SLT reforms a key confidence building measure

The Government has announced that it will go ahead with the restructuring of Sri Lanka Telecom (SLT) which entails further privatisation of shares currently held by the State. Segments of the opposition have been harping on long outdated arguments, citing national security concerns as a reason against this much needed move.

In March this year the cabinet of ministers listed SLT among several State-owned Enterprises (SOEs) to be re-structured. SLT, which was previously fully owned by the State, was partially diversified in 1997 as part of a major reform in the telecommunication sector. Today, the State owns 49.5% of the company which is the market leader in fixed line telecom services in the country and which also operates the second largest mobile service provider.

The partial privatisation and opening of the telecom sector to private sector competition remains one of the success stories of economic liberalisation in the country that has brought in enormous benefits for the whole economy and individual consumers. The telecommunications service which began in 1896 when Sri Lanka was a British colony was first liberalised in the 1980s when the Department of Telecommunications was separated from the postal service. Even then the telecommunications sector failed to operate as a commercial entity. The Department faced all the trappings of the Government owned business entity with political interference and selective patronage. In the early 1980s, it was found that ‘38% of telephone lines in the Greater Colombo area were out of order at any given time’ and the applicants on the waiting list for telephones exceeded the number of existing lines, and waiting periods were on average 10 years.

This situation changed under the President Chandrika Kumaratunge administration when the Government signed the World Trade Organisation agreement which led to reforming the telecom sector. The initial reforms saw the partial privatisation of SLT, entry of private mobile operators and the creation of a robust regulator. The independent regulator monitors the competition within the sector and is tasked to advise the Government on telecommunications related issues. One of the impediments to this competition has been the partially State owned SLT and its mobile provider Mobitel having an undue advantage. The regulator also, despite needing to be an independent entity, like any other Government institution, has been subjected to political interference.

Due to the Government being the largest shareholder of SLT, each Government since 1997 has also interfered in its operations. The Chairperson of SLT has often been a political appointee. As a result, rather than accruing the benefits of privatisation and competition the telecom sector has once again become stagnant.

The divestiture of the rest of the shares owned by the Government and truly making the telecom sector independent will give a much-needed boost to the economy. It is time for courageous decision making as done in the 1990s. Even at that time the same arguments of national security and selling national assets were highlighted to stifle the reform process. The labour unions within the telecom sector also were a significant barrier to the liberalisation process.

Anti-full-privatisation camp’s assertion that State ownership must be retained is because SLT is a key partner of the South East Asia–Middle East–Western Europe optical fibre submarine communication cable system. It will be interesting to see how advisors to the sale of SLT  will handle this issue.

Due to smart policy making Sri Lanka was blessed to have a robust telecom sector at a crucial time of its economic development. It is vital that similar prudent policy making is done ignoring the usual cacophony of opposition. Getting the liberalisation in the telecom sector right will be an important boost to the much-needed reforms in the rest of the State-owned Enterprises.