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Experimenting with State-Owned Enterprises

Sri Lanka reports a total of 527 State-Owned Enterprises (SOEs), with 55 deemed strategically important. However, transparency issues arise as only 11 out of 52 SOEs have published financial data up to 2022, obscuring the full extent of their losses and employment figures. Amidst public concern over the privatization of these entities, Suresh Shah has been appointed as the head of the State-Owned Enterprises Restructuring Unit (SOERU) to spearhead reforms, emphasizing transparency and effective management across the board.

The proposed reforms include introducing draft legislation based on nine guiding principles for SOE reform, covering aspects from board appointments to financial management. A significant part of the reform strategy involves consolidating SOEs under a Holding Company modeled after Singapore's Temasek, aiming to streamline governance and improve efficiency. Despite these efforts, there is skepticism regarding the ability to replicate Temasek's success due to entrenched issues of nepotism and political interference that have historically plagued Sri Lankan SOEs, leading to widespread inefficiency and losses.

The reform efforts are underscored by the urgent need to address the financial liability SOEs pose to the state, with plans to either privatize or wind down certain entities. However, concerns remain about the focus on commercial value potentially overlooking the broader contributions SOEs make to the state and society. The government's approach raises questions about the future of employment for thousands and the potential loss of state assets through privatization. The success of these reforms hinges on implementing transparent, effective policies and overcoming the challenges of political influence and mismanagement that have characterized Sri Lanka's SOEs to date.