Treasury Secretary Mahinda Siriwardena – Pic by Lasantha Kumara

•  New SOE legislation and Public Financial Management Act to provide overarching legal framework for the governance of SOEs going forward
•  Govt. in the process of setting up State-held Holding Company to take ownership of SOE assets

Treasury Secretary Mahinda Siriwardena yesterday warned it was essential that there is no holdback of reform of State Owned Enterprises (SOEs) and the Government is putting in place new legislation to lock in this critical step to ensure sustainable socio-economic growth in the country.

“The SOE reform measures already put in place and those in the pipeline will help minimise their losses while providing efficient services to the public. Going forward, the transformation of existing SOE from fiscal burdens to value creators through such reforms is vital for them to emerge as facilitators of Sri Lanka’s progress onto the high economic growth categories rather than serve as a stumbling block,” said Siriwardena.

“Hence it is essential that there is no holdback of this reform in the future, as the general public and the workforce have been and could be easily deceived by short term selfish and falsified so called gain that could be gained by reversing progressive reforms,” the Treasury Secretary told the Asian Development Bank organised Serendipity Knowledge Program focussing on ‘SOE reform: Challenges and Opportunities’.

“The proposed legislative measures will then lock in some of these reforms. However, it is essential that there is greater public understanding of the need for such reform and why any reversal of the same would be detrimental to public interest in the long run, either directly or indirectly,” added Siriwardena in his address which explained Sri Lanka’s approach to SOE reform.

He said that the SOE restructuring program is a crucial element of the overall economic reform effort. “Given the extremely challenging fiscal conditions, the Government has no space to provide transfers to fund SOE losses any longer, whereas ideally, the Government should receive more tax revenues or dividends from SOEs in the hands of more efficient management,” he said.

“Therefore, a business as usual approach is no longer tenable,” Siriwardena stressed, adding many ADB studies have indeed discussed in detail the overall efficiency gains experienced by Southeast Asian, East Asian and increasingly South Asian economies through prudent approaches to SOE reform and creating a conducive environment for private sector activities in Sri Lanka.

He also revealed that the proposed SOE legislation and the Public Financial Management Act will provide an overarching legal framework for the governance of SOEs going forward.

It was revealed that the Government is also in the process of setting up a Holding Company that will eventually take ownership of SOE assets. “This will enable professional management of such assets and ensure corporate governance standards are upheld. The Holding Company will be Government owned and will be accountable to the Finance Ministry,” he added.

These moves are under governance and legislation reform concerning SOEs. Siriwardena also referred to four other key reforms - pursuing cost-reflective pricing, Balance Sheet restructuring, introduction of competition in key sectors, and divestment of non-strategic assets.

The keynote at the forum was delivered by Sweden’s former President of Stattum and Industry Ministry Director Dag Detter. ADB South Asia Director General Kenichi Yokoyama, Country Director Takafumi Kadono and National Planning Department Director General Anuradha Kumarasiri also spoke.

The event saw an insightful panel discussion involving SOE Restructuring Unit Chairperson Suresh Shah, ADB Senior Public Management Specialist Public Sector Management and Governance Sector David Robinett, ADB Director Special Initiatives and Fund’s Office of Markets Development and Public Private Partnership Director Adrian Torres, OECD’s Business and Industry Advisory Committee member and consult to ADB, IFC, OECD and World Bank Anne Molyneux, and Temasek International Director International Relations Christina Choo. It was moderated by Advocate Institute Senior Research Fellow Roshan Perera.

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