• One of 34 dormant State enterprises closed, 18 cannot be touched, and a new law to remake the living ones waits at the Legal Draftsman’s

Missing financial records, some of them a decade old, are holding up the Government’s plan to shut down its dormant State-Owned Enterprises (SOEs), with only one company closed more than a year after the Cabinet gave the exercise a 12-month deadline.

An official attached to the Finance Ministry’s SOE Reform Unit (SOERU) handling the closures told The Sunday Morning that a State company he identified as the ‘Natural Resources’ company was wound up last week, the first of 34 entities earmarked for liquidation. 

Eighteen others have been removed from the unit’s list because they are tied up in court proceedings, or were never registered with the Registrar of Companies, or have already been struck off its books, leaving 16 institutions that the unit must actually close.

“The problem is that, from the very beginning, these institutions were not maintained with the proper information. Because of that, our work has been delayed to a great extent,” the official said. “Closing an institution like this is not something that can be done directly and quickly.”

The figure of 34 echoes the number President Anura Kumara Dissanayake cited on 23 October, when he told the Government Surveyors’ Association that a special committee would oversee the closure and amalgamation of 34 State institutions. According to the official, the Cabinet’s original list of 33, approved in September 2025, becomes 34 once a subsidiary is counted.

The liquidation drive is the quieter of two tracks along which the Government is reworking its sprawling estate of SOEs. The louder one was sketched on Tuesday (27 October) by Deputy Minister of Finance and Planning Dr. Anil Jayantha Fernando, which is a new SOE act, a holding structure for commercial enterprises, and the prospect of listing some of them on the Colombo Stock Exchange (CSE). 

The two tracks are run separately, yet those involved in both describe the same obstacle, namely that the State has seldom kept its enterprises in a condition that would allow a liquidator, a buyer, or a shareholder to see clearly what they hold.

A decade of missing ledgers

Most of the entities on the list are companies, and the Companies Act prescribes in some detail how a company must be wound up. Following that procedure, however, presupposes accounts that in many cases were never kept.

“The Companies Act clearly sets out the methodology we have to follow. Our problem is that in order to follow it, the financial statements and the information have not been updated,” the SOERU official said. “The last audited financial statements are from nine or 10 years ago. Some activities have been carried out in these institutions since then and those cannot be bypassed.”

Some of the companies, he said, had not functioned from the day they were established. In others, the remaining assets cannot be properly identified and creditors must be traced one by one. He attributed part of the problem to successive rounds of political appointments, which had left current staff with little institutional memory. “Ten or 15 years have passed. How are the people currently there supposed to find these things out?” he asked.

The Cabinet had allowed the exercise for a year. Counted from the September 2025 decision, that year has now run its course, and the official said that the unit’s target was to complete most of the work by the end of 2026. “If we can identify it quickly, we can do it quickly. If we can’t, it will take several more months,” he said.

A law in the queue

The proposed SOE act is the centrepiece of the second track. Speaking at a forum organised by the Securities and Exchange Commission and the CSE, Deputy Minister Fernando said that only a limited number of the 527 entities classified as State enterprises were genuinely commercial; some could be divested and others merged, while the State would stay involved in strategic sectors such as energy. 

The new law would incorporate commercial enterprises as limited liability companies under a single umbrella, with room to respond to market conditions and, eventually, to list. Dr. Fernando conceded, however, that delays at the Legal Draftsman’s Department could mean it reaches Parliament only next year.

The SOE Restructuring Unit, set up in 2022 under the International Monetary Fund-backed reform programme, was meant to deliver both divestitures and a holding company. The Auditor General later found that it had cost about Rs. 350.7 million without completing a major sale or forming the holding company, and the unit was reconstituted as the SOE Reform Unit in November 2025.

Advocata Institute Chairman Murtaza Jafferjee served on that unit from November 2022 until he stepped down around the 2024 Presidential Election. The entity, he told The Sunday Morning, never went away. “There is some entity still functioning. It’s in the Ministry of Finance,” he said, pointing to the continuing restructuring of the unfinished Grand Hyatt Colombo.

Owner, regulator and manager

Jafferjee’s starting position is that the State should divest commercial assets altogether, keeping only those justified by national security, acute market failure, or a developmental need the private sector will not meet because the returns are too thin. “The majority of these assets don’t fit that bill,” he said.

A holding company, in his telling, is a second-best answer to a structural tangle. Every SOE is owned by the Treasury, yet each is gazetted to a line ministry that simultaneously makes policy for its sector, regulates it, and meddles in the management of the enterprise. “These three things are inherently in conflict,” he said. 

Moving the enterprises under a holding company, he argued, would sever that link and, with it, the use of SOEs as instruments of political patronage, while placing them under a governance structure accountable for returns.

“The government has been a terrible steward of SOEs. It has been a very poor owner,” he said. A private owner would chase efficiency, return on equity, and competitiveness; an enterprise that belonged to everyone, he added, tended to interest no one in particular.

The bill that stays behind

On the fiscal question of retaining weaker strategic enterprises while selling others, Jafferjee traced most historical losses to the energy utilities and the absence of cost-reflective pricing. He cited the Ceylon Petroleum Corporation (CPC), whose accumulated debt the Government absorbed during the crisis, and explained that the interest on that bailout alone, by his estimate about Rs. 80 billion a year, set the minimum return the corporation should be earning.

He also took aim at the familiar objection to privatisation. “People tend to forget. They say, ‘Oh, you sold the family silver,’” he said. “But the government is a stakeholder in every other business in Sri Lanka through the tax system. It has a 30% share. Even if these businesses are sold and become profitable, the government will still get its share through taxes.” 

Reducing State ownership, he added, would also ease market distortions and lift national productivity.

Bringing the State to market

The stock market is the destination the Deputy Minister held out for reformed enterprises, and the CSE has already built the door. 

A CSE spokesperson told The Sunday Morning that if entities such as the Bank of Ceylon, People’s Bank, the National Savings Bank, the Sri Lanka Ports Authority, or Sri Lanka Insurance Corporation Ltd. were listed, they could add in the region of Rs. 1 trillion to market capitalisation, roughly 14% of the current total, depending on valuations and the proportion offered.

“Listing selected SOEs could be a defining moment for market depth,” the spokesperson said, adding that liquidity would follow the free float.

While stressing that the decision rested with the Government, the spokesperson said that from a market perspective, the optimal route would be an initial public offering on whichever board best suited the institution concerned, with the Catalyst Board available as an alternative if required.

According to the spokesperson, since listing requirements differ from one board to another, the appropriate board will be determined by the specific SOE.

Whether the market could absorb sizeable SOE offerings, the spokesperson said, would be decided largely by foreign and local institutional investors as well as retail investors, noting that the market was already moving in the right direction, with average daily turnover more than tripling and active investor participation nearly tripling between 2020 and 2025. 

The quality, governance, and transparency of the SOEs that came to market, the spokesperson added, would also help attract long-term capital.

The base remains narrow, however; CSE Chairman Dimuthu Abeyesekera told the same forum that active investors numbered around 60,000, below last year’s peak of 78,000.

Jafferjee was more guarded as listing, he said, could improve transparency, and enterprises could begin by issuing debt instead of equity, as the Bank of Ceylon and the Ceylon Electricity Board have done. On equity, however, he described the record as chequered. 

“Unless there is a complete improvement in governance, listing is suboptimal. You are doing a disservice to minority shareholders, because you are misallocating capital,” he said.

Back to the paperwork

As of now, both tracks converge on the same unglamorous prerequisite. A holding company, a listing, and a liquidation each presuppose an enterprise whose assets, liabilities, and accounts can be stated with confidence, and that is precisely the information the liquidation unit says it is still piecing together for companies that have not produced audited accounts in nearly a decade. 

The 2027 Budget, due on 12 November, is expected to carry capital market proposals, while the SOE act awaits its turn at the Legal Draftsman’s Department. In the meantime, the unit will go on tracing creditors and cataloguing the assets of enterprises that, in some cases, never opened for business. By the official’s count, 16 remain to be closed.