Prime Minister Ranil Wickremesinghe recently told Parliament that unless there was a partnership between the private and public sectors, SriLankan Airlines, the Mattala Airport and the Hambantota Port would have to be closed down. He said that the volume of debts obtained on behalf of these institutions were too heavy for the government of Sri Lanka to pay back especially as all of them were making heavy losses.
This is definitely an indictment on the ability of the government to run business. If you look at the past such instances are many. The bus services that were running at profit under the private companies became loss making entities when they were nationalized and placed under the Ceylon Transport Board. Profit making plantations became financially nonviable entities when they were taken over by the government. Losses were so heavy, after many years the government had to restructurethe plantations and give them to the private sector for management under long-term leases.
Then there are other government-owned businesses such as the Electricity Board, Railways, Petroleum Corporation and so on which could easily become cash cows under proper management,but they are causing huge losses under governmental control. This happens mainly because of politicization of the management which in effect creates a situation where the workers are rewarded on political affiliations and not on their performance while another major reason is excess workers recruited for political reasons. This has become the bane of most government owned enterprises.
Even the state institutions which are not making losses are not making the type of profits that they should make. This means that there are no adequate returns from the assets owned by these institutions when compared to the private sector. Earning sufficient income for a growing population is a challenge for any government and the situation become worse when the country’s resources are not effectively utilized. That is why it is not advisable for any country to continue to own loss making entities for long. Treasury absorption of these losses means indirectly passing the burdens on to the people and this unfortunately is not understood by the majority of them.
However, fully privatizing of some of these state enterprises is not favoured by many who continue to argue that strategically important entities should remain under state control. Therefore the answer to the problem is public–private partnership which has become a successful model of management in many countries.
The recent convention of the SLFP in a major deviation from its traditional philosophy has emphasized the relevancy of public-private partnerships. One of the resolutions adopted at this convention said “Regarding loss making institutions, the SLFP’s position was that they should be restructured, but the government should have a majority stake when it came to public-private partnerships managing these institutions.” This is a welcome sign and the Prime Minister is not alone when he supported the idea of private sector participation in managing loss making state enterprises. This understanding could make the much needed change in the economy by transforming the loss making state entities to profitable ventures.