Sri Lanka is already in one of the worst economic crises in its history. Experts warn that deep economic reforms are essential.
Reforming SOE’s can curb further losses, which add to the fiscal deficit.
The Cumulative losses of the 55 SOEs from 2006-2020 was a staggering 1.2 trillion.
Disposing of State Owned Enterprises which are a burden on the public finances, is the crucial need of the hour.
Immediate privatisation of large State Owned Enterprises, will build international investor confidence.
“Some big government enterprises are not responsive to our needs. And because they’re not responsive, you will go home today and you will have a blackout of one hour, because they are load shedding during peak hours ,” says Prof. Rohan Samarajiva, a veteran policy expert and an advisor of the Advocata Institute.
He made these comments at Advocata’s recent press briefing, organised to highlight the urgency of carrying out reforms to State Owned Enterprises (SOE).
“The basic issue is that we, in this country, are suffering from a twin deficit. We need to get started on addressing the core problem”, further stressed professor Rohan Samarajiva.
According to Prof. Samarajiva privatising a globally visible, yet loss making SOEs such as SriLankan Airlines is the best solution to create confidence among investors that Sri Lanka is serious about reforms.
Sri Lanka’s SOEs are a serious burden on public finances. With the economic crisis reaching a tipping point, it is becoming increasingly impossible to keep these loss making enterprises afloat. The continuation to do so, at the expense of the taxpayer can have serious consequences to the economic trajectory of the nation.
Advocata Institute’s research team has identified that the cumulative losses of the 55 SOEs from 2006-2020 is a staggering 1.2 trillion. The combined loss per day of the Ceylon Petroleum Corporation, The Ceylon Electricity Board , Sri Lanka Airlines, Sathosa and the National Water Supply and Drainage Board is about LKR 384,479,189, according to data for the year 2019. This is at the backdrop, where the country is wading through a serious debt crisis with questions surrounding our ability to meet forthcoming debt obligations.
The briefing brought together a panel of industry experts who raised alarm bells on why Sri Lanka cannot afford to be complacent about State Owned Enterprise reforms anymore.
Prof. Rohan Samarajiva, further explained the seriousness of this issue along with how privatisation can achieve positive outcomes for the country.
“In 1997, Sri Lanka Telecom was making losses and providing bad services. Today, after privatisation, it is providing us with good services and employment and double of what they were earning. It is also providing the government with a dividend which generated billions to the government”. He highlighted that the country has no other alternative to prevent the hemorrhaging losses of State Owned Enterprises apart from privatisation.
“Privatisation is not a one size fits all model, it is different in different countries and sectors – as seen in the telecommunication industry in Sri Lanka – with a good regulator, we can have competition, leading to greater efficiency and making technology accessible to the common public” commented Ms. Anarkali Moonesinghe, Advisor to the Advocata Institute.
She further elaborated that possible avenues for privatisation that can be considered include listing of State Owned Enterprises in the stock exchange. According to Ms. Moonesinghe, “our stock market could use large capital companies that are owned by the government today. It not only gives people ownership but also broadens ownership by giving the average person an opportunity to become a direct stakeholder to these enterprises. This can be a better option than attaching the person through taxpayer money or having your EPF/ETF being taken into these enterprises”, thereby describing the merits of listing.
Dr. Sarath Rajaptirana, Advocata’s Academic Chair, said that the present crisis makes two choices available to us, which is “reform or perish ”. He highlighted the urgency of implementing structural reforms. He further commented that the key issue with State Owned Enterprises lies in productivity.
” For over 30 years, Sri Lanka’s total factor productivity was less than 1%,.This is in severe contrast to countries such as South Korea and Vietnam, where a jump in productivity is experienced today which we were never able to maintain . If you want permanent change in the GDP rate, you need to have productivity increase” said Dr. Rajaptirana.
Teejay achieves milestone US$ 250 million in sales in 2021-22
Teejay Lanka PLC has reported a revenue milestone of Rs 50 billion at Group level for FY 2021-22, achieving its first annual sales of a quarter of a billion in US Dollar terms at the rates of exchange that prevailed during the year.A strong fourth quarter during which revenue grew 38% to Rs 13.5 billion, the highest quarter revenue since the Company’s inception, enabled Sri Lanka’s largest textile manufacturer to achieve 12-month sales growth of Rs 17.8 billion or 56% to end what was a challenging year for businesses in general, on a high note.
The Group posted profit before tax of Rs 2.887 billion and net profit of Rs 2.517 billion for the year ending 31st March 2022, recording healthy growth of 11% and 18% respectively. Net profit for the fourth quarter was Rs 826.2 million, reflecting an improvement of 9%.At company level, Teejay Lanka increased revenue by 40% to Rs 29.4 billion for the year, and reported pre-tax profit of Rs 2.6 billion and net profit of Rs 2.4 billion, achieving growth of 23% and 24% respectively.
Elaborating on the Group’s performance, Teejay Lanka Chairman Mr Ajit Gunewardene said the revenue increase was the result of increased demand from the region. The enhanced volumes were delivered with the increased capacity within the Group and the support of outsourced partners, he said.Gunewardene said, however, that margins had been impacted during the year because of the upsurges in the prices of cotton, oil, freight, dyes, chemicals, and auxiliaries. “The increase in the costs of inputs has been the biggest challenge during the year,” he said, disclosing that enhancing efficiency within the Group and increasing prices to customers were the key strategies to counter the challenge.
Nippon Paint Lanka accredited by Great Place to Work®
Nippon Paint Lanka (Pvt) Limited has been certified as one of the best workplaces in the country. The Japanese coatings company in Sri Lanka has received this recognition in the manufacturing and production industry category by the globally famed Great Place to Work®.
“We embarked on this to understand employee perceptions of the company. We are proud to have received this honor in our journey towards building and sustaining a high-work ethic, and performance culture,” said General Manager of Nippon Paint Lanka, Nemantha Abeysinghe. “Being recognized as a ‘Great Place to Work-Certified’ organization is an honor and a tribute to the hard work, pride, and dedication put in by every member of Nippon Paint Lanka. We went the extra mile during the COVID period to extend to our employees, special working hours, perks and annual bonuses despite a countrywide lockdown. As a result, the company saw everyone dedicating their efforts more than two hundred percent to uplifting the business.”
“Being certified as a Great workplace indicates that we have differentiated ourselves by creating a great place to work for employees and established Nippon Paint Lanka as an employer of choice. It has passed the rigorous measurement through analysis of results of the Great Place to Work® Trust Index© survey,” Abeysinghe added. Great Place to Work® research is backed by data compiled by assessing over 100 million employees around the globe. Every year, they conduct the world’s largest study of workplace culture and hold the gold standard benchmarks for each country, industry, location and more. Companies that want to be on a Best Workplace list start by getting Great Place to Work-Certified™. Through the Certification process, they capture employee feedback and details about the programs and practices that make a workplace unique.
Clarification on default status helps boost share market
By Hiran H.Senewiratne
Business confidence will likely build up in the wake of Central Bank Governor Dr Nandalal Weerasinghe telling the media yesterday that Sri Lanka was not facing a hard default but a pre-emptive default, which entailed informing about the payment of funds beforehand until the IMF debt restructure plan comes into play.Further, JP Morgan, a leading investment bank in the United States is on record that with the recent political changes, the current political crisis in Sri Lanka will stand defused and the value of bonds will rise. This would also create some impetus for the stock market, analysts said.
They point out that political stability will lead to a rise in the value of bonds above current lows. The Bank predicts that this will facilitate discussions with the International Monetary Fund as well as the process of appointing legal and financial advisors.
“We think this stability should result in both IMF discussions and the process of appointing legal and financial advisors moving forward,” Reuters said quoting JPMorgan analysts.
“Political stability should pave the way for bonds to move higher from near all-time lows,” JPMorgan analysts added.
Amid those developments stock market trading activities started on a positive note and later moved downwards. The All- Share Price Index went down by 243 points down and S and P SL20 declined by 94.9 points. Turnover stood at Rs 1.5 billion minus a crossing.In the retail market top seven companies that mainly contributed to the turnover were; Expolanka Holdings Rs 777 million (3.7 million shares traded), Browns Investments Rs 204 million (24.8 million shares traded), LOLC Finance Rs 130 million (13.9 million shares traded), LOLC Holdings Rs 70.7 million (127,000 shares traded), Softlogic Life Insurance Rs 56.8 million (914,000 shares traded), Royal Ceramic Rs 33 million (one million shares traded) and Lanka IOC Rs 30.3 million (752,000 shares traded). During the day 69 million share volumes changed hands in 17000 transactions.
It is said that following four sessions of sharp gains recorded in the CSE soon after the appointing of Ranil Wickramasinghe Prime Minister, indices edged down due to profit-taking in heavyweight stocks across sectors due to faulty speculation on the market. However, activity picked up to stronger levels with turnover surpassing Rs. 3 billion for the first time in nine weeks, largely boosting blue- chips, market analysts said.Yesterday, the Central Bank announced the US dollar buying rate as Rs 354.56 and the selling rate as Rs 364.53. The rupee rate has appreciated as against the dollar as certain policy measures have been adopted to bridge the gap between the Central Bank rate and the kerb market rate.
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