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Monday, 24 May 2010

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Business comment:

A fine combination

The private sector is often hailed as the engine of growth and with good reason. It is dynamic, result and profit oriented, efficient, disciplined and determined to reach greater heights.

Thus private companies have a positive image among the public as 'go-getters'.

Alas, this same perception does not exist as far as State sector organisations are concerned. They are often seen and portrayed as being lethargic, inefficient, loss making and stagnant. Many of them are also overstaffed, which adds to their financial burden. The Ceylon Petroleum Corporation (CPC), the Ceylon Electricity Board, Railways and Central Transport Board are often cited as such enterprises, among others. It will not be easy to turn them around without resorting to drastic measures.

Privatisation was once used as a panacea for all ills of the State sector. Many State institutions were privatized, including some of the profitable ones, without ever considering whether they could be reformed by other means. They were sold for a song to dubious companies and individuals. Granted, there are a few instances where privatisation worked and the companies in question have transformed themselves dramatically, shedding their negative image. But this did not happen in every instance.

The present Government has taken a policy decision not to privatise any State-owned enterprise. It has vowed to examine and implement other ways and means of making them more efficient and profitable. In fact, no State enterprises have been privatized since 2005 despite some of the financial challenges faced by the State in the context of the global economic downturn and other factors.

This policy has been hailed by various segments of society, from trade unions to economists.

The Government has instead focused on reforms to the management structure of these State ventures to make them self-reliant and profitable.

It is well-known that many Government owned business ventures turn to the Treasury whenever they face financial problems. But this cannot be a long-term solution. They have to be financially independent, for which they have to be managed well in turn. Good management is the key to the growth and success of any organisation. This is the formula for the success of the private sector.

Why not infuse that formula to the staid organisations of the State sector ? This is exactly what the Government seems to be doing, with its latest, highly commendable move of appointing well-known private sector business leaders to key positions (usually Chairman/director) in State sector companies.

Among these appointments are: Harry Jayawardana (CPC), Susantha Ratnayake (Sri Lanka Tea Board), Nimal Welgama (Sri Lanka Telecom), Jayampathy Bandaranayake (Board of Investment). Several more such appointments are to be made in the coming days in various fields.

The organisations they will head are crucial for the country's development. For example, both the BoI and the EDB perform vital tasks in the field of economic development.

Mobilizing savings is no less important. Tea is also a prime mover of the economy. The appointment of top business leaders to head these ventures shows the Government's commitment to developing the economy. These are all top names in the business sphere and all are known for their business acumen. They bring with a wealth of experience and insight into the workings of a business organisation.

Some of them are also known for transforming underperforming business ventures into top-notch ventures. The respective organisations headed by these individuals will benefit immensely from having them at the helm. They are just what the doctor ordered for some of the ailing State organisations. We hope that they will be able to steer the loss-making State ventures into the black this year.

They will have to take unpopular decisions in this process, but such action could be needed to save these enterprises and their workers.

But effecting management changes alone will not suffice to reform them. The attitudes of State sector employees too have to change.

They have had a cosseted existence for far too long and it is time that they wake up to the realities of the modern corporate world.

By having renowned business leaders at the helm, the employees will get an idea about how organisations should adapt to changing times and requirements.

The customer has to come first. That idea is sadly lacking among the majority of State sector employees. Serving the public should not be thought of as a hassle, but rather as a privilege.

The business leaders should strive to inculcate this line of thinking in the workforce. They will no doubt introduce many other result-oriented practices which are commonplace in the private sector but alien to the State sector.

It will be interesting to see how they would deal with trade unions. Unfortunately, politically motivated trade union activity has often been a hindrance to the growth of many State owned business ventures.

They often resort to strikes without exploring other avenues of winning workers' demands. It is our hope that the business leaders appointed to head the State organisations would have a productive dialogue with the unions to ensure industrial peace, vital for a higher level of productivity.

Depending on the success of this move, the Government should extend it to other unprofitable State ventures. Public-private partnerships are often hailed as the best approach to develop an emerging economy.

This is a good start and a harbinger for greater cooperation between the two sectors.

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