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Sri Lanka’s state-owned enterprises:

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Figure 1 Source: Ginting, Edimon et al, 2020, Reforms, Opportunities, and Challenges for State-Owned Enterprises, Asian Development Bank

A major crisis in the making

By Migara Rodrigo

Sri Lanka has a whopping 527 state-owned enterprises1 (SOEs). The 55 SOEs classified as “strategically important” alone employ 10% of the public sector workforce2, or about 1.9% of all workers. Such a large number of SOEs are not the norm globally3; many other countries (such as India) have been reducing their stakes in SOEs and, in some cases (e.g. Air India), have been privatizing them entirely. SOEs – particularly many in Sri Lanka – tend to be grossly inefficient, loss making, and a burden on the taxpayer. The time is ripe for major SOE reforms.

What is an SOE?

A SOE is traditionally defined as a commercial entity that has majority ownership/control by a nation’s government – in Sri Lanka, this can include statutory bodies, regulatory agencies, promotional institutions, educational institutions, public and limited companies. While Sri Lankan SOEs have traditionally been incorporated by an Act of Parliament, in recent years these entities have also been incorporated under the Companies Act instead. Sri Lankan SOEs can be divided into three categories: 55 Strategic SOEs, 287 SOEs with commercial interests, and 185 SOEs with non-commercial interests. Unlike nations such as India which mandate internal audits of their SOE’s business activities and publish an annual overview with a balance sheet of each individual business, the majority of Sri Lankan SOEs do not reveal this pertinent information to the public; financial information is available for just 10.4% of SOEs.

Fundamental Problems with Sri Lankan SOEs

Contrary to what some believe, low quality of talent is not the most significant issue with SOEs; many employees are eminently qualified and capable. Unfortunately, these organizations fall victim to government mismanagement and corruption. In addition to excessive employment to fulfill their political ambitions, there have been allegations that some SOEs have been formed purely to facilitate corruption – for example, the Lanka Coal Company engaged in fraudulent deals to purchase coal causing a loss of over Rs. 4 billion (allegedly with the knowledge of the minister in charge)4. SOE financials are late and few obtain ‘clean’ audit reports. Investigations have revealed repeated instances of fraud, mismanagement, corruption and negligence. Furthermore, the internal control, monitoring and governance frameworks seem inadequate to deal with these problems – of over 500 SOEs, regular information is only available for 55. Even obtaining a complete list of entities proved to be a challenge. Public access to information is limited – the PED has not released an annual report since 2018, and right-to-information requests often go unanswered.

Moreover, SOEs have few budget constraints and shareholder (public) accountability, and therefore have limited incentive to control costs. Unlike with private sector enterprises, which have a need to make a profit, many SOEs (particularly in Sri Lanka) can simply borrow from other state organizations/banks or the government when they require additional funds, which undermines the threat of bankruptcy as a source of discipline5. Some recently established SOEs have found a new way of bypassing budgets and oversight: by incorporating as companies rather than through an act of Parliament, they are excluded from Parliamentary accountability and allowed to rack up unsustainable debts and surpass budgets more easily. This has led to SOEs burning through taxpayer rupees: the cumulative losses of the 55 strategic SOEs from 2006-20 amounts to Rs. 1.2 trillion.

Finally, while some SOEs do manage to make a profit this is, more often than not, due to the advantage that these companies have in an uneven playing field. In addition to lax budgetary requirements and ability to rack up unsustainable debts, these companies are supported by the government through direct subsidies and state-backed guarantees; by regulators through exemptions from antitrust policies and preferential treatment; and by the justice system through an ability to sidestep parliament. This has led to private sector organizations being crowded out of the industries that SOEs operate in. Instead of having private firms in the market-place with efficient and high-quality services, the Sri Lankan taxpayer is beset with SOEs with total liabilities of 4-5% of GDP6.

Potential Reforms

Given that the nation has reached an economic tipping point, with serious questions about debt sustainability and government solvency, it is clear that immediate action must be taken. Advocata proposes a short term policy solution consisting of privatization, restructuring and disinvestment, and listing on the Colombo Stock Exchange. None of these solutions are particularly radical in the global or local context. According to Anarkali Moonesinghe, CEO of CIMB Sri Lanka, the two main policies of both Western and Eastern governments when reforming SOEs are to reduce subsidies and increase efficiency, forcing SOEs to compete more equitably with private enterprises. Alternatively, full or partial privatization is a possible solution: SLTMobitel’s service has markedly improved following its 1997 privatization and the entrance of competitors such as Dialog Axiata, all held accountable by the broadly competent Telecommunications Regulatory Commission. Listing on the CSE would allow these firms to have broad-based direct ownership, while also improving the growth of the CSE and capital markets. Importantly, these firms would have to be ‘corporatized’ before listing, an opportunity to improve productivity and eliminate bloat. There are, unfortunately, firms that will essentially have to be given away due to their huge debts and poor reputations. A prime example of this is SriLankan Airlines, which has racked up Rs. 316 billion in losses7 since control was taken from Emirates in 2008. While some will regard this as a blow to our national pride, Sri Lanka would not be alone in taking such a pragmatic step to improve government finances and customer experience; Air India, the Indian national carrier, is currently in the process of being sold to the Tata Group for the relatively small sum of INR 18,000 crore. This would also inspire confidence in Sri Lanka amongst foriegn investors as it would show the country’s commitment to meeting its upcoming debt servicing obligations.

Furthermore, long term solutions include strengthening governance/limiting corruption & influence, improving efficiency, enacting cost-reflective pricing, and finally unbundling key sectors. This applies particularly to firms like the Ceylon Electricity Board which, as a natural monopoly, cannot be broken up and privatized without losing efficiency. A 2006 study by the Japan International Cooperation Agency recommended breaking up CEB into three parts: “making the generation, transmission, and distribution divisions…independent”8. Despite the 15 years and multiple nationwide blackouts that have occurred since, GoSL continues to drag their feet on the issue, as it is politically unpopular. Cost-reflective pricing (also prevented due to political unpopularity) is another essential reform. The existing system of having electricity tariffs priced below cost is a public subsidy whose cost will be borne by future generations. It is also inequitable, as the government could provide low cost services to those who need it by giving them direct cash transfers, instead of subsidizing the wealthy who can afford to pay. A similar situation is evident with the Ceylon Petroleum Corporation, which currently makes a loss of Rs 23-38 per litre of fuel9; again, a public subsidy to those who can often afford to pay the market price. Finally, greater accountability, by means of annual internal audits and the availability of SOEs’ financial information to the public, is also important to ensure these firms stick to the targets they are given.

A successful and thriving market, in most industries, will only occur with the presence of three crucial factors: competition, a good framework, and competent regulation. By reforming Sri Lanka’s SOEs to meet these criteria, we will ensure a good customer experience, a reduction in the government deficit, and general prosperity for all key stakeholders.

Migara Rodrigo is a Researcher at the Advocata Institute. He can be contacted at migara.advocata@gmail.com. The Advocata Institute is an Independent Public Policy Think Tank. Learn more about Advocata’s work at www.advocata.org. The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute.



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Partnering India without dependence

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President Dissanayake with Indian PM Modi

Indian Prime Minister Narendra Modi once again signaled the priority India places on Sri Lanka by swiftly dispatching a shipload of petrol following a telephone conversation with President Anura Kumara Dissanayake. The Indian Prime Minister’s gesture came at a cost to India, where there have been periodic supply constraints and regional imbalances in fuel distribution, even if not a countrywide shortage. Under Prime Minister Modi, India has demonstrated to Sri Lanka an abundance of goodwill, whether it be the USD 4 billion it extended in assistance to Sri Lanka when it faced international bankruptcy in 2022 or its support in the aftermath of the Ditwah cyclone disaster that affected large parts of the country four months ago. India’s assistance in 2022 was widely acknowledged as critical in stabilising Sri Lanka at a moment of acute crisis.

This record of assistance suggests that India sees Sri Lanka not merely as a neighbour but as a partner whose stability is in its own interest. In contrast to Sri Lanka’s roughly USD 90 billion economy, India’s USD 4,500 billion economy, growing at over 6 percent, underlines the vast asymmetry in economic scale and the importance of Sri Lanka engaging India. A study by the Germany-based Kiel Institute for the World Economy identifies Sri Lanka as the second most vulnerable country in the world to severe food price surges due to its heavy reliance on imported energy and fertilisers. Income per capita remains around the 2018 level after the economic collapse of 2022. The poverty level has risen sharply and includes a quarter of the population. These indicators underline the urgency of sustained economic recovery and the importance of external partnerships, including with India.

It is, however, important for Sri Lanka not to abdicate its own responsibilities for improving the lives of its people or become dependent and take this Indian assistance for granted. A long unresolved issue that Sri Lanka has been content to leave the burden to India concerns the approximately 90,000 Sri Lankan refugees who continue to live in India, many of them for over three decades. Only recently has a government leader, Minister Bimal Rathnayake, publicly acknowledged their existence and called on them to return. This is a reminder that even as Sri Lanka receives support, it must also take ownership of its own unfinished responsibilities.

Missing Investment

A missing factor in Sri Lanka’s economic development has long been the paucity of foreign investment. In the past this was due to political instability caused by internal conflict, weaknesses in the rule of law, and high levels of corruption. There are now significant improvements in this regard. There is now a window to attract investment from development partners, including India. In his discussions with President Dissanayake, Prime Minister Modi is reported to have referred to the British era oil storage tanks in Trincomalee. These were originally constructed to service the British naval fleet in the Indian Ocean. In 1987, under the Indo Lanka Peace Accord, Sri Lanka agreed to develop these tanks in partnership with India. A further agreement was signed in 2022 involving the Ceylon Petroleum Corporation and the Lanka Indian Oil Corporation to jointly develop the facility.

However, progress has been slow and the project remains only partially implemented. The value of these oil storage tanks has become clearer in the context of global energy uncertainty and tensions in the Middle East. Energy analysts have pointed out that strategic storage facilities can provide countries with greater resilience in times of supply disruption. The Trincomalee tanks could become a significant strategic asset not only for Sri Lanka but also for regional energy security. However, historical baggage continues to stand in the way of Sri Lanka’s deeper economic linkage with India. Both ancient and modern history shape perceptions on both sides.

The asymmetry in size and power between the two countries is a persistent concern within Sri Lanka. India is a regional power, while Sri Lanka is a small country. This imbalance creates both opportunities for partnership and anxieties about overdependence. The present government too has entered into economic and infrastructure agreements with India, but many of these have yet to move beyond initial stages. This has caused frustration to the Indian government, which sees its efforts to support Sri Lanka’s development as not being sufficiently appreciated or effectively utilised. From India’s perspective, delays and hesitation can appear as a lack of commitment. From Sri Lanka’s perspective, caution is often driven by domestic political sensitivities and concerns about sovereignty.

Power Imbalance

At the same time, global developments offer a cautionary lesson. The behaviour of major powers in the contemporary international system shows that states often act in their own interests, sometimes at the expense of smaller partners. What is being seen in the world today is that past friendships and commitments can be abandoned if a bigger and more powerful country can see an opportunity for itself. The plight of Denmark (Greenland) and Canada (51st state) give disturbing messages. Analysts in the field of International Relations frequently point out that power asymmetries shape outcomes in bilateral relations. As one widely cited observation by Lord Parlmeston, a 19th century prime minister of Great Britain is that “nations have no permanent friends or allies, they only have permanent interests.” While this may be an overly stark formulation, it captures an underlying reality that small states must navigate carefully.

For Sri Lanka, this means maintaining a balance. It needs to clearly acknowledge the partnership that India is offering in the area of economic development, as well as in education, connectivity, and technological advancement. India has extended scholarships, supported digital infrastructure, and promoted cross border links that can contribute to Sri Lanka’s long term growth. These are tangible benefits that should not be undervalued. At the same time, Sri Lanka needs to ensure that it does not become overly dependent on Indian largesse or drift into a position where it functions as an appendage of its much larger neighbour. Economic dependence can translate into political vulnerability if not carefully managed. The appropriate response is not to distance itself from India, but to broaden its partnerships. Engaging with a diverse range of countries and institutions can provide Sri Lanka with greater autonomy and resilience.

A hard headed assessment would recognise that India’s support is both genuine and interest driven. India has a clear stake in ensuring that Sri Lanka remains stable, prosperous, and aligned with its broader regional outlook. Sri Lanka needs to move forward with agreed projects such as the Trincomalee oil tanks, improve implementation capacity, and demonstrate reliability as a partner. This does not preclude it from actively seeking investment and cooperation from other partners in Asia and beyond. The path ahead is therefore one of balanced engagement. Sri Lanka can and should welcome India’s partnership while strengthening its own institutions, fulfilling its domestic responsibilities, and diversifying its external relations. This approach can transform a relationship shaped by asymmetry into one defined by mutual benefit and confidence.

by Jehan Perera

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The university student

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A file photo of a university students’ protest against private medical colleges

This Article is formed from listening to university students from across the country for two research initiatives, one on academic freedom and another on higher education policy. In speaking with students, the fears they carry could not be ignored. Students navigate university education, with anxieties about their future and fears that they and their university education are inadequate, all while managing their families’ daily struggles. I explore students’ anxieties and the extent to which we, the public, and higher education policies must take responsibility for their experiences.

The Neoliberal University

For decades, universities have been transforming. Neoliberal policies, promoted by the World Bank, have reduced public education expenditure and weakened the State’s commitment to public institutions. These policies frame individuals as responsible for their success and failure, minimising structural realities, such as poverty and precarity. They instrumentalise education, treat students as “products” for a “competitive’ job market, while education markets feed on students’ insecurities. Students are made to feel lacking in “soft skills”, or skills seemingly necessary to navigate classed-corporate structures, and lacking in technical skills, or those needed to operate technologies used within the private sector.

Student activists and, sometimes teachers, have challenged this worldview, demanding State commitment to free education. Governments sometimes yield but also fear the consequences of student politics and have long waged campaigns to discredit student activism. It is within this context that students pursue education.

Portrayal of students

A Peradeniya student told me student-organised events must meet “high standards”, because of the negative public perceptions of university students. I understood what she meant; I had heard of our ‘ungrateful’, ‘wasteful’, ‘unemployable’, and ‘entitled’ students. The media and decades of government propaganda have reinforced these depictions.

About 10 years ago, when government moves to privatise higher education were strong, a corporate executive, complaining about traffic caused by “yet another useless protest”, was unable to explain why they protested. News coverage, I realised, framed these protests as public inconveniences, rarely addressing students’ demands. A prominent advocate, of neoliberal educational policy, reinforced this narrative, saying “state university students make up just 10 percent of their cohorts”, gesturing dismissively as if to say their concerns were insignificant. Such language belittles student activists and youth, renders them voiceless and allows their concerns, such as classed worldviews, and access barriers to and privatisation of education, to be easily dismissed.

It is in this environment that the conception of the useless university student, fighting for no reason, has developed. Students must carry this misrepresentation, irrespective of their own involvement in activism.

Not being good enough

Attacks on free higher education and the absence of meaningful reforms designed to address students’ problems, now weigh on students’ minds. Students question whether their education is relevant and current, pointing to outdated equipment, software, and curricula. University administrators acknowledge these constraints, which reflect Sri Lanka’s ranking as one of the lowest in the world for the public funding of education and higher education.

Rarely has the World Bank, so influential in driving educational policy, highlighted the public funding crisis and, instead, emphasises technological deficiencies, the public sector’s “monopoly” of higher education and limited private sector involvement. It downplays the reality that few families can privately afford such funding arrangements.

Students are also bombarded with fee-levying programmes, promising skills and access to jobs, preying on students’ insecurities. Many, while struggling to make ends meet, enrol in off-campus pricy professional courses, such as in accountancy, marketing, or English.

The arts student

Some students worry their education is too theoretical and “Arts-focused.” A student from the University of Colombo described having to justify her decision to pursue an arts degree. The public, she said, saw this as a waste of her time and the country’s resources. She courageously wore this identity, yet questioned if she was, in fact, unemployable as she was being led to believe.

She does not, however, draw on the fact that arts education has long been the “cheap” option that governments have offered when pressured to expand higher education. While arts education may need fewer laboratories and equipment, they require adequate investments on teachers, strong on content and pedagogy, to closely engage with individual students; aspects of arts education which have systematically been disregarded.

As access broadens, particularly in the arts, more students from marginalised backgrounds have entered universities; students who may feel alien in systems aligned with corporate interests. Thus, students quite different from the classed conception of the “employable graduate,” whose education has systematically been under-funded, graduate from arts programmes frustrated, diffident, and ill-suited for jobs to which they are expected to aspire.

The dysfunctional university

Students voice criticisms of their teachers, as myopic, unworldly, and unfair. Their perspective reflects the universities’ culture of hierarchy and its intolerance of difference, on the one hand, and the weak institutional structures on the other. They are symptoms of years of neglect and attempts by governments to delegitimise universities, to shed themselves of the burden of funding higher education through anti-public sector rhetoric.

Some students, marginalised for being anti-rag, women, or ethnic minorities, feel an added layer of burdens. Anti-rag students, or more often, students who do not submit to university hierarchies, whether enforced by students or staff, are ostracised, demeaned and sometimes subjected to violence. Students unable to speak the institution’s dominant language face inadequate institutional support. Women describe being ignored and silenced in student union activities and left out of student leadership positions.

Furthermore, quality assurance processes rarely prioritise academic freedom or students’ right to exist as they wish, except when they complement the process of creating a desirable graduate for the job market. These processes focus on moulding professionals and technicians, as one would form clay, disregarding students’ anxieties from being alienated from themselves by such efforts.

Problems at home

Beyond the campus, parents face debt, illness, and precarious work. Students are acutely aware of these struggles. Some describe parents collapsing from the strain and sometimes leaving them to carry the family’s difficulties. A student described feeling guilty for being at the University while his family struggled to survive. To ease the burden on their families, students earn incomes by providing tuition, delivering food, and carrying out microbusinesses.

Tied to their concerns over having to depend on their families, is their fear of being “unemployable”, a term that places the blame of unemployment on students’ skill deficiencies. Little in this discourse connects the lack of decent work and jobs for them and their parents to the weak economy and job markets into which successive batches of graduates must transition. Much of the available jobs in the country are those that require little in the form of education, and those, too do little to provide a living wage. Students must, therefore, compete for a limited number and breadth of frankly not very desirable work. Yet, it is they who must feel the weight of unemployability.

Committing to students

Universities frequently fail to recognise students’ worries. Instead, we, coopt neoliberal discourses, telling students to become more marketable and competitive, do and learn more, be confident, improve English, learn to inhabit those classed spaces with ease; often without the support that should accompany these messages.

We expect these students, insecure and anxious, to think critically, and demonstrate curiosity and higher-order analyses. When they collapse under the pressure, universities respond by providing mental health services. While such services are needed, they risk individualising and pathologising systemic problems. They represent yet again the inherent flaws with solutions that emerge from neoliberal ideological positions that treat individuals as the source of all success and failure. Such perspectives are likely to reinforce students’ anxieties, rather than address them.

As Sri Lanka revisits education policy reforms, there is an opportunity to change our framings of education and to recognise these concerns of students as central to any policy. The state must renew its commitment to free education and move from the neoliberal logic that has guided successive reform efforts; we, as the public, must restore our hope and expectations from free education. Education across disciplines, the arts, as well as STEM (science, technology, engineering and mathematics), must be strengthened. Students’ freedom to inhabit university spaces as they wish, must be respected and protected by institutions. Education policies must be tied to broader economic and labour reforms that ensure families can safely earn a living wage and graduates can access a rich range of decent meaningful work.

(Shamala Kumar teaches at the University of Peradeniya)

Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies.

by Shamala Kumar

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On the right track … as a solo artiste

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Mihiri: Worked with several top local band

Mihiri Chethana Gunawardena is certainly on the right track, in the music scene.

The plus factor, where Mihiri is concerned, is that she has music deeply rooted in her upbringing, and is now doing her thing in the Maldives.

Her father, Clifton Gunawardena, was a student of the legendary Premasiri Kemadasa and former rhythm guitarist of the Super 7 band.

Mihiri took to music, after her higher studies, and her first performance was with her father, while employed.

Mihiri Chethana Gunawardena

After eight years of balancing both worlds – working and music – she chose to follow her true calling and embraced music as her full-time profession.

Over the years, Mihiri has worked with some of the top bands in the local scene, including D Major, C Plus from Negombo, Heat with Aubrey, Mirage, D Zone Warehouse Project and Freeze.

In fact, she even put together her own band, Faith, in 2017, performing at numerous events, and weddings, before the Covid pandemic paused their journey.

What’s more, her singing career has taken her across borders –performing twice in Dhaka, Bangladesh, with the late Anil Bharathi and the late Roney Leitch, and multiple times in the Maldives, including a special New Year’s Eve performance with D Major.

In the Maldives, on a one-month contract

Last year, Mihiri was in Dubai, along with the group Knights, for the Ananda UAE 2025 dance.

She continues to grow as a solo artiste, now working closely with the renowned Wildfire guitarist Derek Wikramanayake, and performing, as a freelance musician, travelling around the world.

Right now, she is in the Maldives, on a one-month contract, marking a new chapter in her evolution as a solo vocalist.

On her return, she says, she hopes to create fresh cover songs and original music for her fans.

Mihiri believes in spreading joy and positivity through her singing, and peace and happiness for everyone around her, and for the world, through music.

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