Treasury issues strict guidelines to state-owned enterprises
Sri Lanka’s State-owned Enterprises (SOEs) numbering 422 will be reinvigorated under the Statement of Corporate Intent (SCI) mechanism now in full operation.
The SCI mechanism is aimed at enhancing the operational, financial and service delivery performances of the SOEs within the agreed period in line with the macroeconomic policy framework of the government.
SCI is a tripartite agreement, signed by the Secretary to the Ministry of Finance (MOF), Secretary of the relevant line Ministry and the Chairman of the respective SOE on behalf of the Board of Directors with the mission of creating a platform for SOEs to operate in a commercially viable manner.
Initially SCI agreements have been signed with 05 SOEs on March 15, 2017 and subsequently another eight (08) SCI agreements were signed with SOEs on June 10, 2019. The SCIs are expected to be gradually introduced to other SOEs as well.
The SCI concept needs to be strengthened by establishing systems and procedures for its better implementation and achievement of the expected outcome of the project, Treasury Secretary Dr. R.H.S. Samaratunga stated in a Public Enterprises Circular recently.
Accordingly the Treasury has issued a guideline in order to facilitate and monitor the SCI process.
It will provide clarity to SOEs regarding the expectations with respect to the role and responsibilities of stakeholders directly involved in the process. Performance focus of SOEs should be anchored on profitability, ideally self-funding and minimise their reliance on fiscal support.
They should be net contributors to government coffers via dividends, levies and taxes. SOEs should pursue fiscal and service delivery performance to achieve value for money on the basis of their set objectives aligned with sectorial policies and national development.
According to governance guidelines, SOEs and ownership entity should ensure strong corporate governance is practiced. This is the key in ensuring sustainability of performance and the SOEs’ mandates are upheld.
SOEs should support the government’s macroeconomic policies and national development objectives, without compromising performance and governance.
The ownership entity should ensure that objectives of the SOEs are aligned with macro-economic objectives and development policies.
Objectives of SCI are to operate SOEs in a budgetary independent and commercially viable manner, to improve corporate governance practices, to strengthen the financial and human resource management, change the operational culture and reengineer the business process.
It is also aimed at improving the transparency and accountability in operations, to ensure efficient and effective business operations and generate reasonable return on Investment.
Moreover, SCI contains key performance indicators linked to corporate plan, action Plan and annual budget of the SOEs spread over three years’ time frame.