ECONOMYNEXT – Sri Lanka plans to transfer more than 80 state enterprises into a holding company (HoldCo) under a broad policy framework for better governance, capital raising, while maintaining state control or for future divestiture under.
The enterprises, whose shares even now nominally owned by the Secretary to the Treasury, will be taken away from the line ministries and be directly under the finance ministry.
State enterprises, though financed by the tax payer, who effectively supply the capital as shareholders come under the control of political authorities who have temporary terms and have no long-term responsibility towards SOE, creating an agency-principle problem, analysts say.
Meanwhile Suresh Shah, Director General of the SOE reform unit said under the current system there was a further “dual ownership” structure, where enterprises came under a line ministry while shares were owned by the Finance Ministry.
In future, ministries will be policy-making bodies, without any conflict of interest to favour agencies coming under them compared to firms set up by citizens.
Commercial entities coming under the HoldCo would be will be registered under the companies act and be subjected to its governance rules and disclosures.
Sri Lanka already has a law to convert state owned entities to companies, Shah said.
The priviledges or ‘most favoured’ status afforded to state entities sometime violating the law of the land will be taken away.
The practice of borrowing from state banks through Treasury guarantees to cover losses, will also be done away with.
An SOE Act with legislating the principles contained in the policy will be brought to parliament towards the end of the year.
An inter-ministerial SOE policy committee will be established under the proposed SOE Law which will advice the Holding Company on wider government policy issues, approve the creation and acquisition of an SOE or approve the divestiture and winding up of and SOE.
The SOE Policy committee will be chaired by the President, and will include as members ministers of finance, investment promotion and labour, the Governor of the Central Bank of Sri Lanka, Secretary to the Treasury and the Chair of the Hold Co.
Other Ministers and Secretaries will be invited to attend on a need basis.
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Compared to countries like Singapore or some European nations, Sri Lanka also does not have permanent secretaries of ministries, which has been a core problem in the overall breakdown of the country’s civil service since the 1970s, according to some analysts.
Permanent secretaries led to a long-term policy formulation process to prevent avoidable mistakes and sudden reversals, and public servants with extensive sector and domain knowledge being able to advice political authorities if necessary.
Fluid secretaries eventually led to fluid ministries and the structure of the government also changed from election to election with agencies kicked around like footballs, critics say.
The UK started a civil started a permanent civil service following the Northcote Trevalyan report.
“It cannot be necessary to enter into any lengthened argument for the purpose of showing the high importance of a permanent civil service of the country in the present day,” the report said.
“The great and increasing accumulation of public business, and the consequent pressure upon the Government, need only to be alluded to: and the inconveniences which are inseparable from the frequent changes which take place in the responsible administration are of a sufficient notoriety.”
SOEs to be transferred to the Holding Company
1. Airport and Aviation Services Ltd.
2. BCC (Pvt.) Limited 3
. Ceylon Shipping Corporation Ltd, Subsidiaries & Associates
4. Ceylon Sugar (Pvt) Ltd.
6. Cey-Nor Foundation Ltd 7. Chilaw Plantations Ltd
8. Colombo Commercial Fertilizer Company Ltd
9. Colombo Lotus Tower (Pvt) Ltd.
10. Elkaduwa Plantation Company Ltd
11. Galoya Plantation (Pvt) Company
12. Grand Oriental Hotel
13. GSMB Technical Services (Pvt) Ltd.
14. Hotel Developers Lanka Ltd. (Hilton)
15. Hyatt / Canwill Holding Ltd. 16. Kalubovitiyana Tea Factory Ltd
17. Kantale Sugar Company Ltd.
18. Kurunegala Plantations Ltd
19. Lakdiva Engineering Ltd.
20. Lanka Ashok Leyland Ltd.
21. Lanka Logistics Limited
22. Lanka Phosphate Ltd.
23. Lanka Sathosa Ltd
24. Lanka Sugar Company Ltd
25. Litro Gas Lanka Ltd
26. Litro Gas Terminal Lanka (Pvt) Ltd
27. Mahaweli Livestock Enterprise Ltd.
28. National Salt Ltd. 29. North Sea Ltd
30. Ocean View Development (Pvt) Ltd.
31. Paranthan Chemicals Ltd.
32. Polipto Lanka (Pvt) Ltd.
33. Rakna Arakshana Lanka Ltd.
34. Sri Lanka Insurance Corporation Ltd.
35. Sri Lanka Savings Bank Ltd.
36. Sri Lanka Telecom, Subsidiaries & Associates
37. Sri Lanka Thriposha Ltd 38. Sri Lankan Airlines Ltd.
39. STC General Trading Company
40. Waters’ Edge Ltd
41. The Lanka Hospitals Corporation PLC
SOEs to be Registered Under the Companies Act No 07 of 2007 and Transferred Under the Holding Company
1. Bank of Ceylon
2. Building Material Corporation
3. Cement Corporation
4. Central Engineering Consultancy Bureau
5. Ceylon Ceramics Corporation (Brick and Tiles Division)
6. Ceylon Fisheries Corporation 7. Ceylon Fishery Harbors Corporation
8. Department of Government Factories 9. Development Lotteries Board
10. HDFC Bank
11. Janatha Estates Development Board
12. Mahinda Rajapaksa National Tele Cinema Park
13. National Equipment and Machinery Organization
14. National Livestock Development Board
15. National Lotteries Board
16. National Savings Bank
17. Pradeshiya Sanwardena Bank
18. Peoples Bank
19. Regional Development bank
20. Selacine Television Institute
21. Sri Lanka Ayurvedic Drugs Corporation
22. Sri Lanka Cashew Corporation
23. Sri Lanka Exhibition and Convention Bureau
24. Sri Lanka Handicraft Board (Laksala)
25. Sri Lanka State Plantation Corporation
26. State Development and Construction Corp.
27. State Engineering Corporation
28. State Mortgage & Investment Bank
29. State Pharmaceuticals Manufacturing Corporation
30. State Printing Corporation
31. State Timber Corporation