Sri Lankan Government ready for an Economic Turnaround (Part 2)

It is up to the NPPC to review it in consultation with the Central Bank, as I have pointed out above, and to convert the final product into detailed work programs to be implemented by various government agencies.

Full Stop to Privatisation

The newly elected government, several other features, would strengthen the role of the government. It has made it very clear that no state-owned company will be privatized and even gone as far as proposing law implementation to ban it. In reality, these are very poor proposals as no one can bind a future parliament to uphold them. Even concerning those already privatized, the government must issue directives, and all investors in the private sector are required to comply with them.

Alleged corruption charges and the absence of clear efficiency-based changeover plans have marred many past privatization activities. Therefore, political logic is behind these three movements. However, political logic has subsumed economic philosophy based on requirements for efficiency and the need to change business strategies in line with emerging global developments. It is unlikely that a management agency that works under a dictator can act swiftly and with the foresight to save a company from an unexpected external shock.

Hiring competent managers

By implementing two steps, The newly elected government plans to resolve this problem. One is a rebellious measure that should be supported by all. In this step, the management of these companies is recommended to be turned over to professional and qualified managers who would be paying market wages and are subject to regular quality audits. When they struggle, they have to resign as they do in a private company. Hence, it was the template Singapore used for state-owned enterprises. A possible barrier to the successful implementation of this model is the lack of a sufficient number of talented managers to operate these companies.

Singapore resolved this by hiring foreign executives on competitive salaries while setting them time-bound goals. The newly elected government is quiet about this possibility, so it is NPPC's responsibility to analyze it and make appropriate changes.

Another bureaucracy

The other step is to put these businesses under the control of a newly created National Enterprises Authority or NEA to reform them under state ownership to ensure their competitiveness and viability. The aim is to liberate taxpayers from the burden of bailing them out if they fail. The current model adopted by Sri Lanka is to submit these undertakings to ongoing review by a group of technocrats housed in the Ministry of Finance's Public Enterprise Department and assist the Parliamentary Committee on Public Enterprises or COPE in making a final recommendation.

The previous COPE reports focused too much on a financial audit to exclude the necessary 'enterprise audit.' A company audit examines whether a program conducted by a state-owned company is consistent with its mission to mitigate emerging global and local risks. When the financial review focuses on financial irregularities and the media advertises them as widely as possible, managers in these companies will become extra-cautious and refrain from making the right decisions. Such events are the main reason for widespread state-owned inefficiency. The hope is that there will be no such risks under the new NEA scheme.

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