Intellectuals from the private and the public sectors last week made a unison plea from the government to bring in professionalism to the management of State-Owned-Enterprises (SOEs) to ensure productive use of state resources.
Addressing a panel discussion following the official launch of a handbook on ‘Good Governance for Chairmen and Directors of Public Enterprises’, Auditor General Gamini Wijesinghe said that given the past experiences of Sri Lanka’s governance culture among public enterprises, the only way to ensure proper implementation is by enacting laws in Parliament.
“The appointment of professionally qualified directors to the Board of Public Enterprises is one of the biggest challenges we face today. On the other hand, although there are so many regulations and circulars issued, since they have not been enacted, they cannot be implemented by law,” the Auditor General highlighted.
The handbook developed by the National Human Resource Development Council (NHRDC) in collaboration with the Institute of Chartered Accountants of Sri Lanka was launched by Speaker of Parliament, Karu Jayasuriya on Tuesday. It is learnt that the Ministry of Finance will soon issue the handbook to all commercial public enterprises through a circular.
Explaining how recent legislations has already helped create a better governance framework, the Auditor General said that the passage of the 19th Amendment had now empowered him to play a wider role to put the financial accounts in order.
“Although previously the scope of an audit was confined to the financial aspects, the 19th Amendment has made a revolutionary change bringing in greater scrutiny on performance, environment, procurement and IT as well,” Wijesinghe said.
On the other hand, he noted that the Right to Information Act had already dealt a welcome blow to corruption in the public sector by bringing in transparency and accountability while the passage of the proposed Audit Act is also expected to further strengthen governance.
“Once the Audit Act comes into force, all reports will be uploaded to the Auditor General’s website immediately after they are tabled in Parliament allowing any member of the public to raise queries. Even if the Committee on Public Enterprises and Committee on Public Accounts do not have time to discuss matters, affected parties can still start dialogue,” he said.
‘Sil Redi’ a landmark case - AG
Meanwhile, the Auditor General also cited that the recent case of former Secretary to the President, Lalith Weerathunga was ‘a landmark’ as it taught the right lesson for those mismanaging public funds.
In September last year, Weeratunge and former Director General of Telecommunications Regulatory Commission, Anusha Palpita were found guilty by the Colombo High Court for misappropriating Rs. 600 million of State funds belonging to TRC. This was over the distribution of Sil Redi (fabrics used by devotees to observe Sil).
Lack of professional management, a key challenge
- Kanagasabapathy
Commenting on the state of affairs in public enterprises, President of the Association of Public Finance Accountants of Sri Lanka (APFASL) – the Public Sector Wing of CA Sri Lanka, V. Kanagasabapathy said a lack of professional management is a key challenge in the public sector. Pointing out that this is not limited to the Board level but also applied to the senior management level, Kanagasabapathy recommended the formation of an independent selection board to make suitable recommendations to senior positions.
“At present, as there is no performance monitoring in public enterprises, key performance indicators are not identified. Based on the objectives, the strategic plan has to be formulated in such a way where the action plan and budget can follow.
“Thereafter, there should be continuous monitoring of performance,” the official said, lamenting that public institutions having a multiplicity of objectives and multiplicity of masters had aggravated the situation.”
CA Sri Lanka President, Jagath Perera said political appointees, poor performance in governance, absence of market-based pricing, powerful trade unions have been some of many perennial issues for State Owned Enterprises in Sri Lanka. However, according to him, as reforms can come with political dangers, the government appears reluctant to tackle challenges.
“It is increasingly apparent that delays will come at great cost to the future growth prospects of the country. If large scale privatisation is not possible, the government has to look at what can be done in the short term to improve the current dismal situation,” Perera said.
SOE liabilities a massive 12% of GDP – World Bank Director
Explaining the gravity of public sector losses and the burden on the economy, Country Director of Sri Lanka and the Maldives, Dr. Idah Z. Pswarayi-Riddihough said that the net transfers from the State to Public Enterprises between 2012 and 2015 had amounted to Rs. 460 billion, which was more than the country’s health budget of Rs. 380 billion.
“These losses haven’t stopped; Apart from financial sector institutions, the State is contributing more to its commercial public enterprises than receiving from them. It is also exposed to growing liabilities, through guaranteed and non-guaranteed debt, equivalent to 12% of GDP, not counting other contingent liabilities,” the World Bank’s Country Director said.
She highlighted that while around 400 SOEs operate in Sri Lanka, the total turnover of the 55 strategically important State Owned Business Enterprises (SOBEs) alone amounted to Rs. 1.5 trillion, equivalent to 13 percent of GDP in 2016. Hence, the performance directly impacts Sri Lanka’s competitiveness and the achievement of its socio-economic development objectives, she said.
“It is against this backdrop that we very much welcome the timely release of the Handbook for Corporate Governance of Public Enterprises, which reflects upon internationally adopted principles and good practices. Every stakeholder – from the individual, the NGOs, the government, and private sector – must read the handbook, identify actions and implement them. The handbook is an important tool; but unless it’s used its impact will be minimal,” she emphasised.
Speaker spells out government initiatives
Speaker of Parliament, Karu Jayasuriya highlighted that the present Government has taken several initiatives to uphold transparency, accountability, rule of law, participation and good governance in managing the public sector.
The introduction of the 19th amendment to the Constitution and the appointment of independent commissions, enactment of the Right to Information Act and the proposed National Audit Act, Public Finance Act and the Public Enterprise Board Act are some of them, the Speaker emphasized.
Jayasuriya also disclosed that the President has appointed a high level committee to examine and to recommend nominations to the boards of public enterprises while guidelines have been issued specifying the eligibility requirements of candidates for the appointment to such posts
Address complex governance structure in SOEs – Dr. Roshan Perera
Meanwhile, Director to the Ministry of Public Enterprise Development, Dr. Roshan Perera,
Development said the complex governance structure in Public Enterprises has to be addressed as it is one of the prime causes of public sector inefficiencies. According to her, as public enterprises have to report to several different authorities ranging from the Ministry of Finance, Line Ministries, Ministry of Public Enterprises, Parliamentary Committees, this results in confusion on their role and how they report to.
“On the other hand, there are also multiple legislations that Public Enterprises come under which again creates confusion. Then you need to figure out which legislation applies to the particular Public Enterprises and know which legislation supersedes in terms of accountability,” she said.
She explained that the proposal to set up a holding company similar to the Temasek model in Singapore was to address this complex governance structure, where SOEs were receiving mixed messages from different Ministries. The new model will make the holding company to act an intermediary between the government and the State Owned Enterprise.
“The legislation is being drafted and has to be fine-tuned. Until that legislation comes through, the Public Enterprise Development Ministry in partnership with the CA Sri Lanka developed a curriculum to train Board members and key management personnel on how to turnaround these institutions,” Perera, who was recently appointed a Director of SriLankan Airlines said.