Once again it has fallen to my lot to play the role of the child who spotted the Emperor who had no clothes and raised the alarm. I have been doing this throughout my career and thereby made myself unpopular with those in power. But once again I am prepared to run that risk for the greater good.

In this instance I am constrained to point out that the President has been intimidated by the JVP into turning away from privatisation when it is very necessary, in fact essential. To be specific, it is vital for our economic well- being that the Ceylon Electricity Board (CEB) is privatized without delay.

It has been recognized the world over, except in bastions of Marxism like Cuba (consequently one of the poorest countries in the world) that the government is less adept at running businesses than the private sector. In our case it has become evident that the government is quite incapable of running a business efficiently. Witness for example, the CEB and the Petroleum Corporation. Such State Owned Enterprises (SOE’s) invariably end up making huge losses that become a serious drain on the government’s resources. Not only do they make losses they give poor service.

Let it be understood straight away that this is not due to inherent incompetence on the part of public sector managers or employees. It is due to the very nature of the system. Public sector managers are answerable not to shareholders or stakeholders such as banks, but to their political masters.

The General Manager and the Board of Directors are almost always political appointees beholden to Ministers and other politicians. These Ministers and politicians look upon the SOE that they control as a source of perks and power. When they are not extracting some benefit from the SOE they find it useful as an institution where they can give jobs to their relatives and friends. Every SOE is a cow to be milked.
Apart from that there is no motivation to work hard and honestly in an SOE. There are no rewards in the form of extra salaries and wages and rapid promotions in the public sector because of the rigidities that exist there. The system does not encourage SOE’s to attempt to annually evaluate the performance of individuals as happens in the private sector. Bonuses in the public sector are uniform. In the private sector there is an immediate correlation between your performance and the rewards you receive. This makes a huge difference in the levels of motivation.

Apart from all this, there is the difference that every employee of a listed company in the private sector can become a shareholder and share in the profits and accumulation of wealth that success brings. These property rights are the essential difference in the performance of the two sectors. Nobody working for an SOE feels any sense of ownership. Many years ago when the ETF was established the proponents of the scheme actually believed (and loudly proclaimed) that workers who contributed to the Fund would have a sense of ownership of the companies that the Fund invested in. That delusion did not last long.

For all these reasons, privatization has been a major success worldwide -provided the management of the SOE becomes truly private. Very little can be expected of an SOE that is privatized but maintains its public sector character. If the Chairman of the newly privatised company is a political stooge, and the board is packed with political appointees, very little will change.

Implacable enemies of privatization such as dyed-in-the-wool Marxists cannot be persuaded by reasoned arguments. They are ideologues and one should not waste time trying to persuade them. But the people of this country, the citizens, should look around and see what a success some privatizations have been. Look at the telecommunication sector. When it was a government monopoly we had to wait years to get a telephone line unless we were prepared to pay substantial bribes. Today every man in the street has a mobile phone and companies are vying vigorously with each other to give you a better deal. That is what competition does.

Another excellent example is insurance that was at one time a government monopoly. Today companies are falling over each other to offer the customer a better deal. We must all be aware that proposals to privatize an SOE will be opposed by three groups. The trade unions will oppose it because they will lose the opportunities that are there for their members to rob the enterprise because of the laxity of the controls, and the lack of concern of the managers. They will also fear that the discipline that prevails in private sector establishments will compel the workers to work harder.

The other group that will oppose the privatization of the SOE are the senior managers who will inevitably suffer a diminution in power and influence. The opposition from the managers will usually be covert, because they would not like to be seen to be in opposition to government policy.

The third group that will oppose it will be the politicians presently involved in the SOE, because they too will lose power and influence. They too would tend to be covert in their opposition. The group that will benefit from privatization will be the people of the country - the customers. This group is much larger in numbers, by far, so that it is a mystery why our leaders are hesitant to privatize when every economic consideration demands it. The leadership should realize that for every single vociferous ‘hostile’ there are a thousand silent voters who will benefit. Every privatization will be a political triumph - if it is properly done.