Sri Lanka Human Development Report 2012.pdf

at the local government level were further centralized,
but accompanied by a revenue-sharing mechanism. The
Provincial Business Turnover Tax levied by local authorities
on all enterprises in their jurisdiction was removed, but
one-third of revenue collected from the Nation Building
Tax, the entirety of stamp duty collection and 70 percent
of the motor vehicle registration fee were credited to the
revenue account of the provincial councils. 314 It is too early
to gauge the impact of this reformed tax regime, but it is
unlikely to make the provinces fiscally stronger as, given
limited economic activity, revenue collection of provinces
outside the Western province is likely to be small.
In general, the devolution of powers from the center to the
provinces continues, but it has been accompanied by the
continued dependence of provincial governments upon
the central Government for finance. Unfortunately, the
centre’s funding ability was constrained by the prolonged
conflict and the corresponding need to beef up security
expenditure. These pressures produced high central budget
deficits. Liquidity shortages in turn have impeded the
work of the provincial councils and further undermined
public perception of them. 315
A 2010 evaluation of the performance of devolved
government in Sri Lanka noted: “Whereas local
government should have deepened devolution, local
authorities have got entrapped in increasingly centralized
fiscal and administrative arrangements.” 316 In an important
sense, then, devolution has narrowed provincial fiscal
space and the ability of provinces to create a businessfriendly
environment. The heavy dependence on the
central government amounts to a containment of the
private sector, which in turn constrains poverty reduction
and human development.
The precarious fiscal position of the provinces has led
to a debate about whether devolution of powers as per
the 13th Amendment and the creation of provincial
governments have worked effectively for Sri Lanka. There
are questions about lack of coordination between central
and provincial governments over the provision of public
services; often functions are not clearly demarcated, which
leads to overlap and/or inconsistencies. 317 Several reports
have noted significant shortfalls in the government
structure and highlighted elements to strengthen for
provincial authorities to perform well. The Institute of
Policy Studies of Sri Lanka argues that the present system
of fiscal decentralization is “beset with institutional and
financial constraints...it is neither a purely administrative
and decentralized system nor a fully devolved system of
government.” 318
No significant change in the present structure of
decentralized government is likely to take place soon.
To make better use of the existing structure, Sri Lanka
could at least undertake a legal, functional, fiscal and
administrative review of local government. Such a study
would identify weaknesses and strengths, what needs to be
strengthened and why, and how to get local government
to work effectively within the limits it faces. The study
could also identify which services should be provided by
devolved bodies and the centre, respectively. The Institute
of Constitutional Studies pointed out: “…the Provincial
Public Administration has matured enough to take up the
task of regional development within the unitary polity of
Sri Lanka utilizing powers devolved by the Constitution.
The administrative systems of the Provinces have proved
that given power, time, space and resources, they are
able to deliver public services and undertake regional
development improving local governance capabilities.” 319
People’s Participation
Often, states place less emphasis on engaging private
stakeholders in governance, reform processes and public
policy-making. It is more common for civil activists, the
media and various interest groups to raise their voices.
In general, democracy is deeper and richer if people and
organizations from all quarters engage with each other
and debate issues that affect them.
That said, the onus is not only on the government. In
Sri Lanka, stakeholders, particularly those from the private
sector, could find strategic ways to actively interact with
Chapter 6 Bridging Governance Gaps: State Capacity and People’s Participation 113