Sri Lanka to Strengthen the SOEs Without Privatizing Them…

Sri Lanka’s State Owned Enterprises (SOE) management should be strengthened by removing political interference without privatizing, Deputy Policy Planning and Economic Affairs Minister Harsha de Silva has said.

“As it now stands, our position is not one of privatization,” de Silva said, at the LBR/LBO CEO Forum held last week.

“Our position is to strengthen the management of the State Owned Enterprises. Give them the freedom to make their own decisions and also ensure that they work in an environment where then can adjust prices based on the cost of production,” he said.

State enterprise losses which are financed by bank debt requires higher interest rates to crowd out private investment and slow growth, but the State usually prints money to keep interest rates down, triggering high inflation and currency depreciation.

Sri Lanka’s rulers gained the ability to print money after a central bank was created in 1950 to join the failed Bretton Woods system of unstable soft-pegs.

SOE’s are able to run persistent large losses because state banks which under the control of the elected ruling class continue to channel savings collected from the people despite their finances weakening steadily.

Heavy SOE losses borrowings keeps lending rates high, diverts savings to unproductive consumption spending reducing national savings, hurting future employment and growth.

The new administration of President Sirisena’s declined the fuel prices by reducing tax which makes the government to lose 65 billion rupees revenue per year.
The government also have plans in merging the national carrier SriLankan Airline and Mihin Lanka due to the higher losses the airlines have made over the past years.

“That is what particular the Ceylon electricity board, Petroleum Corporation the large monsters that people have been speaking about, unless you give them to price according to cost, you will kill them,” de Silva said.

“All this time we were expecting them to be profitable, but they were not given the ability to price according to market.”

The minister said that the SOE’s should not be politicizes which help them to work independently.

Critics have said that the government enteritis are hugely politicize and decision that were made also affected due to politics within the institutions.

“The other thing is when these institution get politicizes, it just becomes the places for politicians to stuff people,” de Silva said.

“Take The Transport Board, The Railways, The Port Authority. It is just a place where you appoint people and give jobs,”

“So, that discipline must be there. Boards must be empowered to take decisions along with CEOs. They must run as efficient entities not restricted by political interference,”

“If we remove this politics from this state owned enterprises, am certain that they can do a lot better than they are doing currently.”

“All what I’m telling is that let them compete in the market the rest of Private enterprises, that is in that space. The politics of running those must be removed. So they become another competitor in the market.”