Why Sri Lanka should privatize the Railways but not give it to the usual wheeler dealers?

Sri Lanka has underperformed since its independence, not so much due to corruption, though it has become a convenient slogan, but due to its inability to reform. 

Last week, a wildcat trade union action by the locomotive drivers cost the lives of two commuters and inconvenienced hundreds of thousands of others. A young man who rode on the roof was killed when he hit a bridge, and another passenger fell to death while travelling on the footboard of an overcrowded coastal train. 

Despite the tragedy, the strike continued for another day, in a display of callous disregard for the public and also violating an essential services decree issued by
the president. 
Even during the better days, Sri Lanka’s public transport is a major inconvenience to the public. The rot runs deeper than the underinvestment. Freshly imported train carriages and locomotives are rusting in the train yards. Buses are rotting in the depots due to the lack of basic spare parts and criminal negligence of the management. 
Any newly imported state-of-the-art buses have a life span of less than a couple of years, for the mechanics in these places are decades behind the learning curve. Ramshackle Ashok Leyland buses, first seen on the local roads in the 50s or even before, continue to dominate the fleet of SLTB. The Indian company that builds them is churning out modern models. Still, Sri Lanka continues to buy the antiquated ones built on lorry chassis initially meant for cargo transport. That is a testament to the contempt with which the passengers are treated. 

 Epitome of Failure 

There is probably no better case study of the State-Owned Enterprises (SoE) corruption, inefficiency, rent-seeking and political interference than SLTB and SLR. 
Political stooges appointed to lead these institutions at the turn of every government have no clue how to run the complex pubic service they are meant to provide. 
Bus and railway depots are nothing more than job banks for supporters of the minister of transport of successive governments.

Engineers lack incentive and modern technical know-how but still think they know better than the Chinese and Indians. 
Officials entrusted with procurement are rent-seeking wheeler-dealers. Trade unions are only good at cannibalizing their workstations, along with the commuters. There are six employees for each SLTB bus. 

The primary problem in the public transport sector is its organizational structures; they leave no room for innovation and decisive decision-making, lack initiative and are rotting from top to bottom. 
Successive governments have invested in public transport. While the state funds may not have kept up with the demand for modernization, one can safely bet that they would have provided a qualitative improvement had they been properly utilized. But, most of the state-of-the-art locomotives and carriages are rotting in the Mahadana railway yard. No amount of fresh investment can lift the public transport sector in Sri Lanka until the rotten structure they operate is dismantled. 

Indifferent governments

Passengers are the primary victims of this unscrupulous status quo. Yet, successive governments have hesitated to reform SLR/SLTB, just like much of other State-Owned Enterprises and government departments, fearing the virulent trade union activism. 
The daily humiliation of the passengers is lost in this callously self-interested state of affairs. Anyone who thinks the public transport as it stands today is providing a public service is fooling himself. In contrast, the poor form of public transportation is a major drag on the productivity of the rest of the workforce and the
country’s development. 

Last week’s tragic deaths drove home the truth of the callous nature of public transport in this country. Public anger was palpable. A forward-looking government would have used this opening to push forward the reforms in the Railway and SLTB and regulate the private bus sector.  
An even more industrious government would have presented a major reform bill named after the two victims of the trade union action. One driven by conviction would have pursued legal action to hold those responsible for their tragic deaths accountable. Popular anger at the tragedy should be harnessed to support the reforms.
 However, Sri Lanka has continuously lagged behind its international peers, is because its politicians are lacking in initiative and conviction. They are no less the passengers in the gravy train, charlatans in white.

Piecemeal reforms are an eyewash

What sort of reforms would lift the SLTB and SLR from the current rot is open to question. What is, however, clear is usual piecemeal reforms would be of little practical use. Sri Lanka needs drastic reforms, a kind of shock therapy to stimulate the economy and dismantle the old status quo. 
Privatization of the Railway is an obvious choice. However, even in better-equipped countries, the full scope of pros and cons of the privatization of Railways is still disputed. Britain privatized the Railway in the mid-1990s, and Japan in the 1980s. There is a debate about whether the objectives of the privatization of the British Railway were achieved, though such discourse often overlooks the potential outcome had it not been privatized at all. 
Hefty investment and low return may also dissuade private investment. Indian Railway, the world’s fourth largest, offered to sell five per cent of Mail/Express trains to the private sector, but there were no willing takers. 

Privatization

Sri Lankan Railway and SLTB, though inefficient, antiquated and overburdened with excess staff, is still sitting on a gem pit. Both are the largest landowners in the country, including some of the multi-billion-dollar real estate in Colombo. Still, these institutions are simply ill-equipped to develop these assets commercially. 
A Private-Public Partnership would provide for the best-case scenario. 
However, privatization in Sri Lanka carries negative connotations, except for a few, such as SriLankan Airlines
and Telecom. 

Each successful episode of privatization involves a competent foreign partner. Whereas where the locals are involved, privatization has proved to be one large wheeler dealer enterprise, where State assets are sold to the political cronies at a knockdown price. 
While uplifting local businesses is commendable, local ventures do not have deep pockets or technical sophistication to run complex ventures such as public transport. Generally, it is crooks who lobby for a pie in the loot while knowing well their inadequacies. Remember a previous attempt to sell the stake of SLTB to a local businessman during the Ranil Wickremesinghe government in 2002-2004.

If bundled with its real estate portfolio, SLR and SLTB would be an appetizing offer. The government should consider selling a stake and handing over the management of SLR/SLTB (the latter is still a hard sell) through competitive international tender. Government holdings can then be transferred to a state holding company similar to Singapore’s Temasek, which the government plans to set up.

Until then, perhaps the temporary option would be auctioning the train services during office hours to the private sector providers, who could fix the discarded powersets in the railway garages and run during rush hours. 
Sri Lanka has underperformed since its independence, not so much due to corruption, though it has become a convenient slogan, but due to its inability to reform. 
This stagnation is depressing and mind-boggling, running from education to public transport to every nook and corner of the economy. The Railway is only a symptom of a greater ailment. Only decisive and drastic measures could unentangle the country from this predicament and provide a long-term recovery.

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