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Sunset for State enterprises

July 15, 2014
• The riddle of everlasting life
It is a sad phenomenon of our times that enterprises fuelled by taxpayers’
money have a tendency to act contrary to nature and go on forever and
ever It is the nature of all things in this !orld that change is the only
constant "othing, no entity !hatever, can survive, if it cannot adapt to the
changing environment in !hich it operates #he dinosaur is the prime
example
$e in %sia &no! !ell !hat happens to political and regal dynasties !hich
set themselves up for eternal rule #he dustbin of history is !here they end
up, !ith the occasional plaintive s'uea&, of a revival, once in a !hile, (ust to
reinforce the point, that nothing is eternal) #he survival of the *ritish
monarchy is a case in point for adapting to change + a one,time absolute
monarchy, imbibing strength from foreign royal houses, being forced to
surrender po!er to the -ords and .ommons through the /agna .arta, over
time becoming a classic model for a constitutional monarchy
#he 0ouse of $indsor dre! genes from the 0ouse of *attenberg of
1ermany, !hich deftly adapted and changed its name to the %nglicised
/ountbatten 2a direct translation of *attenberg3, and !hen *ritain fought
1ermany in $orld $ar II, a descendant of the 0ouse of *attenberg, a&a
$indsor ,!as on the *ritish throne + irony of ironies) #his is classic tale of
adapting to survive
4acuum cleaners for tax money
-osses,ma&ing state enterprises, !hich have an access to
unlimited taxpayer funds, sadly, do not abide by this rule
#he sunrise of the 5tate,6!ned 7nterprise 25673 is
heralded !ith great celebration, a steel mill, a tyre
factory, a coal po!er plant, and cement factories paper
factories, chemical plants, all symbols of the greatness of
the state + !hich in most developing economies, private
enterprise !ill not touch, due to the high capital
investment and huge ris&s, !hich !ill not give a return on
investment for years, are started up by starry,eyed
statist economic planners and politicians, using the
taxpayers’ money
5adly over time, they are run do!n, not maintained, the
technology is dated and the poor tax payers have to
pump in money to &eep the ine8cient and loss,ma&ing
plants and enterprises running It has been !ell proved
that government servants, especially politicised ones,
cannot run enterprises pro9tably 5uch 567 are vacuum cleaners for tax
money, suc&ing it up and (ust tend to go on and on, for misbegotten
national prestige or the po!er of trade unions, managers and politicians,
!ho 9ght change or simply due to the lucrative nature of the s&imming o:
!hich ta&es place by the political masters #here is simply no change
$e have the example of a extractor of minerals on 5ri -an&a’s east coast,
!hich for over 40 years has done nothing more than extract and export the
sand "o value addition, no do!nstream industry investment, no ne!
technology + all ;ero <et, because it is an 567, it simply goes on and one
doing the same thing over and over again, for 40 years) #here is no
incentive to change =urther there have been doubts cast !hether all the
revenue from the exports reach its proper source)
.6>7 experience
0o! taxpayers’ money is spent is in a democratic parliamentary set up is
monitored by elected representatives of the people, through !hat is called
a >ublic %ccounts .ommittee, of >arliament, to !hich the accounts of all
567s are submitted !ith a report of the %uditor 1eneral for scrutiny
0o!ever, it !as soon realised that a post,expenditure compliance audit of
this nature !as utterly useless for a 5tate,6!ned 7nterprise, !hile it may
be useful for a 1overnment department
5ome parliaments therefore set up a .ommittee on >ublic 7nterprises
2.6>73 or its e'uivalent to supervise the accounts of 567s 5ri -an&a has
done this *ut the results from the .6>7 experience are a parody 6ne
ne!spaper editorial recently reported that the o8cials of the /edia /inistry
had been directed by .6>7 to remove the 0ead of the 5tate >rinting
.orporation over an alleged fraud #he 7ditor described this as a
manifestation of +?the largely toothless .6>7 has been pushed to
individualistic and perhaps controversial action’
#he 7ditor goes on to say that the .hairman of .6>7, a 5enior /inister no
less, has repeatedly issued !arnings that the monitoring of public 9nances
is in a deplorable state and that it is high time that >arliament acted on
.6>7 reports =urther the 7ditor points out that there are 1@ 567
companies, established in the last 10 years, some loss ma&ing, and !hich
are not audited by the %uditor 1eneral
#hey are serial loser /ihin -an&a, 5hipping and %viation Information
Aesearch -td, >olipto -an&a -td, 5ri -an&a #hriposha -td, Aa&na %ar&sha
-an&a -td, -an&a -ogistics and #echnologies, 5ri -an&a 5avings *an&,
-an&aputhra Bevelopment *an&, 5ri -an&a Insurance .orporation, 5tate
#rading 2$holesale3 .o -td, -an&a 5athosa, 5tate 7nterprise /anagement
%uthority, and 1al 6ya >lantations -td
1al 6ya
#he !ords 1al 6ya, rings a bell + indicating one of the possible credible
evolutions of a 567 in 5ri -an&a #he original 1al 6ya Bevelopment *oard
!as set up as a statutory %uthority to develop one of .eylon’s 9rst
multipurpose big dam irrigation and po!er schemes, in the 7astern
>rovince #his !as totally funded by the taxpayer 2no foreign aid3 and a
highly,successful development pro(ect led by politicians and civil servants
of integrity
-ater this 567 !as transformed into the Aiver 4alleys Bevelopment *oard,
to underta&e the $ala!e development and later its salient parts !ere
integrated into the /aha!eli Bevelopment %uthority In this latest avatar,
the body lives on and on, although the /aha!eli %ccelerated pro(ect !as
long ago terminated, the authority lives on, seeing repeated sunrises and
sunsets !ith a cycle of unrelenting rebirths)
#here have been a number of ?golden handsha&es,’ some funded through
funds borro!ed on concessional terms, to close up the authority, but !ith
every ministerial change, !hich happens on a regular basis in this ?$onder
of %sia,’ there is a series of ne! recruitments)
"o !ill to change
%t a recent discussion on this 567 problem organised by the >ath9nder
=oundation, >rofessor 5irimal %beyratne of the .olombo Cniversity
bemoaned ?the lac& of political !ill’ to reform and change 567s in 5ri -an&a
0e stated that 5ri -an&a has around @00 567s in various and varied guises,
some of recent origin in camouDage uniform too 2more of that later3
#he legal structures are an unmitigated (igsa! pu;;leE statutory authorities,
companies, trusts, cooperatives, (oint ventures #he /inistry of =inance
%nnual Aeport details the heavy reliance on taxpayer money for most of
these serial losers to survive from day to day
#he six big boys are the .eylon >etroleum .orporation, the .eylon
7lectricity *oard, 5ri-an&an %irlines, 5ri -an&a #ransport *oard, /ihin -an&a
and "ational $ater 5upply and Brainage *oard 5ome of these are
commercial operations in airline and ground transport in !hich the private
enterprise ma&es handsome pro9ts 6thers are suppliers of essential
utilities !hich in other (urisdictions are run at a surplus In this ?$onder of
%sia,’ they are robbing the poor taxpayers’ poc&et)
#here is no !ill to change #here is no incentive to change #he poor
taxpayer, mu;;led by censorship, muddled by corruption and befuddled by
imaginative accounting procedures, !hich are not ade'uately exposed by a
mere post facto compliance by 1overnment auditors, bordering on outright
fraud, has no voice, !hile his hard,earned money is siphoned o: to &eep a
variety of corrupt politicians and their incompetent acolytes happy
>rivate enterprises vs 567s
.ompare a private enterprise #!o *ritish nationals came
to .eylon, in colonial times and set up a partnership to
buy co:ee, rubber tea and coconut and other ?.eylon
>roduce’ from *ritish planters and local gro!ers and
supply them to the !holesale trade in -ondon #hey did
!ell and Doated the company on the local stoc&
exchange and gave their shareholders a good return on
investment In time they expanded into management of
plantations
-ater !hen they sa! the decline in these sectors on the
hori;on + that the inevitable sunset !as coming + they
moved into the leisure business, to ta&e bene9t from
concessions and incentives o:ered by the 5tate for
development of tourism #oday, seeing that gambling
plays a huge part in the tourism industryE they are
moving into the casino business) %ll done, in order to
change !ith the times, be competitive and give their
shareholders a return for their investment If they did not
do that, they !ould have to fold up and li'uidate,
succumb to the inevitable sunset, not having tax money to &eep them
arti9cially aDoat
.ompare this !ith the 567 set up to bene9t from the tourism concessions,
the .eylon 0otels .orporationE although it had some prime properties to
manage, it !as run to the ground and sold o: to the private sector, after
repeated raids on taxpayers’ money failed to deliver a resurrection)
5o also, a gentleman from 5!it;erland, !ho came to set up a business,
sees an opportunity in supplying fertiliser to the plantation industry In time
this enterprise migrated into importing 5!iss pharmaceuticals, became the
1eneral 5ales %gent for 5!issair, got into plantation management and
today is one of the leading conglomerates in .olombo, proving regular
dividends to its 5!iss investors #he .eylon =ertiliser .orporation on the
other hand bit the dust and is being propped up by taxpayer money for no
&no!n and perceived bene9t to the taxpayer
#he list can go on and on 0istory is replete !ith 567s crashing to the
ground &ept on arti9cial life support by taxpayers’ money !hile private
enterprises in the same sectors adapt to changing conditions and ma&e
pro9ts and pay taxes) 6f course there are the exceptions !hich ma&e the
rule, the 5tate >lantations .orporation and the .#* !ere run pro9tably at
one time, under professional and disciplined managers + but for ho! longF
#hey !ere made unsustainable due to corruption, do!nright theft of public
assets but &ept unchanged using taxpayer’s funds
5unset clause
In reality !e cannot hope for a !orld !ithout 567s #hey are needed and in
some instances are classic examples of cutting,edge management best
practice and governance 5ingapore’s 5tate,o!ned strategic investment
company, #emase& .orporation comes to mind *ut in a populist
democracy, !here management of 567s are re!ards to political acolytes
and cronies, rather than assignments to competent managers, the only
viable !ay to protect taxpayers’ money is by building in !hat is &no!n as a
?sunset clause’ into the originating document of the 567, be it a %rticles of
%ssociation of a .ompany or a 5tatute or a .ooperative 6rdinance
In public policy la!, a sunset provision is a measure !ithin a statute,
regulation or other document incorporating an entity that the la! shall
cease to have e:ect on a speci9c date, unless further action is ta&en to
extend the lifetime of the entity 5unset provisions have their root in the
Aoman la! of the /andate #heory % mandate !as issued by the 5enate in
Aome, to collect taxes, raise a legion, etc for a 9xed timeframe and expired
thereafter, and had to be rene!ed by the Aoman 5enate #he senators !ere
!ary of the proconsul having an open,ended, uncontrolled and unlimited
mandate
0o! do you translate this sunset theory into today’s issue 5ri -an&a faces
!ith 567s !hich are loss,ma&ing parasites living forever on taxpayers’
money and being + proverbially + ?no bloody use at all’F #he most sensible
!ay to do it !ould be build in a mandate say for 9ve,year lifetime !hen the
567 is created and provide that the managers of the 567 at the expiry of
the 9ve,year period !ill have to come before a panel of peers and prove
their !orth, the positive !or& they have done and (ustify the further
extension of the mandate
#he panel of peers could be managers dra!n from private sector
institutions such as .hamber of .ommerce, the 6rganisation of >rofessional
%ssociation and the Institute of Birectors, etc #he hearing should be public
and sta&eholders in the sector should be allo!ed to come and 'uestion the
managers of the 567 on their performance or underperformance #here
!ould have to be rules of procedure for 'uestions to be raised, notice to be
given in advance, etc
#o give an example, say the 567 is the #ourist Bevelopment %uthority, the
other sta&eholders in the sector + travel agents associations, hotel o!ners
associations, trade unions, professional groups such as hotel managers
associations, tour guides associations + should be allo!ed to come before
the panel and 'uestion the performance of the 567 >ublic hearings and
public participation !ill ensure transparency, and the managers of the
entity !ill have to really ma&e a strong case for their future continuity
>eer >anels
6ften politicians are opposed to any 567 reform !hen they are in o8ce #o
get around this problem the Aeport of the >anel, !hich should be a pubic
document, should be submitted to a bipartisan >arliamentary 5elect
.ommittee, !hich also should hold hearings on the >anel’s Aeport and
ma&e a recommendation to >arliament, on the extension of the life of the
567 or its closure, ie implementation of the sunset clause
#he /embers of >arliament may be divided on party political lines, as they
normally are, in ma&ing their recommendation, but at least the taxpaying
public and consumers !ill have before them a >eer >anel Aeport
recommending the future of the 567, based on its past performance, and
also a >arliamentary .ommittee’s recommendation on the >eer >anel’s 9nal
recommendation, !hether the 567, if it is loss ma&er gobbling up
taxpayers’ money, should be further funded by the taxpayer to continue %ll
this !ill be in the public domain and the taxpayer !ill &no! !hat is being
done !ith his money
%t one time the /inistry of >olicy Bevelopment set up a prototype of these
>eer >anels informally, had a process going for some months in
collaboration !ith the /inistry of =inance !ith 567s being invited to present
their performance Cnfortunately the experiment !as later scrapped =or
existing 567s a timeframe should be 9xed for them to appear before a >eer
>anel %nother option may be to list on the 5toc& 7xchange a certain
percentage of shares of the 567, after converting it into a stoc& company
#he discipline of compliance !ith the regulatory rigour imposed by the
listing forces an 567 to reform and change India did this !ith the 5tate
*an& of India
.amouDage business
5ri -an&a has a ne! phenomenon + .amouDage business Aecently there
has been a surge of enterprises by the military 5ervice men and !omen,
most often in camouDage uniforms or in trac& suits, have ta&en to the
construction industry, managing golf courses running air lines, managing
hotels and resorts, !hale and dolphin !atching tours, !ayside tea
bouti'ues, selling vegetables, maintaining par&s and public spaces and
most recently eradicating dengue and reconstructing buildings destroyed in
%luthgama by communal violence %re all these legitimate and authorised
military activitiesF
#he .omptroller and %uditor 1eneral of India famously raised this 'uestion
regarding the Indian %rmy,maintained Aegimental 1olf .ourses) #he issue
!as, does the >arliament of India, !hich votes taxpayers’ money to the
Indian %rmy to defend /other *harath from external enemies, also permit
these funds being utilised to maintain golf courses for %rmy o8cers playing
golfF #he same 'uestion arises here
5ome of these may be laudable enterprises .ertainly it is conceded that a
victorious %rmy cannot be sent home, even though !ith full pension, after
!inning a !ar 6ne recalls the infamous ?/arch on $ashington’ by
demobilised 1I Joes after $orld $ar II, protesting that they had no (obs #he
C5 Befence Bepartment had to deploy armed cavalrymen to brea& up the
demonstrations *ut are these camouDage enterprises !hich results in the
cro!ding,out of private enterprise sustainable in the long runF
It !as reported at the >ath9nder seminar that the 5- %rmy has raised four
ne! civil engineering regiments post,!ar %nyone in the private
construction industry should sit up and ta&e notice) #here is a strong
argument that there should be a sunset cause for all these military
camouDage enterprises too It is conceded that private enterprises may not
see a viable return on investment in running hotels in post,conDict regions
immediately #he military might have to (usti9ably step in, in the immediate
post,conDict timeframe, to initially provide these facilities
=or example if there is no place for local tourists visiting >rabh&aran’s
destroyed home, to buy a cup of tea, even, there can be no ob(ection to the
nearby military camp opening a tea bouti'ue, temporarily *ut should the
military step bac& at some time and let private entrepreneurs, !ho pay
taxes, and are not subsidised by the taxpayer, step inF
It is claimed that in 1ermany after $orld $ar II, the %merican and *ritish
and =rench forces had to set hospitality and utility services for visitors as
there !as no one else to do it in the ;ones controlled by themE 1ermany’s
economy had been bombed into the dust by the %llied *omber .ommands
air raids *ut their intervention !as time,bound, and as soon as indigenous
1erman entrepreneurs could set themselves up, the %rmy retreated to their
barrac&s #he sunset &ic&ed in
1iven the 5ri -an&a experience !ith loss,ma&ing 567s, there is a strong
case for a sunset process, >eer >anel Aevie! and >arliamentary
recommendations, and maybe listing on the stoc& exchange of all of such
567 and camouDage enterprises to avoid the haemorrhaging of taxpayers’
money
2#he !riter is a la!yer, !ho has over @0 years of experience as a .76 in
both 5tate and private sectors 0e retired from the o8ce of 5ecretary,
/inistry of =inance and currently is the /anaging Birector of the 5ri -an&a
*usiness Bevelopment .entre3
It is a sad phenomenon of our times that enterprises fuelled by taxpayers’
money have a tendency to act contrary to nature and go on forever and
ever It is the nature of all things in this !orld that change is the only
constant "othing, no entity !hatever, can survive, if it cannot adapt to the
changing environment in !hich it operates #he dinosaur is the prime
example
$e in %sia &no! !ell !hat happens to political and regal dynasties !hich
set themselves up for eternal rule #he dustbin of history is !here they end
up, !ith the occasional plaintive s'uea&, of a revival, once in a !hile, (ust to
reinforce the point, that nothing is eternal) #he survival of the *ritish
monarchy is a case in point for adapting to change + a one,time absolute
monarchy, imbibing strength from foreign royal houses, being forced to
surrender po!er to the -ords and .ommons through the /agna .arta, over
time becoming a classic model for a constitutional monarchy
#he 0ouse of $indsor dre! genes from the 0ouse of *attenberg of
1ermany, !hich deftly adapted and changed its name to the %nglicised
/ountbatten 2a direct translation of *attenberg3, and !hen *ritain fought
1ermany in $orld $ar II, a descendant of the 0ouse of *attenberg, a&a
$indsor ,!as on the *ritish throne + irony of ironies) #his is classic tale of
adapting to survive
4acuum cleaners for tax money
-osses,ma&ing state enterprises, !hich have an access to unlimited
taxpayer funds, sadly, do not abide by this rule #he sunrise of the 5tate,
6!ned 7nterprise 25673 is heralded !ith great celebration, a steel mill, a
tyre factory, a coal po!er plant, and cement factories paper factories,
chemical plants, all symbols of the greatness of the state + !hich in most
developing economies, private enterprise !ill not touch, due to the high
capital investment and huge ris&s, !hich !ill not give a return on
investment for years, are started up by starry,eyed statist economic
planners and politicians, using the taxpayers’ money
5adly over time, they are run do!n, not maintained, the technology is
dated and the poor tax payers have to pump in money to &eep the
ine8cient and loss,ma&ing plants and enterprises running It has been !ell
proved that government servants, especially politicised ones, cannot run
enterprises pro9tably 5uch 567 are vacuum cleaners for tax money,
suc&ing it up and (ust tend to go on and on, for misbegotten national
prestige or the po!er of trade unions, managers and politicians, !ho 9ght
change or simply due to the lucrative nature of the s&imming o: !hich
ta&es place by the political masters #here is simply no change
$e have the example of a extractor of minerals on 5ri -an&a’s east coast,
!hich for over 40 years has done nothing more than extract and export the
sand "o value addition, no do!nstream industry investment, no ne!
technology + all ;ero <et, because it is an 567, it simply goes on and one
doing the same thing over and over again, for 40 years) #here is no
incentive to change =urther there have been doubts cast !hether all the
revenue from the exports reach its proper source)
.6>7 experience
0o! taxpayers’ money is spent is in a democratic parliamentary set up is
monitored by elected representatives of the people, through !hat is called
a >ublic %ccounts .ommittee, of >arliament, to !hich the accounts of all
567s are submitted !ith a report of the %uditor 1eneral for scrutiny
0o!ever, it !as soon realised that a post,expenditure compliance audit of
this nature !as utterly useless for a 5tate,6!ned 7nterprise, !hile it may
be useful for a 1overnment department
5ome parliaments therefore set up a .ommittee on >ublic 7nterprises
2.6>73 or its e'uivalent to supervise the accounts of 567s 5ri -an&a has
done this *ut the results from the .6>7 experience are a parody 6ne
ne!spaper editorial recently reported that the o8cials of the /edia /inistry
had been directed by .6>7 to remove the 0ead of the 5tate >rinting
.orporation over an alleged fraud #he 7ditor described this as a
manifestation of +?the largely toothless .6>7 has been pushed to
individualistic and perhaps controversial action’
#he 7ditor goes on to say that the .hairman of .6>7, a 5enior /inister no
less, has repeatedly issued !arnings that the monitoring of public 9nances
is in a deplorable state and that it is high time that >arliament acted on
.6>7 reports =urther the 7ditor points out that there are 1@ 567
companies, established in the last 10 years, some loss ma&ing, and !hich
are not audited by the %uditor 1eneral
#hey are serial loser /ihin -an&a, 5hipping and %viation Information
Aesearch -td, >olipto -an&a -td, 5ri -an&a #hriposha -td, Aa&na %ar&sha
-an&a -td, -an&a -ogistics and #echnologies, 5ri -an&a 5avings *an&,
-an&aputhra Bevelopment *an&, 5ri -an&a Insurance .orporation, 5tate
#rading 2$holesale3 .o -td, -an&a 5athosa, 5tate 7nterprise /anagement
%uthority, and 1al 6ya >lantations -td
1al 6ya
#he !ords 1al 6ya, rings a bell + indicating one of the possible credible
evolutions of a 567 in 5ri -an&a #he original 1al 6ya Bevelopment *oard
!as set up as a statutory %uthority to develop one of .eylon’s 9rst
multipurpose big dam irrigation and po!er schemes, in the 7astern
>rovince #his !as totally funded by the taxpayer 2no foreign aid3 and a
highly,successful development pro(ect led by politicians and civil servants
of integrity
-ater this 567 !as transformed into the Aiver 4alleys Bevelopment *oard,
to underta&e the $ala!e development and later its salient parts !ere
integrated into the /aha!eli Bevelopment %uthority In this latest avatar,
the body lives on and on, although the /aha!eli %ccelerated pro(ect !as
long ago terminated, the authority lives on, seeing repeated sunrises and
sunsets !ith a cycle of unrelenting rebirths)
#here have been a number of ?golden handsha&es,’ some funded through
funds borro!ed on concessional terms, to close up the authority, but !ith
every ministerial change, !hich happens on a regular basis in this ?$onder
of %sia,’ there is a series of ne! recruitments)
"o !ill to change
%t a recent discussion on this 567 problem organised by the >ath9nder
=oundation, >rofessor 5irimal %beyratne of the .olombo Cniversity
bemoaned ?the lac& of political !ill’ to reform and change 567s in 5ri -an&a
0e stated that 5ri -an&a has around @00 567s in various and varied guises,
some of recent origin in camouDage uniform too 2more of that later3
#he legal structures are an unmitigated (igsa! pu;;leE statutory authorities,
companies, trusts, cooperatives, (oint ventures #he /inistry of =inance
%nnual Aeport details the heavy reliance on taxpayer money for most of
these serial losers to survive from day to day
#he six big boys are the .eylon >etroleum .orporation, the .eylon
7lectricity *oard, 5ri-an&an %irlines, 5ri -an&a #ransport *oard, /ihin -an&a
and "ational $ater 5upply and Brainage *oard 5ome of these are
commercial operations in airline and ground transport in !hich the private
enterprise ma&es handsome pro9ts 6thers are suppliers of essential
utilities !hich in other (urisdictions are run at a surplus In this ?$onder of
%sia,’ they are robbing the poor taxpayers’ poc&et)
#here is no !ill to change #here is no incentive to change #he poor
taxpayer, mu;;led by censorship, muddled by corruption and befuddled by
imaginative accounting procedures, !hich are not ade'uately exposed by a
mere post facto compliance by 1overnment auditors, bordering on outright
fraud, has no voice, !hile his hard,earned money is siphoned o: to &eep a
variety of corrupt politicians and their incompetent acolytes happy
>rivate enterprises vs 567s
.ompare a private enterprise #!o *ritish nationals came to .eylon, in
colonial times and set up a partnership to buy co:ee, rubber tea and
coconut and other ?.eylon >roduce’ from *ritish planters and local gro!ers
and supply them to the !holesale trade in -ondon #hey did !ell and
Doated the company on the local stoc& exchange and gave their
shareholders a good return on investment In time they expanded into
management of plantations
-ater !hen they sa! the decline in these sectors on the hori;on + that the
inevitable sunset !as coming + they moved into the leisure business, to
ta&e bene9t from concessions and incentives o:ered by the 5tate for
development of tourism #oday, seeing that gambling plays a huge part in
the tourism industryE they are moving into the casino business) %ll done, in
order to change !ith the times, be competitive and give their shareholders
a return for their investment If they did not do that, they !ould have to fold
up and li'uidate, succumb to the inevitable sunset, not having tax money
to &eep them arti9cially aDoat
.ompare this !ith the 567 set up to bene9t from the tourism concessions,
the .eylon 0otels .orporationE although it had some prime properties to
manage, it !as run to the ground and sold o: to the private sector, after
repeated raids on taxpayers’ money failed to deliver a resurrection)
5o also, a gentleman from 5!it;erland, !ho came to set up a business,
sees an opportunity in supplying fertiliser to the plantation industry In time
this enterprise migrated into importing 5!iss pharmaceuticals, became the
1eneral 5ales %gent for 5!issair, got into plantation management and
today is one of the leading conglomerates in .olombo, proving regular
dividends to its 5!iss investors #he .eylon =ertiliser .orporation on the
other hand bit the dust and is being propped up by taxpayer money for no
&no!n and perceived bene9t to the taxpayer
#he list can go on and on 0istory is replete !ith 567s crashing to the
ground &ept on arti9cial life support by taxpayers’ money !hile private
enterprises in the same sectors adapt to changing conditions and ma&e
pro9ts and pay taxes) 6f course there are the exceptions !hich ma&e the
rule, the 5tate >lantations .orporation and the .#* !ere run pro9tably at
one time, under professional and disciplined managers + but for ho! longF
#hey !ere made unsustainable due to corruption, do!nright theft of public
assets but &ept unchanged using taxpayer’s funds
5unset clause
In reality !e cannot hope for a !orld !ithout 567s #hey are needed and in
some instances are classic examples of cutting,edge management best
practice and governance 5ingapore’s 5tate,o!ned strategic investment
company, #emase& .orporation comes to mind *ut in a populist
democracy, !here management of 567s are re!ards to political acolytes
and cronies, rather than assignments to competent managers, the only
viable !ay to protect taxpayers’ money is by building in !hat is &no!n as a
?sunset clause’ into the originating document of the 567, be it a %rticles of
%ssociation of a .ompany or a 5tatute or a .ooperative 6rdinance
In public policy la!, a sunset provision is a measure !ithin a statute,
regulation or other document incorporating an entity that the la! shall
cease to have e:ect on a speci9c date, unless further action is ta&en to
extend the lifetime of the entity 5unset provisions have their root in the
Aoman la! of the /andate #heory % mandate !as issued by the 5enate in
Aome, to collect taxes, raise a legion, etc for a 9xed timeframe and expired
thereafter, and had to be rene!ed by the Aoman 5enate #he senators !ere
!ary of the proconsul having an open,ended, uncontrolled and unlimited
mandate
0o! do you translate this sunset theory into today’s issue 5ri -an&a faces
!ith 567s !hich are loss,ma&ing parasites living forever on taxpayers’
money and being + proverbially + ?no bloody use at all’F #he most sensible
!ay to do it !ould be build in a mandate say for 9ve,year lifetime !hen the
567 is created and provide that the managers of the 567 at the expiry of
the 9ve,year period !ill have to come before a panel of peers and prove
their !orth, the positive !or& they have done and (ustify the further
extension of the mandate
#he panel of peers could be managers dra!n from private sector
institutions such as .hamber of .ommerce, the 6rganisation of >rofessional
%ssociation and the Institute of Birectors, etc #he hearing should be public
and sta&eholders in the sector should be allo!ed to come and 'uestion the
managers of the 567 on their performance or underperformance #here
!ould have to be rules of procedure for 'uestions to be raised, notice to be
given in advance, etc
#o give an example, say the 567 is the #ourist Bevelopment %uthority, the
other sta&eholders in the sector + travel agents associations, hotel o!ners
associations, trade unions, professional groups such as hotel managers
associations, tour guides associations + should be allo!ed to come before
the panel and 'uestion the performance of the 567 >ublic hearings and
public participation !ill ensure transparency, and the managers of the
entity !ill have to really ma&e a strong case for their future continuity
>eer >anels
6ften politicians are opposed to any 567 reform !hen they are in o8ce #o
get around this problem the Aeport of the >anel, !hich should be a pubic
document, should be submitted to a bipartisan >arliamentary 5elect
.ommittee, !hich also should hold hearings on the >anel’s Aeport and
ma&e a recommendation to >arliament, on the extension of the life of the
567 or its closure, ie implementation of the sunset clause
#he /embers of >arliament may be divided on party political lines, as they
normally are, in ma&ing their recommendation, but at least the taxpaying
public and consumers !ill have before them a >eer >anel Aeport
recommending the future of the 567, based on its past performance, and
also a >arliamentary .ommittee’s recommendation on the >eer >anel’s 9nal
recommendation, !hether the 567, if it is loss ma&er gobbling up
taxpayers’ money, should be further funded by the taxpayer to continue %ll
this !ill be in the public domain and the taxpayer !ill &no! !hat is being
done !ith his money
%t one time the /inistry of >olicy Bevelopment set up a prototype of these
>eer >anels informally, had a process going for some months in
collaboration !ith the /inistry of =inance !ith 567s being invited to present
their performance Cnfortunately the experiment !as later scrapped =or
existing 567s a timeframe should be 9xed for them to appear before a >eer
>anel %nother option may be to list on the 5toc& 7xchange a certain
percentage of shares of the 567, after converting it into a stoc& company
#he discipline of compliance !ith the regulatory rigour imposed by the
listing forces an 567 to reform and change India did this !ith the 5tate
*an& of India
.amouDage business
5ri -an&a has a ne! phenomenon + .amouDage business Aecently there
has been a surge of enterprises by the military 5ervice men and !omen,
most often in camouDage uniforms or in trac& suits, have ta&en to the
construction industry, managing golf courses running air lines, managing
hotels and resorts, !hale and dolphin !atching tours, !ayside tea
bouti'ues, selling vegetables, maintaining par&s and public spaces and
most recently eradicating dengue and reconstructing buildings destroyed in
%luthgama by communal violence %re all these legitimate and authorised
military activitiesF
#he .omptroller and %uditor 1eneral of India famously raised this 'uestion
regarding the Indian %rmy,maintained Aegimental 1olf .ourses) #he issue
!as, does the >arliament of India, !hich votes taxpayers’ money to the
Indian %rmy to defend /other *harath from external enemies, also permit
these funds being utilised to maintain golf courses for %rmy o8cers playing
golfF #he same 'uestion arises here
5ome of these may be laudable enterprises .ertainly it is conceded that a
victorious %rmy cannot be sent home, even though !ith full pension, after
!inning a !ar 6ne recalls the infamous ?/arch on $ashington’ by
demobilised 1I Joes after $orld $ar II, protesting that they had no (obs #he
C5 Befence Bepartment had to deploy armed cavalrymen to brea& up the
demonstrations *ut are these camouDage enterprises !hich results in the
cro!ding,out of private enterprise sustainable in the long runF
It !as reported at the >ath9nder seminar that the 5- %rmy has raised four
ne! civil engineering regiments post,!ar %nyone in the private
construction industry should sit up and ta&e notice) #here is a strong
argument that there should be a sunset cause for all these military
camouDage enterprises too It is conceded that private enterprises may not
see a viable return on investment in running hotels in post,conDict regions
immediately #he military might have to (usti9ably step in, in the immediate
post,conDict timeframe, to initially provide these facilities
=or example if there is no place for local tourists visiting >rabh&aran’s
destroyed home, to buy a cup of tea, even, there can be no ob(ection to the
nearby military camp opening a tea bouti'ue, temporarily *ut should the
military step bac& at some time and let private entrepreneurs, !ho pay
taxes, and are not subsidised by the taxpayer, step inF
It is claimed that in 1ermany after $orld $ar II, the %merican and *ritish
and =rench forces had to set hospitality and utility services for visitors as
there !as no one else to do it in the ;ones controlled by themE 1ermany’s
economy had been bombed into the dust by the %llied *omber .ommands
air raids *ut their intervention !as time,bound, and as soon as indigenous
1erman entrepreneurs could set themselves up, the %rmy retreated to their
barrac&s #he sunset &ic&ed in
1iven the 5ri -an&a experience !ith loss,ma&ing 567s, there is a strong
case for a sunset process, >eer >anel Aevie! and >arliamentary
recommendations, and maybe listing on the stoc& exchange of all of such
567 and camouDage enterprises to avoid the haemorrhaging of taxpayers’
money
2#he !riter is a la!yer, !ho has over @0 years of experience as a .76 in
both 5tate and private sectors 0e retired from the o8ce of 5ecretary,
/inistry of =inance and currently is the /anaging Birector of the 5ri -an&a
*usiness Bevelopment .entre3