Sri Lanka makes big financial gains from plantations privatization
ECONOMYNEXT – Sri Lanka’s government has made financial gains from privatising plantations and also avoided continuous bailouts from taxpayers, but diversification had been slow partly due to state restrictions, an economist said.
"I would say it was a qualified success from the country’s point of view," Romesh Dias Bandaranaike, an economist who was involved in the privatisation process, told an economic forum organised by the Ceylon Chamber of Commerce in Colombo.
"Many of the RPCs have operated profitably in the face of difficult circumstances, although very few have been able to maintain continuous steady profits.
"But from the government’s point of view, it had been a very big financial success."
By 1992, amid a downturn in the commodity cycle (benign monetary policy from the Federal Reserve), Sri Lanka’s taxpayers were pumping money to keep expropriated plantations afloat.
Bandaranaike said, when the privatisation process started, people were paying Rs1.2 billion a year to meet cash shortfalls at Sri Lanka State Plantations Corporation and Janatha Estate Development Board, two large state firms. In today’s rupees in could be about 10 billion rupees, he said.
The two firms were built with land expropriated from individuals and companies in Zimbabwe and Venezuela style expropriations in 1972 and 1975.
The government turned over most of the land in the two state firms into 22 Regional Plantations Companies (RPCs) through long-term leases and sold them to the private firms, with 22,000 acres were kept with the two companies.
The government got about Rs6.0 billion from the privatisation itself, Bandaranaike said while avoiding unquantified further bailouts.
In addition, an annual lease was structured to increase with the GDP deflator.
About Rs7.0 billion had been collected from leases. Annual collections were now around Rs800 million, Bandaranaike said.
Many of the firms also paid income tax in the years they made profits, when the commodity cycle was peaking, analysts say.
Meanwhile the JEDB and SLSPC with only 20,000 hectares and Elkaduwa Plantations needed about1.5 billion rupees from tax-payers to cover unpaid Employees Provident Fund and Employees Trust Fund arreas.
JEDB Chairman Kennedy Gunwardene told reporter in July taht tax-payers were forking out about 60 million rupees a month to supplement salaries of the two state agencies now.
But Bandaranaike said there was limited diversification of crops. Some firms had moved into mini-hydro and tourism.
But the requests made by the firm to do new things were held up at the Treasury, where the government as ‘Golden Shareholder’ was dragging their feet on approving initiatives, and there was state interference in wages. (Colombo/Aug06/2016)