Home / FT View Editorial/ Transparency for change

Transparency for change


Comments / {{hitsCtrl.values.hits}} Views / Friday, 16 August 2019 00:00


 


The Committee on Public Enterprises (CoPE) will be continuing its proceedings into SriLankan Airlines, Lanka Sathosa, National Water Supply and Drainage Board, and the Ceylon Electricity Board (CEB) during the next sitting week of Parliament commencing on 20 August, which will be the first time sessions have been opened to media. 

CoPE members are hoping that opening up the sessions to media and increasing transparency will push for more financial accountability in State enterprises, which are notorious for being inefficient, corrupt and wasteful. But as elections draw nearer, it is also important to ensure that better management of SOEs become part of the narrative, where candidates have to set out clear goals in their manifestoes of what they will do regarding SOE management. Unfortunately SOEs only feature in public discourse when it comes to employment, and their fiduciary responsibilities are routinely ignored.          

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.  

According to the Treasury, the Government, at the end of 2017, had contributed Rs. 1,150 billion as capital to 55 strategically important SOEs. Although the country has more than 127 commercial business enterprises, only 25% of them have contributed to the consolidated fund by way of levies and dividends in 2017, which amounts to Rs. 54 billion. However, the Government has channelled over Rs. 41 billion to SOEs through the Budget. 

Last year, 55 SOEs recorded a turnover of Rs. 1,755 billion, which comes to about 13% of GDP. Out of these, 35 SOEs recorded net profit of Rs. 136 billion, while 16 made net losses of Rs. 87 billion in 2017. The total asset base of SOEs grew by 13.6% in 2017, which made up about 57% of GDP.

Even though SOEs occupy significant space in the economy, it is by no means a reflection of their potential or capacity. In fact, the return on assets is merely 0.64% with all 55 business enterprises put together. Clearly, these business enterprises have not been performing at full potential. 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 SOE management.

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.  

SOEs were a major point of discussion in the early days of the current administration, but gradually dropped off the radar. It is time to revive the discussion. 

 


Share This Article

Facebook Twitter


DISCLAIMER:

1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.

COMMENTS

Today's Columnists

COVID-19 – The dark side of global supply chains

Monday, 17 February 2020

The coronavirus, now known as COVID-19, outbreak in China has slowly but steadily rattled the global economy, disrupting virtually every major industry, from food, fashion, pharmaceuticals, entertainment to automobiles and technology. The first casu


Covid-19 and its effect on the airline industry

Monday, 17 February 2020

The effects of the Coronavirus, now named Covid-19 by the World Health Organization (WHO), has already had a numbing effect on the airline industry. Sadly, it appears that the worst is yet to come. SARS in 2002 Readers who remember the Severe Acute


Coronavirus epidemic and China’s slowdown: Economic impact on Sri Lanka

Monday, 17 February 2020

On 28 January 2020, the World Health Organization (WHO) declared the outbreak of the novel coronavirus (2019-nCoV) a global emergency. The new virus emerged in Wuhan, the capital of Hubei Province in China but has now spread to at least 27 other coun


Doing bigger and better

Monday, 17 February 2020

When I say this to my colleagues, many misinterpret it as working for a bigger enterprise with better perks. Well, that is not what I mean. This truly is a confusing and opportunistic statement. During the three decades of my entrepreneurial exper


Columnists More