Tuesday, 1 July 2014 00:00
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The largely-toothless Committee on Public Enterprises (COPE) has been pushed into individualistic and perhaps controversial action, with new reports recently indicating that officials of the Media Ministry has been asked to remove the head of the State Printing Cooperation over alleged fraud. Such action has again put COPE front and centre of opaque financial dealings.
The breaking point has been long in coming. COPE Chairman Senior Minister D.E.W. Gunasekara has repeatedly warned monitoring of public finance is in a terrible state and Parliament has to take action on the reports that are released annually by the committee. Yet consecutive years have proven that such appeals are deftly ignored by the Government.
Despite repeated appeals, neither the CID nor the Bribery Commission has seriously investigated and punished the numerous offenders citied in successive reports. Deals such as the National Saving Bank’s Rs. 390 million investment in The Finance has gained traction, more due to political reasons than ethical ones. Many other irregular transactions, such as BOI approval of the Hyatt Regency investment that is strongly backed by the Rajapaksas, remain in the shadows.
Moreover, 13 important Government enterprises not coming under the purview of the Auditor General raises serious questions on good governance, transparency and management of public finance on a scale that demands urgent attention. Details of the companies emerged in Parliament when the Opposition pointed out State-owned companies which have failed to provide a decent return during the past 10 years but continue to be funded by State coffers.
Amazingly, none of these loss-making companies are audited by the Auditor General’s Department but subjected to a private audit, which has “no binding with the shareholders,” which includes the Government. Mihin Lanka Ltd., Shipping and Aviation Information and Research Ltd., Polipto Lanka Ltd., Sri Lanka Thriposha Ltd., Rakna Arakshaka Lanka Ltd., Lanka Logistic and Technologies, Sri Lanka Savings Bank, Lankaputhra Development Bank Ltd., Sri Lanka Insurance Corporation Ltd., State Trading (Co-Operative) Wholesale Co Ltd., Lanka Sathosa, State Resources Management Corporation, and Gal-Oya Plantation Ltd. are the 13 companies established during the past 10 years.
Of these companies, only Sri Lanka Insurance has managed to accrue profits and pay taxes, a return on investment that the Government badly needs. Yet the financial governance of these institutions is not being regulated by the Auditor General. Several others, notably Mihin Lanka, have lost billions of rupees but continue to be allowed to fly into the red.
In the 2013 COPE report alone, 16 out of 72 public companies were found to be loss-making. The responsibility for acting on the COPE report falls primarily on Parliament itself, which should, in particular, pay attention to the revelation made by COPE that 98% of the loss in public enterprises is by four State companies: Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), national carrier SriLankan Airlines and Mihin Lanka. Economists have estimated that loss-making companies bleed as much as 2% of GDP from the economy.
Yet COPE has failed to question Budget allocations given to companies that are repeatedly making losses and establish a mechanism that makes top officials directly culpable for mismanagement of public finance. At the very least it should ensure that a performance-based pay structure is implemented for the board of directors and other top appointees. The public is certainly the loser in this mess.
