33 SOEs and beyond

The Cabinet’s decision last week to shut down 33 inactive state-owned enterprises (SOEs) marks a long-overdue first step towards reform. Among those on the list was Mihin Lanka, the infamous vanity airline project of the Rajapaksa era, which for years drained public funds with little to show in return. For too long, the Treasury has carried the dead weight of inefficient, politically captured SOEs. If the Government is serious about pulling the country out of bankruptcy and placing it on a sustainable growth path, reforming these state-owned dinosaurs must become a national priority.

This country currently has more than 530 SOEs. Even the Parliament has not been clear on the exact number. While some play a vital role in delivering public goods and services, and 55 of these have been identified as ‘strategically important’, a vast majority of the SOEs operate at a loss, serving as a financial black hole. The cumulative losses of these enterprises have been one of the key contributors to the fiscal crisis that culminated in bankruptcy in 2022. Every rupee (and sometimes dollars), wasted on propping up loss-making SOEs is a rupee taken away from hospitals, schools, infrastructure, and much-needed social protection for the vulnerable.

The biggest culprits are well known, and among them are the Ceylon Electricity Board (CEB), the Ceylon Petroleum Corporation (CPC), and SriLankan Airlines. Year after year, these three institutions alone devour billions of rupees in subsidies, bailouts, and guarantees, saddling the public with mounting debt. Their inefficiencies are legendary; overstaffing, corruption, mismanagement, and political interference have left them bloated and uncompetitive. For decades, successive Governments have shied away from confronting these giants, preferring instead to kick the can down the road.

Closing down 33 inactive SOEs is commendable, but it is by no means enough. The real challenge lies in addressing the actively loss-making entities that continue to gobble up scarce resources. This will require political courage, technical expertise, and above all, the recognition that protecting inefficiency in the name of ideology is no longer affordable.

This Government is uniquely positioned to carry out such reforms. With a two-thirds majority in Parliament, strong trade union connections, and socialist credentials, it enjoys the political capital and credibility that previous administrations lacked. It can reassure workers that reforms are not about crony privatisation deals as done in the past. It can negotiate with unions from a position of trust, offering fair transition packages, retraining, and redeployment for affected employees. Most importantly, it can frame reform as a patriotic duty, rescuing the country from economic ruin and laying the foundation for future prosperity.

Reform, however, must not be reduced to privatisation alone. The answer is not simply selling off assets, but restructuring them to operate efficiently, transparently, and sustainably. In some cases, partnerships with the private sector may be the best way forward. In others, professional management, depoliticised boards, and strict performance targets could transform State enterprises into contributors rather than liabilities.

For decades, Sri Lankans have been told that SOEs are “national assets.” In truth, they have become national liabilities. The public has borne the cost in higher taxes, higher debt, and declining services. The decision to shut down 33 SOEs must be the beginning, of a bold reform agenda. If the Government seizes this moment, it can finally break the cycle of waste and mismanagement that had led the country to bankruptcy.