The Central Bank says state owned enterprises are not geared to support the government’s post-war economic transformation talk.
The government is talking about transforming Sri Lanka into a naval, aviation, commercial, energy and knowledge hub, to develop the country into a strategically important economic centre in the region.
However, the latest Central Bank annual report (2009) points out that “While the initiatives taken by the government to improve the economic infrastructure development in the country is admirable, the issues relating to economic infrastructure have to be resolved urgently to place the country in the expected high economic growth path.
The state owned enterprises, which provide key economic infrastructure services are operating below optimum level, though the majority of them function as government monopolies.”
In addition to state owned enterprises, Sri Lanka’s corrupt and highly politicised public education and public health facilities will also need to be overhauled, to supply the quality of human resources needed for an economic transformation.
The performance of state owned enterprises meanwhile, reads like a loss-maker competition.
Not very bright.
For starters the power sector, vital for economic growth, is not shining a bright green light for an economic take off. This is mainly because of the financial weakness of both key power sector service providers in the country.
The Ceylon Electricity Board’s (CEB) operating loss in 2009 has reduced to Rs.7.4 billion, which seems a lot less scary than the Rs. 33.3 billion reported in 2008.
But the CEB’s finances are also having a domino effect on the state-owned Ceylon Petroleum Corporation (CPC) and the economic activities of the entire country.
“The persistently high outstanding liability of the CEB to the CPC, has made the CPC borrow substantially from the banking system, thereby crowding out lending to the private sector while impacting on market interest rates,” says the Central Bank report.
The operational loss of the CPC meanwhile, reduced slightly to Rs. 12.3 billion compared its loss of Rs. 14.7 billion in 2008. But having to do business with its sister state-owned enterprises is not likely to help improve the CPC’s finances in the future. Even now, out of the total Rs. 64 billion owed to the CPC by various parties, Rs. 52 billion is due from the CEB.
Losses on land and air
Meanwhile, transport facilities, vital for economic growth and daily activities, are only just chugging along in fits-and starts.
The public bus operator, the Sri Lanka Transport Board’s had an operational loss of Rs. 5.1 billion in 2009. Its sister state enterprise, the Sri Lanka Railways’ almost matched this with an operational loss of Rs. 4.7 billion.
Undaunted, the government kept up its road building and flyover constructions in 2009 and even the Southern Expressway is expected to finally arrive in 2011- at a total project cost of Rs. 59.5 billion for 131 kms. This puts the cost, per kilo metre, at over 400 million rupees.
Sri Lanka’s air operations are also not encouraging. The national airline, SriLankan, posted an operating loss of Rs. 12.2 billion in 2009 but cited the global tourism downturn for its negative behaviour.
Meanwhile, Sri Lanka’s second national carrier ‘Mihin Lanka’ that was re-started by the government in January 2009, presented the country with an operational loss of Rs. 930 million in 2009.
Ship coming in?
In the land of loss making state enterprises, the Sri Lanka Ports Authority (SLPA) reported the rare word profit, although only a small Rs 2 billion operating profit.
More ports are also coming up in Hambantota, Colombo and Oluvil and the capacities of existing ports in Colombo, Galle and Kankesanthurai are being enhanced.
However, despite a few profit makers, in general, the battalion of state-owned enterprises are not seen as a ready to support sharp, speedy economic transformation. “A significant improvement is needed to be implemented in the areas of electricity, petroleum, passenger transportation, air transportation, postal services and water supply,” says the Central Bank report. |
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