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Anti-privatization statements will depress bid prices: Will JVP be held accountable?

1 April 2024 12:01 am - 5     - {{hitsCtrl.values.hits}}

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Sunil Handunetti, a senior and respected leader of the JVP, has urged the government not to sell (and potential buyers not to buy) state-owned enterprises such as the SriLankan Airlines, SLT and Litro, for which requests for proposals have been called. 
He implicitly threatens to expropriate the sold entities. The Ceylon Electricity Board (CEB) is also mentioned, but there is no such process underway for it.
Policy mistakes


This coincided with the government taking USD 210 million in dollar loans and LKR 41.4 billion in rupee loans off the Airline’s books. This has, understandably, angered many members of the public. They argue that wrong decisions led an airline that once paid dividends to the Treasury to come to this sorry state. They argue that those who made these decisions should be held to account.


The wrong decisions began with the forcing out of Emirates in 2007 for a petty reason. The person responsible, President Mahinda Rajapaksa, was reelected subsequently, which suggests that there is no political accountability. 


More mistakes were made, such as appointing an incompetent brother-in-law as chairman. Still no harm to his popularity. Perhaps what the aggravated individuals want is some kind of judicial process, but there are no penal provisions in our law against making bad policy decisions at the highest levels.
Nothing can be done about policy mistakes other than trying to prevent them using means such as policy interventions like this, and court cases. If that fails, the wronged public must vote out the perpetrators. 

 

The wrong decisions began with the forcing out of Emirates in 2007 for a petty reason. The person responsible, President Mahinda Rajapaksa, was reelected subsequently, which suggests that there is no political accountability. 

 


Consequences of statements

The JVP’s public statements seek to halt an ongoing process of selling SOEs that are badly managed, and are therefore yielding less-than-benchmark returns at best and burning up public money at worst. The process is governed by a Cabinet-approved divestiture policy. It is being conducted transparently and properly as indicated by the recent decision by Lycamobile to withdraw its challenge to some of the privatizations.


If the JVP succeeds in halting the sales, the negative outcomes will not go away. For example, the debt incurred by SriLankan Airlines and guaranteed by the Treasury will still have to be paid by the taxpayer, because SriLankan cannot. The Airline will continue to be unable to provide high-quality service without significant infusions of funds from its only shareholder, the Treasury. If the Treasury cannot give the required sums, the delays and cancellations will increase, resulting in erosion of business and further increase in losses. This will lead to greater use of Treasury-guaranteed debt (precluded by the IMF agreement) or bankruptcy. Recall this is not the first time the government has bailed out its airlines.
Risk among bidders

 

 Even if the government does not halt the sales, these kinds of statements will increase the perceptions of risk among the bidders. 


Even if the government does not halt the sales, these kinds of statements will increase the perceptions of risk among  bidders. This will depress the offer prices and lower the yield from the sales. It’s not that the government will sell these enterprises at low prices, but that the JVP would have talked down the prices that would have been bid.


So, it appears that the JVP is making a policy mistake that taxpayers will have to bear the consequences. The immediate question is whether we can stop the government from acceding to the pressure from the JVP and assorted parties and protect ourselves from further debt and hopefully have a functioning airline that carries the name SriLankan. We must dissuade the JVP from these kinds of harmful interventions. 
If these actions fail, are we willing to hold the JVP accountable politically for aggressively promoting an obvious policy mistake and depressing the bid prices? Or are we going to give them a free pass like we did to President Rajapaksa?


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  Comments - 5

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  • What madness to try hold politcs accountable Monday, 01 April 2024 10:51 AM

    JVP is trying to make government fail. They want to form new government without the mad private sector attitude of Ranil. Country became bankrupt because of private sector subsidies. JVP should end all subsidy for private sector business, especially any with more than ten employees.

    Sokrates Monday, 01 April 2024 12:33 PM

    The state has never been a good entrepreneur and so the sale of state companies is a must, including the CEB, of course in a transparent way with international tenders without bribery being involved. The sale of state-owned companies in Germany was only beneficial, such as: German Post (which even bought the much larger American company DHL after privatization), electricity companies, Telekom (formerly owned by the state post office), the German airline Lufthansa and others. Only Deutsche Bahn, which was converted into a stock corporation with 100% ownership by the state, continues to make losses. The unions that previously had their own bank and supermarket chain also sold out a long time ago because they were also unable to manage companies.

    Nandasena de Groote Monday, 01 April 2024 03:11 PM

    The SOE's failed because the govts appointed stooges as directors. How can a tailor at Maradana operate a multimillion Rs enterprise.There had been drunkards whose primary function was pimping appointed as directors.Though in the private sector employees have a chance to reach the board not in the State sector, with two exceptions- once in the CTB and the other in the Paper mills. Both were dismissed when the govt changed. Only profession that had not been appointed are the ROAD LEVEL PROSTITUTES. Prof Samarajeeva I had more respect for your intelligence. 149 SOE had been sold, but where are they today. It is said that a man who bought a industry with alcohol sold the alcohol, pocketed the money and caused a strike and closed the industry down. What was the Treasury doing? The 149 institutions were owned by the public not political parties or their leaders. NOTE DAILY MIRROR WILL NOT PUBLISH THIS COMMENT> DOES NOT MATTER The JVP is right Dr Samarajeeva.

    NV Jen Monday, 01 April 2024 06:51 PM

    The comrades do not have a plan for restructuring the bleeding SOE's. They will also not do anything to reduce the humongous number of state employees. All this will ensure continuation of exorbitant govt. expenditure, hence prices of goods and services will always remain high, apart from chasing away potential FDI. Another disaster in the making.

    Tissa Fernando Monday, 01 April 2024 11:03 PM

    Comrades are just playing sone gallery jokes at meetings because they know that majority of the population is stupid. Stupids want to hear some jokes about failed politicians so they could have some laugh So far there has not been a single solid plan presented.


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