Courageous NPP executing reforms in areas predecessors feared to tread

Tuesday, 11 August 2026 01:13 - - {{hitsCtrl.values.hits}}

President Anura Kumara Dissanayake

Opinions may differ, but the facts are stubborn: the National People›s Power (NPP) Government has made more progress in the past 18 months than any previous Government in implementing public sector and state-owned enterprise (SOE) reforms. Whilst there are still vestiges of political patronage, not free of blemishes and still a long way off from the pursued totality, the signs are encouraging.

For eons, the discourse surrounding Sri Lanka’s public sector and SOEs has remained trapped in a perpetual cycle of political expediency, administrative inertia, and hollow rhetoric. While successive administrations routinely paid lip service to restructure, the weight of inefficient, loss-making enterprises has continued to drain the national treasury, strangling economic vitality and suppressing overall national productivity.

Yet, pragmatic progress demands objective recognition. Over the past 18 months, the National People’s Power (NPP) administration, notwithstanding its foundational socialist leanings, has demonstrated a remarkably disciplined resolve. Moving beyond ideological posture into decisive execution, it has driven more tangible momentum in SOE governance, fiscal discipline, and public sector streamlining than what four decades of preceding Governments managed to deliver. Giving credit where it is genuinely earned is not partisan loyalty. It is a recognition of structural courage.

This decisive momentum underscores a fundamental truth. Comprehensive public sector reform is not a concession to ideology, but the absolute cornerstone of economic survival. Increasing Sri Lanka’s productivity demands dismantling bureaucratic bloat, establishing rigid accountability, and optimising the use of state assets to work for the public good rather than serving as a drain on national wealth. A lean, transparent, and high-performing public apparatus is the irreplaceable engine for sustainable growth. The structural courage displayed today sets the foundation upon which Sri Lanka’s long-term productivity, economic independence, and fiscal integrity must be forged.

Sri Lanka’s State sector reform is currently witnessing an unusual spurt of action and an infusion of courage, vigour, vision, and momentum, benefiting from the solid foundation laid by the State-Owned Enterprise Restructuring Unit (SOERU) established under the Ranil Wickremesinghe administration. Guided by private sector leader Suresh Shah and a team of dedicated pro bono experts, SOERU systematically evaluated over 130 commercial entities, crafting and framing robust operational principles to modernise state governance. By drafting pivotal legislation to convert enterprises into limited liability entities and mapping strategic divestment frameworks for flagship assets like SriLankan Airlines, Sri Lanka Telecom, and Sri Lanka Insurance, SOERU provided a foundation and a roadmap for transformation.

Translating high-level concepts into decisive action

Seamlessly advancing this groundwork, President Anura Kumara Dissanayake’s National People’s Power (NPP) Government has successfully translated these high-level concepts into decisive action. It is converting strategy into action. It is no longer a matter of “set, aim, aim and aim” but a forward movement of “set, aim and fire.” Adopting a hybrid approach, the administration has established a centralised “super-hoIding company”, inspired by global benchmarks like Singapore’s Temasek and Malaysia’s Khazanah, to house commercial SOEs and list entities on the Colombo Stock Exchange. This forward-looking configuration is aimed at shielding commercial state entities from political interference and entrusting their management to independent, merit-based professionals. Through this progressive, structured evolution, Sri Lanka is, at last, taking real steps in creating a resilient state sector engineered for modern growth and lasting economic vitality.

The National People’s Power (NPP) Government was swept into office on a pledge to clean up radical corruption and establish system-wide accountability. Yet, deep skepticism remains, rightly so, because of past failures. Though campaign slogans are painless, restructuring deeply entrenched, union-heavy state monopolies without buckling under political pressure requires an iron resolve. Thankfully, the NPP has taken some tough first steps in the right direction

As per this model, commercial SOEs will be converted into limited liability companies under the Companies Act. This shift anticipates the enforcement of strict corporate governance, transparent financial reporting, and merit-based board appointments free from political patronage. To meet IMF governance benchmarks while retaining strategic oversight, the NPP is pursuing the implementation of cost-recovery pricing mechanisms, rationalised expenditure, and the creation of public-private partnerships. By curbing fiscal drain while safeguarding key public assets, the administration is grounding Sri Lanka’s state governance in modern, market-aligned management. Through this, the Government aims to achieve strict capital efficiency, eliminate chronic loss-making entities, and unlock dividend yields for the national treasury.

Inexperienced, slow, and flawed as the NPP administration may appear to detractors, it has taken some significant first steps in fundamentally reshaping state administration. Moving away from a strategy of soft-pedaled status-quo management and fire-sale privatisations, the Government is executing a pragmatic overhaul through structural unbundling, professional asset management, and rapid digital transformation.

A centerpiece of this reform agenda is the structural unbundling of the Ceylon Electricity Board (CEB). Long a monolithic, debt-laden utility, the CEB is being broken into independent operating units covering generation, transmission, and distribution. By ring-fencing transmission under strict state control while introducing operational competition, cost-reflective pricing, and accelerated integration of renewables, the administration is dismantling decades of union-driven gridlock and establishing balance-sheet transparency. The NPP Government has shown unprecedented political resolve by pushing through these essential reforms despite strike threats and opposition-fuelled discontent. While previous regimes repeatedly capitulated to powerful labour unions to protect political interests, the current administration has stood firm, prioritising national energy security, fiscal discipline, and systemic reform over entrenched resistance. This is very similar to what Kanchana Wijesekera did for the supply, marketing, and distribution of petroleum in 2022/2023.

Concurrently, and importantly, there is a national drive toward digital governance through a project led by Chief Adviser to the President on Digital Economy Dr. Hans Wijayasuriya. Under his stewardship, the Government is executing a comprehensive digitisation framework designed to modernise public delivery channels, interlink state databases, and automate manual, discretion-heavy processes. From digitising taxation and civil registration to establishing robust digital identity systems, these initiatives target the root drivers of administrative inefficiency while eliminating channels for petty corruption and extortion.

Pairing structural reforms

By pairing structural reforms in power and State asset governance with cutting-edge digital infrastructure, the NPP Government is replacing systemic inertia with institutional accountability. These combined interventions demonstrate that public sector management is being transitioned from a crisis-driven liability into a modern, transparent engine for sustained national economic recovery.

However, SriLankan Airlines stands out as an enigma. For decades, Sri Lankan Airlines has functioned more like an open fiscal wound and less like a source of national pride. The core issue is stark. A working-class public, the vast majority of whom will never step foot inside an aircraft, has been forced to continuously underwrite an enterprise at the direct expense of functional hospitals, public schools, and vital social safety nets. Decades of political cronyism influenced operational structures, and corrupt aircraft leasing agreements are proof that state-backed aviation cannot withstand the vicissitudes of domestic politics and global economics. Available evidence suggests a lingering impulse to retain state ownership and engineer an internal turnaround. Clinging to equity stakes in a volatile, capital-intensive industry repeats historical blunders where scarce public funds are poured into endless lifelines. Retaining the carrier under the state mantle leaves the treasury dangerously exposed to global oil spikes, severe currency swings, and aviation downturns.

True structural reform demands confronting deeply entrenched patronage networks head-on, enforcing uncompromising financial discipline across every ministry, and courageously enduring immediate, politically painful friction to secure lasting, generational recovery. Armed with a decisive popular mandate, the NPP Government possesses an unprecedented historical opportunity to shatter decades of systemic inertia and institutional decay

Liquidating the airline brings immediate fiscal relief, halting the drain on public coffers to fund essential infrastructure. It enforces market discipline by eliminating distortive subsidies and caps massive state-guaranteed liabilities. Conversely, shuttering the carrier severs strategic air links for tourism, cargo exports, and crisis evacuations. It triggers severe job losses among specialised aviation staff and creates acute route dependency on foreign operators. I remain uncommitted to either option because I believe that the viability of SriLankan Airlines cannot be assessed as a standalone enterprise but as a synergy-generating linchpin within a broader macroeconomic strategy. It may be managed as a ‘loss leader’ while opening paths to other areas of economic activity which may benefit from the existence of a national airline.

The National People’s Power (NPP) Government was swept into office on a pledge to clean up radical corruption and establish system-wide accountability. Yet, deep skepticism remains, rightly so, because of past failures. Though campaign slogans are painless, restructuring deeply entrenched, union-heavy state monopolies without buckling under political pressure requires an iron resolve. Thankfully, the NPP has taken some tough first steps in the right direction. They are promising to do more. Genuine reform is more than a rhetorical posture. The NPP must pivot from ideological caution to aggressive execution via a credible roadmap that demands five harsh, concrete first steps.

Cut the Treasury lifeline: Enforce hard Budget constraints

For decades, Sri Lanka’s commercial state-owned enterprises (SOEs) have operated on a systemic moral hazard: running deficits, accumulating debt, and relying on Treasury bailouts. This implicit guarantee obliterated operational discipline and fiscal accountability. The NPP administration must enforce unyielding budget constraints across the public sector via,

n Zero-Bailout Rule: Commercial SOEs, excluding non-market public welfare providers in basic healthcare, must fund operational costs strictly through generated revenues or market-rate debt. Taxpayer lifelines must end,

n Statutory Financial Transparency: Legally mandated quarterly, independently audited balance sheets, particularly for high-risk entities such as Sri Lankan Airlines, the Ceylon Electricity Board (CEB), the Ceylon Petroleum Corporation (CPC) et cetera,

n Asset Monetisation: Conduct an immediate review of state assets. Idle real estate and redundant equipment. Monetise them. Underperforming subsidiaries must be sold to settle existing liabilities rather than seeking fresh capital injections.

If a commercial SOE cannot demonstrate a credible, time-bound path to solvency, the Government must restructure, merge, or liquidate it without exception.

Eliminate political patronage in governance

The primary catalyst for SOE degradation has been the use of state entities as political rewards. Boardrooms populated by party loyalists have caused catastrophic capital allocation and institutional paralysis. The Government must institutionalise professional leadership through three mechanisms,

n Independent Appointments Commission: Enact legislation establishing an autonomous, non-partisan panel to screen and shortlist candidate directors based strictly on merit and industry expertise,

n Binding KPIs: Executive and board appointments must be contractually tied to enforceable metrics. Directors failing to meet targets must be placed on Personal Improvement Plans (PIP),

n Restricted Board Composition: Enforce a hard ceiling on ministry-appointed representatives and mandate that at least 60% of board members are independent professionals.

Depoliticise utility pricing

Suppressed utility tariffs functioned as political bribes, starving providers of capital, triggering debt spirals, and inflicting macroeconomic shocks. The Government must permanently insulate utility pricing from political interference via,

nAutomatic Cost-Reflective Formulas: Permanently link electricity, water, and fuel tariffs to transparent formulae adjusting dynamically for international commodity prices and exchange rate fluctuations,

n Empowered Independent Regulators: Legally fortify the Public Utilities Commission of Sri Lanka (PUCSL), granting it statutory authority to approve tariffs completely free from Cabinet oversight,

n Targeted Cash Transfers: Replace broad price subsidies with direct income support by expanding initiatives like Aswesuma, to protect vulnerable households without destroying utility balance sheets.

Tackle overstaffing via structured workforce rationalisation

Overstaffing remains a key bottleneck to SOE productivity. Because abrupt mass layoffs risk paralysing national infrastructure, the solution demands a phased workforce rationalisation as follows,

n Months 1–3 (Independent Labour Audits): Commission external forensic experts across major SOEs to quantify surplus headcount and identify skill gaps,

n Months 4–6 (Funded Voluntary Retirement): Roll out attractive Voluntary Retirement Schemes (VRS) financed strictly via asset sales and multilateral assistance, avoiding operational debt,

n Months 7–12 (Reskilling and Transition): Partner with vocational institutes to reallocate retrenched personnel into high-growth private sector industries like logistics, export manufacturing, and tourism. This can be done through carefully considered change management. If there is a will, there is a way!

The coming years will unequivocally demonstrate whether this administration commands the iron-jawed execution and unshakeable resolve required to transform parasitic state entities from catastrophic drainpipes of national wealth into self-sustaining, world-class engines of economic prosperity

Implement hybrid Public-Private Partnerships (PPPs)

Maintaining full state control while continuously absorbing perpetual operational losses is economically unsustainable and fiscally irresponsible. Under the traditional status quo of state ownership, capital sourcing relies heavily on Treasury loans and sovereign debt guarantees, daily operations suffer from arbitrary ministerial intervention, and vital technological upgrades stall due to severe public deficits. A commercial Public-Private Partnership (PPP) framework directly resolves these systemic failures. By crowding in private equity, installing battle-tested professional management, injecting world-class global expertise, and generating dependable state royalties, PPPs can upgrade national assets without adding a single rupee to the public debt burden.

To achieve long-term operational excellence while safeguarding strategic national interests, the NPP administration should deploy a targeted, transparent PPP framework built on three distinct, practical models,

n Performance-Linked Concession Models: The Government retains 100% legal ownership of primary national assets, such as deep-water port terminals, airport logistics hubs, and power generation facilities, while leasing long-term operational rights to qualified international consortiums under strictly enforced, performance-backed concessions that mandate continuous capital investment,

n Minority Equity Sales on the Local Bourse: Divest non-controlling stakes (ranging from 20% to 49%) in viable commercial entities via the Colombo Stock Exchange. This strategy introduces rigorous public reporting standards, quarterly regulatory scrutiny, and true market discipline while maintaining majority state ownership and oversight,

n Strategic Joint Ventures: Partner directly with global industry leaders to modernise aging energy, water, and transport infrastructure. These joint ventures leverage foreign direct investment and high-level technology transfers, transforming state assets into competitive, revenue-generating powerhouses that drive broader economic growth.

Reforming Sri Lanka’s State-owned enterprises is no longer a mere intellectual debate or an academic exercise; it is an absolute, non-negotiable predicate for long-term fiscal survival. The national economy can no longer sustain bloated, inefficient public entities that relentlessly bleed precious taxpayer funds, paralyse economic mobility, and compound an already staggering sovereign debt burden. This struggle is fundamentally a high-stakes battle of unyielding political will against convenient, populist political rhetoric that has stymied national progress for generations.

True structural reform demands confronting deeply entrenched patronage networks head-on, enforcing uncompromising financial discipline across every ministry, and courageously enduring immediate, politically painful friction to secure lasting, generational recovery. Armed with a decisive popular mandate, the NPP Government possesses an unprecedented historical opportunity to shatter decades of systemic inertia and institutional decay. Yet, a political mandate alone builds nothing. The coming years will unequivocally demonstrate whether this administration commands the iron-jawed execution and unshakeable resolve required to transform parasitic state entities from catastrophic drainpipes of national wealth into self-sustaining, world-class engines of economic prosperity.

The stark choice before them permits no middle ground. Execute relentless, unapologetic, and comprehensive structural reform now, or capitulate to cowardly compromise and condemn the nation to perpetual stagnation and ultimate economic ruin. NPP, the call is yours.

(The author is, currently, a leadership coach, mentor and consultant and boasts over 50 years of experience in very senior positions in the corporate world – local and overseas. www.ronniepeiris.com)

Courageous NPP executing reforms in areas predecessors feared to tread

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