War and New Realities

Tamil Circle, 7 October 2000

1. A war, in a class by itself, is by far the most important happening in the lives of the societies engaging in it. It is as great a midwife of fundamental change as the tide of scientific invention. The changes wrought by war are, generally, irreversible. At the end of a war a new era commences for the societies and nations that join to make the peace that ends the war. Deplorable as war is, it is war that marks the great watersheds of human history. The status quo ante bellum is wiped away and gone forever, utterly beyond recall. This is the case irrespective of whether the war ends with the unconditional surrender of one of the protagonists (e.g. the Axis powers in World War II) or by a stalemate between two undefeated adversaries left with their forces intact (e.g. the end of the war of Irish Independence in 1922).

2. Sri Lanka is no exception to this rule – indeed, it is one of the most striking examples of it. Though the war in Sri Lanka has just begun its 18th year and, almost certainly, has many decades more to run, some of the fundamental changes it has wrought already, both on the island and outside it are clearly apparent. It is these fundamental changes that are the subject of this paper. They are the new realities.

The end of the Single All-Island State:

3. The first and most fundamental of all the changes is the loss by the Sri Lankan state of the quintessential attribute of a state, namely, the exclusive possession of organised armed force within its borders. For 17 years now the Sri Lankan state has shared the island with an armed challenger, the LTTE. The 17 yearlong attempts to extinguish and eradicate the challenger have failed to achieve these objects. On the contrary, the challenger has gone from strength to strength and has evolved from a purely guerilla force into a conventional army and navy. The long succession of tremendous military defeats sustained by the Sri Lankan armed forces at the hands of the LTTE since 1996 makes it very clear that the situation is irreversible and will, on the contrary, be exacerbated with the passage of time.

4. So, the Sinhala people and the Sri Lankan government face a new reality, namely, that a part of the island is outside the state’s jurisdiction and is under occupation and control by the armed and invincible challenger to the state. The following new realities dealt with in this paper have a direct bearing on whether this situation can be reversed or not.

The rise of the Eelam Tamil Diaspora

5. The second great new reality has a direct and causative relationship to the first. However, it is but dimly perceived by the Sinhala people and the Sri Lankan government. It is the existence of the Eelam Tamil Diaspora in nearly all of the world’s richest countries, and in this new domiciles its exponential growth in economic, financial and educational strength. Its number now approximates 700,000. With the passage of time they acquire progressively permanent residence status in their respective countries of domicile and with it all the immense advantages such as qualifying for social security and medical benefits as well as the right to employment and trade and business. The early waves of the Eelam Tamil Diaspora are now well beyond this stage and are beginning to play a growing role in the economic, political and cultural life of these countries.

6. The annual per capita income of the Eelam Tamil Diaspora now is estimated, on the most conservative basis, at around US$ 20,000 i.e. about 22 times greater than the annual per capita income of the population of Sri Lanka, which is around US$ 900. The lowest paid, hourly-waged persons of the Eelam Tamil Diaspora such as for example petrol service station attendants earn more than a Cabinet Minister of the Sri Lankan government inclusive of all his/her perks of office. The tens of thousands of mid-level professionals of the Eelam Tamil Diaspora each earns annually many multiples of the Sri Lanka President’s salary with all its perks.

7. The numerous international shipping companies of the Eelam Tamil diaspora together possess shipping facilities vastly in excess of those of the Sri Lankan government. The Eelam Tamil diaspora earns and saves in the world’s hardest currencies and its ability to finance the purchase of the most modern weaponry appropriate to the needs of the LTTE grows all the time whereas the corresponding capacity of the Sri Lankan government declines steadily with the devaluation and continuing weakness of the Sri Lankan currency against the world’s hard currencies in which international arms purchases are made.

8. The growing financial strength and international power of the Eelam Tamil diaspora is the second new and vital reality which is here to stay and will not go away. The Sri Lankan government has no control over it at all and it will have a vital role in determining the military outcome on the island.

Vain hopes of international help

9. The Sri Lanka government’s desperate appeals to the governments of the western countries in which the Eelam Tamil diaspora is domiciled to ban the LTTE in their respective countries shows how little the Sri Lanka government understands the limits of governance and the growth of economic freedom in those countries. They are all well aware how easily bans are evaded in the modern world and will not stultify themselves by the imposition of inoperable controls. A control-and-ban regime is dear to the hearts of both Sri Lankan politicians and Sri Lankan bureaucrats but it is anathema in the modern world. No western liberal democracy will, or can, undertake such a responsibility.

10. Even in Sri Lanka itself the ban on the LTTE has not arrested its exponential growth in military strength. The ban has only served to tie up the Sri Lanka government itself in knots. Despite the ban the Sri Lanka government from time to time, in rare moments of intruding realism, expresses its willingness to talk to the LTTE. The third new reality that has to be reckoned with is that unpleasant reality cannot be dealt with by resorting to bans either local or abroad.

Increasing costs of the military effort
11.For the last 17 years the war was waged without any serious financial or economic sacrifices by the Sinhala people. The annual budgetary provision for the war ran at less than the annual cost of servicing the public debt both local and foreign. But now for the first time this has changed. The massive military defeats since November 1999 have led to huge increases in war expenditure. The last five supplementary estimates for war expenditure, passed on 10th August by an unquestioning parliament, take the total to SL Rupees 80 billion. The remaining four months of this year which are bound to witness the heaviest fighting of the entire war will certainly raise the total still higher. Already the pain is beginning to be felt. Cuts in subsidies, increases in the charges for public utilities, widening of the GST net to catch up the tourist industry are all but the first steps of far more pain to come.

12.It is easy to argue that victory in war cannot be had without sacrifice. Everyone can agree on that. The far more difficult and troubling question is are even far greater sacrifices than so far undergone sufficient to bring victory. Many nations have sacrificed far more than we have and still lost their wars. Sacrifice is needed, indeed heroic sacrifices now unimaginable will be needed, but sacrifice alone is not a sufficient condition for victory. To sacrifice must be coupled the huge financial resources needed for modern warfare and even more for victory in modern war. So, the crucial question is do we have the resources needed for victory. The following paragraphs address that all-important question.

13.As mentioned earlier in this paper the annual per capita income of the population of Sri Lanka is in the region of US$ 900. This limits the base of direct taxation of personal incomes. The corporate sector is small as industrialisation is in its early stages and plantation agriculture for export is dependent on the vagaries of international markets, which are buyers’ markets while local costs are inflexible and rise ahead of inflation. Both personal and corporate sectors have little further room for increases in direct taxation. Borrowing too has been stretched to the limit. A long history of deficit budgets has stacked up the public debt to such an extent that only annual tranches of foreign aid (some of it loans as opposed to grants thus adding to future debt burdens) enable it’s servicing. Without that aid international default would follow automatically. In short the available financial resources are inelastic and if stretched too far, especially suddenly to meet military exigency, could soon reach the point of diminishing returns.

14.The paucity of financial resources is clearly seen if the country’s finances are looked at from an international perspective. The government’s annual expenditure budget plus the extra budgetary costs of servicing the public debt (foreign as well as local – they are about evenly balanced) come to a total of SL Rs. 320 billion for this year. At current exchange rates (i.e. SL Rs 120=1£ Stg) this comes to £2.7 billion – a piffling sum by international standards. Of this small sum only about SL Rs 80 billion is for the war effort, mostly local rupee expenditure on local rupee expenses such as salaries, food etc. Of the Rs.80 billion only about Rs.36 billion are for external purchases of all the requirements of modern warfare ranging from armaments (terrestrial, naval and aerial), fuel, medical supplies and communications equipment. This comes to about £300 million per year for a military force of 180,000 men and women – itself a piffling figure considering the costs of modern armaments. The LTTE, fielding one-twentieth the number of the Sri Lankan government forces would require for parity one-twentieth of the Sri Lanka government’s appropriation, i.e. one-twentieth of £300 million or £15 million per year. Many multiples of that sum are easily within reach for the Eelam Tamil diaspora.

Cost implications of the use of modern military hardware
15. For the last 17 years the Sri Lankan government forces have tried to make do with long-outmoded East European weaponry, mostly beyond economic use, and with very little battlefield life still left in them. It is well known that in the heat of battle much of it has turned with remarkable speed into heaps of scrap iron. With the fall of Elephant Pass, however, the Sri Lankan government is getting introduced to the contemporary costs of modern weaponry supplied by the Israelis. (Even these did not succeed against the Hezbullah). Far more modern and more versatile and more effective weaponry is now coming on the international arms markets but they do not bear even thinking about on account of their stratospheric costs.

16. We have come now to the most vital of the new realities that confront us the huge costs of modern military hardware and a corresponding high quantum leap in the military budget to be able to afford them. In a paper written by me and published 2 years ago I estimated that the total military budget would have to rise to SL Rs.400 billion per year for a basic minimum effort. Since then prices have risen to well above the average levels of inflation and due to technical improvements to all the families of weapons (few, if any, are individual, self-standing weapons now). To advance from SL Rs. 80 billion per year to SL Rs 450 billion, even in stages, takes a lot of doing. But can it be done at all?

17. Funds for any activity of any government have to be raised by taxation and borrowing. This is no less true in Sri Lanka. It applies to Sri Lanka’s military expenditure as well. In paragraph 13 above the limited possibilities from direct taxation and borrowing have been discussed. There remains indirect taxation, the new milk cow of all governments. In Sri Lanka too the bulk of the proceeds of taxation comes from the GST, a non-progressive, undifferentiated tax that falls equally on rich and poor alike. The numbers of “the rich” in Sri Lanka are so small that their contribution to the proceeds of the GST is far smaller than that of “the poor” i.e. the general population. So the poor make a far greater contribution to the costs of war than the rich. This means that it is the poor that we have to look to for the huge financial leap now required. In short, can the poor be soaked for much, much more? That would necessitate substantial increases in the rates of the GST (now 12.5%) and the NSL (now 6.5%).

18. The political costs of doing this could be very serious but evidently the political parties, which advocate a greatly escalated military effort, believe the people will bear such swingeing increases even grudgingly. The problem, however, is the actuarial one – how soon will the point of diminishing returns be reached i.e. when will people, especially the really poor cut back on consumption just to make ends meet at the barest level of subsistence. Only time and experience will answer this question.

Implications of the new realities for policy
19. These are the new realities that political parties in Sri Lanka will have to take into account in evolving rational policies that can be explained to our people as a means of deliverance from a war, which is now nearing the end of its second decade. The time is long past when any government can present to our people the wishful thinking that a constitutional reform devolving powers can end war as a serious, credible policy. It is not. It is an insult to the intelligence of our people to try to pull such wool over their eyes.

20. It is equally futile to assure our people of military victory on the primitive magnitudinarian assumption that since we are more numerous and richer and have the advantage of an organised government victory must be ours in the end. Soon, very soon, the Eelam Tamil diaspora will be stronger than the Sinhala nation. And our possession of a government, such as we have now, is really a millstone round our necks of which the Tamil nation is free to their great advantage at a time of war.

21. The political parties of the Sinhala nation, old and new alike, must now evolve new, rational, credible, viable policies based on these new realities, policies which offer hope of ending war and delivering a lasting peace.