More thoughts on role and viability of State enterprises

At independence Sri Lanka inherited an ‘Agency house’ economy from the colonial masters

We were practically a ‘Banana Republic’ or rather a ‘Banana Dominion’ relying on three agricultural crops which we exported in primary form to import all our needs including our staple food. We did not have an industry to even make a hairpin in this country and there was a chronic dearth of technology to commence industries. A cartel of seven British Brokering houses were controlling the prices and supply of world tea and thus the vicissitudes of price fluctuations in global markets were proving to be beyond the new independent nation. Apart from this dependent nature the exclusiveness of economic activity made the empowerment of masses through economic development difficult.

This prompted the Government of 1956 to start a series of Government institutions called ‘Corporations’ to diversify the economy, acquire technology and empower the masses. Petroleum Corporation, Flower Milling Corporation, Tire Corporation, Steel Corporation, Leather Corporation, Ceramic Corporation and The State Trading General Corporation were all results of this initiative. It should be noted that it is the socialist countries that provided us with technology and equipment for all this while our ex-colonial masters wanted us to continue to send them raw rubber and then import their tires.

Commercial culture

All SLFP lead Governments acknowledged the role played by these corporations, not just as moneymakers but more in their role in building an industrial and commercial culture and in generating employment. Products and services provided by the corporations were always relied upon by the people for their quality and reasonability in price. People also preferred corporations to the private sector for employment because in a corporation the staff placement is according to their qualifications whereas in private sector the promotions and terminations are not always transparent.

Hence it is only in the area of ruthless profit making that the corporations come second to the private sector institutions. Here again even though the private sector may make profits what matters to the country’s economy at the end is how well these profits are utilized. If the profits are repatriated on some ruse, spend on foreign travel or spend in importing luxuries, such profit making amounts to an exploitation of a developing country’s economy.

Hence when you consider all that the corporations could always play a significant role in a developing country’s economy and hence that explains why the present Government follows a policy of protecting and nurturing what is left of the corporations.

The problem with the corporations however, is not in their role and functions but in their effective management. State corporations are slow to respond to changes in the commercial environment. Unlike in a private sector organization where even the most important decisions do not go beyond the Chairman and the Board of Directors, a State corporation is answerable to the Ministry. In a bureaucratic set up you can take hundred decisions that may benefit the corporation but the moment a single decision of yours go wrong you are held answerable. This means in a private set up decision making is worth the risk but in the public set up it is only a risk and hence the unresponsiveness.

Private sector

The private companies have their Annual General Meetings where the shareholders do an appraisal of the company’s performance and make whatever necessary changes collectively. In the public sector it is the COOPE (Committee on Public Enterprises) that scrutinizes the accounts of the State corporation to appraise the performance annually and it is made up Members of Parliament and officials of the treasury. The COOPE meeting therefore is the AGM of the State corporations and hence the officials who sit in COOPE should realize that they are representing the interest of the public who effectively are the shareholders of all the corporations. The Minister in charge of the State corporation should ensure that all the relevant recommendations in the COOPE report are effected. Public should have access to these reports and the media too should give enough prominence to these reports in keeping with their responsibility to educate the public on how the Government is handling public funds.

The other crucial problem faced by the State corporations is the shenanigans of the trade unions. The trade unions and the employees, depending on the degree of patronization they command from the political party in power, assume a degree of proprietorship in the affairs of the corporation.

The job of the trade unions however, should be strictly confined to the welfare of the workers and they should have no right to criticize or obstruct the activities of the corporations on grounds of mismanagement or corruption. There is more suitable mechanism in place to evaluate such activity of the corporation and hence the ‘dog in the manger’ should be avoided.

Questionable activities

However having a worker representative in the Board on observer status would help foster understanding between the management and the workers. The last but not least threat to the viability of State corporations is the mismanagement by the Minister concerned to accommodate his political and personal obligations.

If the Minister makes the corporation inefficient and non-viable, either by recruiting more people of through other questionable activities the Cabinet should hold him responsible for not delivering the goods to the public as envisaged by the Government. After all, the politicians want to win elections and if their overall public policy has suffered due to offering employment to a few people it should mean losing many votes and gaining a few. In the end, if it becomes clear to the voter that the Government in power is incapable of handling State corporations what would he think of its overall performance? [email protected]