SOEs and the upcoming elections
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All kinds of developments are taking place in Sri Lanka as we head for the polls, the first one being Presidential elections in September-October 2024 followed by in 2025 (or would it be earlier?) Parliamentary polls.Alarm bells rang on Wednesday after a special cabinet meeting was summoned. The Cabinet normally meets on a Monday and a second one on Wednesday seemed unusual. “Will they be proroguing Parliament?” asked one business leader. Another predicted, “It must be for another Constitutional amendment.”
Eventually it appears that the special meeting was to clear a backlog of many cabinet papers which was not possible on Monday.
This was the theme of my discussion with ‘Shifty’ Silva, the always-inquisitive IT expert, who called on Thursday morning.
“I say, many things are happening and I wonder whether presidential elections would be postponed,” he said, after exchanging the usual ‘welcome’, having not spoken to each other for a long time.
“I don’t think so. The election date is to be announced soon,” I said. (Readers: The date of September 21 was announced on Friday).
“I was also wondering about the whole list of state enterprises listed for privatisation. Should these be put on hold in the event a new regime is elected and would look at things differently?” he asked.
“You may be right. Members of Ranil’s own government (Pohottuwa leader Mahinda Rajapaksa) had in fact written to the President urging that this process be suspended till the election is over,” I said. After once again exchanging pleasantries, we ended the conversation promising to meet up after the elections.
The government has called for bids for several state-owned entities, including Hotel Developers Lanka Ltd, Canwill Holdings Pvt Ltd, Lanka Hospitals Corporation PLC,
Sri Lanka Telecom PLC, Litro Gas Lanka Ltd and Sri Lanka Insurance Corporation. Offers have been made and some interested companies have been selected as pre-qualified bidders
However, the restructuring process has slowed down amid political uncertainty with the upcoming presidential election.
Perhaps the biggest exercise among all these is the sale of a 49 per cent stake in national carrier SriLankan Airlines which has been reporting operating profits whilst having a horrendous carry-forward debt of over Rs.70 billion, more likely to be borne by the government, in case a foreign investor steps in.
Taking a breather, I stepped into the kitchen to collect a ‘maalu paan’ courtesy of mobile baker Aldoris, the choon- paan karaya, who came to our neighbourhood this morning, and watched as the trio was in conversation under the margosa tree.
“Okkoma puvath mae davasvala desha-palanaya saha mathivaranaya gana (All the news these days is about politics and elections),” said Kussi Amma Sera.
“Aaaduwa dan athyavashya badu-wela mila adu karanawa. Ela-valu mila adu wela (The government is also reducing the prices of essential commodities and vegetables are now cheap),” noted Mabel Rasthiyadu.
“Mae mathivarana gundu-da? (Are these election gundus?)” asked Serapina.
Returning to the conversation of the part-sale of SriLankan Airlines, the authorities seem to be going ahead with it despite the elections on the horizon.
Rather than pushing ahead with a new strategy, the airline is best served by waiting till the dust settles, the election is over and then come up with an alternate strategy. No one in his right mind – unless it’s a fly-by-night investor – is going to make a bid with elections and a new regime hanging in the balance.
Last week, the government said it had dropped plans to sell a minority stake of 49 per cent after none of the bidding entities that expressed interest in it was deemed “worthy.” “Instead, the airline will undergo restructuring under an alternate plan,” Minister of Ports, Shipping and Aviation Nimal Siripala de Silva said in a statement, which didn’t say what the alternate proposal was.
“We are looking at an alternate proposal which would still be under the previous plan to invite investors. We hope to announce the new plan in two to three weeks,” said an informed source.
Aviation analysts said the lack of a clean balance sheet is one of the reasons why the airline is not attracting any positive offers. “Investors want their money ploughed into the airline instead of settling a government loan,” one analyst said.
Another expert, who is familiar with the 1998 part sale to Emirates, said the problem in finding a suitable partner is the timing and uncertainty of the call for offers. “Sri Lanka is heading for a series of elections starting with the Presidential election in September/October 2024 and investors are unsure what the situation would be if a new president is elected. Furthermore Sri Lanka’s economic woes have also created uncertainty,” he said, adding that the government also needs to provide a proper risk assessment to potential investors so that they know in advance what they are getting into in making a positive bid. “The amount of debt and the profitable routes and non-profitable routes have to be clearly expressed and whether these unprofitable routes would be shed; these are all questions that have to be answered,” the aviation expert said.
It seems one of the positive messages the government is offering investors in the airline is in highlighting the airline’s strategic location Colombo, the nation’s capital, as a regional travel hub, connecting South Asia, Southeast Asia, and Australia. But this may not be the case because India after the state’s Air India was bought over by the Tata Group in January 2022 has seen a massive expansion with the carrier revealing plans to acquire 470 new planes from Airbus and Boeing. India’s gigantic Tata-led carrier is establishing a regional hub focusing on its own travellers to various parts of the world with direct flights to Asia, Europe, Africa and North America compared to earlier taking connections from West Asian hubs or Singapore. Colombo as a regional hub would lose out in this development.
As I completed the column, my thoughts were on the need to delay or suspend the privatisation of SriLankan Airlines until the dust settles with the upcoming election in the case of a new regime coming in requiring to re-assess the potential sale of the national carrier.
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