Equitisation of government business enterprises – SL SoEs

THE Sri Lankan Government is planning to begin the equitisation process of SoEs, a form of quasi privatisation. The term Equitisation originated in Vietnam at the time of embarking restructure of their SoEs.

- By Eng. J.L. Jayawardena

Sri Lanka aims to increase the productivity, efficiency and be independent of Treasury which hitherto supported the lossmaking SOEs; one example was SriLankan Airlines which made headlines for continuous losses and mismanagement. As per ref source (1) Sri Lanka has 399 SoEs, out of which only 52 SoEs had data to assess their performance score and ranking. In this context determining the SoEs to be equitised is a mammoth task of the Government and also the availability of local expertise.

Identification of lossmaking SoEs

Selection of SoEs for restructure shouldn't be random or the wish of politicians but, on the predetermined criteria revealed by various research studies, such as the economic, political, and social objectives at each stage of development. However, this may likely create selection bias, political and social bargaining which would lead to inaccurate estimation of the true effect of equitisation; hence it is important to weigh all factors both internal to SoE and external influences according to individual merits and demerits to arrive at a plausible decision.