Statements for SOE independence

Cabinet this week approved a ‘concept of statement of corporate intent’ for what it deems strategically important public enterprises. It is hoped that allowing State-Owned Enterprises (SOEs) to make their own decisions will create space for them to be more profitable.  

The concept, proposed by Finance Minister Ravi Karunanayake, could be applied to select SoEs to “encourage and facilitate to sustain those enterprises independently without depending on the Treasury.”

Clearly there is a dire need for any policy that will make SOEs even slightly more profitable. The latest COPE report presented to Parliament this year recorded losses of Rs. 110 billion due to “wasteful and uneconomic” practices by SOEs.  

In its latest edition, COPE focused on 15 establishments from 1 May until 31 August 2016. Among the worst offenders was former President Mahinda Rajapaksa’s pet project, the Sooriyawewa Cricket Stadium, which has a payment of Rs. 5 billion pending but is without an owner. 

The Cooperative Wholesale Establishment, Road Development Authority, Sri Lanka Insurance, State Engineering Corporation, Telecommunication Regulatory Commission, Sri Lanka Cricket, Sri Lanka Rupavahini Corporation, National Lotteries Board, Ceylon Electricity Board and Sustainable Energy Authority of Sri Lanka, Football Federation, Sri Lanka Ayurvedic Medicine Corporation, Maga Neguma institutions under the Road Development Authority, Sri Lanka Ports Authority, Kurunegala Plantations and Employee Trust Fund were the other State enterprises investigated in this report.

Certain projects which are not within the purview of the Road Development Authority have created massive losses, the COPE committee said, highlighting investment on Nelum Kuluna as a “total waste”. The Football Federation is also under the pump as it has received millions of euros in donations but has largely wasted them in questionable transactions. 

The State Engineering Corporation loss is Rs. 2,918 million, mostly exacerbated by the actions of ministers who refuse to repay the corporation from funds allocated to their respective portfolios despite work done and try to shift responsibility to the Treasury. Despite two years of rule by the present Government, much of these oversights remain unaddressed and people responsible for these excesses under the previous administration have not been held responsible.     

In the 2015 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 losses in public enterprises is by four State companies: The 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. 

Allowing key SOEs to formulate a statement of corporate intent makes sense only if the Government stops stuffing them with their loyalists and appoints competent people who are allowed to run these institutions in an independent manner. They have to be empowered to make unpopular decisions, such as firing extra staff recruited under numerous governments, can manage their assets and focus on profit-making strategies. For this, stronger policies need to be made and politicians will have to learn to take a backseat.