Mahinda Takes A stand.
Posted on May 18th, 2024

Sugath Kulatunga

The present divestiture drive is ostensibly aimed at minimizing govt. expenditure on loss-making state owned enterprises and meeting certain IMF conditions. The ex-President should be applaude for taking firm stand on this burning issue. It would have been more welcomed if the policy of the SLPP was declared much earlier before the SOE restruction program commenced. MR has without naming an individual who is sponsoring the divestiture of publc assets has vey diplomatically said that ‘some political parties have an ideology driven, dogmatic approach to privatization and seeks to privatize anything and everything that can be privatized”. He proposes that  that all moves to sell off state owned assets or enterprises be postponed until a new government is formed after the next Presidential election.

The claim by SOE reform groups that privatization of Public Enterprise is to satisfy a condition of the IMF incorrect and misleading.

The public is made to believe that this policy is guided by the directions of the IMF. The Letter of Intent signed by the Presdent and the Governor of the Central Bank sums up what we have agreed with the IMF. There is no doubt it is impelled by the IMF Staff. The following is all that the IMF poposes and we have agreed on SOE reforms

Article13. Structural reforms are needed to strengthen the governance of SOEs and make them financially viable. To strengthen the governance of SOEs and enhance their financial transparency, we will:

  • clarify the mandates of key SOEs through Statements of Corporate Intent and hold their management accountable for delivering satisfactory results informed by key performance indicators;
  • (ii) review the framework for selecting SOE board members to ensure that they are qualified and independent; and (iii) ensure that all 52 major SOEs publish their audited financial statements, which could be accessed on a dedicated website. For 2021, 33 SOEs have so far published audited financial statements for 2021. We will ensure that the remaining 19 major SOEs will also publish audited financial statements for 2021 and that audited financial statements for 2022 will be published by end-June 2023.”

Why then is the President keen on privatizing even the profit making and strategical vital public enterprises. If the rationale is economic the IMF would have made it a condition. RW has been Mr. Clean other than the allegation of complicity in the Arjuna Mahendran Bond scam. A good guess is it is due to the Mont Pellerin Society dogma which is his guiding principle. RW was an active member of the Mont Pellerin Society (MPS) and even organized one of its meetings in Sri Lanka. The Neo Liberal ideology of MPS postulates that the elimination of state interventions in economic and social activities and the deregulation of labor and financial markets, as well as of commerce and investments is the panacea to resolve all economic and social problems of all nations.

If some of the many SOEs which do not make an elemental contribution to the economy or provide an essential service, a selective and judicious privatization is justified. But when one looks at the past privatization episodes in Sri Lanka one shudder to think of the consequences. Privatization became a fetish during the JR regime on political grounds and more as an opportunity for politicians to enrich themselves and their henchman. A reputed economist and the head of the prestigious Institute of Policy Studies, late Dr. Saman Kelegama 2001 cites a case where in Sri Lanka an SOE valued at US $100 million was sold at only US $7 million on the ground that the government only wanted to get the privatization policy itself moving.” In many episodes the buyer of SOEs did not continue operating the SOE but sold the machinery for scrap like in the case of Kantale Sugar. A similar scam took place with the Werehara workshop of the CTB which was considered one of the best equipped and efficient workshops in South Asia. One cannot recall a single privatized SOE during this period operating more efficiently and profitably. Most of them are cannibalised or nonexistent. 

The most effective way to prevent privatization of particularly profit making national assets and assets which are of national security value is for MR to make an unequivocal statement that with a change of government those asset will be taken back wihout compensation. Otherwise it will only be a face saving political statement of no consequence.

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