soe reforms in sri lanka - institute of policy studies · - soe reform - regulatory governance 2nd...
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SOE Reforms in Sri LankaFrom Policy to Action
Aneesha Guruge
27 February 2018
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State owned enterprises: scale & scope
277 (?) SOEs
29 Regulatory Agencies
17 Promotional Institutions
14 Research and Development Agencies
57 Educational Institutions
160 Commercial & Other SOEs
55 State Owned Business
Enterprises (SOBEs)
105 Other SOEs
Income=13%ofGDP Debt=11%ofGDP
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PSOs
Large workforce
Politicization of unions
Environmental impacts
DistributionalDimension
Need for reform: multiple dimensions
EfficiencyDimension
Management weaknesses
Lack of competitiveness
Lack of transparency
Political interference in SOE activities
Lack of modernization
Operating losses
Financial obligations
Circular debt
Cost reflective pricing
FiscalDimension
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Looking back: a history of reforms
1977-1988 1989-1993 1994-2000 2001-2004 2005-2014 2015 onwards
1st wave of privatization “Peoplization” “Consolidated fund” NTC in 1991 Policy gaps
- Competition policy- Regulatory governance
Competition legislation Policy gaps
- SOE reform- Regulatory governance
2nd wave of privatization Increased competition TRC in 1996 Policy gaps
- Rent seeking impacts- Regulatory governance
Multi sector regulation - PUCSL in 2002- SEMA in 2004
Policy gaps- Privatization- Competition policy
Privatization ruled out Renationalization of major enterprises Ministry of State Resources &
Enterprise Development (2010) Holding company (SRMC) Policy gaps
- Regulatory governance
SOE reform policy platform Ministry of Public Enterprise
Development (2015) Holding company, Public
Enterprise Board legislation draft in process
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National policy priorities: the last three years
2016• GovernmentHoldingCompany• PublicEnterpriseAct• PPPs• DivestitureofNon‐strategicAssets• KPIs• PM’sEconomicPolicyStatement&2016BudgetSpeech(Nov2015)
2018
• PublicEnterpriseAct• PPPs• DivestitureofNon‐strategicAssets• KPIs&StatementsofCorporateIntent• PartialDivestitureofStateBanks• CostReflectivePricing• Vision2025(Sep2017)&2018BudgetSpeech(Nov2017)
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Three complexities of SOEs
Complexityofidentity– competingexpectationsoftheroleofSOEs
ComplexityofSOEinterdependence– interactionsbetweenSOEsaffectingoverallperformance
Complexityofinstitutions– decentralizationofgovernmentoversight&politicizationofunions
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Identity: competing interests
Non‐commercialSocialObligations
CEB‐>Rs.56bn (2017)CPC‐>Rs.12bn (2016)
CommercialViability
CostReflectivePricingFormulasFuel– March2018
Electricity– September2018
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SOE interdependence: circular debt
Treasury
CEB
StateBanks
CPC
CirculardebtimpactstheliquidityofthebanksectorandoftheTreasury.
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Institutions: multiple stakeholder contestation
SupportingMuchNeededReformSupportingMuchNeededReform
11EvaluatingSuggestedReforms
22Objecting CriticalReformsObjecting CriticalReforms
33
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SOE reform modalities
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SOE reform: inclusive growth
PSOs (public goods) Competitiveness Independent regulation Transparency / hard budget constraints
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Sustainable SOE reform: no blanket solutions
Role of government clearly defined: PSOs, natural monopolies etc. Avoid reinventing the wheel: look back to go forward Sequencing: competition/liberalization & independent regulation before ownership change Management reforms: performance-based incentives, hard budget constraints Political ownership/commitment: over the reform process Broad stakeholder buy-in: communication strategy, branding, open public dialogue
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Thank you