Govt. to promulgate new State Owned Enterprises (SOE) Act soon

The Government is to promulgate a state owned enterprises (SOEs) Act in the coming months to accord legislative authority and operational effect to the SOE reform policy, Finance Ministry’s fiscal policy report outlined.

The principles elaborated in the reform policy advocated by the International Monetary Fund broadly align with good practice and, if realised, should result in improved fiscal and governance outcomes from commercial SOEs.

While commercialisation should help in removing line ministries from management of state-owner firms, the success of the approach is very much reliant on the independence, capability and diligence of the holding company board and its management and the oversight of the holding company itself, it added.

It is essential that the holding company set appropriate governance policies and performance-oriented governance arrangements for its subsidiaries but not engage in their operation.

Holding Company (HoCo) will drive comprehensive reforms of state enterprises, the management and governance of state enterprises, and the state’s portfolio of enterprises.

The Government maintains ownership and control over somewhere between 300 and 500 entities (432) that it characterises as public corporations.

The Public Enterprises Division is established within the ministry which arranges the budgets, business plans, and financial reports of 52 SOEs – those which it considers to be the most strategically important.

The Government is considering multiple options to improve oversight and performance of state-owned entities.

The public financial management rules (PFM) vest responsibility and accountability for management of individual SOEs with the secretary of the respective line ministry.

SOEs are required to apply employment, procurement and financial controls defined for the central government, and are subject to audit by the Auditor-General. (Bandula)