‘Merit should be basis for SOE appointments’ | Daily News

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‘Merit should be basis for SOE appointments’

The need of the hour is to stem the bleeding in SOEs and bring in private sector governance and management practices to SOE whilst continuing state ownership. Even profit making SOEs could improve their performance substantially if the governance issues in SOEs are addressed

The appointments of chairpersons and board of directors of State Owned Enterprises (SOEs) should be based on specified criteria; calling for applications from the public or nominations from the professional organizations related to the subject and the political appointments are done away with and those appointed should not be changed with a change of minister, according to a set of proposals revised by the Organization of Professional Associations (OPA).

The revised report says, “The practice of Ministers handing over letters of appointment to public officers should cease, since it reinforces the idea that jobs are the prerogative of the Minister.”

“Most importantly, the selection of board of directors should be carefully screened through a nomination committee of the constitutional council or public service commission to ensure people with criminal charges or accused for bribery and corruptions are not appointed for such positions.”

The unsustainable and highly politicized practice of treating SOEs as a means to solve unemployment problems through ‘sponsored employment’ should cease.

Administrators should be protected against interference by politicians. The Right to Information Act should be strengthened in this respect to make information as to all appointments and criteria followed publicly available.

The proposals further suggest professional management, transparency & accountability, financial discipline, performance monitoring and progress review of key performance indicators (KPIs) measured with provision for incentives, effective internal controls, risk management practices, audit, and adequate disclosures in financial reporting, to be introduced among others at SOEs.

The cumulative loss of 55 strategically important SOEs amounted to Rs. 636 billion for the period 2006 to 2015, which amounts to Rs.31, 750 per citizen. Bank borrowings by these SOEs stood at Rs.471.2bn as at end 2014, thus crowding out the private sector and citizens having to pay high interest rates when they borrow. Between 2009 and 2014 the number of SOEs grew from 107 to 245 while the number employed grew from 140,500 to a staggering 261,683.

As per the Ministry of Finance, 16 SOEs have made a total loss of Rs.87 billion for year 2017.

The return on assets amounts to 0.64% clearly indicating that SOEs are not performing as a whole.

Whatever the regime is in power, SOEs continue to incur enormous and persistent losses and the citizens unknowingly pay for these losses unless they realizes their folly on trusting politicians and their empty promises. Even the poorest person has to pay Rs.181.60 on 15% VAT per year for the infant milk packet they buy for their child to recover losses incurred by SOEs. (The average annual spending on infant milk powder was Rs.1, 210.68 according to 2016 household income and expenditure survey).

If these objectives are to be achieved, the media should play a pivotal role in educating the citizens and citizens cannot continue to be passive observers but to bring in the pressure upon the politicians to introduce the required governance practices to address the sorry state of affairs at SOEs.

The solution to addressing State Owned Enterprises (SOE) governance issues in the long term lies in establishing a proper nomination process for the appointment and carefully screening who get appointed as chairpersons and board of directors of SOEs, similar to the private sector governance principals, according to the Report of the committee appointed by the National Human Resources Development Council (NHRDC). The report says, what is required primarily is public awareness about the political theft that is going on and to bring in high standard of governance to SOEs. The committee report on ‘Explore New Ways of Working in the Public Sector’ explains the changes required in the governance structure, if Sri Lanka is to get out of this situation. “Most politicians will not want to pay heed to implementation of these proposals, as they will lose their ability to amass large amounts of funds they need to win elections and look after their henchman after winning an election,” NHRDC report said.


 

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