New PPP framework with ADB, WB assistance

Public Enterprise Board in the offing:

The Government is working with the Asian Development Bank (ADB) and the World Bank to create a strong public private partnership (PPP) framework which would lay out clearly the policy, legal and institutional aspects of contracting PPPs.

“This will go a long way in creating the environment which is conducive for PPPs. Several countries, including Chile, Brazil, Malaysia, Peru and South Africa have developed comprehensive frameworks for encouraging PPPs in development projects,” Development Strategies and International Trade Minister Malik Samarawickrama said. He was speaking at the Sri Lanka Economic Summit 2016 organized by the Ceylon Chamber of Commerce last week.

State-owned enterprises are a part of public wealth and are supposed to be for the benefit of the people of the country. Therefore, it is necessary to set up a framework to have State-owned enterprises (SOEs) managed and operated as efficient commercial enterprises, based on prudent commercial principles, ensuring adequate returns equal to or more than the comparable commercial enterprises in the private sector, he said.

“Therefore, we will introduce a new Public Enterprise Act shortly comprising members of the private sector, public sector and trade unions, and will be chaired by a private sector professional.”

The Government has planned some sweeping reforms centred on private-public-partnerships to reduce debt and improve public revenue and the reforms are to be presented to the pubic sortly.

“Prime Minister Ranil Wickremesinghe in his forthcoming presentation of the Five-Year Plan will set out a road map for State-Owned-Enterprise (SOE) reform and the disposal of non-strategic state assets,” he told a packed gathering of business leaders, and foreign delegates.

Speaking on the theme ‘The future of public enterprises’, Minister Samarawickrama said, “it is no longer viable for the government to allow continued loss making in the SOE sector. The lack of fiscal space, amplified by the debt burden, simply does not allow for this.

“Through a combination of restructuring and sale of non-strategic private assets, the government is determined to address effectively this long-standing problem, which has been a major drag on the development prospects of the country.”

Among the government’s immediate reform plans are to list some of the enterprises on the Colombo Stock Exchange. “We will even look at some of the enterprises which are profitable. Over the next few months it is our intention to dispose of hotels, Lanka Hospitals and prime commercial property in Colombo’s business district via the Stock Exchange or through joint ventures.”

Various options are also being considered for Sri Lankan Airlines on an urgent basis. “We are also in the process of finalizing PPPs or Joint Venture arrangements for the Port of Hambantota and Mattala Airport, thereby reducing the heavy debt burden. These transactions will be conducted in an open and transparent manner,” he asserted.

Talking about the base for PPPs, the Minister said given Sri Lanka’s fiscal deficit and debt dynamics, PPPs have an important role to play in implementing the government’s extensive development program. “PPPs have the overarching objective of alleviating pressures on government budgets and allowing the public sector to share risks with the private sector in the provision of public services.

The added advantage of PPPs is the ability to tap into new technologies, innovation and efficiency gains, thereby improving the quality of service.

“There’s evidence to show that productivity gains from PPP projects can range from 10% to in excess of 70% over purely publicly delivered projects. However, it is important to ensure that the risks are appropriately shared between the government and the private providers,” he said.

The sale of non-strategic state assets will have a positive fiscal impact at a time when the government’s finances are being constrained by low revenue and high debt service payments. Where the privatization of an enterprise is not considered in the national interest, the sale of minority stakes in commercial SOEs, including through the stock market, will increase disclosure thereby contributing to the improvement of operational efficiency, Samarawickrama said.

Sri Lanka is to introduce a law for State-owned enterprises and set up a Public Enterprise Board with top executives sourced from the private sector, Trade and Investment Minister Malik Samarawickrema said. - CJ