One of Sri Lanka’s long-standing failures in governance was its inability to act rationally, responsibly, and decisively on the bloated state-owned enterprises (SOEs), which have over decades grown to hemorrhage valuable taxpayer rupees, which could have otherwise been put to good use. 

It is indeed ironic that the National People’s Power (NPP) Government, with the Janatha Vimukthi Peramuna (JVP) as its core element, is today strapped with the governance responsibility of pushing through a reform agenda that they had stubbornly fought against and sabotaged at every turn throughout history. ‘Heavy is the head that wears the crown’ – the NPP is gaining experience and understanding the demand of governance, let us hope they are quick learners and more effective than previous administrations.

The island’s SOE landscape was truly mammoth and made Sri Lanka’s state versus private sector services and industry landscape uneven and inefficient. In 2022, according to some reports Sri Lanka had over 500 state-owned enterprises. Of that, 55 SOEs were classified as ‘strategically important’ and those alone employ 10% of the public sector workforce. Such a large number of SOEs are not the norm globally. Many countries have moved away from having a wide range of SOEs. Others, like our neighbor India, which came to the island’s aid in its time of need, have been reducing their stakes in SOEs and. India moved to privatise its loss-making national carrier Air India. Such wisdom is yet to dawn on Sri Lanka’s present leadership. 

It is believed, and with good cause, that many in Sri Lankan SOEs are to be wholly inefficient, loss-making, and a burden on the taxpayer. Reports have indicated that the cumulative losses of the 55 ‘strategic SOEs’ from 2006 to 2020 amounts to Rs. 1.2 trillion. The time has been ripe for major SOE reforms, and the last Government of Ranil Wickremesinghe finally mustered the political will to get the ball rolling on the matter. That administration was clear that Sri Lanka needed to rid itself of the burden of maintaining loss-making SOEs in order to manage the fiscal position of the country and meet International Monetary Fund (IMF) targets.

However, the SOE reforms of the incumbent Government so far remain ambiguous, with them resisting the reforms and restructuring agenda of some SOE’s, halting the restricting of others, reviving some which have shuttered. The desire to continue with the debt-cumbersome Sri Lankan Airlines is emblematic of this uncertainty.

However, the NPP Government has moved to enact some SOE reforms, and they should be given the due credit for following through on the commitments made under the IMF programme. Yesterday (4) the Cabinet of Ministers has approved a proposal presented by the President to formally close down 33 non-operational SOEs as part of ‘Phase Two’ of the Government’s state-sector reform programme, the public was told. 

“Certain enterprises that were established some time ago to achieve objectives such as providing public services and promoting strategic economic activities have become nonfunctional due to the incompatibility of the objectives of their establishment with the present, the incompatibility with market requirements, the impracticability of their further maintenance, and the lack of financial performance. It has been identified that it is appropriate to close down various categories of State enterprises, such as statutory bodies, State corporations, and state-owned companies that do not make a meaningful contribution to the national economy or the provision of public services, rather than continuing to operate them as a burden on the Government” the Government said, stating that 33 SOE have been approved for liquidation. While this is a commendable move in the right direction, the Government’s commitment to reforms and state expenditure reduction/fiscal discipline will be tested on how they deal with the big ticket SOEs, ones which hold large volumes of their own trade union membership and continue to hemorrhage state coffers. 

That would be the litmus test for the NPP’s political will to do what’s right versus to do what’s in their political interests. A nation watches and awaits action. The state must reduce its own weight if it is to grant the public, which has been facing austerity, some much needed relief.