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Treasury bonds controversy taints good governance

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The Maithripala Sirisena-Ranil Wickremesinghe government of cohabitation came into office just over two months on a slogan of good governance or ‘yahapaalanaya’. They promised a political culture free of corruption and abuse of power. Now, that pledge is facing its first real test.

Embroiled in the controversy is Central Bank Governor, Arjuna Mahendran. It is claimed that a firm linked to the Governor’s son-in-law benefited from the sale of 30-year Treasury bonds through insider information. It is alleged that the government lost two billion rupees in the transaction.

Opposition political parties are demanding Mahendran’s resignation over the issue. Mahendran was handpicked for the Governor’s post by Prime Minister Ranil Wickremesinghe and is a citizen of Singapore. At the time of his appointment, some ministers raised concerns about this.

However, after much discussion Mahendran’s appointment was ratified by the Cabinet. He was granted dual citizenship enabling him to serve as Governor. The Prime Minister reportedly took responsibility for Mahendran’s appointment, indicating that he had confidence in him.

Mahendran’s credentials as a banker are impressive. Graduating from Oxford University, he served previously at the Central Bank before seeking greener pastures overseas, serving the Hong Kong and Shanghai Banking Corporation and Emirates NBD, the largest banking group in the Middle East.

In 2001, when the United National Front led by Prime Minister Ranil Wickremesinghe formed a government while Chandrika Kumaratunga was President, Mahendran was appointed as Chairman and Director General of the Board of Investment for a period of nearly three years.

http://www.nation.lk/edition/images/logo/tis.jpgSuch a track record, however, does not appear to mitigate the current controversy. Arguably because the present government swept into power on a promise of ridding the country of corruption, the collective opposition has been quick to pounce on the issue, demanding Mahendran’s resignation.

President Maithripala Sirisena, while in Britain for the Commonwealth Day celebrations, has responded by appointing a committee to inquire into the disputed transaction but this has done little to appease the opposition which is demanding that Mahendran should resign in the meantime.

Several parliamentarians of the President’s own party, the Sri Lanka Freedom Party (SLFP), on Wednesday went to the extent of lodging a formal complaint against Mahendran at the Bribery Commission. The Janatha Vimukthi Peramuna is also demanding Mahendran’s resignation.

There is an obvious element of political one-upmanship here. The SLFP is smarting under the charges of bribery and corruption leveled against many of its stalwarts. In recent weeks, some were remanded; others had their passports impounded. So, they have seized the first opportunity to respond.

The SLFP, with an eye on the impending general election, is aware that this is an issue that will be watched by the general public with great interest. To label a key appointee of the United National Party (UNP) led government as corrupt would take the heat off charges against its own members.

The government also has only itself to blame for some aspects of the current controversy. Although there were many allegations against members of the Mahinda Rajapaksa government and much publicity was given to its excesses, definitive action against its members has been too little, too late.

This has allowed some members of the previous regime, including Rajapaksa himself, to claim that they are innocent. They allege they are the targets of a political witch-hunt. The government, however, claims that prosecutions are time consuming and that the due processes would have to be followed.

The UNP though would do well to realize that the controversy surrounding the Central Bank Governor has the potential to become something more than just a financial scandal. It could boomerang disastrously on the party which promised ‘clean’ government when it assumed office.

The UNP is also finding it hard to enact constitutional reforms because the SLFP is stonewalling until an election system favorable to its own interests is adopted. Thus, many promises of the ‘100 day plan’ remain unfulfilled and the public are questioning the government’s bona fides.

Therefore, the UNP wouldn’t want to be seen defending a top official, if he has been guilty of at least a conflict of interest. While it unfair to demand Mahendran’s resignation when he has to be presumed innocent until an inquiry is held, it would perhaps be prudent for him to step aside temporarily. It is true that a committee has been appointed to inquire in to the matter but that will hardly satisfy a vociferous opposition. While Mahendran remains in office, there will also be questions about the credibility of such an investigation, which the opposition will eagerly exploit.

The controversy surrounding Governor Mahendran provides the oxygen the opposition desperately needs to ignite its campaign. The Government must nip this in the bud - or else its own days in office could be numbered - and limited to the 100 days it initially promised.

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