Kudos to the Government | Sunday Observer

Kudos to the Government

12 June, 2021

Amid the fear of the country being sold to the Chinese, the government has been able to pass the much needed and important legislation on the Port City Commission. In addition, the government has initiated a very important Public Private Partnership (PPP) venture to develop prime properties that were hardly yielding any returns for the state.

The government in general and the leadership in particular should be congratulated on making these two projects a reality. It is hoped that in time to come, the fruition of these projects will auger well for Sri Lanka and put to rest many of the skepticism felt by various parties.

However, for these projects to be successful, two important conditions warrant special attention. One, we have to rely on Chinese goodwill for the success of the Colombo Port City (CPC) project. The Chinese involvement in the project is more likely to bring in the investments that we alone cannot source. This is because the Chinese have a reputation for making big investments abroad and they have the ‘know-how’ to manage them successfully and generate returns.

Any new foreign investor is more likely to consider the Chinese involvement rather than our track record when making their investment decision. Hence, it is not prudent nor helpful to peddle the ‘selling everything to China’ narrative when China is actually trying to help. There is immense goodwill from the Chinese side which we need to reciprocate.

Second, it is important to have a proper governance structure in place when running a mega project such as the CPC. A proper governance structure should bring integrity, know-how, experience and credibility to the entity if it is to run successfully and bring in investments.

The negative sentiment about non- Sri Lankans sitting in the commission has been voiced by various quarters, thus, likely leading to the government’s decision to appoint all Sri Lankan members. This is a missed opportunity to bring in much needed international expertise and experience and even potential foreign investment leads to the CPC at its infancy.

A good example which illuminates this fact is to see how the Singapore national wealth fund ‘Temasek’ has constituted its board and top management team. In its board there are two non-Singaporean members, a former president of the World Bank and a director of IBM and Royal Dutch Shell.

Having such reputed people help to create non-corrupt environments whilst instilling enormous credibility in the entity. In Temasek’s top management team, there are a number of foreign individuals who are experts in the required asset management fields. The important point is to get the best local or foreign talent and bring in credibility to the entity, so that it has the best chance to succeed. Voicing opposition to hiring foreigners is a short sighted, and meaningless affair.

The treasury owned holding company (Selendiva Investments Pvt. Ltd.) model is the right way for the government to manage public commercial assets. It is hoped that other non-performing state-owned enterprises too can be brought under an umbrella of a similar treasury owned holding company. Since governance issues are the main reasons for the dismal performance of State-Owned Enterprises (SOE’s), a professionally managed holding company with credible governance structure can avoid political patronage, clientelism, corruption and mis-management.

Once instituted, such a structure can insulate the holding company and the SOE’s from the short-term political cycle that doesn’t coincide with the longer-term view that the public asset management requires. Singapore’s Temasek which has generated over 10% annual returns since its inception is a good example which highlights that this model really works.

Then, what the government needs to do is to appoint the best team of professional board of governors and a best team of asset managers and request the highest possible returns from the appointees. Otherwise, using the same old model of politicising the SOE’s will only perpetuate the same old failures that were seen for so many decades.

The writer - PhD, MA (Economics) and BBA (Economics & Finance) Temple University, Philadelphia, Pennsylvania, USA. Dr.Perera is currently a Sessional Lecturer at La Trobe University and Charles Sturt University in Australia and a tutor for the Public Management Program at CeFIMS, SOAS, University of London.