An analysis of State-Owned-Enterprises (SOEs) in Sri Lanka

Today, airports, ports, roads, power plants, railways, etc. are operating around the world through private sector and public-private partnerships.

When traveling abroad, Sri Lankans don't think twice.

The same holds when they fly on private airlines, land in private airports, go on private toll roads or get their electricity from individual power plants.

However, over the 70 years since independence, the leaders of Sri Lanka have not dared to emulate this global phenomenon locally. Neither have our private sector leaders had the vision or drive.

The Pathfinder Foundation launched a table of underused government assets in 2015. The launch of which came with the election of the 'Yahapalanaya' government, whose sentiments were that these assets should be sold to private investors or opened up to private-public partnerships.

The sale of these assets was to both raise government revenue and, more importantly, kick-start a moribund economy.

Since these recommendations were not notified by either the then government or the private sector, the Pathfinder Foundation again presents this table, entitled 'Broad-based SOEs: Increasing efficiency, debt reduction, and revenue generation,' in the hope that this proposal will be considered by the new government when formulating policy and that these proposals will be included in their lobbying initiatives by the private sector.

There are 422 government-owned enterprises (SOEs) in Sri Lanka, contributing 13 percent of GDP, based on the currently available data. Nonetheless, for various reasons, including legal definition, the exact number of SOEs is open to question. Fifty-four classify as strategic state-owned enterprises (SOEs) out of this number. These SOBEs' total asset base stood at Rs. 7.6 trillion by the end of 2017, 57 percent of GDP.

All SOBEs' total net profit amounted to an Rs. 27 billion loss in 2018. There were 17 SOBEs, which incurred aggregate losses of Rs — 158 billion, which outstripped others' aggregate income. The profits were reported primarily from government-owned banks and non-bank financial institutions as well as trust funds. Ceylon Petroleum Corporation (Rs. 104bn), Ceylon Electricity Board (Rs. 30bn), and SriLankan Airlines (Rs. 17bn) reported the most significant loss. The government also collected Rs. 37bn as levy income and Rs. 4.6bn as SOBE dividends.

OSL Take:

The new amendment to foreign exchange legislation enabling Sri Lanka’s state-owned enterprises to borrow monies from external sources would result in the expansion of operations in many state-owned enterprises.

The latter would invite more open as well as direct transactions between foreign business/financial institutions and Sri Lankan state-owned enterprises.

Once the government introduces the reforms to SOEs, it will make them less risky for private investment. The reforms, coupled with the GoSL’s stance on promoting PPPs, will contribute to more profitable public-private partnerships (PPPs) signed on concerning SOEs. Therefore, foreign businesses could explore opportunities for trade with Sri Lankan state-owned enterprises.

VBS/AT/05022020/Z_TB1