Last week, we commented editorially on President Ranil Wickremesinghe’s speech in Parliament, where he mentioned a 25-year development plan. Now, in an interview with the prestigious international magazine The Economist, President Wickremesinghe has outlined his plans in detail and given Sri Lankans a further glimpse into what the future might hold for the country.
One of the recurring themes in this wide-ranging interview was the acute need to reduce State expenditure and the massive losses suffered by State-Owned Enterprises (SOEs) such as SriLankan Airlines, the Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB).
Our sister paper The Daily News carried an insightful editorial on this subject last week, which revealed some of the huge losses incurred by these inefficient and bloated SOEs. As quoted in this editorial, 52 State enterprises had suffered losses totaling a staggering Rs. 860 billion in the first quarter alone in 2022.
The CPC is the biggest culprit, having incurred losses to the tune of Rs. 628 billion in the first quarter of this year representing 73 percent of the total loss of the 52 loss-making State bodies. The National Carrier comes a close second with its share of the loss in the first quarter of this year alone standing at Rs. 248 billion while the loss suffered in the whole of 2021 amounted to Rs. 171 billion.
The Ceylon Electricity Board (CEB) had incurred losses totalling Rs.47 billion in the first quarter of 2022 alone.
Make no mistake, this cannot be allowed to go on. These entities should no longer be funded through the public purse. It is rather well known that bonus and overtime payments alone at these loss-making entities run into billions of rupees. The President’s assertion that subsidies can no longer be given for certain sectors (such as petroleum and electricity) is correct, but we nevertheless feel that the public should not be asked to foot the “mismanagement bill” of these institutions.
Hence the only alternative is restructuring these institutions within the public sector domain or privatisation, however unpalatable that option may be. There are well-managed and profitable State sector organisations in many countries and indeed, even in Sri Lanka. These organisations do not have excess staff, overtime payments, inefficient and corrupt managements and huge vehicle fleets. Restructuring is not an impossible option, though it will certainly be very complex.
However, given the precarious financial position of the country, privatisation or the sale of these assets could be a more viable option. It has been suggested that out of these 52 State bodies, as many as 40 could be vested with the private sector. As the President said in The Economist interview, Sri Lanka will be able to raise around US$ 3 billion through the sale of certain State assets, which is a lifeline in the present economic context.
There is an example from within the above-mentioned State entities for the case for privatisation – SriLankan Airlines, which consistently earned profits during its strategic partnership with Emirates, the UAE-based airline. Once a former administration terminated this agreement, SriLankan went into a nosedive from which it never really recovered.
It is, therefore, imperative that a decision on restructuring or privatising these SOEs is taken soon. In The Economist interview, the President has rightly pointed out that he was not worried about the reaction of trade unions in case these SOEs are subjected to any form of privatisation or restructuring. This is a laudable stance, as Sri Lankan leaders up to now have been wary of the power the trade unions wield not only over their members and workers, but also over the managements of SOEs.
Again, there is a precedent from the past. If President J.R. Jayewardene did not take decisive action against the July 1980 strikers, foreign investors would not have come to Sri Lanka at all to fill the newly-created Free Trade Zones (FTZs) with brand new factories. That sent a strong message to the global investor community that industrial action will not be tolerated in Sri Lanka.
Trade unions are worried over privatisation or broadbasing of ownership as the private sector does not entertain time wasters, political lackeys or unqualified employees. But as the President has hinted, the people have had enough of these SOEs as a result of the recent travails they experienced. For example, if the CEB had done its homework properly and added more renewable energy power plants, there would have been no power cuts today. Likewise, if the CPC was not bleeding red, it would still have been able to ensure an uninterrupted supply of fuel. Even the QR Code solution, which ultimately ended the fuel queues, should have actually been initiated by the CPC itself.
Since there is a possibility that an All-Party Government (APG)/National Unity Government (NUG) could be formed within the next few weeks or in the alternative, an All-Party Program (APP) could be formulated, all political parties must reach a consensus on transforming SOEs into profitable institutions at least by the end of the decade, if not sooner. This should necessarily be a component of the Common Minimum Program (CMP) alluded to by the President in The Economist interview.
There should also be a wider debate in the media on the privatisation or sale of SOEs to gauge public opinion, which seems to have turned in favour of this option. For example, many of those interviewed on TV during the fuel crisis said the petroleum field should be opened to more players apart from the CPC and LIOC. In any case, businesses always do better in private hands.