SOEs responsibility

Friday, 27 July 2018 00:00 - - {{hitsCtrl.values.hits}}

Strikes are part and parcel of living in Sri Lanka, but there are times when this democratic tool is misused by State employees. Last month’s postal strike crippled services in the country and caused an estimated loss of Rs. 240 million but, according to reports, the striking employees will be paid for the 16 days when they were not working, creating questions over whether public funds are being used in the most responsible manner and whether State employees are being held responsible for their actions.

The Postal Department is a chronically loss-making institution that loses billions of rupees annually and is given cash infusions regularly by the Treasury to function. Part of the reason it makes such colossal losses is because the department is overstaffed and given the increase in electronic correspondence increasingly redundant except for a few key services such as dissemination of pensions. Undeterred the workers go on strike each year demanding higher salaries and usually get their way.

This is by no means a situation unique to the Postal Department. Most, if not all, State-Owned Enterprises (SOEs) demand and get salary increases and capital infusions regardless of their fiscal performance and are rarely held responsible for even paying their taxes. Earlier this year the Ceylon Electricity Board (CEB) was found to be paying its employees PAYE taxes amounting to billions of rupees, which is essentially double taxation of the masses. Despite the issue being highlighted in several Committee on Public Enterprises (COPE) reports and even being discussed at Cabinet, few steps have been taken to make SOEs more fiscally responsible and uphold their duty towards maintaining public trust.

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 and they need to serve the people and the economy of Sri Lanka. The environment of impunity, mismanagement, wastage and corruption of SOEs have to be seriously re-evaluated by all stakeholders if the country is to actually have a SOE sector that serves the people.