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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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Politics of Enforced Disappearances in Sri Lanka

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Image courtesy UNHRC

In 2016, I participated in research focused on gathering information about reconciliation mechanisms in post-war Sri Lanka. During one of the interviews, a Tamil mother, from the Eastern part of the country, broke into tears as she shared her story. Her son had disappeared, and, according to some of the neighbours, he was apparently abducted by a paramilitary group. Her story goes as follows: After hearing the news, she began searching for her son and went to the police station to file a case. However, police refused to file the case and directed her to a military camp. In the military camp, she was directed to an officer, who took her to a room with scattered flesh and blood stains. Then the officer, pointing to the room has told the lady that, ‘This is your son’.

In another instance, in the same year, while we were working in Kurunegala, an elderly mother, wearing a white saree, approached us and shared her story. She held a stained envelope, and when she carefully took out a piece of paper, related to her son, she broke into tears. She handled the paper with such tenderness, as though it were a part of her son himself. Her son was abducted by a para military group in 1989 and never returned.

These two stories have remained deeply etched in my mind for several years, leaving a lasting impact. Now, with the release of the Batalanda Commission Report, which sheds light on the atrocities committed during a dark chapter of Sri Lanka’s history, coupled with the release of the movie ‘Rani’, there is renewed attention on enforced disappearances. These disappearances, which were once shrouded in silence and denial, are now gaining significant traction among the public. Thus, it is timely to discuss the stories of enforced disappearances and the political dynamics surrounding them.

The Effect

Enforced disappearance is often employed as a strategy of terror, deliberately designed to instil fear and insecurity within a society. The tactic goes beyond the direct impact on the immediate family members of the disappeared individuals. The psychological and emotional toll on these families is profound, as they are left with uncertainty, grief, and often a sense of helplessness. However, the effects of enforced disappearance extend far beyond these immediate circles. It creates a pervasive atmosphere of fear that affects entire communities, undermining trust and cohesion. The mere threat of disappearance looms over the population, causing widespread anxiety and eroding the sense of safety that is essential for the social fabric to thrive. The fear it engenders forces people into silence, discourages activism, and ultimately weakens the collective spirit of resistance against injustice.

Absence of the body

For years, the families and loved ones of the disappeared hold on to a fragile hope, clinging to the belief that their loved ones may still be alive. The absence of a physical body leaves room for uncertainty and unresolved grief, creating a painful paradox where the possibility of closure remains out of reach. Without the tangible proof of death—such as a body to bury or mourn over—the search continues, driven by the hope that one day they will find answers. This absence extends beyond just the physical body; it symbolizes the void left in the lives of the families, as they are left in a perpetual state of waiting, unable to fully mourn or heal. The constant uncertainty fuels a never-ending cycle of searching, questioning, and longing.

Making a spectacle of unidentified bodies

In 1989, as a small child, I found myself surrounded by an atmosphere that was both suffocating and frightening, filled with sights and sounds that I couldn’t fully comprehend at the time, but that would forever leave a mark on my memory. I can still vividly recall the smell of burning rubber that hung thick in the air, mixing with the acrid scent of smoke that lingered long after the flames had died down. The piles of tyres, set ablaze, were a regular feature of the streets where I lived. Yet, it wasn’t just the sight of the burning tyres that etched itself into my consciousness. As the flames raged on, the shadows of bodies emerged—neither completely visible nor entirely hidden.

Though my parents tried their best to shield me from the horror outside our home, I would sneak a peek whenever I thought no one was watching, desperate to understand the meaning behind what was unfolding before me. It was as though I knew something important was happening—something I couldn’t yet comprehend but could feel in the very air I breathed. I understood that the flames, the smoke, and the bodies all signified something far greater than I could put into words.

The burning piles of tyres—and, of course, bodies—which people spoke of in hushed tones, served as a chilling spectacle, conveying the threatening message the government sent to the public, especially targeting the young rebels and anyone who dared to challenge the state

Unable to seek justice

The absence of the body makes justice seem like a distant, unreachable concept. In cases of disappearance, where no physical evidence of the victim’s fate exists, the path to justice is often blocked. Without the body, there is no concrete proof of the crime, no tangible evidence that can be presented in court, and no clear sign that a crime was even committed. This leaves families and loved ones of the disappeared in a state of uncertainty, with no clear answers about what happened to their dear ones. As a result, families are forced to live in a limbo, where their grief is ignored and their calls for justice are silenced.

Undemocratic actions under a Democratic Government

Governments are meant to serve and protect the people who elect them, not to subject them to violence, fear, or oppression. Irrespective of the situation, no government, under any circumstances, has the right to make its citizens disappear. A government is a democratically elected body that holds its power and authority through the consent of the governed, with the explicit responsibility to safeguard the rights, freedoms, and lives of its citizens. When a government starts to take actions that involve the arbitrary killing or disappearance of its own people, it betrays the very principles it was founded upon.

The act of making people disappear and killing represents a fundamental breach of human rights and the rule of law. These are not actions that belong to a legitimate government that is accountable to its people. Instead, they signal a state that has become corrupt and tyrannical, where those in power are no longer bound by any ethical or legal standards. When the government becomes the perpetrator of violence against its own citizens, it destroys the trust between the state and the people, undermining the core foundation of democracy.

In such a scenario, the authority of law collapses. Courts become powerless, and law enforcement agencies are either complicit in the wrongdoing or rendered ineffective. This breakdown in legal authority does not just mean a failure to protect the rights of individuals; it signals the descent of society into anarchy. When the government wields power in such a violent and oppressive way, it erodes the social contract. When this relationship is violated through actions like disappearances, those in power essentially declare that they are above the law, which leads to a breakdown of social order. It no longer becomes a state that works for its people but rather a regime that rules through fear, repression, and violence.

by Dr. Anushka Kahandagamage

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Hazard warning lights at Lotus Tower

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Lotus Tower enveloped in mist

Much has been written about the use of Hazard Warning Lights at Lotus Tower (LT)

Now it looks as if the authorities have got the day and night in a ‘twist’.

During the day time LT is in darkness. What should be ‘on’ during the day are the High Intensity Strobe Lights. It is observed that the authorities switch them ‘on’ in the night instead!

According to the ICAO recommendations what should be ‘on’ in the night are the low intensity strobe lights. High intensity in the night as is now, can momentarily blind the pilots.

At this time of the year the island experiences afternoon thunder showers which make the LT and the natural horizon invisible. (See picture) in a phenomenon known as ‘white out’ caused by fog (low cloud), mist and rain. However, the LT is kept dark and not lit up and that could be dangerous to air traffic.

In short what is needed are white strobe lights 24/7 (day and night). High Intensity by day and Low Intensity at night. They are known as ‘attention getters’.

The red lights must be ‘on’ at sunset and ‘off’ by sunrise (as correctly carried out currently).

I am aware that the Organisation of Professional Associations (OPA) has written to the LT authorities at the request of the Association of Airline Pilots, Sri Lanka, about three months ago but strangely the OPA has not even received an acknowledgement!

GUWAN SEEYA

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Ninth Iftar celebration organised by Police Buddhist and Religious Affairs Association, Wellawatte

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Islam is a peaceful religion that guides people to fulfil the five pillars of Islam, namely, Kalima, Prayer, Sakkath, Fasting and Hajj and through them to attain the grace of God.

The fact that the Holy Quran, the sacred book of Muslims, was revealed on one of the odd nights of the month of Ramadan, makes people realize the special importance of the month of Ramadan.

Fasting, the Holy Quran states, “0 you who believe, fasting is prescribed for you as it was prescribed for those before you, that you may become pure.” (2.183)

Muslims observe the first fast in the early hours of the evening when the first crescent of the month of Ramadan is sighted. The special feature of Ramadan fasting is to wake up early in the morning, eat before the sunrise (Sahur) and then fast for 14 hours until the evening prayer (Mahrib), remember the Creator and worship Him five times a day, break the fast at the time of Iftar (Mahrib), eat food with dates and spend the 30 days of Ramadan.

Ramadan fasting increases fear and faith in Allah, and it is not equal for the wealthy to live luxuriously without realizing the poverty of the poor and the poor to die of poverty. Therefore, fasting has been emphasized as the fourth Pillar in Islam to make the rich aware of the nature of poverty and to make the rich aware of the nature of hunger and to give charity.

Ramadan fasting is a shield for Muslims. The main objectives of fasting are the virtues, characteristics, morality and spiritual attraction of a person.

When approaching fasting from a medical perspective, it is said that ‘a disease-free life is an inexhaustible wealth’, so the good deed of fasting provides great benefits to the body.

Generally, it is a universal law to give rest to all the machines that have power. That is, it allows the machines to continue to function well. Similarly, it is necessary to give rest to our bodies. The fasting of the month of Ramadan explains this very simply.

“Historically, fasting has been proven to be very safe for most people,” says Babar Basir, a cardiologist at Henry Ford Health in Detroit, USA. “Ramadan fasting is a form of intermittent fasting that can help you lose fat without losing muscle, improve insulin levels, burn fat, and increase human growth hormone,” he says.

All wealthy. Muslims are required to give 2’/2 percent of their annual income to the poor in charity. This is why Muslims give more charity in the form of money, food, and clothing during Ramadan.

Anas (Kali) reported that the Prophet (Sal) said, “The best charity is to feed a hungry person.” This shows how great an act it is to feed a hungry person.

Fasting during the holy month of Ramadan, one of the most sacred duties of Muslims, is Providing facilities for fasting and breaking it is also a pious act that brings benefits. In that way, the Sri Lanka Police, as a way of receiving the blessings of Allah, have organized the Police Iftar ceremony to break the fast for the fasting people.

The Police Iftar ceremony, which is organized annually by the Sri Lanka Police Buddhist and Religious Affairs Association for Muslim police officers serving in the Sri Lanka Police, will be held for the 9th time this year on the 24th at the invitation of the Acting Inspector General of Police Mr. Priyantha Weerasooriya and will be held at the Marine Grand Reception Hall in Wellawatte under the participation of the Hon. Minister of Public Security and Parliamentary Affairs Mr. K.M. Ananda Wijepala. Muslim members of Parliament, Foreign Ambassadors of Islamic countries, High-ranking Police officers and Muslim Police officers, as well as members of the public, are also expected to attend the Iftar ceremony.

a.f. fUARD
Chief Inspector of Police
International Affairs
Criminal Investigation Department

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