How the Privatization of State Assets is not in the National Interest.
Posted on September 19th, 2022

Garvin Karunaratne, former Government Agent, Matara, 19/9/2022

The present Government has already embarked on a programme of privatization, despite the fact that it has no mandate from the people.

In the Presidential Election where over sixty percent of people voted and elected Gotabhaya as the President, as well as in the General Election where the Podujana Permuna was elected the premise was that State Assets would not be privatized. , Our former President, Mahinda Rajapaksa is an avowed personality on this issue. The Privatization of State Assets is not approved by him. Thus the present Government has no mandate from the people to privatize any State Asset. This is an important fact and our learned judiciary is kindly reminded of this fact, because if the Government yet moves on privatization it is only the Judiciary that the people have to depend on. .

The present Government should also take note and stop the privatization of State Assets forthwith, be they even incurring a loss forthwith.

The news today in Lankadeepa-18/9, discloses that many Government farms are to be privatized. They are all national assets- Bopatala in Nuwara Eliya- 1133 acres, Kottukachchiya- 500 acres, Nikaweratiys-1954 acres, Oyamaduwa- in Anuradhapura-1477 acres, Parangasweva-1632 acres, Weerawila- 412 acres. All these are areas where the State farms have to be worked to perfection to enable the maximum crop which will be held as achievable to farmers. Instead, if these are sold to the private sector it is a great loss as there is no guidance ever possible to show to the farmers. If any of these are not paying that is entirely due to their being run inefficiently and the managers and the officers above have to be held responsible. Instead of doing that task, trying to get rid of this by privatization is definitely not in the national interest.

The remedy for loss making institutions is to make them profitable. There is no other way. We do have administrators amongst us who can accomplish that task. I am definite as I was a member of the Administrative Service and am personally aware of the ability of our administrators. There should be no political meddling. Our administrators are veterans who can sort out anything. Recently petty political persons have been posted as the Head of the District Coordinating Committees. Dr Sudath Gunasekera, former Permanent Secretary to the Prime Minister Sirimavo has voiced himself that this is detrimental. In my days, the Government Agent was at the font of the district administration. If a petty political person is to be in charge why have Government Agents . Do away with them. Why have any staff officers; have a few clerical officers to carry out orders. If our Government is interested in performance the administrators have to be tasked.

Let us now step back and see how privatizations have not been in the interests of the country.

It will be found on any assessment that the Privatization of State Assets has ruined both Sri Lanka as well as Developed Countries. .

Let us consider what happened in Brazil: The Government of Brazil appointed a Committee of Inquiry that estabished that eleven transnational corporations brought into Brazil $ 298.8 million in capital, created and re invested profits of $ 693 million and repatriated as much as $ 744 million.(Latin America Economic Report: Jan 1976) Privatization brought heavy profits to investors, profits that should been with the people.

What happened in privatization of State Assets in the UK is revealing.

Take the UK. When I first stepped onto the fast trains in the UK in 1969, it was a marvel, the envy of the developed countries. Prime Minister Margaret Thatcher privatized it by dividing the routes and further taking the rail track away from the route rail companies. Rail track neglected maintaining the track. Instead of investing in new technology to ensure the safety of commuters, Rail Track paid fantastic salaries to the higher staff and paid plush dividends to the shareholders. Even safety devices

that are commonly used in France and other European Countries are not in place. The result- repeated rail crashes killing around a hundred people and in the Imperial British manner there are Royal Commissions that present reports. In the hands of Rail Track the reports end up in the garbage. Today the people avoid the railways like the plague.”

Recently there was a rail crash in London where four commuters lost their lives. It was found on investigation that the Railtrack in the UK does not follow the basic technology of an engine coming to a halt if it goes through a red light and proceeds on an unauthorized track. This is standard equipment in many other developed countries but not adopted in the UK because the multinational that has taken over the track does not want to spend a few million pounds to have this installed. To that multinational it is more important to make profits and provide a good dividend to its shareholders than to adopt safety measures that will save the life of its commuters.”

Take what happened in the USA. The Golden State of California a few years ago, privatized the electricity distribution system and a few years later found that the charges that were levied by the distribution companies was so high that an investigation had to be held. The companies were found to have jacked up the rates to the consumers and provided fantastic dividends to the shareholders and even a mighty company like Enron had cooked up its books to enable the distribution companies to make profits. The State of California had to buy back the two distribution companies.’

In Sri Lanka, take the privatization of Ceylon Oxygen: the ugly side is the fantastic increase in staff salaries amounting to as much as 680% between 1990 and 1998… 60% of the equity of the company is held by Norsk Hydro, a Norwegian Multinational… the loss of sovereignty is important…. After privatization the profit goes as follows: 60% to Norsk Hydro of Norway, 10% to the employees and the rest- 30% to the shareholders, mostly from Europe and USA!…. The profits is to the Government of Norway and to the affluent in Norway and Europe and America.” It is important to note that the profit was earlier coming to Sri Lanka benefitting every citizen.”

Take what happened to the Tyre Corporation of Sri Lanka, a factory donated by Russia, which according to its Chief Chemist Hector Perera, who installed it, had the capacity to make all the tyres Sri Lanka required.Privatization is hailed on grounds of efficiency on attracting foreign funds to expand and develop. What is not talked of is the fact that the foreign investor will earn fat profits and the country has lost control over its asset. The Tyre Factory that was privatized to a local industrialist got into the clutches of CEAT, an Indian Giant.” Henceforth the profits go to that foreign multinational and Sri Lanka is yet importing most of its tyre requirements.

Sri Lanka had a well developed Ceylon Transport Board- a bus service that provided a superb service. It was well run for the people and even the Chairman Anil Munasinghe often used it , unannounced. It had a state of the art factory that made bus bodies employing thousands of workers. This was privatized and the new owners pillaged the factory and sold off the machines and left valuable machines to rot. Today the bus service is very inefficient. That was the contribution of privatization.

Take the rice mills in Sri Lanka. Rice Mills was within my department- the Agrarian Services and once I was in charge of rice mills in the Southern Province. I had a state of the art Lewis Grant Rice Mill at Ambalantota milling a thousand bushels of paddy a day. It worked 24 hours a day and was serviced- with resurfacing rollers on Sundays. It worked not stop from Monday morning till Saturday evening milling paddy and employed two hundred workmen. When this was abandoned with the privatization programme, the rice mill- a valuable asset was laid to rot. Once in the Eighties I stepped in and gazed in reverence at the rice mill which was under me and cared for with my life as I would have been then sacked if it was neglected.

Paddy Seed Farms in Sri Lanka that found the miracle seeds- H4 and H8 which doubled the yield, found in the Fifties, years before the IRRI- the International Rice Research Institute was established, were privatized. Then Sri Lanka produced all the seed paddy it needed and plans were laid down for their systematic distribution to farmers. This caused increased yields. After the privatization of the seed farms the farmers cannot even find seed paddy.

The above true details of privatization both in Sri lanka as well as in Developed UK and the USA serve as an eye opener to our present leaders who are pursuing privatization programmes.

Privatization at times is said to have become a method of obtaining commissions in the selection of private companies and many allegations have been made.

As shown above in detail, privatization is not in the interests of the country and should be abandoned. It has also been shown that the present government though pursuing privatization has no mandate from the people. Someday the persons pursuing privatization will be held responsible and will have to pay for this misadventure.

(All quotes are from my book:How the IMF Ruined Sri Lanka & Alternative Programmes of Success: Godages:2006)

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