WHY SRI LANKA NEEDS PRIVATIZATION OF PUBLIC ENTERPRISES?
Posted on January 26th, 2021

BY EDWARD THEOPHILUS

The privatization of public enterprises had been a significant policy initiative in a liberal economic system, and if it considers the era after the first world war, it could be seen that many countries in the world have espoused the privatization of public enterprises for various reasons and purposes, and many governments used various techniques for privatizing the public-owned enterprises. Investment in public enterprises began when the private sector has no sufficient capital to invest in such business or did not interest in investing in such business and services.

People in Sri Lanka either misunderstand the policy of privatization or misinterpreted the policy by left politics. The privatization of public enterprises means changing the ownership of enterprises that need because of various reasons, and although it might have chances to destroy the organizations if the private sector weak to adopt efficient and effective management, it does not mean they will destroy.

In traditional society, no restrictions were imposed by the government for economic activities except that activities aimed to promote immoral and anti-social animations, against the national security and counter the national interest purposes. The traditional society was more liberal, and entrepreneurs had greater freedom to start a business and maintain business if consumers demanded products and services. In a free society in history, doing business was easier and the price mechanism helped to determine demand, supply, and equilibrium. These ideas were incorrectly interpreted by Marxist politicians to attract the power of people to them. The collapse of communism in the early 1990s was the best example for expressing implausible views that would not last forever and ever.

Public enterprises became a grave burden to governments during the cold war, and after the cold war, developed countries attempted to get away from the burden of public enterprises by privatizing them. Many governments had various aims of changing the ownership and converting public enterprises to better management than wasting government funds to the management of such organizations. Developed countries used privatization of public enterprises to gain successful solutions to problems such as retiring public debt, fiscal issues, the balance of payment adjustments, and many others. In the late 1980s, public enterprise management in Australia crippled the economy with many problems, and the government took leadership to get out of problems, despite the protests of trade unions and some groups of people. The strategy used in Australia was comparatively different from the way used in Sri Lanka, and it was successful and popular among voters. The government has been monitoring the concerning issues in privatized public enterprises and passed regulations to counter possible disadvantaged developments.  

Sri Lanka’s parliament passed legislation to monitor privatized enterprises and take back them, however, politics and corruption involved in the monitoring process. Politicians’ as well as politically supported bureaucrats involved in corrupt activities, and the concept of privatizing public enterprises became corrupt activities and misunderstanding of people.  

The nature of Sri Lanka’s privatization has been in misunderstood and untypical style, and policymakers introduced the experience of foreign countries as they were without adapting the foreign experience appropriately. One example is foreign governments did micro-reforms in public enterprises, converted them to public companies, and listed such organizations in the stock market with a reasonable price for a share and a percentage of shares allowed to institutional investors and individual investors. For example, Commonwealth Bank and Telecom in Australia are privatized in that way. The story in Sri Lanka reflected that the government did not allow Sri Lankans to invest in such organizations and allowed foreign investors to play with public enterprises. The incident relating to the

Higurana sugar factory was the best example to point out how corruption and bribery involved in the privatization of public enterprises. They were corrupt deals in Sri Lanka that have been rejected by people. Overseas, government enterprises took over or merged by experienced private investors that were called merging public enterprises for the development of synergy.

When allowing single buyers, there may be many malpractices, as Sri Lanka experienced in the 1980s and 1990s and the government introduced a new law to take back privatized enterprises. People have seen these experiences and they object to privatization, however, if private firms attract the supports of people, the public doesn’t want to oppose the privatization process. 

The privatization policy in Australia successfully worked to get out of grave problems and to achieve sustainable growth with the improvement of macroeconomic variables. Sri Lanka has many economic and social problems that should be approached by modernised strategies without giving a heavy burden to the government. In Australia, privatized public enterprises contributed a massive sum of tax revenue to the government, and such tax revenue is used to provide benefits to disabled people, single parents, pensioners, and many others. However, privatization in Sri Lanka has not benefited the public, and it created a bad problem for people and to question and opposed by people. This situation created      

The purposes of privatizing public enterprises could be well identified as following points.

  • Sharing the burden of economic activities with people and converting the role of government to regulating the operational activities than management of firms.
  • Providing opportunities to those who wish to invest capital in a business and allow the knowledge, skills, and experience of people to invest them in the management of public enterprises.
  • Saving government spending for enterprises management using such an
  • An enormous sum of money for infrastructure development and education and training.
  • Generating efficiency (like electricity, when needs it can gain switch on and when no need the service can switch off) and flexibility (when a strong wind comes trees bend and the wind goes away trees go back to the previous position) in public enterprises provide good services to the country.

Privatization of public enterprises has been involved with international politics, many community groups such as religious clergy and people who are interested in gaining popularity, and international issues that are not related to Sri Lanka (Indo – China issues) have associated with and the complexity in the process seem to outweigh the benefits possible to gained by Sri Lanka. It has become an international issue, despite this situation Sri Lanka can gain enormous benefits by changing current fiscal spending for the benefits of lower-income earners and creating a strong financial base for Sri Lanka.

It is regret to note that the government is attempting to drink medicines without feelings to thought and should educate the public on the matter of privatization and its advantages and disadvantages.  

One Response to “WHY SRI LANKA NEEDS PRIVATIZATION OF PUBLIC ENTERPRISES?”

  1. Nimal Says:

    Privatization is the best solution to run enterprises like Electricity, Public transport, Railway and even the cooperative stores. China is now doing that and North Korea may follow. Under private enterprise there no room for lazy and inefficient people. Also it will stop politicians putting their uneducated and unsuitable people into jobs. JVP friends may not agree with me but it is the honest truth.

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