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Sunday June 23rd, 2024

Sri Lanka ex-President Mahinda Rajapaksa slams privatization

ECONOMYNEXT – Sri Lanka’s ex-President Mahinda Rajapaksa has slammed a current privatization drive, claiming that they are ‘national’ assets.

“I ruled the country for more than nine years from November 2005 to January 2015 without ever selling a single state-owned enterprise,” President Rajapaksa said in statement.

“In fact, my government actually re-acquired some state owned enterprises such as the Insurance Corporation, and Lanka Hospitals that had been sold off by previous governments and these enterprises continue to make profits for the state to date.”

The Insurance Corporation ended up in state hands due to a court order, which has been questioned due to lack of opportunity to cross examine witnesses.

Critics however have blamed the Rajapaksa administrations for running down state enterprises for off-budget spending and to give jobs to henchmen and family members.

In additional some SOEs, like the re-acquired Sri Lanka has not only run losses but have figured in high profile corruption scandals.

Anti-privatization was a policy plank of the Janatha Vimukthi Peramuna from 2004, and was seized by subsequent Rajapaksa administration.

The full statement is reproduced below:

The sale of national assets and state owned enterprises

The government’s plans to sell off certain national assets and state owned enterprises have given rise to discontent among trade unions, political parties and the general public. The present divestiture drive is ostensibly aimed at minimizing govt. expenditure on loss-making state owned enterprises and meeting certain IMF conditions in that regard. I ruled the country for more than nine years from November 2005 to January 2015 without ever selling a single state owned enterprise. In fact, my government actually re-acquired some state owned enterprises such as the Insurance Corporation, and Lanka Hospitals that had been sold off by previous governments and these enterprises continue to make profits for the state to date.

My government had a pragmatic approach towards state owned assets and enterprises. If a state owned enterprise was making profits and providing a good service to the public, we saw no reason to privatize it. At times, a government may take a strategic decision to manage the prices of certain goods or services produced by state owned enterprises for the overall benefit of the economy or to help low-income earners. The energy sector is a good example of this. There is no government in the world that does not subsidise certain earmarked economic activities.

During my tenure as President, even if some state owned enterprises made losses due to a government decision to manage prices, our management of the economy resulted in an unbroken nine year economic boom. We had no difficulty in paying off our debts or meeting the costs of the subsidies we maintained and nobody even spoke of privatization when I was President. Since the divestiture of certain sectors can have far reaching consequences for the country especially when foreign parties are involved, this is an issue that has to be approached with caution. As was resolved at the SLPP May Day rally, any restructuring of state owned enterprises should take place with maximum transparency, according to a national plan, in a manner consistent with national security and in consultation with the employees.

Having said that, I wish to stress that the trade union sector for its part, should take a more nuanced approach towards private sector participation in state owned enterprises. Going by the dictionary definition of privatization, any involvement of the private sector in the ownership structure or the control of a state owned asset or enterprise can be characterized as privatization. However, trade unions should not oppose every attempt to obtain foreign or private sector investment in a government owned enterprise. A pragmatic and non-dogmatic approach to such matters is required.

If there are unutilized government properties or underperforming government enterprises, it makes sense to obtain private sector participation to turn such enterprises around. If a profitable state owned enterprise needs further investment to add a new feature which cannot be financed by the government, it makes sense to award a share of that enterprise to a private investor in exchange for the investment. If an investor is willing to build a new enterprise from scratch, it makes sense to award shares in that enterprise to the investor so that a new state asset comes into being.

Some political parties have an ideology driven, dogmatic approach to privatization and seeks to privatize anything and everything that can be privatized. Many trade unions also have a similarly dogmatic attitude and tend to oppose any involvement of the private sector in state owned enterprises. Both these extremes are harmful to the country. Trade unions should regard proposals to obtain private or foreign participation in a state owned enterprise on a case by case basis and look at the overall benefit of such collaboration to the country. The only real way national assets and strategically important state owned enterprises can be safeguarded is by having a government that takes a pragmatic and non-dogmatic approach to such matters. This is why it is important to take note of the fact that when I ruled the country for more than nine years, the economy flourished and there was not even a discussion on the subject of privatization.

The present government is an interim arrangement formed to run the country for the remainder of former President Gotabaya Rajapaksa’s term. Even the pro-privatisation lobby should realize that the hasty divestiture of state owned assets at a time like this will not produce the best outcome for the country. Furthermore, the next Presidential election is only a few months away. Hence, as a measure to ease the widespread discontent over the government’s divestiture drive, I wish to propose that all moves to sell off state owned assets or enterprises be postponed until a new government is formed after the next Presidential election. The new government will then be able to deal with state owned properties and enterprises in accordance with the mandate they obtain at the election.

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India supports Sri Lanka Coast Guard to boost maritime security

ECONOMYNEXT – India has given 1.2 million US dollars’ worth spare parts to Sri Lanka’s Coast Guard to be used in a vessel also gifted to the Indian Ocean Island on an earlier occasion, the Indian High Commission in Colombo said.

“Handing over of the large consignment of spares symbolizes India’s commitment to support capability building towards addressing the shared challenges of Maritime Security in the region,” the Indian High Commission said

The spare parts were brought to Sri Lanka on the Indian Coast Guard Ship Sachet, an offshore patrol vessel that was on a two-day visit to the island.

The spares were formally handed over to the Sri Lanka Coast Guard Ship Suraksha which was gifted to Sri Lanka in October 2017 by India.

India has gifted spare parts for the ship in June 2021 and April 2022 and also provided assistance in refilling of Halon cylinders in January 2024. (Colombo/June23/2024)

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Sri Lanka Water Board makes profits, tax-payers inject Rs28bn

ECONOMYNEXT – Sri Lanka’s state-run National Water Supply and Drainage Board has made a profit of 5.2 billion rupees in the year to December 2023, after a tariff increase despite not getting money for 25 percent of its water it pumps out.

Total revenues went up to 61.8 billion rupees in 2023 from 35.4 billion rupees, a Finance Ministry report said.

Water revenue surged to 58.5 billion rupees from 33.1 billion rupees, cost of sales also went up to 32.8 billion rupees from 23.14 billion rupees, helping boost gross profits from 12.3 billion rupees to 29.0 billion rupees.

Finance costs surged to 14.9 billion rupees from 3.9 billion rupees,

NSWD reported net profits of 5.2 billion rupees for the year, against a loss of 2.7 billion rupees a year earlier.

The Treasury had given 28 billion rupees from tax payer money to settle loans.

During the Rajapaksa administration, macroeconomists who ran the Finance Ministry made state enterprises borrow money from banks through Treasury guarantees listing them as ‘contingent liabilities’, claiming they were ‘off balance sheet’.

The Road Development Authority, which had no revenues to speak of borrowed large amounts of money from banks which were listed as ‘contingent liabilities’ though they were a responsibility of the state from day one, allowing macroeconomists to understate both the budget deficit and national debt, critics say.

The water tariffs were raised by 81 percent after macroeconomists printed money to supress interest rates for flexible inflation targeting/potential output targeting. The currency collapsed after macroeconomists tried to float the rupee with a surrender rule in place.

Non-revenue water for which no money is collected was 25.2 percent. The agency was supposed to reduce non-revenue water. In some districts religious establishments are responsible for non-revenue water, according to an official who said it on condition of anonymity.

The water board is also unable to collect money from some services like common toilets for underserved communities. (Colombo/June23/2024 – Update II)

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Sri Lanka will expedite Indian projects: President

ECONOMYNEXT – Sri Lanka will expedite Indian-backed projects in the island, President Ranil Wickremesinghe told Indian business people after a visit by Indian External Affairs Minister S Jaishankar this week.

“I discussed with Prime Minister Modi the need to accelerate the joint program that we have decided, agreed on. So the major ones are identified, and Foreign Minister Jaishankar came down today [20] to have a discussion. Now this will show the new path we are taking,” president Ranil Wickremesinghe said.

“It won’t be individual projects. We’ve discussed a fair number of them. First is the grid interconnection between Sri Lanka and India, so that sustainable energy can be transmitted to India.

“We have the Sampur solar power project, which is a Government to Government (G2G) project, and a three island project, which is where we hope the ground breaking can take place in July,” he told Indian business people at the 31st All India Partner’s Meet 2024 (AIPM 2024), held at ICT Ratnadipa in Colombo.

The AIPM 2024 which was organised by KPGM Sri Lanka and India provided a platform for both countries to reaffirm their commitment to collaborative projects that promise to redefine bilateral relations and propel socio-economic growth.

“It’s a great pleasure and a privilege to have you in Sri Lanka, in Colombo, holding this meeting. It shows on one hand the close friendship that our two countries have, and on the other hand, the confidence that you have in Sri Lanka.

“Having now survived two difficult years, I must acknowledge that this was possible because India gave us a loan of $3.5 billion. All that will be repaid.”

Cooperation between the two nations needed to be enhanced, particularly in the energy sector, aiming to foster new development for the Northern region, Wickremesinghe said.

“We are looking at developing Palk Straight for wind energy and solar energy, both countries to get together and have a large farm for solar energy, for renewable energy. It also means that we will have a new economy for the northern province, which was worst affected by the war.”

Several Indian-backed projects in Sri Lanka have stalled due to protests from some parties, with some going to courts.

India is helping expand the Kankesanturai port, and is discussing development of the Palali and Colombo airports.

The National Livestock Development Board of Sri Lanka, in collaboration with India’s Amul Dairy Company, is involved in a project to enhance liquid milk production in the country.

The two nations are also considering establishing land connectivity.

Discussions have also taken place regarding expediting the Trincomalee Development Project, which encompasses industrial investment zones and tourist areas.

“Plans are underway to construct a multi-product oil pipeline from Nagapatnam to Trincomalee, pending the final observation report. Trincomalee is poised to become a hub for oil refining, with the development of ports and investment zones, transforming Trincomalee Port into a significant hub on the Bay of Bengal.

“Today, the entire East Coast is being opened up for tourism, with additional land earmarked for hotels in Galle and southern areas. Moreover, there are plans to establish more investment zones across the country, alongside expanding our professional training programs. In these endeavours, we are collaborating closely with India.” (Colombo/Jun22/2024)

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