Challenges facing public sector reform in Sri Lanka

As public sector reform is one of the conditions for getting the IMF bailout, the Sri Lankan government is trying to figure out how it can be done without alienating the public as well as politically powerful elements which have a vested interest in the existing system.   

It is a complex and daunting task. But it has to be done now if Sri Lanka is to pull itself out of the morass it has got into. Successive Sri Lankan governments had resorted to short-term and politically expedient economic strategies that had only debilitated the economy progressively.  

Describing the state of the public sector in Sri Lanka comprehensively, the Colombo Development Dialogue (CDD) held by the UNDP in 2020 said: “Sri Lanka is now party to a State-sector that is too big; has mainly recruited and promoted through political affiliations and connections leading to feelings of entitlement towards state sector jobs; and is under-resourced in every aspect other than people, who are also increasingly badly paid.”  
One of the pre-eminent consequences of past policies is the ever-burgeoning public sector. These are structures which are complex, highly hierarchical, lacking in coordination and deficient in skills.   

According to a public presentation made by Kithmina Hewage and Harini Weerasekera of the Institute of Policy Studies (IPS) Colombo (see: Economic Reforms in Sri Lanka: Salvation or a Recipe for Inaction?) there were, in 2017, 52 Ministers, 21 State Ministers,121 departments, nine Provincial Councils,332 Divisional Secretariats, 25 District Secretariats, 22 Special Spending Units and 341 State Owned Enterprises (SOEs). According to the CDD of 2020, there were 450 public enterprises.
Presently, there are about 1.5 million public servants of various categories, or one public servant for every 14 Sri Lankans, according to EconomyNext.

Commenting on the grossly excessive employment in the public sector, EconomyNextquoted the Minister of Power Kanchana Wijesekera as saying that the Ceylon Electricity Board (CEB) employed 26,000 people to do jobs that could be done by 5,000.It also said that out of every 100 cents, the government got by way of taxes,86 cents were spent on salaries and pensions of its staff.  

In the guise of providing employment, political leaders created jobs in the public sector rather than encourage economic development and get the private sector to generate jobs. In 2020, President Gotabaya Rajapaksa started implementing his electoral promise to provide 50,000 jobs to unemployed graduates and low paying jobs to 100,000 indigent persons.  

Such unproductive recruitments resulted in the public service doubling in size in 15 years.
However, the size of the public sector is less important than its efficiency. The size of public sector employment in the OECD (advanced) countries in relation to the total workforce is large (about 21%) but they are productive and deliver to the people what they are supposed to deliver.  

According to Hewage and Weerasekera, “institutional fragmentation” in the Lankan public sector has resulted in excess and unproductive employment. New institutions are created to cater to political needs without any regard for economy or efficiency. The researchers argue that there cannot be rational change in the absence of institutional stability and consistency.   

The IPS researchers suggest the formation of ‘clusters of core subject areas”so that functions do not overlap. A beginning could be made at the ministerial level. The current ad-hoc and clumsy distribution of ministerial portfolios creates conflicts whilst also hindering the scope of policy consistency and continuity, they add.  

Hewage and Weerasekera are not in favour of broad brush or sweeping reforms which will put the entire system out of gear. They urge sequencing and taking up the low hanging fruits first. Public sector re-organization and down-sizing could have political implications and therefore, reformers should avoid rocking the boat too much.  
Another area which needs attention on a priority basis is increasing internet usage, which is low in Sri Lanka despite having relatively affordable charges and higher internet speeds compared to other countries in the region.   
Similarly, schoolchildren should be motivated to study Science, Technology, Engineering, and Mathematics (STEM) because Sri Lanka is lagging behind in this area with only 3.1% of the population above the age of 15 engaged in science and technology-related education and employment, the researchers point out.   

The other major requirement for any meaningful reform they say is “data accessibility.” Deficiencies in data accessibility are obstacles to good policy research in Sri Lanka, and ultimately to sensible policy reform.  
Public institutions should give more information and data on their websites and keep them regularly updated.According to Verite Research, the information put out by 90% of 55 public authorities are only ‘moderately unsatisfactory’ and only 2% are “moderately satisfactory.”   

About recruitment to the public sector, the Colombo Development Dialogue said that although initial recruitment is based on principles of meritocracy through a very transparent process, the promotion process is wanting in rationality. In many sectors, promotions are based on seniority. With the result, those junior but efficient, feel blocked.   

Public servants are also reluctant to take decisions fearing adverse comments and punishment in case things don’t go right. Limited autonomyand inhibitions stifle innovation.  
Lack of skill development has been identified as a major lacuna in Sri Lanka. A common misconception is that public sector modernization involves introducing new technology. But, as observed in other countries, introducing technology alone will not deliver results. Staff will have to be trained to use the new technology.It has also been observed that equipment bought or gifted lie unused in Sri Lanka, showing a lack of accountability.   

Given the paucity of employment opportunities in developing countries like Sri Lanka,workforce reduction through outright dismissals or automation should be ruled out. For one thing, retrenchment will be morally unjustified and secondly, it is a political hot potato. Therefore, governments have no option but to work with the existing personnel. But these could be retrained and redeployed. Meaningful alternative roles could be created and personnel trained for them. This is a time-consuming process. But it is time it
was started.   

The Colombo Development Dialogue recommended reducing the decision-making layers in institutions to a maximum of four tiers. It also suggested downsizing projects that did not have a positive Rate of Return and upgrading those that showed a good rate of return.  
Overall, the Colombo Development Dialogue recommended a localized and piecemeal approach to reform in which government departments are reformed one at a time.  

Sri Lanka has to improve tax collection. Tax’s share as a percentage of Gross Domestic Product (GDP) should increase as the per capita GDP rises. In Sri Lanka, this is not the case; the country’s per capita GDP has been rising but the tax to GDP ratio has been falling. Sri Lanka needs to improve its tax revenue.  
People should be made aware of the benefits of paying taxes. When Karu Jayasuriya was Mayor of Colombo, he put up hoardings in public places giving details about the use to which municipal taxes were put. The government should also proactively carry out propaganda about the proposed reforms, explaining their benefits to the man-in-the-street.   

And most importantly, a key area of focus must be measures to ensure a robust anti-corruption regime. If anti-corruption measures are compulsorily made part of the reform process in every department, people will accept the reforms without demur.   
Procedures must be drastically cut. Apparently, there are 13 procedures to get a construction permit and these take three months to be completed. Sri Lanka is ranked low in Ease of Doing Business Index. It had a value of 99 in 2019. The most business friendly country was given a value of 1. Outdated laws and regulations must be updated.