New asset holding company to manage SoBEs
View(s):Sri Lanka’s 55 major state-owned business enterprises (SoBEs) are to be transformed to profitable ventures with a new management under an independent asset holding company putting an end to the accumulation of massive losses year after year, officials said.
These enterprises have not been managed properly during the past 50 years and have become white elephants to the economy burdening the public, they said. Trustees of the proposed SoBE asset holding company are to appointed in consultation, compromise and consensus with political parities and civil society organisations.
This was a fulfillment of the pledge given in the United National Party (UNP) manifesto presented before the people during the general election period. Sri Lanka will learn from Singaporean and Malaysian holding companies to reform SoBEs under the proposed asset holding company, a senior official of the Finance Ministry who wished to remain anonymous, told the Business Times.
In the past, these enterprises have had lenient financial regulations than government departments, paving the way for the elected ruling party henchmen to misuse them more easily. As a result the existence of state enterprises has become one of the key causes of corruption in the country in the recent past, he added.
Senior government officials revealed that the plan involves restructuring SOBEs by strengthening their balance sheets and finding ways for these organisations to seek their own funds, internally, with little or no financial support from the government. Currently most of the SOBEs are managed by financial support from the Treasury. On the other hand whatever these state companies collect through revenue or levies is transferred to the Consolidated Fund – through regulation – which in turn is used by the Treasury to return some part of these earnings, back to the organisation for operational and management.
A senior government official, who spoke on condition of anonymity, told the Business Times that the entire structure of funding state institutions is to change under this process.
State Owned Business Enterprises (SOBEs) in Sri Lanka represent a substantial portion of GDP, capital investments, employment and play a dominant role in key sectors of the economy whose performance is of great importance to broad segments of the population and to other parts of the business sector.
According to Finance Ministry statistics, during the first three months of 2015, 11 SoBEs contributed towards government’s non-tax revenue by way of paying dividends and levies to the Consolidated Fund totalling Rs. 9.5 billion.
Outstanding debts to banks of SoBEs as at 31.12.2014 were Rs. 471 billion while it increased by 6 per cent to Rs. 499 billion I the first three months of 2015. Profitability (less debts) of these SoBEs for the year 2014 was Rs. 59 billion while it recorded Rs. 34 billion for the three months of 2015.