No one solution to reform SOEs, says Dep Minister at Advocata launch

May 06, 2016 (LBO) – Sri Lanka’s state-owned enterprises need individually crafted approaches for reforming them and one solution may not suit every enterprise, Deputy Minister Eran Wickramaratne said.

Wickramaratne was speaking at the launch of Advocata Institute, a new independent policy think tank based in Colombo, and its report on SOEs. The institute will be dedicated to economic development through free-markets and will promote sound policy ideas compatible with a free society in Sri Lanka, its officials said.

Wickremeratne who looks at Public Enterprise Development said the government is evaluating all possible mix of policy options with regard to reforming SOEs. “There is no one solution to reform SOEs.

We are currently looking at it industry-wise and institution-wise,” Wickramaratne said. As per the Advocata report, certain SOEs in Sri Lanka have incurred 636 billion rupees of losses during 2006 to 2015 period, while others contributing 530 billion rupees in profits. The report highlighted that even though the treasury says there are 245 SOEs in Sri Lanka, performance of around 190 SOEs remain unknown since the treasury classifies only 55 institutions as strategically important.

The report called upon the government to keep the privatization option in the policy mix if the government is serious about reforming SOEs. The government has reiterated that no SOE will be privatized simply as a means to increase revenue and instead to follow a more strategic approach, where the SOEs will be strengthened and made independent. 2016 budget proposed initially to bring all SOEs under a government-owned holding company similar to that of the Temasek Holdings of Singapore.

The shares of these enterprises will be passed onto a Public Wealth Trust, where the Secretary to the Treasury and the Governor of the Central Bank will be the custodians.

Deputy Minister Wickramaratne further stated that in order to reform SOEs there should also be limitations for borrowing from state-owned banks. 2014 performance report shows that bank borrowings by strategically important 55 SOEs stood at 471.

2 billion rupees as at end 2014. Wickramaratne said under Basel lll convention these banks will have little room for these activities as it requires revealing more information on capital adequacy criteria. By end 2014, these 55 SOEs had obtained 126 billion rupees in budgetary support and 47.

6 billion rupees in treasury guarantees.