Sri Lanka is looking at listing a state holding company in the stock exchange of commercial enterprises and consolidating or closing other agencies which are a burden on state finances, President Anura Kumara Dissanayake said.
There were corporations, boards and other agencies which were creating a problem, he said.
“We need a new plan for administration,” President Dissanayake told an economic forum organized by Sri Lanka’s Ceylon Chamber of Commerce.
“The system is unsuccessful and very corrupt. So there is a burden for government finances.
“Instead of looking at it in the old angle, we are ready for a structural change of these institutions.
“We are looking at whether we can combine them into a holding company and sell to the stock market. We are ready for that.”
Ceylon Chamber Chairman Duminda Hulangamuwa said Sri Lanka was looking at transformational growth like South East Asia.
However fast growing South Asian nations have monetary stability, not 5 percent inflation targets and currency crises where two years of growth are lost after rate cuts, while several including Singapore and Hong Kong do not have centrally planned policy rates to trigger external crises in the first place.
Countries like Vietnam in East Asia, have progressed by divesting individual companies where investors can choose which type of business sector to invest.
The State Capital Investment Corporation of Vietnam operates like an investment managers which owns state enterprises and lists them in the Hanoi and Ho Chi Minh Stock Exchange in a process called ‘equitization’.
When Sri Lanka’s then administration expropriated a number of private companies including two listed companies, in 2011, SCIC started the listing of Bank for Investment and Development of Vietnam (BIDV).
BIDV closed at 40,000 Vietnam dong, up 100 on Tuesday. Other state banks like Vietnam Joint Stock Commercial Bank For Industry And Trade (VietinBank) is also listed, after a strategic stake being sold to Japan’s Mitsubishi UFJ Financial group.
VietinBank Trade Union is also a shareholder. The stock closed at 38,000 dong, down 100 on Tuesday.
Among the most successful firms which have become foreign investor darlings are Vinamilk, originally state enterprise built by expropriating multinationals in South Vietnam including Nestle and Friesland (Dutch Lady). Vinamilk closed up 200 dong at 62,200 on Tuesday.
Both Dutch Lady and Nestle are back in Vietnam.
Vinamilk has also invested in the US. Under the US-Vietnam free trade agreement firms can invest in each others’ countries.
Meanwhile, President Dissanyake said there were a number of other non-commercial agencies which are a burden to the state that a committee under the Prime Minister’s Secretary is looking at.
“There several agencies that do the same thing,” President Dissanayake explained. “Some agencies were build for a need that existed at that time.
For example, the government has several construction companies. We had to do it at the time because there were no strong private contractors. But now there are strong external contractors who are efficient.
“Now do we have to maintain them? We will have to close them, combine them, and some we have to change their role.
“These are challenging things to do.”
Sri Lanka is expected to grow around 4 percent in 2025, as the economy recovers from the latest currency crisis, he said.
Sri Lanka has suffered a series of currency crises with credit bubbles fired through flexible inflation targeting to generate 5 percent inflation or money printing for growth (targeting a potential output gap) followed by stabilization crises that kill growth for at least two years.
(economynext.com)
(This story, originally published by economynext.com has not been edited by SLM staff)
