Private investments soon in Sri Lanka SOEs, utilities, no over-staffing

ECONOMYNEXT – Sri Lanka will reform state enterprises by encouraging private sector investments in public services and utilities, and ending the corrosive practice of indiscriminate hiring to fulfill election promises, senior government officials said.

"Despite their strategic importance, state-owned enterprises have not achieved full potential, which is reflected by its low return on assets of 0.64 percent," said Minister of Finance and Media Mangala Samaraweera.

"This as a dismal performance that creates public outcry over the mismanagement of our national resources," Samaraweera said, addressing a conference for heads of the 55 strategically important state-owned enterprises.

A new government agency has been set up to facilitate partnerships with the private sector across public infrastructure and services, as part of overall reforms to make public enterprises commercially viable and accountable.

"We made a pledge to restructure SOEs to enable them to operate as commercially viable ventures with accountability," Samaraweera said.

National Agency for Public Private Partnership (NAPPP) will be the single facilitation point for all stakeholders in designing and implementing private public partnerships, the Finance Minister said.

"You must now make efforts to closely work with the NAPPP in compliance with our PPP initiatives to gain the strength of the private sector to remain viable business operations," Samaraweera said.

In 2017, these public enterprises recorded a combined turnover of 1.8 trillion rupees which was 13.2 percent of GDP. Assets of the 55 state-owned enterprises grew 13.6 percent and accounted for 57 percent of GDP.

Thirty nine of these reported profits totaling 136 billion rupees, while the other 16 made a combined loss of 87 billion rupees, with losses at four of these (energy utility Ceylon Electricity Board, national carrier SriLankan Airlines, retail chain Sathosa and the Agriculture and Agrarian Insurance Board) totaling 84 billion rupee.

"The reasons for such under-performance ranges from lack of good governance practices, including lack of a clear accountability mechanism, policy and legal framework, to a weak supervisory role," he said.





"As the key players in our national ventures, you may have to re-look at your operations seriously to achieve reasonable management improvements in the interest of our fellow citizens," Samaraweera said.

"This demands the appointment of personnel who are properly qualified and have the capacity to guide your entities to achieve their objectives," Samaraweera said.

Sri Lanka’s government must end the practice of over-staffing public enterprises to fulfill election pledges of creating jobs in the government sector, Treasury Secretary R. H. S. Samarathunga said.

"The government recruits thousands of people and many state-enterprises while sustaining losses continue to recruit people without giving due attention to sustainability," he said, calling for end to indiscriminate hiring.

He said all future hiring to the public sector must be made with due approval from the Management Services Department of the central Treasury.

"The Management Services Department will not only look at the suitability of all new appointments, but also make sure there are enough funds to do so," he said.

Government revenue from state-owned enterprises like dividends and levies fell 50 percent in 2017.

The government will introduce management reforms and prudential cost accounting to enhance public accountability.
Sri Lanka is also adopting key performance indicators for state-owned enterprises, but not everyone is adopting these.

"I encourage all of you to follow suit without any delay," the Finance Minister told the heads of state-owned enterprises.

State-owned enterprises will also be exposed to market competition and pricing.

"We cannot pass the cost of inefficiency on to consumers. It is essential that SOEs eliminate management inefficiencies prior to the implementation of fully cost reflective pricing," Samaraweera said. (COLOMBO, 06 July, 2018)


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