Strikes: Why the Govt. should sell off SOEs ?

14 August 2018 12:10 am - 0     - {{hitsCtrl.values.hits}}



It is not always easy to tell whether a wildcat work stoppage is an act of deliberate sabotage or a desperate act of last resort. Often, trade union activism in this country tends to have shades of both.   

Last week, locomotive engine drivers stopped work, bringing the railway services to a grinding halt for four days. Stranded commuters clashed with striking workers and damaged railway property. The strike was called off on Sunday after the President agreed to look into the salary anomalies, the main grievance of the strikers. During the same week, another strike by the government doctors left the hapless patients without treatment. The doctors were demanding an increase of their travelling allowance from Rs.35,000 to Rs.70,000. Journalists who pointed out the arbitrariness of the trade union action were labelled as traitors. The GMOA is reportedly preparing a traitors’ list, perhaps taking a clue from former Defence Secretary Gotabaya Rajapaksa.  

This kind of trade union vigilantism suggests that something is rotten within the system. When these same folks are up in arms against free trade agreements such as with Singapore and India, which would increase both the productivity and completion at home, that implies a bigger problem of ideological lowliness and self-centeredness in so called professional elites.  

On the other hand, there is no gainsaying that Sri Lanka’s professionals are poorly paid, which has resulted in an exodus of the educated class, who are competing with the displaced Tamils to go to the greener pastures. The vacuum they left behind cannot be easily filled. At the end, when you pay with peanuts, you get monkeys to run the show.   

Public servants should be remunerated adequately; however, Sri Lanka’s economy is ill-equipped to sustain its overblown public sector and loss making public sector enterprises. Successive governments have enlarged an already bloated public sector workforce, filling up non-existent positions with acolytes, eroding productivity and damaging the economic well-being of employees who made an honest living. At the end, no one is happy.  

 There is no easy solution to this conundrum. When each disgruntled party resorts to trade union action, the government has acceded to their demands. However such ad hoc pay hikes, have created fresh salary anomalies within the public sector. Public sector salary bill has increased by a whopping Rs. 290 billion during the last three years, largely due to the Rs.10,000 increase offered to fulfil an election promise in 2015 and irregular salary increases agreed at various times to settle strikes.

  Still there are too many, idling mouths to feed with relatively limited allocations. During the last decade, public sector workforce alone increased by 39%, from 626,992 in 2006 to 874,395 in 2016. Those numbers are excluding the three armed forces, which also recorded a massive boost in the rank and file during the period. Then State owned enterprises (CEB, CPC, Railway, Sri Lankan Airlines etc.) are bleeding the economy white.  


Successive govts have enlarged an already bloated public sector workforce, filling up non-existent positions with acolytes, eroding productivity and damaging the economic well-being of employees who made an honest living

The bloated public sector and the wastage of under performing SOEs mean that the government cannot pay a decent salary to those who do an honest job. Nor can it afford to invest in areas where it really matters. When schools and hospitals are under-funded, Sri Lanka is losing out probably the only positive legacy of post independent history. We will soon lose out to those emerging economies such as Vietnam in primary and secondary education. Repercussions of this under investment is already manifested in the poor performance of local universities in international ranking and low research output.  

The country should get its priorities right;downsize its bloated public sector and sell a stake of its SOEs. Then, the savings should be invested in education, re-training, healthcare, and infrastructure which would increase the total factor productivity of the economy.   

The notion that fresh money would rejuvenate the loss- making SOEs is also open to question. Even after multi-billion rupees of investment, Sri Lankan railway and SLTB lag decades behind their peers in emerging market economies. CEB, CPC, the Srilankan Airlines are incurring billions of rupees of losses. The government does not have sufficient capital to refinance these institutions, nor the capacity to foster an institutional culture that support their resurgence. That is why the best practices of the private sector should be adopted and management of these ventures be transferred to the coperate sector.  

Take for instance, perhaps the only sound economic decision of the Chandrika Kumaratunga administration: the liberalization of telecommunication industry. Those days of several years of backlog to obtain a telephone are long forgotten now. Today, Sri Lanka has one of the best telecommunication infrastructure, and the lowest tariff. Sri Lanka Telecom (SLT) has, somehow, survived and adopted to the competition, thanks to the earlier Japanese stake in the SLT. That is a pleasant departure from the past practice of fleecing the public for its survival.  

Some of these loss making institutions are allowed to wallow in a deepening rot because, they are termed as strategic sectors- too important to hand over to the public sector and foreign competition.  

Much of that terminology is nonsense. Sri Lanka should interpret strategic importance of these things relative to the country’s immediate and medium term priorities, and the assorted risk perception. Strategic cost of retaining these institutions are in fact much higher. Rather than trying to run these institutions by itself and then screwing up, the government should play the role of the regulator and enabler of the economy.   

However, privatization is not a politically easy proposition. A succession of political charlatans has nurtured a false sentimental value to the state ownership. Trade Unions are also hell bent on sustaining the ‘good-for-nothing’ status quo.   

However, paradox of last week’s wildcat work stoppages and blackmail is that the public is gradually realizing the hollowness of the continuation of the rotten status quo in the public sector and SOEs. The government should make use of that new sense of public enlightenment. It should forge ahead with a new set of public sector reforms that would benefit both the public sector workers and the country.  
Follow @RangaJayasuriya on Twitter  

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