Committee on Public Enterprises (COPE) Chairman Dr. Charitha Herath this week found himself on ground oft-trodden by his predecessors. This was when he called for stronger parliamentary oversight of State enterprises while presenting the first COPE report of the Government.
The report recorded significant revenue losses due to coal purchases over 10 years, and revealed 41 industries located near the Kelani River have been functioning without environmental protection licences, which include 17 high-risk ones. The report also said environmental protection licences have not been provided for the Seethawaka Export processing zone for eight 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. SOEs, such as SriLankan Airlines, have been haemorrhaging money for many years with no solutions. 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.
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. These numbers have likely since increased.
COPE was tasked with trying to throw more light on the deep-seated the issue of mismanagement and wastage is in many SOEs, which it has valiantly attempted for years but with limited success, partly because its powers are limited.
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 within 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. There is also a grave need to bridge the gap between COPE reports and legal action to end impunity.
Concerns over COPE functions include its limitations in overseeing enterprises where the Government holds a minority stake but provides services to the public. Other SOEs are routinely called but face little or no repercussions for their shortcomings.
If the Government is genuine about fighting corruption giving more legal powers to COPE and the Committee on Public Accounts (COPA) would be a good start but little political will has been displayed regarding this up to now.