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SOEs reforms under different restructure models

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Sri Lanka’s key state owned enterprises (SOEs) will be turned into efficient, productive and profitable ventures under several different strategic reforms prescribed by the International Monetary Fund (IMF)

The government has set up the State-Owned Enterprise Restructuring Unit (SRU) under the Ministry of Finance to divest an identified set of SOEs.

The SRU seeks to appoint reputed, qualified and experienced firms to provide transaction advisory services for the divestiture of SriLankan Airlines (SLA), Sri Lanka Telecom, Sri Lanka Insurance Corporation and Canwill Holdings Pvt. Ltd (Grand Hyatt Colombo).

Among the other enterprises are Hotel Developers Lanka Ltd (Hilton Colombo), Litro Gas Lanka Ltd and Lanka Hospitals Corporation.

In addition, as part of its IMF commitments, Sri Lanka is planning a comprehensive strategy to restructure the balance sheets of some key SOEs, notably Ceylon Petroleum Corporation, Ceylon Electricity Board, Road Development Authority and SLA (this strategy needs to receive cabinet approval by June 2023).

These restructured entities are to be operated on a competitive basis, where the Government has no involvement in business with professionals running it, raising the revenue and making profits similar to a private company.

The work principles are set right from the beginning to be competitive, a senior official of the State Ministry of Finance disclosed.

Under this set-up there is privatisation – as in a partial or full sale of assets but it is not the only option for SOEs reform, he pointed out.

For instance, there are other options like the vesting of performance and management in private sector contracts, Public-Private Partnerships (PPPs), holding companies, listing on the stock market, Employee Stock Ownership Plans (ESOPs), etc.

Prompt publication of audited financial statements will be made for all 52 major SOEs while prohibiting new foreign exchange borrowing by non-financial SOEs which have foreign currency debt amounting to US$45.5 billion with limited foreign exchange revenues.

Some of these enterprises owned by the government will be transformed into limited liability companies or joint-stock firms by the end of the year as part of reforms aimed at overhauling their unwieldy structures.

The government will take into account successful results from the privatisation of several state entities during the periods of late 1980s to around 2004 for its present SOEs reforms.

At least 43 commercial entities were privatised between 1995 to 2004 resulting in the privatisation of larger, more complex sectors such as telecommunications, gas and airlines.

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