Govt. clamps down on SOEs’ promotional spending

• Such expenses to be limited to 5% of an SOE’s annual total budgeted operating costs
• State banks and financial institutions among those required to fall in line
• NLB and DLB can spend up to 10% of total revenue of preceding year
• State agencies seeking to spend more on advertising, promotional activities will need sanction of Finance Minister

By Chandani Kirinde 

President’s Secretary Dr. P.B. Jayasundera has issued new instructions to State-Owned Enterprises (SOEs), including State-owned banks and financial institutions, to curtail their advertising, marketing and promotional activities and restrict such expenditure to 5% of an SOE’s annual total budgeted operating costs.

In the case of the National Lotteries Board (NLB) and the Development Lotteries Board (DLB), they can spend up to 10% of the total revenue of the preceding year, the President’s Secretary said in a circular issued to heads of all SOEs on Thursday.

It said that based on the information received from the Director General of the Department of Public Enterprises, State agencies including State banks, lotteries, insurance, etc. were spending heavily on advertising, marketing, and promotional activities.

The circular said that while acknowledging promotional activities were necessary to get the message across to a large client base, such expenditure must be productive and result-oriented, and ultimately bring profitable returns both commercially and socially to the agency concerned.

SOEs are required to obtain the approval of the Finance Minister for expenses above the stipulated limit on annual advertising, any unplanned promotional activity not included in the annual advertising program, donations over Rs. 100,000 and any sponsorships over Rs. 2 million.

Sponsorships in State media institutions can be made up to Rs. 5 million.

Advertising and promotional activities carried out by State agencies such as Sri Lanka Tourism, SriLankan Airlines, Export Development Board, Board of Investment (BOI), and Sri Lanka Tea Board, which target external markets, are required to have a minimum of 35% local content (production work, engagement of Sri Lankan professionals, artistic services, etc.) while other agencies targeting local markets are required to have 100% domestic content.

The circular states that all expenses on Corporate Social Responsibility (CSR) programs should also be considered as promotional expenses and be properly budgeted.

Dr. Jayasundera said the circular was issued on the instructions of the President.