Sri Lanka economy

Prof. Amal Kumarage, Dr. Saman Widanapathiranage and Mr. Sarath Jayatilaka's insights on $480 million MCC compact projects

The Advocata Institute hosted a public forum on the MCC compact “එම්.සී.සී. ගිවිසුම ගැන ඇත්ත නැත්ත” on the 19th of September, with the aim of separating fact from fiction around this hotly debated topic.

By 2030, the number of vehicles on our roads will triple. Prof. Amal Kumarage, the Head of the Dept of Transport and Logistics Management of the University of Moratuwa, emphasizes the immediate need to improve our public transport systems.


Colombo’s traffic problem has become a serious issue in the past few years. Dr. Saman Widanapathiranage, Deputy Director, Highway Designs at the RDA explains that by 2030, our average speed around Colombo will fall to at least 10 km/h.


Mr. Sarath Jayatilaka, Former Deputy Surveyor General, explains the $67 million land component of the MCC Compact.


Link to full video: https://youtu.be/FZKveXeXQJU

MCC ගිවිසුම ගැන ඇත්ත නැත්ත - Event Video

The Advocata Institute hosted a public discussion on the MCC Compact with technical experts, MCC representatives and the Government to separate fact from fiction around the Compact.

The event was held on the 19th of September at the Lighthouse Auditorium and Lawns.

Local experts offer insights on $480 million MCC compact projects

First appeared in Sunday Morning, Sunday Observer, News First, Daily Mirror and Economy Next

The Advocata Institute hosted a public forum on the MCC compact “එම්.සී.සී. ගිවිසුම ගැන ඇත්ත නැත්ත”  on the 19th of September, with the aim of separating fact from fiction around this hotly debated topic. 

Since 2015, Sri Lanka was engaged in a competitive selection process for the  Millennium Challenge Corporation (MCC) grant. In April 2019, Sri Lanka was awarded a grant from the Millennium Challenge Corporation (MCC) for USD 480 million. Since the awarding  of the Compact, concerns around the agreement had gone unaddressed.

To help provide a public platform for the addressal of these concerns, The Advocata Institute convened an open discussion with experts involved in designing the projects for the MCC Compact, Prof. Amal Kumarage (Head of the Department of Transport and Logistics Management, University of Moratuwa); Dr. Saman Widanapathiranage (Deputy Director, Highway Designs at the Road Development Authority (RDA) and Mr. Sarath Jayatilaka (Former Deputy Surveyor General); MCC representatives, Ms. Jenner Endleman (Sri Lanka Resident Country Director - Millennium Challenge Corporation) and the Government, Dr Jagath Munasinghe (Chairman, Urban Development  Authority). 

The experts highlighted the technical details of the Land and Transport Management projects in the grant followed by a Q&A with representatives of the MCC and the Government. 

Prof. Amal Kumarage explained that out of USD 350 million allocated to the Transport Project, USD 50 million would be spent on Bus Services Modernization. He stated that by 2030, the number of vehicles on our roads will triple and it is crucial for our transport system to reflect this. 

Dr. Saman Widanapathiranage (Deputy Director, Highway Designs at the Road Development Authority (RDA) discussed the Advanced Traffic Management System component in the Transport Project. He stated how average speed in Colombo will reduce to 10kmph by 2030, communicating the urgency of improving the city’s traffic management. 

Mr. Sarath Jayatilaka (Former Deputy Surveyor General) detailed the Land Project in the compact which amounts to USD 67 million of the total grant. Since the Sri Lankan government owns 82% of all land and the remaining 18% land is privately owned, he emphasised the importance of developing a State Land Bank to improve land administration policies. 

Joining the Q&A, MCC Sri Lanka Resident Country Director Ms. Jenner Endleman answered some concerns around the compact. To the question of whether the MCC Compact is linked to military agreements, she answered that MCC has no relation to ACSA or SOFA and that the MCC Compact was ready for signing before the renewal of these military agreements. Another question posed was why the Compact was not available in the public domain and that she stated that itis the MCC’s policy to not share the document prior to it being signed by the recipient government. However, she urged concerned citizens to reach out to the Government to release these documents, as they are in a position to share the agreement. 

“In our 15 year history, we’ve never had a situation where an eligible country has come to us and proposed a grant, our board has accepted it, and that same partner country has not approved it” stated Mr. Endleman addressing questions from the audience. 


Inviting media to COPE meetings will help increase accountability of COPE and SOEs: Advocata

State owned enterprises are a vehicle of large scale corruption in Sri Lanka that hasn’t caught public attention. Advocata’s latest report on SOEs highlights some of these abuses documented by COPE.

Adocata’s 2019 report on The State of State Owned Enterprises, highlights some of these abuses documented by COPE. Opening meetings to the public is a good first step to ensure that people understand the massive abuses by SOEs done by using taxpayer money! We urge the government to consider further reform to strengthen COPE and promote accountability of SOEs
— Dhananath Fernando, Chief Operating Officer Advocata Institute

In an attempt to promote transparency and accountability, the hearings of the Committee on Public Enterprises (COPE) will be open to the media. The government has enforced this timely initiative in a greater attempt to promote accountability of State Owned Enterprises. The Speaker, Hon. Karu Jayasuriya MP has officially announced the ceremony to mark the opening of the COPE sessions to the media, and should be commended for this decision.

The COPE is a key committee that oversees State Owned Enterprises (SOEs) in Sri Lanka.  The duty of the Committee is to examine the accounts of the Public Corporations and of any business undertaking vested in the government. Although their reports thus far have lacked comprehensiveness, they have examined a limited number of issues in a few institutions, and are a devastating critique on the state of governance. 

Advocata Institute’s 2019 report, “The State of State Enterprises: Systemic Misgovernance”, highlighted the imminent need of strengthening the COPE and COPA (Committee on Public Accounts; the second financial committee whose duty is to examine the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure). The report recommended that COPE and COPA proceedings be opened to the media and the public in efforts to enhance the transparency of financial management of public institutions and hold state institutions to account. 

Advocata Institute urges that further reform be considered seriously in efforts to improve structural failings and misgovernance that promote a breeding ground for corruption in Sri Lanka’s state sector. We insist that the government opens committee proceedings to non parliamentarians;  specifically for technical experts, to bring in industry knowledge and scrutiny. 

Key Points:

  • Advocata welcomes the decision to open COPE meetings to the media.  

  • The duty of the COPE is to examine the accounts of the Public Corporations and of any business undertaking vested in the government.

  • Advocata Institute’s 2019 report, “The State of State Enterprises: Systemic Misgovernance”, highlighted the imminent need of strengthening the COPE and COPA.

  • The report recommended that COPE and COPA proceedings be open to the media and public in attempts to promote transparency and accountability.

  • Advocata urges the government to further consider reform to strengthen COPE and COPA.

Advocata commends the government’s decision to shut down SaluSala - a State Owned textile Enterprise

First appeared in Daily News, Daily Mirror, Daily FT, Lanka Business Online, Economy Next, Republic Next, Colombo Page and Sunday Observer

Advocata Institute commends President Maithripala Sirisena’s directive to shut down the loss-making, state-owned handloom enterprise Salu Sala. While we commend this decision, we are also anticipating the official gazette enacting this statement.

The SaluSala, now a white elephant to society, was once the only state textile trading enterprise in the country. As the only provider of textile during the closed economy, SaluSala received heavy protection.

In 2011, the First Committee of Public Enterprises Report (COPE) revealed that for the year 2009/2010, Lanka SaluSala Ltd. has made a loss of Rs. 30 million. The reason for this loss, as identified by the report, was due to salaries paid to staff who had been sent on compulsory leave during the restructuring process of the organisation. However, Advocata has been unable to track the financials of Lanka SaluSala thereafter as there has been no Annual Reports or Performance Reports published and available to the public.

‘A lack of accountability is leading to flagrant abuse within SOE’s. The government must act urgently to prevent it spiraling out of control. Salu Sala is only one of many examples”
— Ravi Ratnasabapathy - Resident Fellow, Advocata Institute

Advocata Institute strongly believes that the state should have no role in running business enterprises using taxpayer money,  particularly in industries with enough private investment and competition. Advocata encourages the government to look at other ‘white elephant’ State Owned Enterprises (SOEs), and divest and exit industries that serves no strategic purpose. Out of 527 SOEs identified by Advocata’s 2018 State of State Enterprises report, only 54 are classified as being ‘strategic’ by the government.

Whilst the policy debate in Sri Lanka on SOEs has focused on ‘privatisation’, many of  Sri Lanka’s SOEs have no commercial purpose, riddled with corruption and mismanagement and, in the core justification of existence, is not attractive to private investors looking for profit making ventures. Advocata urges the government to exit enterprises of  this nature and release the valuable resources they occupy into more productive sectors of the economy, while awarding fair compensation to public sector employees of these enterprises.

In the case of Sal Sala, the Treasury has allocated Rs. 340 million to pay compensation for 217 employees under a voluntary retirement scheme. This is a model the government should consider adopting in cases where paying a compensation is more economically viable than continuing to keep a loss making enterprise afloat. Lanka SaluSala is not the only State Owned Enterprise (SOE) that is a fiscal strain on Sri Lanka’s Economy. Non Strategic SOEs like Sri Lankan Airlines, Lanka Sathosa and Agriculture and Agrarian Insurance Corporation are in need of immediate reform.

Source: Department of Public Enterprises, Performance Reports (2015-2017) and Ministry of Finance - Annual Report (2018)

Source: Department of Public Enterprises, Performance Reports (2015-2017) and Ministry of Finance - Annual Report (2018)

Key Points

  • Lanka SaluSala, a state owned handloom enterprise will be shut down as per orders by the President.

  • Advocata Institute commends this decision and is anticipating the gazette formally enacting this order.

  • The Treasury has allocated Rs. 340 million to pay compensation for 217 employees of SaluSala under a voluntary retirement scheme.

  • SaluSalu has been a “white elephant” for years, and the government has failed to keep track of the financials for this enterprise.

  • The first COPE report in 2011 revealed that Lanka SaluSala Ltd. has made a loss of Rs. 30 million for the year 2009/2010. Annual Reports have not been published thereafter, and the Ministry of Industry and Commerce, which is the designated line ministry has also not published any information on the performance of Lanka SaluSala thereafter.

  • SaluSala is only one of the many SOEs fiscally straining Sri Lanka’s economy, and it is only one of the many SOEs that the government has failed to monitor financials for. Out of the 527 state owned enterprises identified by the Advocata Institute, the government regularly tracks the financials of only 54.

  • While the Advocata commends the government’s decision to close SaluSala, it is equally important that the government conducts a survey of all state owned enterprises in order to establish a comprehensive system of financial monitoring.

  • Other non-strategic loss making State Owned Enterprises in need of immediate reform includeSri Lankan Airlines, Lanka Sathosa and Agriculture and Agrarian Insurance Corporation.

Razeen Sally delivers Lecture on Three scenarios for Sri Lanka's future

Prof. Razeen Sally delivered a public lecture at the Advocata Institute, last week on Sri Lanka's future.  This is the third edition on Advocata's series of public lectures.  The full lecture is now online.  The event was done in partnership with the Echelon Magazine. 

 

From Economy Next:

Sri Lanka had windows of opportunity to change direction in the past, but had 'missed the bus' several times in its post-independence history according to many commentators.

Sally recalled something that is said often about Brazil: "Brazil is the country of the future, it always was and it always will be.

"There is that golden potential out there, but it is never achieved," Sally said.

"Of course Sri Lanka never misses an opportunity to miss an opportunity. I hope that opportunity has not been squandered. It is late in the day, but it is still there."

Sri Lanka's economy did not have enough competition with 'commanding heights' of the economy controlled by oligarchs. 

The country was in the grip entrenched political and economic interests without any new blood to bring change and competition.

"Sri Lankan economy has a competitiveness problem," Sally said. "It has a productivity problem," The way to raise productivity and to raise competitiveness is to have a stronger private sector. 

"And also to have much more globalization of the Sri Lankan economy. More trade, more exports import as well as more foreign investments.

Doing business policies had to change. A combination of domestic and private sector investment was needed to transform the economy to have 6-8 percent growth.

Reforms were needed to bring 3 to 5 billion US dollars of foreign investment. 

Sri Lanka needed simple and predictable tax policies.

"No more price controls, no more announcements of exchange controls."

A stable macro-economic policy that went beyond the IMF program, including tax reforms that were genuinely simpler and relatively low without sudden changes was needed.  Institutional checks were needed including a genuinely independent central bank with better policies.

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