Govt. takes action to divest treasury stake in SLT and Lanka Hospitals
By: Staff writer
Colombo (LNW): The Government has taken a very ambitious course of action for the country’s economic transformation by divesting stakes in nonstrategic assets and minority stakes in strategic assets of state owned business enterprises, finance ministry sources disclosed.
Observing the 52 State-Owned Enterprises (SOEs) monitored by the Ministry of Finance (MoF), an aggregate profit has come down in most of these enterprises including Ceylon Petroleum Corporation, Sri Lankan Airlines Ltd. Sri Lanka Transport Board, Sri Lanka Telecom PLC (SLT) and Lanka Hospitals PLC etc.
Sri Lanka is no stranger to divesting SOEs. Divestment of public enterprises were incorporated into the state policy in 1987 with an aim of reducing the fiscal burden, and improving the efficiency and profitability of entities. This led to extensive SOE reforms being carried out between 1989 and 2002 with partial and full divestiture of 84 enterprises.
Divestiture can bring in investors with the capacity to invest in expansions. For example, Hilton has much potential for further development but owing to financial constraints, the government is unable to pursue such developments.
The Hyatt project is also another example that requires significant investments to reach completion, which the Government is not in a position to undertake.
The Secretary to the Treasury has informed the Board of Directors of Sri Lanka Telecom PLC (SLT) and Lanka Hospitals PLC that the Cabinet of Ministers has granted approval in principle for the divestment of the stakes held by the Treasury Secretary in the two companies.
Accordingly, the Secretary to the Treasury has informed the Board of Directors of SLT and Lanka Hospitals that the Cabinet of Ministers has granted its approval in principle for the divestment of the stake held by the Treasury Secretary in the respective companies.
The companies have announced that they have received the approval of the Cabinet of Ministers to sell the shares owned by the government in Sri Lanka Telecom PLC and Lanka Hospital PLC, which are two companies listed in the Colombo Stock Exchange (CSE), as per the policy decision of the government.
Notifying the Colombo Stock Exchange of this decision, Sri Lanka Telecom says that the divestiture will be implemented in the near future by the State-Owned Enterprise Restructuring Unit established under the Ministry of Finance, Economic Stabilization and National Policy, subject to following the due process. Meanwhile, Ceylon Hospital PLC has also issued an announcement stating the same.
The Treasury holds a 49.50% stake of the issued share capital of Sri Lanka Telecom PLC.
Meanwhile, a 51.34% stake of the share capital of Lanka Hospital PLC is held by the Sri Lanka Insurance Corporation, representing the Government of Sri Lanka.
Ideal method that can be followed is to offer a significant stake through a competitive tender process or a bidding process conducted on a special board of the Colombo Stock Exchange (CSE) among shortlisted parties.
Balance can be offered through an Initial Public Offering (IPO) allowing members of the general public to become part owners of a SOE.