The concept of nationalisation was in vogue in the 1960s and 1970s throughout the world. Even staunchly Capitalist countries such as the United Kingdom (UK) adopted nationalisation as a panacea for all ills. The basis for nationalisation is that the State should run all basic or essential services that are needed by the public. This called for the taking over of most companies or services run by the private sector, with or without compensation to the affected parties.
Here in Sri Lanka, the Government led by Sirimavo Bandaranaike elected in 1960, began a nationalisation drive that encompassed many sectors. But the privately-run bus service was nationalised even before that, with the formation of the Ceylon Transport Board (CTB), now known as the Sri Lanka Transport Board (SLTB). Incidentally, you can still see the first “nationalised” bus at the BMICH, Colombo. The J.R. Jayewardene Government once again allowed the private sector to operate passenger transport buses in 1978, but also kept the SLTB afloat.
The nationalisation drive targeted many sectors including education, fuel and energy and plantations. Many schools that were run by private or religious entities were taken over by the State, with the added consequence of phasing out English medium and having only Sinhala or Tamil as the medium of instruction. This created an entire generation averse to the Kaduwa (a term for English in university parlance). Thankfully, this anomaly has now been rectified, with most schools also having English medium.
Perhaps the biggest blunder vis-à-vis nationalisation was the marching order given to oil giants such as Shell and Caltex and the establishment of the Ceylon Petroleum Corporation (CPC), a State-Owned monopoly for importing, refining and distributing all petroleum products. In fact, before it was virtually chased out, Shell wanted to begin one of Asia’s biggest oil refineries in Sri Lanka. It had to shelve that plan after the nationalisation of the fuel sector and take the project to Singapore, which is now one of the leading exporters of finished petroleum products despite having not even one drop of its own oil. The difference between the two policies could not be starker.
“Private enterprise” model
Talking of Singapore, President Ranil Wickremesinghe recently alluded to the fact that former Singaporean Prime Minister Lee Kuan Yew followed the “private enterprise” model favoured by Sri Lanka’s first post-Independence Prime Minister D.S. Senanayake. This model was ditched by the leaders who followed him in a bout of nationalistic fervour. The President said that Sri Lanka would not be facing this existential crisis today if the private entities and services were left intact.
Indeed, had companies such as Shell remained here throughout, they would have deftly managed the forex crisis and ensured a steady supply of fuel even amidst an overall economic crisis resulting from Covid-19 and other factors. The fuel crisis of 2022, where several people died in long fuel queues, led to calls for the restructuring of the CPC and the liberalisation of the fuel retail market. The CPC, along with the Ceylon Electricity Board (CEB), SriLankan Airlines and Sri Lanka Railways (SLR), is a State-Owned Enterprise (SOE) well-known for an excess workforce getting fat salaries and bonuses, huge debts, corruption, lethargy and inefficiency.
Since restructuring the CPC could take some more time due to legal and regulatory requirements, the Government has decided to hand over the operations of 450 filling stations currently operated by CPC dealers to three overseas private companies – Sinopec of China, United Petroleum of Australia and RM Parks of the USA. With the Lanka Indian Oil Company (LIOC) also expanding its footprint in Sri Lanka via the Trincomalee Oil Tank Farm and more filling stations, this will make way for four private players in the local petroleum market.
In any case, the Government has listed seven SOEs for restructuring or privatisation in due course via the sale of Government-owned shares in these entities. The preliminary work in this connection is being carried out by the SOE Restructuring Unit (SRU) of the Finance Ministry. The seven SOEs are SriLankan Airlines, Sri Lanka Insurance Corporation (SLIC), Litro Gas, Hotel Developers Limited (Colombo Hilton), Canwill Holdings (Grand Hyatt Colombo), Sri Lanka Telecom (SLT) and Lanka Hospitals (formerly Apollo Hospital). More SOEs are likely to be added in the future.
While many have pointed that some of these organisations including the SLIC and SLT are making profits and hence should not be privatised, the strongest argument in favour of privatisation is that the State should not be doing any business at all regardless of profit, except perhaps for education and health, which cannot be called businesses in the strict sense of the term. Another plus point for privatization is that corruption can be minimized, if not altogether eliminated. It is also a fact that private companies are generally more efficient, well-managed and consumer-friendly than SOEs. This can be seen in instances such as Plantation Management Companies (PMCs) which are doing a better job than the plantation SOEs.
There is one other sector that needs serious debate and action with regard to privatisation – university education. Although around 150,000 students pass the GCE Advanced Level examination every year and theoretically gain admission to the State Universities, only around 25,000 students are actually admitted due to logistical issues. This leaves the others in the lurch, with little or no avenues for higher education.
Opposition from professional bodies
Although there have been several attempts to establish private universities for Medicine and other fields of study, most notably the South Asian Institute for Technology and Medicine (SAITM) and the North Colombo Medical College (NCMC), they had to fold up due to opposition from professional bodies such as the Government Medical Officers Association (GMOA) and State university dons and students. However, today there are many educational institutions that offer a degree pathway to students, through affiliations with foreign universities. The students complete one or two years of study here and then transfer to a university in Canada, Australia, UK, USA, New Zealand or Malaysia.
It has been estimated that nearly 12,000 Sri Lankan students leave every year for studies abroad, which is a major drain on our foreign exchange reserves as most students require at least US$ 30,000 over two to four years for tuition, lodging and other expenses in the overseas destination. The University World News website has estimated that this could amount to more than US$ 400 million per year, which is a huge sum that Sri Lanka cannot afford especially amidst an economic impasse.
There is no doubt that if Sri Lanka had world-class private universities, at least 50 percent of these students would opt to remain home and complete their education, saving a considerable chunk of foreign exchange. There is also the possibility of foreign students coming in to study at these private universities, thus generating foreign exchange.
It is also no secret that most students who go to Western countries eventually end up getting Permanent Residency (PR) in those countries, which adds to Sri Lanka’s losses. On the other hand, if the local job market can offer well-paying jobs to graduates of private universities, at least some of them will decide to stay on and serve the Motherland.
Private universities
The opposition to private universities in this country is completely misguided and unfounded. Yes, there should be strict safeguards against private universities taking in completely unqualified candidates.
Their examinations too should be thoroughly monitored by the relevant Government agencies (the Education Ministry, the University Grants Commission) to ensure that unsuitable candidates are not awarded degrees. In any case, private universities should be established under a strict regulatory framework, unlike private “international schools” that are run under the Companies Act.
Private universities are a fact of life in nearly all of our neighbouring countries, leave alone the Western countries. India, for example, has more than 400 private universities which attract many students from the region. There is no reason why we cannot replicate the same model here. Of course, we do not need 400 universities, but there is room for around 20-25 private universities that offer courses in all disciplines including medicine and nursing.
Unlike some of the more traditional (non job-oriented) courses offered by the State universities, the private universities should be able to offer subjects and courses aimed squarely at the local and overseas job market, making the moniker “unemployed graduate” a thing of the past. Private Universities will lead to a win-win situation for all segments of the economy.