Sri Lanka Economic Summit panellists express optimism over PPPs

Nine out of 10 attempts to encourage Public-Private Partnerships do not work out but Sri Lanka was in an economic position to perhaps prove to the rest of the world that they could work, panellists at yesterday’s Sri Lanka Economic Summit, the flagship event of the Ceylon Chamber of Commerce (CCC), opined.

The speakers at the event were President Maithripala Sirisena, Finance Minister Ravi Karunanayake, Central Bank Governor Dr. Indrajit Coomaraswamy, Public Enterprise Reform Minister Eran Wickramaratne, Ceylon Chamber of Commerce (CCC) Chairman Samantha Ranatunga, Institute of Policy Studies Chairman Dr. Razeen Sally, Economist Dr. W.A. Wijewardena and TWCorp Head Thilan Wijesingha.

PPP is a new mode of delivering infrastructure and requires massive backing by the Government. Examples of India’s successes were shared with the gathering and experts emphasised on the demonstration of political commitment. 

Secondly, an enabling institutional framework to process, structure and implement PPPs was advocated. This could hinge on a central authority that would be accountable to parliament that could handle PPPs where the centralised unit works with other stakeholders, especially the Finance Ministry to create a one-stop-shop for PPPs. 

All parties also have to focus on outcomes because otherwise all ventures will end up drenched in red tape, they said. Better services at lower costs will be the key selling point on PPPs to masses as they will then buy into the project and ensure that implementation happens on a timeline. PPPs can become tools of crony capitalism and as such has to be reinforced for public good. PPPs should also be part of Government long-term plans so that they are not impacted by political changes.

Minister Wickramaratne stressed that PPPs are a core strategy for the Government to revamp massive loss making enterprises and support fiscal consolidation. 

“For us there are some compulsions as to why we should move towards PPPs. Currently the high deficit as well as high debt means that the Government’s ability to invest is extremely limited and the macroeconomicshas to be looked at as well. Sri Lanka has also lost concessional access to loans, which leaves the private sector as the best option for the Government.”

He pointed out that projects such as the Hambantota Port and Mattala Airport would not have seen the light had they been floated as PPPs. Thus PPPs can make governments more responsible. Since governments have limited capital and access to short tenor funding, it opens up space for entrepreneurship to centre on PPPs. 

“If we are going to change the game here, then partnership with the private sector is absolutely essential. A great example is South Asia Gateway Terminals by John Keells Holdings where different investors have worked with the Government to create a viable partnership. Asia Development Board (ADB) will provide expertise on the East Container Terminal, which will also be a partnership between private companies and the Sri Lanka Ports Authority.” 

For ventures like this to be duplicated, the Government has to put the framework in place and currently the process is slow, he admitted. The Minister stressed that an enabling environment would give rise to more PPPs in ports, expressway and power, especially LNG plants with one to be finalised in the next six months. The management of existing highways, especially the Southern Highway,can also be handed over to private companies.

“We need public support for PPPs. Efforts at privatisation have been reversed by the previous government but we need to show they can improve Government revenue that can be used for health and education. It is possible to sell this idea to the people, we have been trying to do so with SriLankan Airlines. If we take public transport, I travel by train and it is clear we have to tackle services and these are all tools of doing reform from the outside.”

The Minister opined that the Government is open to privatisation but it would depend on the sector. This would depend on socio-political agendas where projects would be considered on the value they would bring the people. If we are privatising a cash cow that is a hard sell to the people. We can still privatise it but we need to explain it to the public, maybe even have a wealth management fund that will use the funds in public interest and will not be interfered by politics.”

Communication of objectives is very important for the PPPs so stakeholders understand what can be achieved and even unions can be made aware of the positives. PPPs can be structured in different ways. The evaluation of a PPP can be very simply; are the people who are benefiting from it happy? Because if that is the case then there is clear value for money, panellists said.

Presently the Government is thinking of a Private Enterprise law and Special Development law, which could work with PPPs. “The legal framework is certainly important. Decision making process needs to be faster, which goes back to the structure of Government where institutions are spread out under many ministries and most focus is structuring at the bottom where it should be done at the top. Restricting the number of ministers and structure, the Government to be efficient so that sustainable change can be achieved. Sri Lanka has the regulations to carry out PPPs and contracts have to be watertight so that even if there are issues after implementation so that fresh negotiations and changes can be carried out at over the next 20 to 30 years.” How can the Government give assurance that the environment will not change in the short term? Have a strong policy plan and transparent implementation so that the project can continue despite political changes. Sri Lanka has to become a country of laws and mature politicians.  “Port City, it should be suspended, but it should have been done on a discussion basis and a lot of these oversights have been corrected but that is because Sri Lanka is a land of laws,” TWCorp Head Wijesingha said.

Coalition extension gives the chance for reforms to be pushed through effectively. “We have to do PPPs right and we will do it right. We will do it transparently. The culture of Sri Lanka is corrupt, it takes two hands to clap and that is not just politicians. A culture cannot change in just nine months, it might not even change in nine years and if this culture is to change then the start must be made with this Government.”