‘Competent management structures vital for state enterprises’

Indunil Hewage

State commercial enterprises must be made profit centred by making them key players in the capital formation. This requires no privatization, but the introduction of competent management structures, Treasury Secretary Dr P B Jayasundara said. He made these sentiments delivering the keynote speech at the ‘First International Research Conference of the Sri Lanka Forum of University Economics.’

Sri Lanka is fast loosing concessional funding from various international donor agencies since it is gradually moving towards a middle income country status since 2005. Today the Sri Lankan government has managed to offer long term sovereign bonds for international investors to subscribe.

It has also exposed its sovereign debt instruments to international investors within exposure limits. The country’s external debt portfolio consists of debts dominated in several currencies, with 1/3 dominated in Yen ,60 percent in US dollars and several other currencies.

Sri Lanka’s biggest structural imbalance lies with the external trade and Sri Lanka must replace the continued reliance on imported products through considerable investments in capacity expansion in such activities and the slow transformation towards value creation exports in areas, in which Sri Lanka is resourceful, is the source of this problem. Import replacement can be made competitive and be consistent with global economic integration on several grounds, first the economies of scale argument.

Most of the heavy industries can replace nearly US $ 6 billion imports, which is almost a third of the country’s imports and provide a solid domestic market scope justifying a sizable investment and efficient cost of production,” Dr Jayasundara noted. The aggregate value of sugar, diary, milk powder, fish and dry food accounts for 15% of total imports.

The share of primary agriculture should decline with the development process, however, it shouldn’t lead to underestimating it potential to provide food security and required raw material for manufacturing and services sector growth through a value chain to transform the economy generating an exportable surplus.

The imbalances in the internal demand needs equal corrections. Fiscal reforms to strengthen revenue efforts through broadening of taxation is vital to protect social spending and public investments to ensure a gradual phasing out of fiscal deficit to a level that will make ‘crowding out’ to ‘crowding in.’