State hiring protocols hamper economic development
With the right people in the right seats, a government is headed down the road to success but in Sri Lanka it is not so – simply because either a relative, a classmate, a school mate or someone who assisted with an election campaign is selected to fill government positions.
Inadequate hiring protocols can affect economic development. This is a stark point made by National Agency for Public Private Partnership Chairman Thilan Wijesinghe, the Chief Guest for the 7th Capital Markets Conference held in Colombo recently. “All loss-making state entities have government appointees,” he said. With plans to attract businesses and citizens, a government needs to provide services that are competitive with other places. This is done by identifying and attracting the right people to fill key positions, ranging from upper management and crucial decision-maker roles. Mr. Wijesinghe noted that these positions should ideally be filled by Finance Ministry officials, given the fact that the Treasury owns the golden share of the state entities and that these officials are familiar with the their mechanisms of function. In line with this argument, he said that the Building Materials Corporation (BMC) is not in a position to service its Rs. 600 million loan due to insufficient income. However, he said BMC has Rs. 6 – 7 billion worth of unproductive prime lands (which could be put to generating income).
The Public Private Partnership (PPP) isn’t working efficiently, he said noting that it’s due to using limited policy options for fiscal consolidation. In a bid to overcome this, addressing sources of revenue leakages, divestiture of minority stakes in State Owned Enterprises (SOE), divestiture of depleted assets, SOE reform through PPP, SOE efficiency through process improvements and acceleration of domestic investment and foreign direct investment through phasing out of para tariffs is much needed, Mr. Wijesinghe said.
He said that Sri Lanka has a successful track record implementing PPP and SOE divestitures. “There are no failures of PPP and divestitures implemented in the last 20 years.” He added that now there are over US$ 6 million in PPP transactions that were financially closed in the last 20 years and operating successfully. He reiterated the importance of divesting non-strategic shareholdings by SOE to strengthen their balance sheets and give dividends to Treasury while enhancing the market’s liquidity. “We must consider Temasek-type listed unit trust structure that will allow state banks to raise additional Tier 1 capital without diluting the voting rights of the government.” The diversification of the Sri Lankan economy and the greater representation of the diversified companies in the local stock market will help Sri Lanka to better economic benefits, Mr. Wijesinghe added.
He noted the Government is faced with the inability to focus on micro level problem-solving and execution. “We have a fantastic Central Bank and have a great brain trust in the Finance Ministry, but we have not been able to address issues at the micro level especially when it comes to planning, problem solving and execution.”
“Divesture and privatisation is only one formula. There are other models where you can take unproductive assets, just like what happened in the case of the Hambantota Port. The Hambantota Port loan was eating into all the profits that the Colombo port was making. And the moment, the repayment of that loan was taken off, Sri Lanka Ports Authority balance sheet became profitable and $1.2 billion was received by the Government.” he said.
He cited sectors such as Tourism, Ports, Shipping and Aviation, Knowledge based services, financial services and agri business as key economic drivers in the country.
Speaking on capital marketS, the Colombo Stock Exchange (CSE) Chairman Ray Abeywardena at the ensuing panel discussion said that there are still forces which work against the revival of the capital market. “We are battling interest rates and fighting slightly above our weight class.”