Sri Lanka move to privatize plantations was correct: Minister
Jun 07, 2018 06:22 AM GMT+0530 | 1 Comment(s)
ECONOMYNEXT - Sri Lanka's decision to privatize state-run plantations in the 1990s was correct, but not all of the new owners were running them well, Plantations Industries Minister Navin Dissanayake said.
"The decision taken by President (Ranasinghe) Premadasa in 1992 to privatize (or peoplise) estates, was a bold decision," Dissanayake told forum of top executives of privatized plantations.
"It was taken amid reservations. But today we can see that it was the correct decision.
"It was enormous burden to the government, the tax payers of this country to keep subsidizing the plantations companies."
The 'state' plantations were originally expropriated from domestic and foreign investors by the post-independent ruling class of Sri Lanka, and was part of several moves that made the country a backward nation in Asia, analysts say.
Many of the foreign investors went to Kenya and set up new plantations.
By the 1990s Sri Lanka's state plantation could not even pay salaries of works and peoples tax money taken from other activities were being channelled to keep afloat a business that was once a revenue earner.
At first only management was given, but later a stronger claim was given through the sale of long lease, on which rentals are now paid to the Treasury.
After privatization many of the firms became profitable under the same estate managers (planters) who ran them under state control.
However Minister Dissanayake said not all privatized plantations were being managed well.
"You know your industry," Dissanayake told the estate managers. "I am not a planter, I am a lawyer. You know more than me. I do not have to tell you what to do. But then after 20-year when we look back we find lapses in some practices in basic plantation management.
"You know this, I know this. We do not want to interfere or intervene in your management model. If you are running profitably, we have to stay back as much as possible. That is my thinking.
"That is thinking of my party the United National Party which introduced free market reform to this country."
He said the country was maintaining at least the current level of growth due to free markets. The leftist parties on the other hand wanted more regulation.
"We have seen this happen," Dissanayake said. "Over 20 years since 1994 there has been more regulation of the economy."
He said the private firms were also not innovative enough. The privatized firms had complained that the government had not given permission for them to carry out many proposals.
The government as 'Golden Shareholder' can deny permission for innovation.
"Fair enough, I accept that," Dissanayake said.
But he said after he took over the portfolio several assessments were done.
"Most of the RPCs (Regional Plantations Companies) had done well. But there are a certain RPCs that are dragging the sector down.
"There is a lack of investments, there is a lack of innovation, lack of dynamism, and sad to say lack of ethical practices.
Minister Dissayanake said he believed the state should get 'some teeth' in monitoring the RPC, because he thought the assets of the companies 'belonged to the people of the country."
"I would like to assure you that I would not try to interfere in your affairs," he said.
"That is not my intention at all. Therefore let us come to a reasonable compromise where we have greater access, greater voice in a monitoring mechanism."
Analysts say if the market is allowed to work, the ownership of badly managed plantations will eventually change.
A case in point is Agalawatte Plantations which is on track for a rights issue to raise new shares after a change in ownership.
While the current minister is a believer in free market policies, the setting up a new regulatory body at a cost to the tax payer may be mis-used by future administrations, they say.
Meanwhile analysts also point out that some plantations that remained in state hands had shown much worse performance. (Colombo/June06/2018)