Features
Sri Lanka’s state-owned enterprises:
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.
Features
Rebuilding Sri Lanka Through Inclusive Governance
In the immediate aftermath of Cyclone Ditwah, the government has moved swiftly to establish a Presidential Task Force for Rebuilding Sri Lanka with a core committee to assess requirements, set priorities, allocate resources and raise and disburse funds. Public reaction, however, has focused on the committee’s problematic composition. All eleven committee members are men, and all non-government seats are held by business personalities with no known expertise in complex national development projects, disaster management and addressing the needs of vulnerable populations. They belong to the top echelon of Sri Lanka’s private sector which has been making extraordinary profits. The government has been urged by civil society groups to reconsider the role and purpose of this task force and reconstitute it to be more representative of the country and its multiple needs.
The group of high-powered businessmen initially appointed might greatly help mobilise funds from corporates and international donors, but this group may be ill equipped to determine priorities and oversee disbursement and spending. It would be necessary to separate fundraising, fund oversight and spending prioritisation, given the different capabilities and considerations required for each. International experience in post disaster recovery shows that inclusive and representative structures are more likely to produce outcomes that are equitable, efficient and publicly accepted. Civil society, for instance, brings knowledge rooted in communities, experience in working with vulnerable groups and a capacity to question assumptions that may otherwise go unchallenged.
A positive and important development is that the government has been responsive to these criticisms and has invited at least one civil society representative to join the Rebuilding Sri Lanka committee. This decision deserves to be taken seriously and responded to positively by civil society which needs to call for more representation rather than a single representative. Such a demand would reflect an understanding that rebuilding after a national disaster cannot be undertaken by the state and the business community alone. The inclusion of civil society will strengthen transparency and public confidence, particularly at a moment when trust in institutions remains fragile. While one appointment does not in itself ensure inclusive governance, it opens the door to a more participatory approach that needs to be expanded and institutionalised.
Costly Exclusions
Going down the road of history, the absence of inclusion in government policymaking has cost the country dearly. The exclusion of others, not of one’s own community or political party, started at the very dawn of Independence in 1948. The Father of the Nation, D S Senanayake, led his government to exclude the Malaiyaha Tamil community by depriving them of their citizenship rights. Eight years later, in 1956, the Oxford educated S W R D Bandaranaike effectively excluded the Tamil speaking people from the government by making Sinhala the sole official language. These early decisions normalised exclusion as a tool of governance rather than accommodation and paved the way for seven decades of political conflict and three decades of internal war.
Exclusion has also taken place virulently on a political party basis. Both of Sri Lanka’s post Independence constitutions were decided on by the government alone. The opposition political parties voted against the new constitutions of 1972 and 1977 because they had been excluded from participating in their design. The proposals they had made were not accepted. The basic law of the country was never forged by consensus. This legacy continues to shape adversarial politics and institutional fragility. The exclusion of other communities and political parties from decision making has led to frequent reversals of government policy. Whether in education or economic regulation or foreign policy, what one government has done the successor government has undone.
Sri Lanka’s poor performance in securing the foreign investment necessary for rapid economic growth can be attributed to this factor in the main. Policy instability is not simply an economic problem but a political one rooted in narrow ownership of power. In 2022, when the people went on to the streets to protest against the government and caused it to fall, they demanded system change in which their primary focus was corruption, which had reached very high levels both literally and figuratively. The focus on corruption, as being done by the government at present, has two beneficial impacts for the government. The first is that it ensures that a minimum of resources will be wasted so that the maximum may be used for the people’s welfare.
Second Benefit
The second benefit is that by focusing on the crime of corruption, the government can disable many leaders in the opposition. The more opposition leaders who are behind bars on charges of corruption, the less competition the government faces. Yet these gains do not substitute for the deeper requirement of inclusive governance. The present government seems to have identified corruption as the problem it will emphasise. However, reducing or eliminating corruption by itself is not going to lead to rapid economic development. Corruption is not the sole reason for the absence of economic growth. The most important factor in rapid economic growth is to have government policies that are not reversed every time a new government comes to power.
For Sri Lanka to make the transition to self-sustaining and rapid economic development, it is necessary that the economic policies followed today are not reversed tomorrow. The best way to ensure continuity of policy is to be inclusive in governance. Instead of excluding those in the opposition, the mainstream opposition in particular needs to be included. In terms of system change, the government has scored high with regard to corruption. There is a general feeling that corruption in the country is much reduced compared to the past. However, with regard to inclusion the government needs to demonstrate more commitment. This was evident in the initial choice of cabinet ministers, who were nearly all men from the majority ethnic community. Important committees it formed, including the Presidential Task Force for a Clean Sri Lanka and the Rebuilding Sri Lanka Task Force, also failed at first to reflect the diversity of the country.
In a multi ethnic and multi religious society like Sri Lanka, inclusivity is not merely symbolic. It is essential for addressing diverse perspectives and fostering mutual understanding. It is important to have members of the Tamil, Muslim and other minority communities, and women who are 52 percent of the population, appointed to important decision making bodies, especially those tasked with national recovery. Without such representation, the risk is that the very communities most affected by the crisis will remain unheard, and old grievances will be reproduced in new forms. The invitation extended to civil society to participate in the Rebuilding Sri Lanka Task Force is an important beginning. Whether it becomes a turning point will depend on whether the government chooses to make inclusion a principle of governance rather than treat it as a show of concession made under pressure.
by Jehan Perera
Features
Reservoir operation and flooding
Former Director General of Irrigation, G.T. Dharmasena, in an article, titled “Revival of Innovative systems for reservoir operation and flood forecasting” in The Island of 17 December, 2025, starts out by stating:
“Most reservoirs in Sri Lanka are agriculture and hydropower dominated. Reservoir operators are often unwilling to acknowledge the flood detention capability of major reservoirs during the onset of monsoons. Deviating from the traditional priority for food production and hydropower development, it is time to reorient the operational approach of major reservoirs operators under extreme events, where flood control becomes a vital function. While admitting that total elimination of flood impacts is not technically feasible, the impacts can be reduced by efficient operation of reservoirs and effective early warning systems”.
Addressing the question often raised by the public as to “Why is flooding more prominent downstream of reservoirs compared to the period before they were built,” Mr. Dharmasena cites the following instances: “For instance, why do (sic) Magama in Tissamaharama face floods threats after the construction of the massive Kirindi Oya reservoir? Similarly, why does Ambalantota flood after the construction of Udawalawe Reservoir? Furthermore, why is Molkawa, in the Kalutara District area, getting flooded so often after the construction of Kukule reservoir”?
“These situations exist in several other river basins, too. Engineers must, therefore, be mindful of the need to strictly control the operation of the reservoir gates by their field staff. (Since) “The actual field situation can sometimes deviate significantly from the theoretical technology… it is necessary to examine whether gate operators are strictly adhering to the operational guidelines, as gate operation currently relies too much on the discretion of the operator at the site”.
COMMENT
For Mr. Dharmasena to bring to the attention of the public that “gate operation currently relies too much on the discretion of the operator at the site”, is being disingenuous, after accepting flooding as a way of life for ALL major reservoirs for decades and not doing much about it. As far as the public is concerned, their expectation is that the Institution responsible for Reservoir Management should, not only develop the necessary guidelines to address flooding but also ensure that they are strictly administered by those responsible, without leaving it to the arbitrary discretion of field staff. This exercise should be reviewed annually after each monsoon, if lives are to be saved and livelihoods are to be sustained.
IMPACT of GATE OPERATION on FLOODING
According to Mr. Dhamasena, “Major reservoir spillways are designed for very high return periods… If the spillway gates are opened fully when reservoir is at full capacity, this can produce an artificial flood of a very large magnitude… Therefore, reservoir operators must be mindful in this regard to avoid any artificial flood creation” (Ibid). Continuing, he states: “In reality reservoir spillways are often designed for the sole safety of the reservoir structure, often compromising the safety of the downstream population. This design concept was promoted by foreign agencies in recent times to safeguard their investment for dams. Consequently, the discharge capacities of these spill gates significantly exceed the natural carrying capacity of river(s) downstream” (Ibid).
COMMENT
The design concept where priority is given to the “sole safety of the structure” that causes the discharge capacity of spill gates to “significantly exceed” the carrying capacity of the river is not limited to foreign agencies. Such concepts are also adopted by local designers as well, judging from the fact that flooding is accepted as an inevitable feature of reservoirs. Since design concepts in their current form lack concern for serious destructive consequences downstream and, therefore, unacceptable, it is imperative that the Government mandates that current design criteria are revisited as a critical part of the restoration programme.
CONNECTIVITY BETWEEN GATE OPENINGS and SAFETY MEASURES
It is only after the devastation of historic proportions left behind by Cyclone Ditwah that the Public is aware that major reservoirs are designed with spill gate openings to protect the safety of the structure without factoring in the consequences downstream, such as the safety of the population is an unacceptable proposition. The Institution or Institutions associated with the design have a responsibility not only to inform but also work together with Institutions such as Disaster Management and any others responsible for the consequences downstream, so that they could prepare for what is to follow.
Without working in isolation and without limiting it only to, informing related Institutions, the need is for Institutions that design reservoirs to work as a team with Forecasting and Disaster Management and develop operational frameworks that should be institutionalised and approved by the Cabinet of Ministers. The need is to recognize that without connectivity between spill gate openings and safety measures downstream, catastrophes downstream are bound to recur.
Therefore, the mandate for dam designers and those responsible for disaster management and forecasting should be for them to jointly establish guidelines relating to what safety measures are to be adopted for varying degrees of spill gate openings. For instance, the carrying capacity of the river should relate with a specific openinig of the spill gate. Another specific opening is required when the population should be compelled to move to high ground. The process should continue until the spill gate opening is such that it warrants the population to be evacuated. This relationship could also be established by relating the spill gate openings to the width of the river downstream.
The measures recommended above should be backed up by the judicious use of the land within the flood plain of reservoirs for “DRY DAMS” with sufficient capacity to intercept part of the spill gate discharge from which excess water could be released within the carrying capacity of the river. By relating the capacity of the DRY DAM to the spill gate opening, a degree of safety could be established. However, since the practice of demarcating flood plains is not taken seriously by the Institution concerned, the Government should introduce a Bill that such demarcations are made mandatory as part of State Land in the design and operation of reservoirs. Adopting such a practice would not only contribute significantly to control flooding, but also save lives by not permitting settlement but permitting agricultural activities only within these zones. Furthermore, the creation of an intermediate zone to contain excess flood waters would not tax the safety measures to the extent it would in the absence of such a safety net.
CONCLUSION
Perhaps, the towns of Kotmale and Gampola suffered severe flooding and loss of life because the opening of spill gates to release the unprecedented volumes of water from Cyclone Ditwah, was warranted by the need to ensure the safety of Kotmale and Upper Kotmale Dams.
This and other similar disasters bring into focus the connectivity that exists between forecasting, operation of spill gates, flooding and disaster management. Therefore, it is imperative that the government introduce the much-needed legislative and executive measures to ensure that the agencies associated with these disciplines develop a common operational framework to mitigate flooding and its destructive consequences. A critical feature of such a framework should be the demarcation of the flood plain, and decree that land within the flood plain is a zone set aside for DRY DAMS, planted with trees and free of human settlements, other than for agricultural purposes. In addition, the mandate of such a framework should establish for each river basin the relationship between the degree to which spill gates are opened with levels of flooding and appropriate safety measures.
The government should insist that associated Agencies identify and conduct a pilot project to ascertain the efficacy of the recommendations cited above and if need be, modify it accordingly, so that downstream physical features that are unique to each river basin are taken into account and made an integral feature of reservoir design. Even if such restrictions downstream limit the capacities to store spill gate discharges, it has to be appreciated that providing such facilities within the flood plain to any degree would mitigate the destructive consequences of the flooding.
By Neville Ladduwahetty
Features
Listening to the Language of Shells
The ocean rarely raises its voice. Instead, it leaves behind signs — subtle, intricate and enduring — for those willing to observe closely. Along Sri Lanka’s shores, these signs often appear in the form of seashells: spiralled, ridged, polished by waves, carrying within them the quiet history of marine life. For Marine Naturalist Dr. Malik Fernando, these shells are not souvenirs of the sea but storytellers, bearing witness to ecological change, resilience and loss.
“Seashells are among the most eloquent narrators of the ocean’s condition,” Dr. Fernando told The Island. “They are biological archives. If you know how to read them, they reveal the story of our seas, past and present.”
A long-standing marine conservationist and a member of the Marine Subcommittee of the Wildlife & Nature Protection Society (WNPS), Dr. Fernando has dedicated much of his life to understanding and protecting Sri Lanka’s marine ecosystems. While charismatic megafauna often dominate conservation discourse, he has consistently drawn attention to less celebrated but equally vital marine organisms — particularly molluscs, whose shells are integral to coastal and reef ecosystems.
“Shells are often admired for their beauty, but rarely for their function,” he said. “They are homes, shields and structural components of marine habitats. When shell-bearing organisms decline, it destabilises entire food webs.”
Sri Lanka’s geographical identity as an island nation, Dr. Fernando says, is paradoxically underrepresented in national conservation priorities. “We speak passionately about forests and wildlife on land, but our relationship with the ocean remains largely extractive,” he noted. “We fish, mine sand, build along the coast and pollute, yet fail to pause and ask how much the sea can endure.”
Through his work with the WNPS Marine Subcommittee, Dr. Fernando has been at the forefront of advocating for science-led marine policy and integrated coastal management. He stressed that fragmented governance and weak enforcement continue to undermine marine protection efforts. “The ocean does not recognise administrative boundaries,” he said. “But unfortunately, our policies often do.”
He believes that one of the greatest challenges facing marine conservation in Sri Lanka is invisibility. “What happens underwater is out of sight, and therefore out of mind,” he said. “Coral bleaching, mollusc depletion, habitat destruction — these crises unfold silently. By the time the impacts reach the shore, it is often too late.”
Seashells, in this context, become messengers. Changes in shell thickness, size and abundance, Dr. Fernando explained, can signal shifts in ocean chemistry, rising temperatures and increasing acidity — all linked to climate change. “Ocean acidification weakens shells,” he said. “It is a chemical reality with biological consequences. When shells grow thinner, organisms become more vulnerable, and ecosystems less stable.”
Climate change, he warned, is no longer a distant threat but an active force reshaping Sri Lanka’s marine environment. “We are already witnessing altered breeding cycles, migration patterns and species distribution,” he said. “Marine life is responding rapidly. The question is whether humans will respond wisely.”
Despite the gravity of these challenges, Dr. Fernando remains an advocate of hope rooted in knowledge. He believes public awareness and education are essential to reversing marine degradation. “You cannot expect people to protect what they do not understand,” he said. “Marine literacy must begin early — in schools, communities and through public storytelling.”
It is this belief that has driven his involvement in initiatives that use visual narratives to communicate marine science to broader audiences. According to Dr. Fernando, imagery, art and heritage-based storytelling can evoke emotional connections that data alone cannot. “A well-composed image of a shell can inspire curiosity,” he said. “Curiosity leads to respect, and respect to protection.”
Shells, he added, also hold cultural and historical significance in Sri Lanka, having been used for ornamentation, ritual objects and trade for centuries. “They connect nature and culture,” he said. “By celebrating shells, we are also honouring coastal communities whose lives have long been intertwined with the sea.”
However, Dr. Fernando cautioned against romanticising the ocean without acknowledging responsibility. “Celebration must go hand in hand with conservation,” he said. “Otherwise, we risk turning heritage into exploitation.”
He was particularly critical of unregulated shell collection and commercialisation. “What seems harmless — picking up shells — can have cumulative impacts,” he said. “When multiplied across thousands of visitors, it becomes extraction.”
As Sri Lanka continues to promote coastal tourism, Dr. Fernando emphasised the need for sustainability frameworks that prioritise ecosystem health. “Tourism must not come at the cost of the very environments it depends on,” he said. “Marine conservation is not anti-development; it is pro-future.”

Dr. Malik Fernando
Reflecting on his decades-long engagement with the sea, Dr. Fernando described marine conservation as both a scientific pursuit and a moral obligation. “The ocean has given us food, livelihoods, climate regulation and beauty,” he said. “Protecting it is not an act of charity; it is an act of responsibility.”
He called for stronger collaboration between scientists, policymakers, civil society and the private sector. “No single entity can safeguard the ocean alone,” he said. “Conservation requires collective stewardship.”
Yet, amid concern, Dr. Fernando expressed cautious optimism. “Sri Lanka still has immense marine wealth,” he said. “Our reefs, seagrass beds and coastal waters are resilient, if given a chance.”
Standing at the edge of the sea, shells scattered along the sand, one is reminded that the ocean does not shout its warnings. It leaves behind clues — delicate, enduring, easily overlooked. For Dr. Malik Fernando, those clues demand attention.
“The sea is constantly communicating,” he said. “In shells, in currents, in changing patterns of life. The real question is whether we, as a society, are finally prepared to listen — and to act before silence replaces the story.”
By Ifham Nizam
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