Sri Lanka to set up Public Enterprise Board; new law next month
Aug 03, 2016 18:19 PM GMT+0530 | 1 Comment(s)
ECONOMYNEXT - Sri Lanka is to introduce a law to state-owned enterprises and set up a Public Enterprise Board with top executives sourced from the private sector, Trade and Investment Minister Malik Samarawickrema said.
"..Our government will shortly introduce a Public Enterprise Act in the next month or so," Minister Samarawickrama told a business forum organized by the Ceylon Chamber of Commerce.
"A Public Enterprise Board has also been identified to comprise members of the private sector, the public sector and trade unions, and will be chaired by a private sector professional."
He said top officials of SOEs will then be appointed by the Public Enterprises Board and ministers will no longer be able to appoint them.
Idris Jala, a former Shell executive who was hired by the Malaysia government and who is now an advisor to Malaysia's Prime Minister to bring the national carrier back to profits, said CEOs have to be given targets or sacked.
In 2004, Malaysia's government put chief executives on three-year contracts, and gave them profit and performance targets. They were paid high salaries and stock options if they performed and sacked if they did not.
Idris Jala ran Shell Gas Lanka at one time.
Samarawickrama said large losses of state enterprise has been a 'major drag' on the development prospects of the country.
"These losses undermine fiscal consolidation and the balance sheets of state banks," he said.
SOEs were used to give off-budget subsidies and they borrowed from banks, pushing up interest rates and depriving funds and raising the borrowing costs of small enterprises.
Although some SOEs made profits, they do not reflect the returns for the investments made. Anushka Wijesinghe, Chief Economist at the Ceylon Chamber of Commerce, said that a report by Advocata, an independent think tank, found that from 2006 to 2015 it cost taxpayers Rs640 billion.
A part of the losses made by SOEs were financed by the budget.
"That means the government has to find tax revenues. Or else, the government has to borrow the money domestically or from abroad.
"These debts also have to be repaid by the people through future taxes. One way or the other the people have to bear the financial cost of these losses."
"Clearly, revenue for this has to come out of the pockets of all citizens of Sri Lanka." (Colombo/Aug02/2016)