Largest challenge?

State Minister of Finance Eran Wickramaratne addressing a Daily FT forum this week noted that reforming Sri Lanka’s bureaucracy would be the “single largest challenge” the country would face over the next few years. But just how overstaffed it is makes for interesting reading and could be the basis for strong reforms, provided the Government can finally get its policies prioritised.  

Sri Lanka’s State and State-Owned Enterprise workers, excluding the military, grew a whopping 30% to 1.1 million from 2006 to 2016, according to a survey by the Census and Statistics Department. The survey, which includes the Central Government, Provincial Government, statutory bodies and State enterprises, showed that not only is the public sector inflated, but it often made recruitments to areas of little use to the people.  

During the last Government, a bewildering array of companies were incorporated as subsidiaries and sub-subsidiaries of State-Owned Enterprises (SOEs) under the Companies Act, which analysts say would be difficult to track. Many have also been avoiding the scrutiny of the Parliament’s Committee on Public Enterprises (COPE), which in turn has little power to actually rein in these entities.  

The Census Department report said it did not include the three services, but includes workers in the Ministry of Defence. According to 2015 data released by the Finance Ministry, Sri Lanka had 272,000 in various branches of the military and 84,000 policemen. Assuming the numbers were broadly unchanged, Sri Lanka could have a total public sector burden of 1,474,000 State workers, compared to 1,316,863 (Finance Ministry 2015) or 1,365,820 (Central Bank 2015), indicating that the issue has not abated under the present Government. Finance Ministry data showed that 88,000 so-called ‘development officers’ had been recruited to the State service between 2005 and 2015 but only managed 11,000 medical officers, 33,000 nurses and 3,579 midwives. Politically-driven recruitment is clearly a major problem within the public service and continues to be a fiscal liability, especially since each year around 30,000 workers become pensioners. According to Finance Ministry data, the number of pensioners grew from 430,153 in 2006 to 564,472 in 2015, increasing the burden on workers.  

There are also questions about their qualifications as about 17.8% of State workers or 196,128 have not passed their Ordinary Level examination. Despite successive Governments recruiting enthusiastically, there are no scientific studies to evaluate the need for and productivity of these public servants. Almost all Sri Lankan governments have tended to be proud to proclaim that they have increased public services and employment therein, despite the fact that this was contributing to a fundamentally-flawed fiscal framework, which is now becoming increasingly unaffordable. Economists have argued that when successive governments were unwilling or unable to introduce economic reforms that would increase private sector job creation, they found the public sector to be a convenient employment creation agency. However, the macroeconomic instability arising from the current fiscal framework calls for a radical rethink of the traditional approach to the Government being the employer of first resort. No program of public service restructuring will be sustainable in this country unless it is supplemented by a package of other reforms that generates rapid expansion of private sector activity. In a country with a limited population, freeing up public sector workers might be the best recruitment tool for the private sector.