Adding to the SOE problem
State-Owned Enterprises (SOEs) in Sri Lanka are a contentious subject even in the best of times. But now with Committee on Public Enterprises (COPE) sessions open to media the amount of shocking details coming to the surface has increased exponentially, showcasing the dire need for reform. Therefore it is astounding that Cabinet last week gave approval for a new SOE to be created to commercialise the soon to be opened Lotus Tower.
The Lotus Tower is in itself a problematic project, which was initiated during the last Government, through an unsolicited proposal that has faced multiple delays and charges of mismanagement and fund wastage by the Auditor General.
Despite several years lapsing since construction began no one has been able to satisfactorily explain the economic need for this $ 104.3 million China Exim Bank funded tower that bears a striking resemblance to the party symbol of Opposition Leader Mahinda Rajapaksa’s Sri Lanka Podujana Peramuna (SLPP).
After numerous delays the Lotus Tower is finally expected to be opened later this month but apparently there is no one to run it as a commercial enterprise. Therefore Cabinet has given approval for a new SOE to be established to commercialise the operations of the Lotus Tower.
Given the excesses of existing SOEs it is mind boggling why policymakers did not consider establishing a public-private partnership with transparent oversight frameworks to undertake the running of the Lotus Tower and ensure it does not become an additional burden to the tax payer who is already on the hook for repaying the loan taken to construct it.
Sri Lanka is a country that has had a large State sector for decades. Currently, Sri Lanka has about 400 SOEs, according to the Treasury, with over a million employees. Yet, only a handful of these SOEs make profits or generate returns for the public, and are largely seen as employment providers, rather than service providers. But they do consume an extraordinary amount of resources, and possess impressive assets. In June Finance Minister Mangala Samaraweera said that SOE losses in 2018 doubled with the State losing a collective Rs. 160 billion from about 70 SOEs. The losses of entities such as SriLankan Airlines are regularly mentioned in Parliament with CoPE even demanding a fresh investigation into the causes of the losses recently.
The Ceylon Electricity Board (CEB) and the Ceylon Petroleum Corporation (CPC) also incur eye-watering losses annually but these are regularly overlooked because they are seen to be providing a public service.
However, what cannot be explained away quite so readily is the Motor Traffic Department incurring a loss of Rs. 4 billion over their failure to acquire a vehicle licensing system, or the National Savings Bank hiring 2,600 staff assistants and peons without interviews at the behest of the former Finance Minister in 2008, or the People’s Bank ex-General Manager allowed to take home two vehicles including a BMW even after CoPE specifically ordered that he not be given a six-month extension.
The details of mismanagement and wastage emanating from the CoPE sessions are jaw-dropping, not because they happened but because of the impunity extended to public officials and politicians that regularly and repeatedly break public trust. When the Government has failed with meaningful SOE reform it should at least refrain from adding to the problem.
Daily FT (September 12)