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Sunday May 26th, 2024

Sri Lanka SOE policy to see over 80 firms shifted to holding company

ECONOMYNEXT – Sri Lanka plans to transfer more than 80 state enterprises into a holding company (HoldCo) under a broad policy framework for better governance, capital raising, while maintaining state control or for future divestiture under.

The enterprises, whose shares even now nominally owned by the Secretary to the Treasury, will be taken away from the line ministries and be directly under the finance ministry.

State enterprises, though financed by the tax payer, who effectively supply the capital as shareholders come under the control of political authorities who have temporary terms and have no long-term responsibility towards SOE, creating an agency-principle problem, analysts say.

Meanwhile Suresh Shah, Director General of the SOE reform unit said under the current system there was a further “dual ownership” structure, where enterprises came under a line ministry while shares were owned by the Finance Ministry.

In future, ministries will be policy-making bodies, without any conflict of interest to favour agencies coming under them compared to firms set up by citizens.

Commercial entities coming under the HoldCo would be will be registered under the companies act and be subjected to its governance rules and disclosures.

Sri Lanka already has a law to convert state owned entities to companies, Shah said.

The priviledges or ‘most favoured’ status afforded to state entities sometime violating the law of the land will be taken away.

The practice of borrowing from state banks through Treasury guarantees to cover losses, will also be done away with.

An SOE Act with legislating the principles contained in the policy will be brought to parliament towards the end of the year.

An inter-ministerial SOE policy committee will be established under the proposed SOE Law which will advice the Holding Company on wider government policy issues, approve the creation and acquisition of an SOE or approve the divestiture and winding up of and SOE.

The SOE Policy committee will be chaired by the President, and will include as members ministers of finance, investment promotion and labour, the Governor of the Central Bank of Sri Lanka, Secretary to the Treasury and the Chair of the Hold Co.

Other Ministers and Secretaries will be invited to attend on a need basis.

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Compared to countries like Singapore or some European nations, Sri Lanka also does not have permanent secretaries of ministries, which has been a core problem in the overall breakdown of the country’s civil service since the 1970s, according to some analysts.

Permanent secretaries led to a long-term policy formulation process to prevent avoidable mistakes and sudden reversals, and public servants with extensive sector and domain knowledge being able to advice political authorities if necessary.

Fluid secretaries eventually led to fluid ministries and the structure of the government also changed from election to election with agencies kicked around like footballs, critics say.

The UK started a civil started a permanent civil service following the Northcote Trevalyan report.

“It cannot be necessary to enter into any lengthened argument for the purpose of showing the high importance of a permanent civil service of the country in the present day,” the report said.

“The great and increasing accumulation of public business, and the consequent pressure upon the Government, need only to be alluded to: and the inconveniences which are inseparable from the frequent changes which take place in the responsible administration are of a sufficient notoriety.”

SOEs to be transferred to the Holding Company

1. Airport and Aviation Services Ltd.
2. BCC (Pvt.) Limited 3
. Ceylon Shipping Corporation Ltd, Subsidiaries & Associates
4. Ceylon Sugar (Pvt) Ltd.
6. Cey-Nor Foundation Ltd 7. Chilaw Plantations Ltd
8. Colombo Commercial Fertilizer Company Ltd
9. Colombo Lotus Tower (Pvt) Ltd.
10. Elkaduwa Plantation Company Ltd
11. Galoya Plantation (Pvt) Company
12. Grand Oriental Hotel
13. GSMB Technical Services (Pvt) Ltd.
14. Hotel Developers Lanka Ltd. (Hilton)
15. Hyatt / Canwill Holding Ltd. 16. Kalubovitiyana Tea Factory Ltd
17. Kantale Sugar Company Ltd.
18. Kurunegala Plantations Ltd
19. Lakdiva Engineering Ltd.
20. Lanka Ashok Leyland Ltd.
21. Lanka Logistics Limited
22. Lanka Phosphate Ltd.
23. Lanka Sathosa Ltd
24. Lanka Sugar Company Ltd
25. Litro Gas Lanka Ltd
26. Litro Gas Terminal Lanka (Pvt) Ltd
27. Mahaweli Livestock Enterprise Ltd.
28. National Salt Ltd. 29. North Sea Ltd
30. Ocean View Development (Pvt) Ltd.
31. Paranthan Chemicals Ltd.
32. Polipto Lanka (Pvt) Ltd.
33. Rakna Arakshana Lanka Ltd.
34. Sri Lanka Insurance Corporation Ltd.
35. Sri Lanka Savings Bank Ltd.
36. Sri Lanka Telecom, Subsidiaries & Associates
37. Sri Lanka Thriposha Ltd 38. Sri Lankan Airlines Ltd.
39. STC General Trading Company
40. Waters’ Edge Ltd
41. The Lanka Hospitals Corporation PLC

SOEs to be Registered Under the Companies Act No 07 of 2007 and Transferred Under the Holding Company

1. Bank of Ceylon
2. Building Material Corporation
3. Cement Corporation
4. Central Engineering Consultancy Bureau
5. Ceylon Ceramics Corporation (Brick and Tiles Division)
6. Ceylon Fisheries Corporation 7. Ceylon Fishery Harbors Corporation
8. Department of Government Factories 9. Development Lotteries Board
10. HDFC Bank
11. Janatha Estates Development Board
12. Mahinda Rajapaksa National Tele Cinema Park
13. National Equipment and Machinery Organization
14. National Livestock Development Board
15. National Lotteries Board
16. National Savings Bank
17. Pradeshiya Sanwardena Bank
18. Peoples Bank
19. Regional Development bank
20. Selacine Television Institute
21. Sri Lanka Ayurvedic Drugs Corporation
22. Sri Lanka Cashew Corporation
23. Sri Lanka Exhibition and Convention Bureau
24. Sri Lanka Handicraft Board (Laksala)
25. Sri Lanka State Plantation Corporation
26. State Development and Construction Corp.
27. State Engineering Corporation
28. State Mortgage & Investment Bank
29. State Pharmaceuticals Manufacturing Corporation
30. State Printing Corporation
31. State Timber Corporation

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Sri Lanka power outages from falling trees worsened by unfilled vacancies: CEB union

HEAVY WINDS: Heavy rains and gusting winds have brought down trees on many location in Sri Lanka.

ECONOMYNEXT – Sri Lanka’s power grid has been hit by 300,000 outages as heavy winds brought down trees, restoring supply has been delayed by unfilled vacancies of breakdown staff, a union statement said.

Despite electricity being declared an essential service, vacancies have not been filled, the CEB Engineers Union said.

“In this already challenging situation, the Acting General Manager of CEB issued a circular on May 21, 2024, abolishing several essential service positions, including the Maintenance Electrical Engineer in the Area Engineer Offices, Construction Units, and Distribution Maintenance Units,” the Union said.

“This decision, made without any scientific basis, significantly reduces our capacity to provide adequate services to the public during this emergency.

“On behalf of all the staff of CEB, we express our deep regret for the inconvenience caused to our valued customers.”

High winds had rains have brought down trees across power lines and transformers, the statement said.

In the past few day over 300,000 power outages have been reported nationwide, with some areas experiencing over 30,000 outages within an hour.

“Our limited technical staff at the Ceylon Electricity Board (CEB) are making extraordinary efforts to restore power as quickly as possible,” the union said.

“We deeply regret that due to the high volume of calls, there are times when we are unable to respond to all customer inquiries.

“We kindly ask consumers to support our restoration teams and to report any fallen live electrical wires or devices to the Electricity Board immediately without attempting to handle them.

The union said there were not enough workers to restore power quickly when such a large volume of breakdowns happens.

“We want to clarify that the additional groups mentioned by the minister have not yet been received by the CEB,” the union said.

“Despite the government’s designation of electricity as an essential service, neither the government, the minister in charge, nor the CEB board of directors have taken adequate steps to fill the relevant vacancies or retain current employees.

“We believe they should be held directly responsible for the delays in addressing the power outages due to the shortage of staff.”

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Melco’s Nuwa hotel to open in Sri Lanka in mid-2025

ECONOMYNEXT – A Nuwa branded hotel run by Melco Resorts and Entertainment linked to their gaming operation in Colombo will open in mid 2025, its Sri Lanka partner John Keells Holdings said.

The group’s integrated resort is being re-branded as a ‘City of Dreams’, a brand of Melco.

The resort will have a 687-room Cinnamon Life hotel and the Nuwa hotel described as “ultra-high end”.

“The 113-key exclusive hotel, situated on the top five floors of the integrated resort, will be managed by Melco under its ultra high-end luxury-standard hotel brand ‘Nuwa’, which has presence in Macau and the Philippines,” JKH told shareholders in the annual report.

“Melco’s ultra high-end luxury-standard hotel and casino, together with its global brand and footprint, will strongly complement the MICE, entertainment, shopping, dining and leisure offerings in the ‘City of Dreams Sri Lanka’ integrated resort, establishing it as a one-of-a-kind destination in South Asia and the region.”

Melco is investing 125 million dollars in fitting out its casino.

“The collaboration with Melco, including access to the technical, marketing, branding and loyalty programmes, expertise and governance structures, will be a boost for not only the integrated resort of the Group but a strong show of confidence in the tourism potential of the country,” JKH said.

The Cinnamon Life hotel has already started marketing.

Related Sri Lanka’s Cinnamon Life begins marketing, accepts bookings


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Sri Lanka to find investors by ‘competitive system’ after revoking plantations privatizations

ECONOMYNEXT – Sri Lanka will revoke the privatization of plantation companies that do not pay government dictated wages, by cancelling land leases and find new investors under a ‘competitive system’, State Minister for Finance Ranjith Siyambalapitiya has said.

Sri Lanka privatized the ownership of 22 plantations companies in the 1990s through long term leases after initially giving only management to private firms.

Management companies that made profits (mostly those with more rubber) were given the firms under a valuation and those that made losses (mostly ones with more tea) were sold on the stock market.

The privatized firms then made annual lease payments and paid taxes when profits were made.

In 2024 the government decreed a wage hike announced a mandated wage after President Ranil Wickremesinghe made the announcement in the presence of several politicians representing plantations workers.

The land leases of privatized plantations, which do not pay the mandated wages would be cancelled, Minister Siyambalapitiya was quoted as saying at a ceremony in Deraniyagala.

The re-expropriated plantations would be given to new investors through “special transparency”

The new ‘privatization’ will be done in a ‘competitive process’ taking into account export orientation, worker welfare, infrastructure, new technology, Minister Siyambalapitiya said.

It is not clear whether paying government-dictated wages was a clause in the privatization agreement.

Then President J R Jayewardene put constitutional guarantee against expropriation as the original nationalization of foreign and domestic owned companies were blamed for Sri Lanka becoming a backward nation after getting independence with indicators ‘only behind Japan’ according to many commentators.

However, in 2011 a series of companies were expropriation without recourse to judicial review, again delivering a blow to the country’s investment framework.

Ironically plantations that were privatized in the 1990s were in the original wave of nationalizations.

Minister Bandula Gunawardana said the cabinet approval had been given to set up a committee to examine wage and cancel the leases of plantations that were unable to pay the dictated wages.


Sri Lanka state interference in plantation wages escalates into land grab threat

From the time the firms were privatized unions and the companies had bargained through collective agreements, striking in some cases as macro-economists printed money and triggered high inflation.

Under President Gotabaya, mandating wages through gazettes began in January 2020, and the wage bargaining process was put aside.

Sri Lanka’s macro-economists advising President Rajapaksa the printed money and triggered a collapse of the rupee from 184 to 370 to the US dollar from 2020 to 2020 in the course of targeting ‘potential output’ which was taught by the International Monetary Fund.

In 2024, the current central bank governor had allowed the exchange rate to appreciate to 300 to the US dollar, amid deflationary policy, recouping some of the lost wages of plantations workers.

The plantations have not given an official increase to account for what macro-economists did to the unit of account of their wages. With salaries under ‘wages boards’ from the 2020 through gazettes, neither employees not workers have engaged in the traditional wage negotiations.

The threat to re-exproriate plantations is coming as the government is trying to privatize several state enterprises, including SriLankan Airlines.

It is not clear now the impending reversal of plantations privatization will affect the prices of bids by investors for upcoming privatizations.

The firms were privatized to stop monthly transfers from the Treasury to pay salaries under state ownership. (Colombo/May25/2024)

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