By Chandeepa Wettasinghe
The government is hoping to build a national consensus for the role of public-private partnerships (PPPs) in revamping state-owned enterprises (SOEs), Public Enterprise Development Minister Kabir Hashim said this week.
“We need to build a national consensus for PPPs. Privatization is a dirty word. Not privatization, but PPP is the answer. Politicians don’t understand these concepts,” he said during a Breakfast Meeting on Public Private Partnerships organized by the Sri Lanka-Malaysia Business Council of the Ceylon Chamber of Commerce.
He noted that the government will start off by listing 10 SOEs on the Colombo Stock Exchange, which would double the bourse’s market capitalization.
“Through this, our country can benefit from increase foreign investments,” he said.
The government’s policy so far communicated is a plan to divest around 49 percent of the shares in the SOEs, and delegate operational control to
The public listing of SOEs is expected to generate US$ 1 billion which would then be utilized to settle the government’s debt burden, which is over 75 percent of the country’s US$ 86 billion GDP. In addition SOEs have also undertaken debt equal to 10 percent of GDP, outside the government books.
According to Hashim, SOEs required Rs.215 billion in Treasury bailouts between 2012-2014, and have crowded out the private sector by absorbing most of the credit in the financial system.
“People think we’re selling out state assets. But we have to take a hard decision due to the debt. So people need to understand beyond political lines. State-owned enterprises need restructuring. The state has no capacity to contribute working capital to turn them around, so we need partnerships,” Hashim said.
He noted that through PPPs, New Zealand and Malaysia were able to reorganize their entire economies during their economic crises in 1986 and 2004, respectively.
However, he said that the government will not seek PPPs for some SOEs that provide strategic goods and services such as banking, insurance and transportation.
The International Monetary Fund (IMF) has been pushing Sri Lanka to restructure its SOEs due to the burden they place on the country’s economy.
Hashim said that a Public Enterprise Development Board is similar to Malaysia’s Khazana and Singapore’s Temasek will be set up soon once the enabling legislation, which is currently at the Legal Draftsman, becomes ready, and that professionals will be appointed to SOEs to make them profitable.
According to Finance Minister Ravi Karunanayake, there are 403 SOEs, of which less than 50 are making losses now, compared to over 200 loss making SOEs at the start of 2015.
Meanwhile, Hashim said that some SOEs are managed exceptionally.
“(But) state-owned enterprises are the largest contributor to the Sri Lankan economy. If you take the top 10 state-owned enterprises in Sri Lanka in 2015, they generated half the revenue of the 245 listed companies in Sri Lanka. Total revenue of the listed companies in Sri Lanka was Rs. 2.2 trillion,” he said.