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Sri Lankan Airlines - The third largest loss making state enterprise

The Sunday Leader quotes Advocata Institute's report on State of State Enterprises:

The learnings from the previous Strategic Planning Exercise of SriLankan Airlines is particularly relevant at present, considering that the airline was the country’s third-largest loss-making State-Owned Enterprise (SOE) from 2006 to 2015 (according to Advocata Institute’s report – The State of State Enterprises in Sri Lanka).

These losses accounted for over a fifth of the total losses of the country’s SOEs (categorized as strategically important by the treasury) from 2006 to 2015, based on the Advocata report.

More on the Sunday Leader

On Sunday Leader : SL has a long way to go in removing para-tariffs

The Sunday Leader quotes an Advocata Institute event on attracting Foreign Direct Investment (FDIs):

think tanks and economists lament that Sri Lanka has a long way to go in removal of para-tariffs (taxes over and above normal tariffs) and trade liberalization to make Sri Lanka a haven for investments. 

To attract Foreign Direct Investments (FDIs) for Sri Lanka, its burgeoning Indian Ocean Island economy, should cut barriers to trade and investment, top trade economist Prof. Prema-Chandra Athukorala said at a forum organized by Advocata Institute, a Colombo-based free market think tank.

“This would form a natural progression from garment manufacture, on which the country is now heavily reliant. Sri Lanka’s protectionist trade policy and erosion of confidence in the legal system are key factors that have discouraged investors resulting in a decline in Sri Lanka’s share in world manufacturing exports from around 2000,” he said.

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Sunday Leader on Deshal's lecture : High govt borrowing crowding out private investment

From the Sunday Leader

Continuous high deficits and cumulative public debt has been one of the driving factors behind the Indian Ocean Island economy’s macroeconomic volatility is adversely affecting the investment climate, one of Sri Lanka’s budding economist said recently.

“High government borrowing levels influence higher interest rates, crowding out private investment. Recent BoP (Balance of payment) weakness has been largely influenced by external debt repayments with implications for the depreciation of the Sri Lankan Rupee. At other times fiscal expansion drives imports, contributing to BoP stress and depreciation of the Rupee. Episodes of inflation in the past were influenced by then Central Bank’s accommodative monetary policy to ease stress on government debt servicing,” said Senior Economist Deshal De Mel at a public forum.

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Advocata Report on SOEs makes an impact at Chamber event

 Photo Courtesy  Kithmina Hewage   

Photo Courtesy Kithmina Hewage 

From Dailymirror.lk:

According to the minister, a top corporate sector CEO has also been appointed to lead the Public Enterprise Board but fell short of disclosing who the official was. The minister said he was in the audience leaving the participants to guess.

According to Advocata, an independent policy think tank, 55 strategically important SoEs in Sri Lanka have made a cumulative loss of Rs.636 billion during 2006 and 2015.  The cumulative profit of the profitable SoEs during the same period has been Rs.530 billion, excluding the Employees’ Trust Fund.  The statement by the minister suggests that the government is ready to go the whole hog in privatizing both the strategic as well as non-strategic SoEs despite the immense political risk forthcoming.  Speaking at the final session under the theme titled, ‘The Future of Public Enterprises’ Samarawickrama said the government had reached the final leg of entering into a public-private partnership (PPP) to restructure the loss-making national carrier, SriLankan Airlines but did not disclose the party involved.

Meanwhile, Chief Opposition Whip and Janatha Vimukthi Peramuna Leader Anura Kumara Dissanayake said if the government could take over the liabilities of SriLankan Airlines prior to the sale of the carrier to a private party, they should also be able to take over the assets and run the airline. 

From EconomyNext.com

SOEs were used to give off-budget subsidies and they borrowed from banks, pushing up interest rates and depriving funds and raising the borrowing costs of small enterprises.

Although some SOEs made profits, they do not reflect the returns for the investments made. Anushka Wijesinghe, Chief Economist at the Ceylon Chamber of Commerce, said that a report by Advocata, an independent think tank, found that from 2006 to 2015 it cost taxpayers Rs640 billion.  

A part of the losses made by SOEs were financed by the budget. 

"That means the government has to find tax revenues. Or else, the government has to borrow the money domestically or from abroad. 

"These debts also have to be repaid by the people through future taxes. One way or the other the people have to bear the financial cost of these losses."

Advocata Institute's Report on SOEs is available in our research section.