Government increases capital injection for COVID-19-hit SOEs
The government is to increase capital injections for State-owned Enterprises (SOEs) as the COVID-19 pandemic disrupts business activities and batters the country’s economy, Finance Ministry sources said.
Multifaceted reforms will be launched in the post COVID-19 period and it is aimed at enhancing the governance structure by improving the composition of the boards of management, strengthening the balance sheets and creating scale of operations.
Strategic mergers of state-owned enterprises (SOEs) and economically viable and equitable pricing policies including price stabilisation mechanisms are among the proposed reforms.
The Treasury has initiated a study on the possible amalgamation and mergers of SOEs.
In doing so the factors that are being considered include the objectives of the SOEs, if there are similar and therefore overlaps and if a merger or acquisition could improve the business valuation of 148 SOEs, which continue to be a key element in the country’s economy.
A Code of Governance drafted in line with the accepted practices will be issued in the second half of 2020.
Budgetary support to another 52 SOEs will amount to over Rs. 50.2 billion, of which Rs.20.3 billion is for recurrent expenditure including salaries and overhead costs this year, provisional estimates revealed.
These SOEs have made a staggering loss of over Rs. 214 billion during the past five months while posting revenue of Rs.740 billion.
The contribution to the government coffers by way of dividends and levies amounted to Rs. 27.7 billion.
This indicates that the SOEs have not been utilising their assets optimally to increase the return on investment by way of dividends, levies and capital investments, Finance Ministry data showed.
These estimates have been made by considering the COVID-19 impact on the performances of these 52 SOEs and nobody knows how much the remaining SOEs cost the state, because most of another over 400 SOEs do not publish their annual accounts as per the statutory requirements.
These non-commercial SOEs marking its presence almost in every sector of the economy are often times placed at various points of the value chain and operate with little or no coordination resulting in less than desirable outcomes.
A recent research has revealed that only 10.4 per cent of SOEs provide financial information on their operations.
While there is no substantial financial contribution to the state, most of the SOEs are overstaffed, poorly managed and under-performing.
Mismanagement, fraud, corruption, misappropriation of funds and negligence in SOEs have been highlighted in the recent reports of the Auditor General and COPE. In the final analysis they have become a severe burden on the people of Sri Lanka, official sources said.