By Hiran H. Senewiratne
The restructuring of State Owned of Enterprises (SOE) is being delayed day- by –day, resulting in an uncertain situation where prospective investors will also tend to think twice before investing in Sri Lanka, Advisor, Advocata Institute Prof Rohan Samarajiva said.
“Although certain trade unions say that Sri Lankan Airlines, CPC, CEB, Water Supply and Drainage Board and other state owned enterprises are making profits, there are various issues in their accounting system. They are actually incurring losses because some of their debts and the relevant interests are borne by the Treasury, Prof. Samarajiva said at a forum organized by Advocate Institute on the topic, ‘IMF and the Urgency for State – Owned Enterprises Reforms’. The event was held at BMICH on Tuesday.
Samarajiva added: “Last year’s interim budget in August 2022 specifically mentioned restructuring of several state owned enterprises, including Sri Lankan Airlines, CEB, CPC, Hilton Hotel and several other entities. But 14 months have passed and not a single such entity has been restructured by the government.
“Undue delays in restructuring SOEs create some uncertainty among prospective investors and workers. Further, due to the inefficiency of those institutions and the higher number of workers in such entities, prospective investors will not be able to get a return on investment.
“Many years ago there were several organizations, such as the Public Enterprise Reforms Commission, Board of Infrastructure Investments and National Procurement Agency that operated in a highly efficient way with a knowledgeable set of personnel, who undertook to select and recommend loss- making state owned enterprises to restructure them. But those entities no longer exist and these tasks are now being vested in an inefficient set of people.”
Advocata Institute’s, Chief Executive Officer, Dhananath Fernando, addressing the forum said that state owned enterprises are now run “by a set of rogues in the country. They need to be privatized or listed in the CSE.
Fernando added: “From 2005 to 2022 SOE entities incurred a Rs 1.8 trillion loss for the country. Therefore, the IMF also specifically mentions that bribery and corruption are the root causes of these ills. The government hopes to reduce Debt to GDP to 95 percent from 128 percent by 2032. But its target could not be achieved if the government does not have proper revenue sources. High expenditure in the government itself, a high debt component and no ample foreign direct investment also ail the country.
“In 2022, losses incurred by state owned entities were; CEB Rs 139 billion, CPC Rs 100 billion, Water Board Supply and Drainage Board Rs 300 billion and Sri Lanka Airlines Rs 72 billion. It is incumbent upon the government to restructure those entities as soon as possible, either by listing in the CSE or by going for private- public partnership, or any suitable business model to make them more viable.”
Independent Consultant Ravi Ratnasabapathy said, Sri Lankan Airlines up to 2010 ran comfortably under an Emirates management, which held a 46.6 percent shareholding. After 2010 the government took over the entire ownership of shares from Emirates by paying US $ 53 million. In this whole deal episode, major state owned banks, Bank of Ceylon, Peoples Bank, National Savings Bank and the EPF paid Emirates Airline on behalf of the government Treasury.
“Due to that two state banks are suffering as they are now facing a difficulty in recovering that money.
“Therefore, it is up to the government to either find a proper solution or evolve a business model to arrest the situation.”