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.
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 email@example.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.
Solidarity and Aragalaya: A few thoughts from an educationist’s perspective
by Harshana Rambukwella
Very little in Sri Lanka at the moment inspires hope. We are facing an existential crisis that was inconceivable just six months ago. Sri Lanka is also, ironically, just a year away from marking the 75th year of its independence. As we reflect on these seven decades of postcolonial nation building, and as we confront a future of extreme precarity, our scorecard as a country is not a proud one. Much blood has been spilt in the name of postcolonial nation building and the ethno-nationalist conflict that shaped almost three decades of that history and two youth rebellions against the state speak to a history of division and enmity. While our current predicament cannot be entirely attributed to this conflictual history alone, it surely played more than a small role in shaping our present misery. It is within this context that I want to offer this brief set of reflections on what I feel is an unprecedented form of solidarity that has emerged in Sri Lanka as the aragalaya took shape. While I do not want to romanticize this solidarity because it is a highly contingent phenomenon and is shaped by the extreme nature of the current political and economic conditions, it offers us as a society, but more specifically as educators, something to reflect on as we try to imagine our role in a society that faces a painful process of rebuilding and recovery (though my hope is that such rebuilding and recovery does not mean the repetition of the tired old neo-liberal script we have followed for decades).
Before I explore what I mean by solidarity within the aragalaya, let me briefly reflect on solidarity as a concept. Solidarity is a term sometimes deployed in geopolitics. Particularly in this time of global turmoil where not just Sri Lanka, but many other countries are experiencing serious economic challenges, we see nations expressing solidarity with or towards other nations. However, such solidarity is almost always shaped by instrumental motives. This is what we might call a form of ‘vertical’ solidarity where more powerful and wealthy nations extend a ‘helping hand’ to their more unfortunate counterparts. Therefore, when India says ‘neighbourhood first’ and expresses solidarity with Sri Lanka in this time of trouble one can easily discern this as a hierarchical gesture shaped by instrumental motives. It is in reality, India’s strategic geopolitical interests that largely dominate this narrative of solidarity though one cannot disregard the critical importance of the assistance extended by India and other such ‘powerful’ nations in this time of national distress.
Another form in which solidarity manifests is through what some scholars have termed ‘enchanted’ solidarities. This is literally and metaphorically a distant form of solidarity where intellectuals, activists and others extend solidarity towards a struggle they perceive as deserving their support but without truly understanding the context in which they are intervening. This has often happened with ‘first world’ academics and intellectuals expressing solidarity towards ‘third world’ struggles which they felt were ideologically aligned with their beliefs. One example is how many liberal and leftist intellectuals supported the rise of the Khmer Rouge in Cambodia, believing it to be an anti-imperial liberation movement, only to become disillusioned with the movement as they began to see the full horror of the repression and violence unleashed by the Khmer regime. I think if we reflect on Sri Lanka’s postcolonial history, we can also find many such moments where enchanted solidarities were expressed towards various movements from people in the ‘metropolitan’ center with little understanding of the nuances of the politics on the ground.
Premised against both vertical and enchanted solidarities, scholars have also proposed what is called ‘disenchanted solidarity’. By this they mean a situation where diverse groups, sometimes with very different political and ideological agendas, come together to fight for a common cause. They are often critically conscious of their differences but face a common precarity that pushes them together to struggle and align in ways that were not possible before. Often such moments are also underwritten by anger, though the sources of anger or the objects towards which the anger is directed could be different. I would like to read the aragalaya through this lens of disenchanted solidarity. Particularly at the height of the Galle Face ‘Gota go gama’ protests – before the brutish May 9th attack symbolically ‘killed’ something of the ‘innocence’ of the struggle – there was a sense in which the different groups represented in that space were expressing solidarity towards a singular goal – getting rid of the Rajapakasas and a political system they saw as deeply corrupt – there was anger and a gathering of disenchanted solidarities. For many middle-class people, the aragalaya was a way in which to express their frustration at the lack of the basic necessities of life – be it gas, electricity and fuel – and how a corrupt political class had robbed them of their future. For those with longer histories of political activism such as the IUSF (the Inter University Students Federation) or youth activists from the Frontline Socialist Party or the JVPs youth wing or the many trade unions that supported the aragalaya, this moment in some ways represented the culmination, and perhaps even a vindication, of their longstanding struggles against a political, social and economic order that they consider fundamentally unfair and exploitative. Of course, within this larger narrative, there were and continue to be pragmatic political calculations, particularly from groups affiliated with political parties. At the same time, we also witnessed ethnic and religious minorities, often historically marginalized in Sri Lanka’s social and political mainstream finding a rare space to express their anger at the ways in which they have been discriminated against. However, the argalaya gave them a rare space to do so by channeling their anger as a form of solidarity towards the common goal of getting rid of the Rajapaksa dynasty and the corrupt political system as a whole.
But at the same time, we also saw the tenuous nature of these disenchanted solidarities in the aftermath of the 9th May attack on ‘Gota go gama’. Initially we saw another spectacular display of organic and spontaneous solidarity when health workers and office workers abandoned their workstations and rushed to ‘Gota go gama’ when news of the attack broke. But by the evening of that day the story had turned more insidious with a wave of attacks against the properties of politicians and others thought to have been involved in the attack against the peaceful aragayala participants. While we may understand and even empathize with this backlash, its violent nature and what appeared to be other instrumental motives driving it, such as the looting and revenge attacks, made it difficult to associate it with the moral principles that had animated the aragalaya thus far.
Thereafter, at the current moment I am writing, the aragalaya also appears to have lost some of its vital energy as the political configuration has shifted and the tragi-comedy of Sri Lanka’s realpolitik with its underhand deals and political mechanizations seems to have regained the upper hand.
However, what does this mean? Does it mean post May 9th the aragalaya has lost its meaning and purpose or can we push our analysis a little deeper. At this point I would like to introduce one final way in which scholars have discussed solidarity which I feel is appropriate to understand the aragalaya and the spirit that underwrote it and continues to underwrite it. This is what some scholars have called ‘deep solidarity’ – a situation where in today’s neo-liberal context where the vast majority of the population come to a realization of their common social and economic predicament and realize their common enemy is the symbolic ‘one percent’ or an insidious nexus between crony capital and political power that disempowers them. This is of course an idealistic conception but one which I feel holds true at least partially to this moment in Sri Lanka. People from widely varying social and economic strata, from different religious persuasions and people with wildly different ideological and political beliefs have been suddenly pushed together. They are all standing in the never-ending petrol and diesel queues, they are desperately hunting for the next cylinder of gas and increasingly many of them are going hungry. The privileges and the divisions that once defined them, no longer seem to be so ‘real’ and the one stark reality confronting them is a form of existential annihilation. I believe within the aragalaya we can glimpse traces of this deep solidarity and as an educationist I think it is our vital task to think of creative ways in which we might sustain this solidarity, grow it and nurture it, so that we can at least ‘imagine’ a better future. These are idealistic sentiments, but at least for me, such hope, is a political and pedagogical necessity of the current moment.
Harshana Rambukwella is attached to the Postgraduate Institute of English at the Open University of Sri Lanka
Kuppi is a politics and pedagogy happening on the margins of the lecture hall that parodies, subverts, and simultaneously reaffirms social hierarchies
No solutions to nation’s problems from draft constitutional amendment
by jehan perera
The three-wheel taxi driver did not need much encouragement to talk about the hardships in his life, starting with spending two days in the petrol queue to get his quota. He said that he had a practice of giving his three children a small packet of biscuits and a small carton of milk every morning. But now with the cost tripling, he could only buy one packet of biscuits and his three children had to share it. This is because their beloved country is facing one debacle after another for no fault of those kids or the larger nation. The latest is the failure of the government to make headway in accessing either IMF funding or other funding on any significant scale. Several countries have made donations, but these are in the millions whereas Sri Lanka requires billions if it is to come out of its vicious cycle of a dollar shortage.
There was much anticipation that the appointment of Prime Minister Ranil Wickremesinghe would bring in the billions that are desperately needed by the country if it is to obtain the fuel, food and medicines to keep the people healthy and the economy moving. But things have not worked out in this manner. The pickings have been slim and sparse. The IMF has given the reasons after the ten day visit by its staff to Sri Lanka. They have specifically referred to “reducing corruption vulnerabilities” in their concluding statement at the end of their visit. The international community in the form of multilateral donors and Western governments have prioritized political stability and a corruption-free administration prior to providing Sri Lanka with the financial assistance it requires.
The pressing need in the country is for the government to show there is political stability and zero tolerance for corruption in dealing with the prevailing crisis. It is not enough for government leaders to give verbal assurances on these matters. There needs to be political arrangements that convince the international community, and the people of Sri Lanka, that the government is committed to this cause. Several foreign governments have said that they will consider larger scale assistance to Sri Lanka, once the IMF agreement is operational. So far the government has not been successful in convincing the international community that its own accountability systems are reliable. This is the main reason why the country is only obtaining millions in aid and not billions.
The draft 22nd Amendment that is now before the parliament (which will become the 21st Amendment should it be passed) would be a good place for the government to show its commitment. The cabinet has approved the draft which has three main sections, impacting upon the establishment of the constitutional council, the powers of the president and dual citizenship. However, the cabinet-approved draft is a far cry from what is proposed by the opposition political parties and civil society groups. It is watered down to the point of being ineffective. Indeed, it appears to be designed to fail as it is unlikely to gain the support of different political parties and factions within those parties whose support is necessary if the 2/3 majority is to be obtained.
In the first place, the draft constitutional amendment does not reduce the president’s power in any significant manner. The amendment is drafted in a way that the reduction of presidential powers will only occur with the next president. The president now in office, who has publicly admitted failure on his part, continues to be empowered to appoint and sack the prime minister and cabinet ministers at his arbitrary discretion. He is also empowered to appoint and dismiss the secretaries to ministries, who are the highest-ranking public service officials. In short, the executive arms of the government are obliged to do the president’s bidding or risk their jobs. This indicates the Prime Minister Ranil Wickremesinghe, whose party has only a single seat in parliament, has no independent strength, but is there at the will and pleasure of the president.
In the second instance, the draft amendment was expected to set up a system of checks and balances for accountability and anti-corruption purposes. The pioneering effort in this regard was the 17th Amendment of 2001 that made provisions for a constitutional council and independent commissions. According to it, the members of all state bodies tasked with accountability and anti-corruption functions, such as the Bribery and Corruption Commission, the Human Rights Commission, the Police Commission, the Public Service Commission and the appointees to the higher judiciary were to be appointed through the constitutional council. The 17th Amendment made provision for seven of the ten members of the constitutional council to be from civil society.
Unfortunately, in a manner designed to deal a death blow to the concept of checks and balances, the draft amendment sets up a constitutional council with the proportions in reverse to that of the 17th Amendment. It reveals a mindset in the political leadership that fears de-politicisation of decision making. Seven of the ten members will be appointed by the political parties and the president in a way in which the majority of members will be government appointees. Only three will be from civil society. This ensures a majority representation in the Council for government politicians, and the ensures government dominance over the political members. The composition of the constitutional council proposed in the Bill undermines the independence of the institutions to which appointments are made through the Council who will be unable to stem the wildly growing tide of corruption in the country.
It is no wonder that the furious people in the endless queues for petrol and diesel should believe that there is corruption at play in the continuing shortage of basic commodities. The government promised that ships would come in laden with fuel a week ago. Then, inexplicably, the information was disseminated that no ships were on the horizon. In any other country, except in a country like no other, the concerned leaders would have resigned. Due to the lack of fuel, perishable farm produce rots in rural farmhouses and markets in urban centres are empty and prices are rocketing up. In the meantime, the media has exposed rackets where the privileged, politically powerful and super rich, are given special access to fuel. It is patently clear that the government has failed to deliver on the results that were expected. The situation is getting worse in terms of corrupt practices.
To the credit of the Sri Lankan people, they are being patient. The bonds of social solidarity still prevail. But the anger at the self-seeking and incompetent political leaders is reaching the boiling point, as it did on 09 May. President Gotabaya Rajapaksa pledged to set up an interim government in consultation with party leaders in parliament. However, he did not do so but appointed UNP leader Ranil Wickremesinghe as Prime Minister and thereby ended efforts of other parliamentarians to form a national unity government. The president’s pledge, made in the aftermath of the cataclysmic and unexpected violence that took place that day, was to reduce his presidential powers, transfer those powers to parliament and to appoint an all-party and interim government of no more than 15 ministers. These pledges remain unfulfilled and need to be implemented to be followed by elections as soon as the situation stabilises.
Kehelgamuwa’s football skills and President Premadasa’s political sagacity
By Hema Arachi
T.B. Kehelgamuwa, the cricketer who needs no plaudits from anyone, is well known. He represented then Ceylon and, later, Sri Lanka as a fearsome fast bowler during the pre-Test era. His contemporaries still talk about Kehel with great respect. Once S Skanda Kumar, the well-known cricketer, cricket commentator and former High Commissioner for Sri Lanka to Australia, proudly told me about his playing cricket with Kehelgamuwa. Bandu Samarasinghe, a Sri Lanka film star, on a TV programme vividly demonstrated how he faced Kehelgamuwa in a Sara Trophy game. That was the top-level tournament in the country.
This note is to share my watching Kehelgamuwa playing soccer when he was not so young. Then, though his grey hair was visible, he ran fast and played hard like a teenager. This was during President Ranasinghe Premadasa’s tenure. Returning from The Netherlands, after my postgraduate studies, I lived in Pelawatta, near the Sri Lanka Parliament and my workplace – International Irrigation Management Institute headquarters. I used to enjoy walking on Parliament grounds. That day was unique because the game between the President’s soccer team, comprising parliamentarians, and the Sri Lanka Police team, was played there.
President Premadasa was well known for his political sagacity, especially in manipulating any situation in his favour. For instance, the day Anura Bandaranayake became the Opposition Leader, Premadasa, praised Anura stating, “Anura is the best Opposition Leader we have.” He further requested that Anura join the ruling party and become a minister and also marry a girl from a prominent ruling party family. But within weeks, he was critical of Anura. One day an Opposition member asked him, “You said Anura was our best Opposition leader a few weeks ago but now criticise.” His reply was this: “Yes, I said so because Anura is the best Opposition leader for us, the ruling party, not for the Opposition. For the Opposition, the best leader is Sarath Muththetuwegama!”
A few weeks before the scheduled encounter between the Parliamentarians and the Police football team, there was a game between the Parliamentarians and the Colombo Municipality team. Premadasa captained the Parliamentarians and kicked the winning goal. I remember a cartoon in a newspaper where the Municipality team goalkeeper withdrew so that Premadasa could score the goal at his will.
During the game against the Police, Premadasa did not play but visibly played the role of the coach of the Parliamentarian team. Unlike the Municipality players, the Police played the game seriously. Kehelgamuwa represented the Police team that scored five goals by halftime, and the Parliamentarian team was nil. At halftime, Premadasa replaced the Parliamentarian goalkeeper with Jayawickerama Perera. Yet, the Police team recorded a sound victory.
I thought Premadasa was upset due to this defeat for his team. But no. Premadasa claimed victory: “I am happy that my team won the game by beating the Parliamentarians today! Being the Executive President, I do not belong to the Parliament. However, as the Commander-in-Chief, the Police come under my purview, so my team won today!”
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