But no govt. touches the issue
because of political sensitivities
By Gamini Abeywardane
In the developed world the elections are often fought based
on economic and social policies relevant to the time. For example the solutions
to main problems facing the country should be in the manifestos of the
contenders at elections and they should be part of the political debate.
Unfortunately in our country the situation seems to be quite
different with various unexpected and emotive issues coming into the political
debate around the election times. This has been the pattern ever since we
gained independence.
Politics of the sixties and seventies was dominated by petty
cultural, linguistic and racial issues to the exclusion of vital economic and
national priorities. Who will give more free rice and impractical ideas like
nationalization or providing government jobs took the centre stage of political
debate sidelining the important issues.
Then with emergence of separatist ideas and onset of
terrorism in the north the need for countering those tendencies came to the
forefront becoming a dominant factor in all subsequent elections. These
tendencies resulted in some of the critical issues not finding their due place
in the ongoing national debate.
One such area that has escaped due attention is the loss
making state enterprises whose burden on the treasury has been escalating at a
rapid speed. According to the Ministry of Finance, during the first quarter of
2019 alone, fifty-five state-owned enterprises made Rs 59 billion in losses.
It has been reported that of the state-owned enterprises
that make losses the Ceylon Electricity Board continues to lead the pack with a
Rs 23 billion loss while the Ceylon Petroleum Corporation has made losses of Rs. 21 billion and Lanka
Sathosa Ltd made losses of Rs. 788 million during the first quarter of 2019.
This trend, if not arrested in time, can have catastrophic
effects on the country’s economy and it’s time that political parties open this
subject for public discussion without keeping mum over such issues for petty
electoral advantage.
Many politicians in our country have opposed the idea of
privatization or even part privatization for mere political expediency and have
instead advocated reforming loss making entities while they are in state
control. The idea is fine, but our experience is such ideas have not worked
despite much talk about converting such entities into profitable institutions.
On the contrary, we could see how SriLankan which was a
profitable airline under Emirates management became a monumental loss under
state control. At the other end is Sri
Lanka Telecom which had poor performance as a state entity which now has not
only become a top performer, but has also revolutionized the entire telecom
sector in the country after its partial privatization.
Many years ago one had to be a Member of Parliament or a top
government official, if one were to obtain a home phone line. Others had to be
in a waiting list for several years. But
now it is a matter of one or two hours and just a phone call away – there are
enough and more telecom players competing with one another to come home and fix
it.
Then take the case of garbage disposal and cleaning of the
city of Colombo. Anyone would remember how untidy the city was with dumps of
garbage strewn here and there, stray dogs often feeding on them while the
municipality had a large number of excess employees among those dedicated to
keep the city clean. It’s no secret that most of them were supporters of
various politicians and many of them were drawing their salaries even without
being physically present at work while attendance were marked through proxies.
Now as a result of outsourcing such work to well organized
private sector companies we see a clean city with garbage being removed on
daily basis at the correct time. These companies are no doubt making a good
profit. It’s because they manage their workers well and do the work with the
minimum number of people ensuring maximum utilization of the resources.
A state entity in our country can never achieve that kind of
efficiency because of some inherent issues such as political interference,
mismanagement, corruption, wastage, inefficiency, indiscipline and lack of
incentives. With whatever plans and restructuring efforts we have failed to
produce any positive results in these state enterprises and all know they have
the potential of becoming profit making institutions under right management.
What we have witnessed in our country is that governments at
popular demand keep stuffing all institutions under them with their supporters
irrespective of whether there are vacancies or not, especially when elections
are around. Politicians generally do not work like businessmen. They have no
idea about efficiency or return on investment. They only think of how to remain
in power. Therefore the general tendency is to do whatever is within their
powers to remain in power and that is how most of the state controlled
enterprises became white elephants.
Always there is a vast gap between what is economically
right and what is politically feasible. Politicians themselves often do not
have the necessary discipline to make these institutions work as they
themselves are corrupt. As far as we see making state enterprises profitable
under government control is a near impossible task with our political culture.
Divestiture of assets belonging to the state to private
sector is a method adopted in many countries as a means of converting
lossmaking enterprises into viable entities. Any structural changes in these
entities are generally resisted by the workers and their trade unions as they
feel insecure with reforms while they are happy to continue with the existing
state of affairs. However, these institutions are a burden on the economy and
the people in the long run as ultimately they are sustained with taxes from the
people.
The situation is made worse when politicians, especially
when out of power start backing the wrong side for political gain and try to
undermine any efforts at reforming these institutions. Even any form of
restructuring is viewed by the workers as a first step towards privatization
and therefore generally opposed.
In countries where there is no such political culture like
China, Singapore and UAE state enterprises have often produced good results
under proper management. Even in neighbouring India there are well-run state
enterprises. Some popular examples of such entities are Emirates Airline,
Singapore Airline, Indian Oil Corporation and Sinopec in China. It’s worth
finding out why such achievements are not possible in Sri Lanka. Merely
opposing privatization is not going to solve this problem and if privatization
is not acceptable then we should go for Public Private Partnerships.
As suggested by the current government a few years ago this
can be achieved by setting up a government owned holding company on the model
of Temasek Holdings in Singapore or Investment Corporation of Dubai (ICD) with
a mandate to consolidate and manage all government portfolios in state
enterprises brought under them. It could provide strategic oversight by
developing and implementing strategy and corporate governance policies for the
long term benefit of the country. However, for whatever reason no visible
progress has been made in this regard.
It is vital to get the private sector into these entities,
if we are to reform them in any meaningful manner. Without introducing good
corporate governance and discipline they can never be reformed. How much of the
shareholding should be divested can be decided depending on the strategic
importance of each enterprise. It is understood that the state should have a
greater say in certain vital areas, nevertheless it is futile to have that say
if these enterprises are only adding burden to the economy.
It is important to have a dialog on this issue and explain
to the public the gravity of the situation and the urgent need for reforming
these entities, so that all political parties can contribute by suggesting ways
and means of depoliticizing the management of these entities and improving
profitability without merely opposing reforms for petty political gain.
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