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Thursday, 8 September 2016 00:00 - - {{hitsCtrl.values.hits}}
Public Enterprise Development Minister Kabir Hashim
By Uditha Jayasinghe
Q: Wide-ranging plans have been outlined for PPPs but recently President Sirisena said no profit-making enterprises would be privatised. How do you see this contradiction?
A: The main State-owned enterprises are banks, Sri Lanka Insurance, ports, in short the key enterprises will not be privatised or will not go into Public-Private Partnerships (PPPs) but those that are making losses we have to consider. If you take SriLankan Airlines, it was destroyed. Our job was only to bury it. What the previous Government did to SriLankan Airlines was shocking but we are trying not to sell it. What we are trying to do is get a Public-Private Partnership going so that the Government will also have a stake but there are other investments the Government or Government institutions have made such as the Grand Hyatt and Hilton. Those will be considered as business decisions and those institutions can make a decision to sell it on the market or re-invest them in other ventures. Those will be business decisions. So despite the fact that they may be profit-making subsidiaries, they will be under consideration for PPPs.
Q: Two COPE reports have been submitted to this Government. What action do you propose to take regarding the large number of allegations against State enterprises?
A: That is the primary concern of my Ministry. Restructuring is not privatisation. One is we may need to go into partnerships but the other focus of my Ministry is to think about having efficient management, to improve the management techniques, to make productivity an important role and to make these companies competitive. At the moment I have a drawback as my Ministry is not very well staffed. It is a new Ministry and the capacity we have is very limited. So if you take sugar, tea, rubber plantations, we need expertise. We have a huge issue with experts and human resources and we are now quietly setting up the Public Enterprise Board and there will be a Public Enterprise Act soon, which will give teeth to the board and those will actually help us to reduce losses and address issues highlighted in the COPE report. But we are taking it seriously.
Q: There are also concerns that too many loyalists are being appointed to State organisations, which could hollow out reforms. How do you respond?
A: I will be honest with you. At the moment we are in the process of restructuring, in the initial stages we have appointed people who have political affiliations but that does not mean they are bad people and we have appointed people who have capacity. We may have a few issues with certain institutions but in the process of restructuring every board will become professional. That is the target.
Look at what Singapore and Malaysia did with their respective State-Owned Enterprises (SOEs). Once they formed their Temasek or their Khazanah they professionalised their management, so we will do the same. Rome was not built in one day; you cannot change Sri Lankan attitudes in two years. It takes longer than that but we are on the right track, we are going in the right direction. But you have to take one step at a time.
Q: Four hotels have been earmarked for listing. What measures have been taken? What is the progress?
A: If there is any delay that is because we have to go for a transparent process, so we have called for Expressions of Interest (EOIs) in the same way we did for SriLankan Airlines and we expect it to be ready before the end of this year.
Q: What is the status of finding an international partner for SriLankan Airlines?
A: We have received over 10 interested parties. I cannot name them because I don’t even know who they are because the entire process is confidential. We closed requests last week and there is an evaluation committee and the facilitating partner is National Savings Bank (NSB). There is a committee looking at it and they will shortlist three to four of those 10 applicants based on their capacity. Those three or four shortlisted companies will then be called for negotiations and then, based on the negotiations, we will look at the best terms for the country and the airline and then make the final decision.
Q: Would a debt sharing agreement be possible?
A: At this point in time I don’t think a debt sharing agreement is possible. The debt is huge and right now we have had discussions at Cabinet level, we may have to think about taking the debt out.
Q: Will the arrangement with Pakistan International Airlines (PIA) be expanded? Will they also be given the A350s?
A: No. We have already contracted one A330 aircraft and two more will be handed over as well. There is no agreement on the A350s with PIA, we are only looking at the A330s.We are also hoping to expand our services with them for the A330s. We are also looking at setting up our engineering services in Islamabad because PIA was very impressed with SriLankan’s engineering services and we believe we have a lot of potential.
Q: SriLankan is to take delivery of the first A350 in October. What are your plans for that aircraft?
A:Good question. I would like to ask that from the people who ordered it. How they would have used an aircraft of that nature? We have looked at it and think that the A350s will be a problem. We are in the process of deciding whether or not we should take delivery of it and deciding how we should handle it. We are in touch with our legal counsel, we are in touch with the airline and we will make a decision in the next couple of weeks. SriLankan Airlines has been in talks with AerCap about buying some of the aircraft out or renegotiating with some other parties, for the Government of Sri Lanka to get involved and then to think of a different model for the leasing arrangements. AerCap has not still given them a word.
Q: The Treasury plan for SriLankan expires in October. How will the airline be funded after that?
A: I think I have breathing space till December. I’m hoping that in December the Treasury will give me the money, that’s why we are hurrying it (the restructuring) because funding is running out and the Government cannot go on giving money. So we are hoping we would be able to wrap up something fast.
Q: About 200 people are reported to earn salaries of more Rs. 1 million at SriLankan Airlines. Given the National Carrier’s precarious financial position, do you feel these expenses are justified?
A: I would suspect that it is even more. I think there are smaller people who have to be paid better but there are others who are taking a fat salary and not doing their job. These are the changes that should have been made when the country ran the airline. The result is we have to go into partnerships, sad to say, our own people did not do their jobs properly.
If I was given a little more time to restructure this airline, I would have started with the top heavy management and kicked out most of the guys at the top and strengthened this airline but when we were given it, SriLankan was such a big burden that the Government cannot hold on to it. There is hardly any time. One year is too short; our only hope is to go for a Private-Public Partnership so the question does not arise now. Of course when we negotiate with the new partner we will have to think about how we are going to handle the staff and in this case, as a Minister, I have to be responsible for every staff member, to make sure they are not left in the lurch, that they are all taken care of properly and right now we will carry that forward, irrespective of whether they received above or below the salary they were entitled to.
Q: You earlier mentioned a Chinese company was interested in Mattala. Could more details be given?
A: I cannot name names but the Chinese company is very seriously considering taking over the management of Mattala. However, Prime Minister Ranil Wickremesinghe has very clearly stated that they must be willing to take over the debt burden as well. At the moment it is making Rs. 16,000 a month, even though we have paid millions. The thought process is that there will be a 10,000 acre industrial park in Hambantota, then the port will be taken over, so they are hoping this will be a hub for South Asia and the Chinese company is thinking they will operate out of Hambantota to service all of South Asia but this industrial park will also become a centre for distribution of goods to South Asia. It will essentially be a debt-equity swap.
Q: The Government recently imposed stronger taxes on Ceylon Petroleum Corporation (CPC), which means it now has to spend more paying the Government and not State banks that have lent to it. This will undermine CPC’s reform efforts. What views do you have about this situation?
A: CPC’s profitability cannot depend on the taxes the State may levy on it. The State will have a tax policy, which will not kill an industry but will time and again change its tax policies. The CPC will have to have a strategy to make profit and be able to service its loans independent of the tax policies. The tax policy is completely different and reform is different. The repayment of the loans is always something the CPC can negotiate with the Treasury in case it has any issues but its reform agenda has to go on even though it would never be privatised. Restructuring per se has to be internal, they are again top heavy, there is pilferage, they have to get those right. If they can do that then they can cut at least 20% immediately from their expenses, so as the Public Enterprise Ministry, though it is not directly under us, when we have the expertise, we will move into restructuring all those institutions as well.
Q: The Public Enterprise Ministry has received Cabinet approval for a number of restructuring efforts for State plantation companies. Could you please expand on your plans?
A: Government plantations, namely JEDB, SLSPC, Elkaduwa, Chilaw and Kurunegala plantations, are under my Ministry. The Chilaw and Kurunegala plantations are profitable but not as much as they could be. The others have lots of issues and at the moment we are trying to maximise productivity and make them efficient. They have made massive losses, workers have not been paid, EPF and gratuity payments are outstanding. It is a mess. I have had to go to the Treasury and ask for funding and again I have been told I will only get funding till December and after that I have to find a way. So while we don’t have paid experts, we have volunteers who are experts in the plantations industry and some financial specialists and we have prepared a comprehensive report on restructuring of the plantations.
Again, it is not a management restructure but to go for multiple partnerships and the positive side is that there has been huge interest from foreigners and locals, big companies, wanting to take over parts of the companies and do various projects. Some of them are multi-cropping projects, some are to improve tea and rubber that is already there, some are eco-tourism projects and dairy farming. We think we can have a good arrangement where the State could become partner in some cases and in others lease out the land. We believe all this land can be productively used. Some of the land will be distributed among the people on an out-grower basis for small-holders.
Q: Concerns were expressed over the Litro Gas tender earlier this year, which is estimated at about $ 100 m. Is the Government any closer to a decision regarding it?
A: We have asked SLIC to have an inquiry to find out if there has been any discrepancy and if so to cancel it. The last report I got was to say there has been looking at process flaws because the allegation is there were process flaws. But as far as the price is concerned it has been relayed to me that the price is very competitive and lower than market price but still if the process is flawed we would have to go for cancellation and take necessary steps. We are waiting on that decision. I’m hoping a final decision will be made in about one week.
