decides not to privatise
Mandana Ismail Abeywickrema
government has decided not to privatise government entities. Sri Lanka
Railways, Ceylon Petroleum Corporation, Sri Lanka Central Transport
Board and the Ceylon Electricity Board
which Finance Minister Sarath Amunugama a few days ago
described as "monsters" and unprofitable organisations will
be retained by the government under its new economic policy unveiled
welfare oriented economy that shuns privatisation, has taken the
challenge of making unprofitable public enterprises generate bankable
profit flows greater than the cash value that could be generated
through privatisation. Finance Minister Dr. Sarath Amunugama however
stated that to maintain these institutions is to cause
haemorrhage of government
Amunugama was quick to add that saying no to privatisation does not
mean that the Treasury would keep pumping money to keep these
further, Dr. Amunugama said that in order to achieve the set growth
rates of 6-8% GDP the government would have to look at stringent
reforms and make the institutions self-sufficient.
economy policy states that the government will also encourage
competition by inviting private sector entry into the specific sectors
to promote healthy competition. Immediate priority will be placed on
the re-engineering of the CEB with restructuring of its balance sheet,
the operation of independent business units within the CEB and
implementing a long term power generation plant to meet the country's
Strategic Enterprise Management Agency (SEMA) has been given the task
of spearheading efficient management of the public enterprises.
further, Dr. Amunugama said that the government hopes to build a
sustainable national economy giving priority to agriculture,
fisheries, livestock, small and medium scale enterprises (SMEs) and
went on to say that the country's first quarter performance, as stated
by the Central Bank is encouraging.
of economic challenges, Dr. Amunugama highlighted that 40% of the
contribution to the country's GDP comes from the Western Province
while the contribution of most of the provinces is less than 10%. This
gross disparity, he said has created a sense of two countries, adding
that the government would look at fiscal policies that could bridge
for the agriculture sector, which would receive greater attention by
the government, a concept of national crops would be implemented.
Amunugama said that the government will look at being self sufficient
in paddy, potato, onion and sugar cane production.
of infrastructure, Dr. Amunugama said that the government would pay
particular emphasis on the power and energy sector, adding that roads,
railway and the transport sectors would follow suite.
for the gap in income and expenditure, Dr. Amunugama said that the
government is now working closely with the revenue collecting
authorities - Inland Revenue, Customs and Excise Departments - in a
bid to increase revenue, which he claimed has seen an increase in the
past few months. When asked about the position of the Treasury as far
as meeting subsidies on fuel, gas, flour, etc., Dr. Amunugama
maintained that although the country's hard earned foreign exchange is
spent on them, the government would continue with it for the time
for provisions for such payment, Treasury Secretary, Dr. P. B.
Jayasundara said that the government could meet the payments as funds
budgeted for certain sections like the Rs. 7 billion under the VRS,
could be utilised for subsidy payments.
Monetary Fund (IMF) Head, Jeremy Carter told The Sunday Leader that he
would like to see a detailed background to the government's economic
policy as certain sections lacked clarity.
also maintained that even the clause of non-privatisation lacks
clarity as the government has not addressed the gamut of issues
surrounding it, but merely states that 12 public enterprises would not
stance that Carter as well as his counterpart in the World Bank, Peter
Harrold maintain is that government subsidies are not a long term
solution as the large amounts of money spent on them could have been
used for other more important projects.
government's decision to ban the use of polythene has come under
attack by leading polythene manufacturing and importing companies
voicing their opinion that this move would cause severe losses to the
more than one million people currently dependent on the polythene
industry in Sri Lanka, this ban would increase unemployment in the
country followed by severe losses to the companies dealing in
polythene as well.
to The Sunday Leader, Managing Director, D.K.W Plastic Industries, D.
K. Weeratunga noted that this ban would affect the entire packaging
industry as well as many companies today that packed their products
do not only manufacture sili sili bags as our company also deals in
other polythene packaging like the packing of pouches, cutlery packing
for SriLankan, packaging of various types of spices and the
manufacture of garment polythene bags. If the government is going to
ban polythene it will affect the entire packaging industry as well.
The manufacture of sili sili bags is only 15% and the remaining 85%
deals in the packing of other products with polythene,"
to Weeratunga, more than 40% of his workforce would be forced into
unemployment and the existing machines that the company had would have
to be sold for scrap or modified with additional parts so that it
could be used for other purposes.
added that since several polythene manufacturers exported to the UK
market as well this would severely affect the foreign exchange coming
into the country.
the government says that environment friendly bags can be used instead
of polythene bags what about the packaging industry? How are we going
to continue our business with the packing of spices and cutlery for
other companies," queried Weeratunga.
Nissico Traders and Industries, Shabbir Abbas told The Sunday Leader
that many people used polythene bags everyday and these bags were the
cheapest to manufacture.
the high cost of living that the country currently faces how can
people afford to buy other bags when polythene bags are the cheapest?
The machines that we currently have are for the manufacture of
polythene bags only and it would cost us severely if we were to
discontinue using them," said Abbas.
Environment Minister, A. H. M. Fowzie, told The Sunday Leader that a
tax would be charged on the import of polythene and that this money
would be used for other alternatives like buying new machines to make
environment friendly bags and organising awareness programmes.
we succeed in this, the government will 'completely ban' the use of
polythene within the next two years. One of the alternatives that
would be used instead of polythene bags would be environment friendly
bags. Used in Bangladesh, these bags are extremely cheap and are user
friendly as well. They are also 'wash and use' bags so that people do
not have to spend money on buying several different bags," the
destroy the existing polythene bags if the ban is implemented in two
years, the Minister said that there were several ways that these bags
could be destroyed. "One of the alternatives is that adhesive
could be added to these polythene bags and within three to four months
these bags would be completely destroyed," the Minister said.
light for Multivision
Commercial High Court on June 23 appreciated the application made by
Ruhuna 2001 Multivision (Pvt) Ltd. seeking the permission of court to
publish an advertisement in the newspapers correcting the previous
advertisements placed in the newspapers by petitioner - Chalmway
Multivision (Pvt) Ltd. previously filed a motion in court on June 11,
whereby Multivision drew the attention of court to the newspaper
advertisements published by Chalmway Proprietary Limited on May 27 and
29, 2004 whereby Chalmway Proprietary Limited it said took undue
advantage of a mistake in the proceedings of court on a previous date
in recording the undertaking given to court by Multivision.
Proprietary Limited in their objections to Multivision's motion did
not state that they had been mislead by the typing error in the
in their counter objections state that the said newspaper
advertisements were wrongful and malafide. Multivision further states
that Chalmway Proprietary Limited thereafter proceeded to regularly
publish a series of advertisements without any sanction and approval
of court, without any notice agreement or approval of Multivision and
without making any correction to the pervious inaccurate and
misleading advertisement published by them. Multivision further stated
that the advertisement published by Chalmway Proprietary Limited was
intended to give maximum possible prominence and were intended to
create maximum possible prejudice, disadvantage and damage to
Multivision it's directors, officers and employees and to impose undue
pressure and influence on Multivision it's directors, officers and
was noted that Gamini P. Gunawardena has only been appointed an
alternate director to an existing director of Multivision. His
appointment is purely to have the necessary representation in the
board and that all decisions are within the current board of directors
court held that Multivision was at liberty to publish the proposed
advertisement in any manner that it thinks fit. Ruhuna 2001
Multivision (Pvt) Ltd. was represented by S. L. Gunasekera, Chanaka De
Silva instructed by Sudath Perera Associates. Chalmway Proprietary
Limited was represented by K. Kanagiswaran PC with Avindra Rodrigo
instructed by F. I. & G De Saram.
we say no to privatisation?
by the example of the developed countries, both the PA and the UNF
returned state managed enterprises to the private sector for an
economic boost and to raise money to bridge the budget deficits. The
new generation politicians in the UNF whose basic need for economic
miracles is no less pressing, discovered at least in part how to hum
believe that the dullest state owned company, the heaviest loss making
utility, or the least efficient public sector service could be
transformed almost overnight into a viable entity and contributor to
the national coffers by saying the magical word privatisation. In Sri
Lanka privatisation has not been without controversy, or the
occasional hiccup. The JVP exploited this in the run up to the
election by creating a picture of victimisation of the common man and
saying that privatisation should stop.
rural poor believed the JVP story because the UNF did not communicate
effectively that state enterprises are burden on the tax payers and a
drag on society due to years of mismanagement. In Sri Lanka however
the positive benefits of privatisation in terms of revenue, raised new
jobs, created productivity gains and increased investment.
market economy the nation is best served with is when the government
leaves the production of goods and services, which meet market,
demand, in the hands of the private enterprise. Why? Because the
entrepreneurs and the capitalists have a right to the profits that
their enterprises generate. In this scenario the more innovative the
initiative the larger the resources required, more hazardous the risk
and higher the profits. However, the right to private property is not
an absolute right. It should contain the responsibility to use private
property not only to enhance wealth, but also to meet the social
obligations of the community.
by virtually saying no to privatisation we will find it hard to come
out of the current state of indebtedness and low capita income and
above all run the risk of isolating Sri Lanka from the global map.
What we instead need is a robust process, which prevents any
manipulation from the state or individuals while retaining all
essential services with the state.
privatisation refers to the sale of majority stake in a state owned
enterprise and with it the power to manage the enterprise. Private
sector professionals who have managed state owned enterprises say it
is impossible for those who have never had to tailor their commercial
instincts to suit the whims of government ministers to realise just
how much it means to escape from their political masters and their
supporters. Therefore, the importance of the government carrying out
an effective role as a facilitator of growth rather than the engine of
growth has been recognised by a government for the first time since
independence, this augurs well for the development of the private
sector. In fact, even people in communist countries have realised that
governments should not be in business. They have no business to be in
business. Their job is to facilitate and regulate business and also
ensure that the interest of the poor is safeguarded.
South Asia, privatisation has become a word with a considerable
cachet, one that encapsulates the advances made by state owned
industries, which have moved into the private sector. Further, the
increased interest creates awareness amongst the general public with
regard to the benefits of share ownership. It implies streamlined and
efficient business, achieving big profits and finding better ways to
it must not be forgotten that it is not merely the act of moving the
public to the private arena which causes these things to happen. On
the contrary, it is the sustained, hard work at every level of a
company, which is required to ensure that they compete effectively.
Becoming private itself is no immediate panacea for improvement. In
fact unaccompanied by anything strategic, it would very well result in
additional travail. Privatisation according to many bureaucrats
brought a cultural revolution, bureaucratic hierarchies were broken
down, recruitment and promotion policies re-written and over and above
all this, managers were encouraged to manage. A former Chairman of
British Telecom, Sir G. Jefferson once said, "they found that the
quality of their people was as good as that of the workers in the
private sector, but state ownership had never allowed them to realise
their full potential."
suggests that public ownership generally leads to confused objectives
for a business because social and commercial objectives get
intertwined to the detriment of both. Privatisation gives management a
focus, but it also intoxicates the factory floor, even in countries
like Britain where there is little record of mass participation in
equity markets and where prior to the sales of stocks, share ownership
was confined to only a tiny fraction of the population. Again there is
no real magic in the reasoning; it has been found that when employees
see the management being given the right to manager, and seizing the
opportunity, they begin to respect it and respond themselves.
former Chairman of Canadian Airlines once said, "I am a believer
in the idea that public companies are a lot freer to be innovative and
entrepreneurial than government owned companies. Since we've come up
with some very innovative ideas for financing equipment. We've become
a lot more customer focused. In the long run, I believe the public
will be better served because of our privatisation."
is a success story and a big business not only for governments and
corporations concerned but for the investment banks, management
consultants, brokers, securities, houses and law firms - indeed for
all who have a part to play in keeping the financial system flexible
and mobile. Now the world map of privatisation shows that the policy
is being considered in every corner of the world, including,
astonishingly, some communist regimes such as Cuba and Poland.
the final analysis, some of the privatisation of our state monopolies
has taken considerable time, however, the effort in some instances has
been a tremendous success. However, for us to benefit from
privatisation we need to ensure that the privatisation proceeds are
channeled for capital investments, because they add to the capacity of
the economy and thus promote growth. Therefore by saying no
privatisation we may dent business confidence and our growth
also need to remember that free market capitalism motivates not only
the mega entrepreneur, but also the small and medium enterprises in
the country. This approach to development leverages powerful forces to
increase capital efficiency.
there is a short term down side to this success story. That the
working class low income groups invariably has to make sacrifices and
be happy with the pittance coming their way until the wealth that
accumulating trickles down to them. This is where state intervention
is required to sustain the welfare measures in the absence of private
sector participation or to prevent exploitation of the poor.