Farmer’s critique of the Gal Oya Development scheme, they were criticisms of the economic efficiency failures of an irrigation project and not a question of sovereignty or environmental stewardship. In fact, the loaded terms that are now thrown about in the current MCC debate were not even part of the political vocabulary in 1969.

No one spoke about sovereignty then even though the island was technically under a foreign monarch at that time. That did not trim our democratic sails in any way. Sovereignty and its assertion became a legal necessity when the country transitioned from its dominion status to become a republic. What Dr. Colvin R de Silva powerfully intoned for legal effect has now become a political albatross. Environmental assessments were nearly a decade away. In the UK, the Third London Airport debate was just beginning, and it would have huge implications for insisting on cost-benefit analysis and public participation in public investment decisions everywhere. In the US, President Nixon started the world’s first Environmental Protection Agency as a government institution in July 1970. The UN commitment to sustainable development was more than a decade or two away.

International aid in 1969 was driven by superpower rivalry in the context of the US-Soviet Cold War, when socialism was still a political option in Sri Lanka and several other developing countries. The opposition to aid, therefore, was part of a domestic political program. The collapse of the Soviet Union that ended the Cold War also foreclosed the socialist option for developing countries. The dynamic of aid has changed in the new environment of globalization and rampant market forces. While the traditionally major donors, the US and Japan, are scaling down government and promoting the foreign operations of their private companies, China is rolling out its Belt and Road initiative to capture infrastructure markets anywhere and everywhere. India, lacking China’s international muscle while matching its population size, is keen to have Sri Lanka as a neighbourly beneficiary of its limited aid agenda. Consistent with their domestic policy changes, western and by extension international agency aid initiatives are now strictly aligned with environmental regulations and gender equality requirements.

Sri Lanka has received and used, with mixed effects, foreign aid through all its manifestations – from the Gal Oya development scheme, Soviet aided industrial corporations, the Mahaweli scheme under both (multilateral) World Bank and bilateral dispensations, and more currently receiving loans, aid and grants from India and China. The US and Japan, not to mention Korea, are also in the picture, with Japan showing quite a bit of involvement in the urban transport sector. In this scheme of things, what is it that is in the two Millennium Challenge Compact (MCC) Projects that makes them and the Compact so vehemently objectionable?

The current opposition to MCC differs from NM’s criticisms of the Mahaweli development scheme in quite a few fundamental respects. His criticisms were well-intentioned and part of an alternative political vision. He did not fault Dudley Senanayake for failing to ‘consult the people’, as almost all of the MCC critics are currently clamouring. Instead, he raised his objections to the scheme on behalf of the people, left it for the people to decide in the upcoming election, and left his logic to stand the test of history. The people seemingly went along with his argument in 1970, but reversed themselves through 180 degrees seven years later, and history has both validated and invalidated NM’s criticisms in different respects. Honestly and quite humbly, I fail to see the same honesty of political purpose and intellectual rigour that NM manifested in 1969, in the criticisms of the MCC projects now.

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