SOE Restructure Raises Alarms Over Valuations, Accountability and Public Assets
By: Staff Writer
October 29, Colombo (LNW): Sri Lanka’s proposed State-Owned Enterprise (SOE) restructuring programme could reshape the relationship between the Government, public assets and private capital. Yet the central question is not simply how many enterprises can be sold, merged or converted into companies. It is whether the country can prevent an exercise intended to improve efficiency from transferring valuable public assets without adequate transparency, competition or demonstrable benefits to taxpayers.
Deputy Minister of Finance and Planning Anil Jayantha has disclosed that a committee is examining the country’s state enterprises and developing restructuring proposals. The proposed legal framework would allow selected institutions to be divested, merged or reorganised under a common holding structure, with individual businesses incorporated as limited liability companies.
The scale of the exercise demands careful scrutiny. Sri Lanka classifies 527 entities as state enterprises, but many are statutory authorities, regulatory bodies and administrative institutions rather than commercial businesses. The Government must therefore establish which institutions genuinely belong in a commercial restructuring programme and which perform public functions that cannot be assessed purely through profitability.
The financial figures expose the complexity of that decision. Major monitored SOEs reportedly generated combined net profits of Rs. 444.4 billion in the preceding financial year, despite a 17.6% decline from earlier levels. The Bank of Ceylon contributed Rs. 120.8 billion, while the Ceylon Petroleum Corporation recorded Rs. 36.5 billion in net profit.
These figures raise an important issue: profitable enterprises must not be treated in the same way as persistently loss-making corporations. Selling a profitable business may provide immediate government revenue, but it also removes future earnings from the public sector. Whether a sale creates lasting economic value will depend on the price obtained, the liabilities transferred, the future revenue surrendered and the subsequent use of the proceeds.
The Ceylon Electricity Board’s reported Rs. 38.7 billion loss and SriLankan Airlines’ Rs. 23.2 billion annual loss illustrate a different challenge. Before restructuring these institutions, authorities must distinguish operational inefficiency from the financial consequences of government policies, regulated prices, debt obligations and public-service requirements.
The liquidation of more than 33 inactive entities and plans to close or amalgamate another 34 institutions could eliminate unnecessary administrative costs. However, liquidation itself requires transparent asset inventories, verified liabilities, creditor settlements and public disclosure of disposal proceeds. Otherwise, the public may remain unable to determine whether dormant institutions have been resolved economically.
A further concern is the proposed transition towards independent corporate management and possible stock-exchange listings. Such arrangements could strengthen governance and broaden investment opportunities, but only if boards are professionally appointed, related-party transactions are controlled and financial statements are independently audited. Corporate status alone cannot eliminate political interference or guarantee commercial discipline.
The Government’s intention to retain ownership in strategic energy utilities reflects concern about market concentration and private-sector manipulation. That principle must be supported by effective regulation, transparent procurement and clear separation between ownership and oversight. Public ownership without accountability can be as problematic as private ownership without competition.
The legislative timetable is another warning sign. Jayantha has acknowledged that delays at the Legal Draftsman’s Department could push parliamentary submission into 2027. Until the Bill is presented, the precise safeguards, valuation rules and accountability mechanisms remain uncertain.
The critical test will be whether the Government publishes enterprise-by-enterprise assessments, independent valuations, competitive sale procedures and post-restructuring performance targets. Parliament and the public must be able to scrutinise every major transaction.
Sri Lanka cannot afford to measure reform solely by the number of institutions closed or the revenue collected from asset sales. The real objective must be a more efficient state sector that protects public wealth, reduces fiscal exposure and delivers lasting economic benefits rather than a temporary financial windfall.
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