‘Listing of SOEs will benefit capital market’ | Sunday Observer

‘Listing of SOEs will benefit capital market’

5 January, 2020
Ravi Abeysuriya
Ravi Abeysuriya

The government should seriously contemplate the listing of State Owned Enterprises (SOEs) on the Colombo Stock market, for better performance which in turn will benefit Sri Lanka’s capital market, former President, Stock Brokers Association of Sri Lanka, Ravi Abeysuriya said.

“As the government has direct control of certain Boards, Authorities and Public companies which perform commercial operations, it is necessary to ensure efficient service delivery as well as sustainability. However, many of these organisations are not profitable and are under-performing at present.

If such entities were to be listed on the Colombo Stock Exchange at the earliest - even without any public share issue, significant benefits can be obtained for all stakeholders as well as Sri Lanka’s capital market,” he said.

Emphasising the need to selectively list SOEs on the Colombo Stock Exchange (CSE) for multiple benefits, he said that the CSE could widen its scope and activities with the increased transaction level.

“The listing will increase CSE market capitalisation. International fund managers usually measure the total market capitalisation of a country as a percentage of its GDP as well as the absolute USD value. Sri Lanka remains stagnant due to size constraints as we have not been increasing the market capitalisation of the CSE which is at 23 percent at present compared to India’s 95%, and Vietnam’s 74%. Listing of SOEs would be beneficial as this would allow greater recognition for Sri Lanka as a frontier/emerging capital market with attached opportunities,” he said.

If the SOEs were to be listed, they will need to adhere to good governance structures including having Independent Directors and Audit committees.

This would allow these institutions to be managed by professionals and thus lead to less political influence and better decision making based on commercial analysis.

“It would also be a requirement for regular filing of financial accounts in a timely manner for these SOEs thus the government could monitor the progress of these entities and auditing of financial statements would be faster and more accountability will be created for these entities,” he said.

Such SOEs may not be asked to give shares to private investors other than to current employees (Employee Share Option Scheme) and after the employee buy-in has been established, medium term plans may allow the government to raise funds through the CSE for these SOEs, reducing the burden on the Government Budget, he added. Highlighting examples of SOEs that can be listed, Abeysuriya said that the Sri Lanka Insurance Corporation, Lanka Mineral Sands, Sri Jayawardenapura General Hospital, Hotel Developers, Lanka Sugar Company, Paranthan Chemical Company, Lanka Leyland, LTL Holdings, Litro Gas, Hyatt Hotel, Heli Tours, Laya Resorts, and SriLankan Catering have the potential to be listed.