Advocata urges full SOE reform following Cabinet move to close 33 dormant SOEs

Colombo-based think-tank Advocata Institute commended the government’s decision to close 33 non-operational state-owned enterprises (SOEs) but urged that this be only the first step toward comprehensive divestiture of commercially viable entities.

“The closure of non-operational SOEs is an important milestone but this should be viewed as a head start towards full or partial divestiture of commercially viable enterprises,” Advocata said in a statement yesterday.

It highlighted the need to reduce fiscal pressure, unlock efficiency, cut corruption and mobilise investment. .

The closures, approved earlier by the Cabinet under Phase 2 of the state-sector reform programme, will be implemented through a Special Liquidation Unit, under the Finance Ministry. 

Advocata added that winding down the dormant SOEs is essential to reduce waste, improve fiscal discipline and redirect scarce resources to more productive sectors.

Sri Lanka has more than 400 SOEs across 33 sectors, employing nearly 250,000 people, with publicly guaranteed debt from these entities accounting for around 4.5 percent of total national debt. 

“Many commercial SOEs are plagued by weak management, political interference and a lack of transparency,” Advocata said, while noting that preferential treatment distorts markets, squeezes private investment and undermines productivity.

The closed entities include Mihin Lanka (Pvt.) Ltd, Lanka Cement PLC, Selendiva Investments Ltd and Magampura Ports Management Company (Pvt.) Ltd. 

Advocata stressed that state ownership is warranted only where there is a clear economic or strategic justification, typically when market failures prevent the private actors from efficiently providing goods or services.

Legacy entities such as the Janatha Estates Development Board and Sri Lanka State Plantation Corporation remain operational but financially unsustainable. Advocata urged the government to wind down these entities and repurpose the assets to reduce fiscal pressures.

Advocata also backed proposals to centralise SOE oversight under a Treasury-owned holding company, citing that this model “breaks capture by line ministries and reduces political misuse, enabling professional oversight, merit-based board appointments, consolidated reporting and a focus on shareholder returns”.