Survey finds 81% of Sri Lankans claim that state enterprises do not provide enough services to justify losses

First appeared in Economy Next, Republic Next, Daily Mirror, Daily News, and Daily FT.

A door to door public opinion poll conducted earlier this year covering 855 respondents in 8 provinces of Sri Lanka reveal that an overwhelming majority of Sri Lankans believe that the losses sustained by State-Owned Enterprises are not justified, compared to the services they provide.

The poll found no significant differences among income, gender or socio-economic groups. Respondents from the Central Province were more likely to believe that the services provided justified losses, with 39% holding this opinion. Those from the Southern and Western Provinces were least likely to believe that the services justified losses, with only 6% from the Southern Province and 12% from the Western Province saying the losses were justified.

According to the Third Report of the COPE, the 18 SOEs with financial statements investigated in the report made a net loss in 2018 amounting to Rs. 61 billion. The report highlights that the Ceylon Petroleum Corporation alone made an enormous loss of Rs. 105 billion in 2018, while the National Water Supply and Drainage Board incurred a loss of Rs. 505 million, and Elkaduwa Plantation Ltd. incurred a loss of Rs. 33 million. Of the 23 institutions being examined, five were found to have annual losses over Rs. 2 million, while another five did not have end-of-year financial statements to present.

A recent report by the Advocata Institute “The State of State Enterprises in Sri Lanka - 2019” highlighted that SOEs are vulnerable to mismanagement and corruption because of potential conflicts between the ownership and policy-making functions of the government, and undue political influence on their policies, appointments, and business practices. The report recommended that the government actively engage in strengthening SOEs and their service delivery by compiling a comprehensive list of all SOEs and setting basic reporting procedures; strengthening COPE and COPA; and implementing the internationally accepted Principles of Corporate Governance.

The complete survey can be accessed here.

Advocata Institute welcomes new selection committee for State Enterprises

First appeared in Sunday Observer, Daily Mirror, Lanka News Web, Daily FT , Daily News and The Island

COLOMBO, Sri Lanka — Advocata Institute welcomes the newly appointed selection board to screen appointments for State-Owned Enterprises (SOEs). The attention given to the massive losses incurred by SOEs in Sri Lanka and the new government’s commitment to making SOEs profitable is to be commended. Distancing politicians from SOE boards is a good first step towards improving accountability and independence in SOEs.

Sri Lankan SOEs are in dire need of reform. The country has an excessive 527 enterprises, a list that covers a convoluted web of subsidiaries and sub-subsidiaries. Tracking the financials of these enterprises is a mammoth task that is yet to be undertaken. The Ministry of Finance tracks the financials of only 55 ‘Strategic SOEs’ and the losses accumulated by what is only 10.4% of all enterprises amounts to a staggering Rs. 156,734 million, only for the year 2018. 

These losses are facilitated by weak governance systems where SOEs have limited checks and balances placed on them. The lack of oversight and accountability has meant that these SOEs are vehicles for corruption. Politicians are able to use SOEs as an opportunity to grant jobs and distribute perks for political capital.

Screening appointments to state enterprises by an independent panel is a step in the right direction, and would hopefully translate into responsible management of taxpayers money in these SOEs. The Advocata Institute welcomes further SOE reform detailed in the President’s manifesto to consolidate state enterprises and establish a National Enterprise Authority. 

We hope the government would turn its attention to further reforms that strengthen SOE governance, such as compiling a comprehensive list of entities through the Department of Census and Statistics, establishing a framework for monthly reporting on key performance indicators, and incorporating the internationally accepted principles of corporate governance in the management of these entities.  In addition to this, the Advocata Institute urges the government to open committee meetings to the public to increase scrutiny and accountability. 

The Advocata Institute wishes to extend our congratulations to the newly sworn-in President Gotabaya Rajapaksa, and Prime Minister Mahinda Rajapaksa. We wish the President,  the Prime Minister and the new government the best in their efforts to establish meritocracy, improve government efficiency and promote prosperity. Advocata Institute looks forward to engaging with the new government with public policy ideas to ensure economic freedom and prosperity for all Sri Lankans. 

Advocata supports recommendation to allow AG dept representation at COPE proceedings

First appeared in Daily FT, Daily Mirror, Lanka Business Online, Daily News and Ceylon Today

Advocata welcomes the recommendation to include representatives of the Attorney General’s (AG) Department at Committee on Public Enterprises (COPE) proceedings and urges the government to prioritise this suggestion. The third report of the COPE was presented to the parliament on the 23rd of October, 2019. While presenting the latest report, its chair Hon. Sunil Handunetti MP requested the speaker to allow the AG department representatives to observe the proceedings of the COPE in efforts to expedite the accountability of those responsible. 

“With the current burden of debt Sri Lanka is holding onto, we cannot afford to continue to bail out loss making SOEs. The CPC loss of Rs. 105 billion needs to be inspected and COPE along with the government of Sri Lanka needs to ensure that our treasury does not continue to bail out these SOEs as our fiscal capacity cannot continue to sustain this.”

— Dhananath Fernando, Chief Operating Officer, Advocata Institute

Currently, Sri Lanka’s debt amounts to 82.9% of GDP (Ministry of Finance Annual Report, 2018, Provisional Data). With domestic debt amounting to 41.6% of GDP (Ministry of Finance Annual Report, 2018), our treasury cannot sustain annually bailing out loss making SOEs. Advocata strongly believes that Sri Lanka needs to reduce waste that happens by way of SOE losses, corruption and monumental investments with poor rate of return. 

The COPE is a key committee that oversees SOEs in Sri Lanka.  The duty of the Committee is to examine the accounts of the Public Corporations and of any business undertaking vested in the government. The third report of the COPE highlights that the Ceylon Petroleum Corporation made substantial losses of Rs. 105 billion in 2018. Furthermore, it also reveals that losses made by the National Water Supply and Drainage Board amounted to Rs. 505 million  and losses made by the Elkaduwa Plantation Limited amounted to Rs. 33 million. 

Since the opening of COPE proceedings to the media in August 2019, there has been a significant increase in scrutiny of the conduct and financials of loss making State Owned Enterprises (SOEs) in mainstream discussions. This has promoted the transparency of the hearings as well as accountability of the respective SOEs and the COPE to the final decisions of these sessions. 

Advocata Institute’s 2019 report, “The State of State Enterprises: Systemic Misgovernance”, highlighted the imminent need of strengthening COPE as a means of managing the losses and misconduct by SOEs. Ensuring that there is representation from the Attorney General’s department at COPE proceedings will fortify that the recommendations of the proceedings will be implemented. 

Advocata Institute urges that further reform be considered seriously in efforts to improve structural failings and misgovernance that promote a breeding ground for corruption in Sri Lanka’s state sector. Advocata urges that the government opens committee proceedings to non parliamentarians;  specifically for technical experts, to bring in industry knowledge and scrutiny. 

Key Points:

• Advocata welcomes the recommendation to allow AG department officials to observe COPE proceedings. 

• Opening COPE proceedings to the media brought about substantial scrutiny of SOEs conduct and losses which is essential to ensuring that the recommendations of the COPE reports are adhered to.

• The duty of the COPE is to examine the accounts of the Public Corporations and of any business undertaking vested in the government.

• Sri Lanka’s debt amounts to 82.9% of GDP. With domestic debt amounting to 41.6% of GDP, Sri Lanka fiscal capacity cannot sustain the bailing out of loss making SOEs, annually. 

• Advocata urges the government to further consider reform to strengthen the COPE. We recommend that COPE proceedings be open to non parliamentarians;  specifically for technical experts, to bring in industry knowledge and scrutiny.

Inviting media to COPE meetings will help increase accountability of COPE and SOEs: Advocata

First appeared in Sunday Observer, Daily Mirror and Republic Next

“State owned enterprises are a vehicle of large scale corruption in Sri Lanka that hasn’t caught public attention. Advocata’s latest report on SOEs highlights some of these abuses documented by COPE.

Adocata’s 2019 report on The State of State Owned Enterprises, highlights some of these abuses documented by COPE. Opening meetings to the public is a good first step to ensure that people understand the massive abuses by SOEs done by using taxpayer money! We urge the government to consider further reform to strengthen COPE and promote accountability of SOEs”

— Dhananath Fernando, Chief Operating Officer Advocata Institute

In an attempt to promote transparency and accountability, the hearings of the Committee on Public Enterprises (COPE) will be open to the media. The government has enforced this timely initiative in a greater attempt to promote accountability of State Owned Enterprises. The Speaker, Hon. Karu Jayasuriya MP has officially announced the ceremony to mark the opening of the COPE sessions to the media, and should be commended for this decision.

The COPE is a key committee that oversees State Owned Enterprises (SOEs) in Sri Lanka.  The duty of the Committee is to examine the accounts of the Public Corporations and of any business undertaking vested in the government. Although their reports thus far have lacked comprehensiveness, they have examined a limited number of issues in a few institutions, and are a devastating critique on the state of governance. 

Advocata Institute’s 2019 report, “The State of State Enterprises: Systemic Misgovernance”, highlighted the imminent need of strengthening the COPE and COPA (Committee on Public Accounts; the second financial committee whose duty is to examine the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure). The report recommended that COPE and COPA proceedings be opened to the media and the public in efforts to enhance the transparency of financial management of public institutions and hold state institutions to account. 

Advocata Institute urges that further reform be considered seriously in efforts to improve structural failings and misgovernance that promote a breeding ground for corruption in Sri Lanka’s state sector. We insist that the government opens committee proceedings to non parliamentarians;  specifically for technical experts, to bring in industry knowledge and scrutiny. 

Key Points:

• Advocata welcomes the decision to open COPE meetings to the media.  

• The duty of the COPE is to examine the accounts of the Public Corporations and of any business undertaking vested in the government.

• Advocata Institute’s 2019 report, “The State of State Enterprises: Systemic Misgovernance”, highlighted the imminent need of strengthening the COPE and COPA.

• The report recommended that COPE and COPA proceedings be open to the media and public in attempts to promote transparency and accountability.

• Advocata urges the government to further consider reform to strengthen COPE and COPA.