Local SOEs should come under singular management - LKI Director
By Rajiesh Seetharam
Sri Lanka's State-Owned Enterprises (SOEs) should come under professional management by a single entity to make them more sustainable in the long-term, similar to how Temasek Holdings manages investments in SOEs in Singapore, according to Lakshman Kadirgamar Institute (LKI) Executive Director, Ganeshan Wignaraja.
Speaking at a webinar organised by the Institute of National Security Studies Sri Lanka, Wignaraja listed some of the important measures the Government should take to revive the economy in the post-COVID period. These include the sale of non-strategic assets when market conditions are appropriate, restructuring SOEs, increasing Modern Services exports, digitalising the public sector, a proper tax administration, boosting domestic agriculture and operating the Samurdhi system more efficiently.
Elaborating on the restructuring of SOEs, he highlighted the case of Temasek Holdings in Singapore. When Singapore gained independence in 1965, the Government had ownership or joint ownership of various local companies. In 1974, Temasek was incorporated under the Singapore Companies Act as a holding company owned by the Government, to hold and manage the assets previously held by the Government. The goal was for Temasek to own and manage these investments on a commercial basis, allowing the Ministry of Trade and Industry and Ministry of Finance to focus on policymaking.
Wignaraja stated that Sri Lanka should integrate more with Asian Markets, as investors look for access to large markets, and Asia is expected to come out of the recession sooner than others.
"The world economy may face a recession similar to the 1929 Great Depression. IMF reports world growth to come down to negative minus 3.3 per cent. The IMF Head recently stated that they might have to revise it further down to minus 4-5 per cent. It is worse than the 2008 financial crisis," stated Wignaraja.
"For Sri Lanka, all our economic partners like China, India, Japan, Europe, and USA are seeing negative economic outlooks; and the crises are not going to reverse quickly. We are likely to see a U-shaped recovery with a long period at the bottom of the 'U'. The US is our major export market, and China is one of the biggest providers of assistance in infrastructure.
"On the whole, Sri Lanka needs to maintain a balanced foreign exchange policy, however with greater integration with Asian countries, as Asia seems to be coming out of the recession before western countries. Sri Lanka needs more integration with Asian countries to attract large investors.
"Sri Lanka may face a wide range of economic issues in 2020. The Central Bank states Sri Lanka is expected to grow at 1.5 per cent. Sri Lanka might face hard times for exports due to rising protectionist policies. India has put on a stimulus package with 10 per cent of its GDP, Bangladesh with around 5 per cent of its GDP. The Central Bank of Sri Lanka has taken measures like cutting interest rates, which is good; however, the Government has to take other measures, like restructuring State-owned enterprises and selling non strategic assets, which are necessary, as it is a strain on the national budget.
Wignaraja added, "The development of Colombo Port City is a good opportunity for Sri Lanka to increase its modern services exports like ICT. To attract investors, Sri Lanka needs to cut down on red tape and digitalise the public sector."