Advocata says SOEs Trojan horses of corruption, not national assets

11 October 2023 12:00 am Views - 344

• Says SOEs are structured to favour politicians and their associates while racking up losses and debt
• Calls for clear, transparent, and practical measures to be brought to improve the performance of these entities
• Says divestiture should be made top priority, followed by down-sizing or closing down non-viable entities

By Shabiya Ali Ahlam
Colombo-based free market think tank Advocata Institute yesterday asserted that despite being marketed as national assets, Sri Lanka’s State-Owned Enterprises (SOEs) are in fact, vehicles for corruption, akin to a Trojan horse.
Rehana Thowfeek, a Research Associate at the Advocata Institute, highlighted that the primary objective of SOEs is to deliver affordable and fair services. However, in practice, these entities are structured to favour politicians and their associates, racking up huge losses and undisclosed debt that ultimately impose a significant burden on the broader public.
Advocata stressed the need for clear, transparent, and practical measures to be brought to improve the performance of these entities so that its weight is not borne by the taxpayers of the country.

A scorecard by the Colombo-based think tank showed that 13 SOES, which include the Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), and SriLankan Airlines are a total failure.
Twelve SOEs, including the Sri Lanka Ports Authority, Milco Ltd, and the Water Supply and Drainage Board, have been categorized as unsuccessful, while 14 entities such as the Bank of Ceylon, People’s Bank, and Sri Lanka Transport Board have received scores indicating marginal success.
However, 13 SOES, including the State Pharmaceuticals, and Airport and Aviation Services have been rated as successful. 
Advocata urged the reform processes to take into account the seven guidelines listed by the Organization for Economic Co-operation and Development (OECD) on Corporate Governance for SOEs.

The international best practices outlined in the guidelines emphasise several key aspects, including, rationales for state ownership; the state’s role as an owner; SOEs in the marketplace; equitable treatment of shareholders; stakeholder relations and sustainable business; transparency and disclosure; and the responsibilities of boards of directors.
Further, as highlighted by experts previously, Advocata recommended the Sri Lanka to follow Singapore’s Temasek model when restructuring the country’s SOE landscape. 
The think-tank suggested that in the reform sequence, divestiture should be made top priority, followed by down-sizing or closing down non-viable entities and establishing a Tamasek-style holding company.