The Committee on Public Enterprises (CoPE) has called for a new investigation into the colossal losses of SriLankan Airlines in Parliament, insisting a wide-ranging investigation is needed to understand the causes of the losses of the National Carrier, identify people responsible for the losses and hold them accountable.
CoPE Chairman Sunil Handunnetti, who has been long engaged in an effort to make COPE reports more effective to promote more awareness among the public and bring wrongdoers before the law, has pointed out glaring concerns in how decisions were made regarding operations of SriLankan Airlines.
Taking the example of the deal with Airbus inked by the previous Government for an estimated $ 2.6 billion and subsequently cancelled by the present Government, he pointed out the leases for eight Airbus A350-900 aircraft were signed at above market prices, which was the fault of officials that ran the airline before 2014.
But when the lease was cancelled by this Government, the penalty paid was Rs. 17 billion, which Handunnetti told Parliament needed to be analysed by the Auditor General. He also emphasised that a second much larger investigation must be done by the Auditor General to understand the reasons behind the colossal losses, which have topped Rs. 240 billion in the last 10 years.
Sri Lanka is a country that has had a large State sector for decades. Currently, Sri Lanka has about 400 SOEs, according to the Treasury, with over a million employees. Yet, only a handful of these SOEs make profits or generate returns for the public, and are largely seen as employment providers, rather than service providers. But they do consume an extraordinary amount of resources, and possess impressive assets.
Even though SOEs occupy significant space in the economy, it is by no means a reflection of their potential or capacity. Clearly, these business enterprises have not been performing at full potential and SriLankan has been an issue for many year. The reasons include a lack of good governance, lack of clear accountability mechanisms, issues associated with policy and legal frameworks, and a weak supervisory role played by management. This is the case for many SOEs and not just SriLankan.
In mid-2017, Moody’s Investors Service put Sri Lanka’s public enterprise debt at a whopping 14% of GDP and warned the Government of additional risks to its finances should such debt require any State support, which is likely to become the case as most cannot support their debt repayment.
This translates into a massive debt pile of little under $ 12 billion, or Rs. 1,848 billion, that has accumulated due to the continuous annual losses. According to Moody’s, the total liabilities include Government guarantees, outstanding SOE debt to the banking system, and outstanding SOE foreign borrowings.
COPE, which recently opened its sessions to media, is trying to throw more light on how deep-seated the issue of mismanagement and wastage is in many SOEs. But one option that could be explored in making COPE engaging is to allow experts to give their views on how management can be improved in SOEs and for those recommendations to also be allowed to be incorporated into the oversight process.
COPE is undoubtedly an important process but accountability requires more stakeholder involvement and ultimately legal redress to truly uphold public interest.