SOE

Privatization & Public Private Partnerships Of SOEs In Sri Lanka

Arundathie Abeysinghe writes on Colombo Telegraph on SOEs In Sri Lanka,

In many Asian countries including Sri Lanka State-owned Enterprises (SOE) continue to control vast swaths of national Gross Domestic Product (GDP) with the state as their biggest share holder. As such, they control about 1/3 of total enterprise assets and SOEs are larger than their non-SOE peers. There is a great variety among Sri Lankan SOEs. Meanwhile, SOEs in the sectors that are monopolized by the state yield good income and profitability, while those that are not supported by the state record poor performance. To better understand the profitability of Sri Lankan SOEs, a deeper analysis should be done by looking into individual sectors.

Shares of SOEs in different sectors are diverse. The majority of SOE profits are contributed by sectors that are monopolized by them, whereas, sectors which are dominated by non-SOEs are major sources of non-SOE profits. The majority of the SOE profits are contributed by state-monopolized sectors and such SOEs record a respectable rate of return.  At the same time, profitability of SOEs in sectors with less state domination is much poorer.

According to the Treasury Annual Report 2014, at present Sri Lanka possesses 245 State Owned Enterprises (SOEs), of which 55 have been identified by the General Treasury as strategically important SOBEs under the clusters of Banking and Finance, Insurance, Energy, Ports, Water, Aviation, Commuter Transport, Construction, Livestock, Plantation, Non Renewable Resources, Lotteries, Marketing & Distribution, Health and Media.

Read The entire article on Colombo Telegraph

Opinion - Sri Lankan Airlines, sour or to sour?

J. Lorenz writes on Lanka Business Online, about Sri Lankan Airlines:

"Although the government inherited a profitable business in 2008 they successfully managed to run it into the ground due to mismanagement and corruption. The two explanations available are the Jensen and Meckling (1976) theory of ‘principal-agent problem’ and the free-rider problem, both of which concern self-seeking individuals, as discussed at the launch of Advocata Institute at the Lakshman Kadirgamar Institute earlier this month.

Managers of state owned firms are aware that salaries would be paid regardless of performance of the company hence motivation to perform is taken away thereby embodying the free-rider problem. Further, tax-payers would continue to pump money into failing SOEs whereas a private company would pump their own money into the business risking everything, hence increasing the commitment to perform well. The budget funds given to SOEs in 2014 is equivalent to every household paying 24100 rupees to keep SOEs afloat. This is while around 40% of Sri Lanka’s households earn less than 24000 rupees a month"

Read the entire article on LBO