Sri Lanka’s State-Owned Enterprises: A Strategic Approach to Economic Development
Sri Lanka’s Deputy Minister recently addressed media reports regarding the financial performance of state-owned enterprises (SOEs) in the first half of 2025. He emphasized that the wealth generated by these enterprises is derived from public capital and aligns with market needs and efficiency. However, he acknowledged that overall profits have declined compared to the previous year due to factors such as the non-revision of electricity tariffs and the foreign exchange gains of SriLankan Airlines.
The Deputy Minister highlighted that several loss-making enterprises have been rendered ineffective due to corruption and incompetence. To address this, a restructuring process has been initiated to make these enterprises profitable. He expressed confidence that the revenue received by the Treasury from state institutions will be further strengthened in the coming years.
The Role of State-Owned Enterprises in the Economy
According to the Deputy Minister, many individuals are attempting to transfer state revenue to private capital. He stated that the government’s policy aims to ensure an efficient and functional market through three models: state, private, and cooperative. This approach ensures that all sectors contribute to the country’s economic development.
He noted that the process that paralyzed Sri Lanka’s state enterprises ended on September 21, 2024. “State enterprises in every country in the world continue to play a huge role in the development of their respective countries,” he said. While some countries have moved away from SOEs after achieving their development goals, others like China, Vietnam, South Korea, Singapore, and India still use them strategically.
Objectives of State-Owned Enterprises
The Deputy Minister explained that when owned by the state, the objective of SOEs is not to maximize profits but to maximize economic and social benefits and to make inefficient markets more efficient. There are currently 52 state-owned enterprises in Sri Lanka that are managed carefully in this way. These are referred to as strategic state enterprises.
Some analysts have used the example of the Cashew Corporation to downplay the importance of these enterprises. The Deputy Minister criticized these analysts for spreading false claims that the government should not engage in business. He emphasized that the current government is focused on strengthening governance, minimizing waste and fraud, and appointing capable individuals without political interference to form strong boards of directors.
Legislative Measures and Financial Performance
A new bill is being drafted to manage these institutions and minimize political interference. The Deputy Minister dismissed the claim that government businesses are wasting tax money as completely false. He pointed out that all businesses in Sri Lanka earned a profit of Rs. 427 billion in 2023 and Rs. 538 billion in 2024. If these enterprises were privatized, the profits would go to a few private capitalists, and price competition for essential goods and services would be lost to the public.
The total profit for 2024 was Rs. 538 billion, with Rs. 280 billion recorded as of June. This includes Rs. 144 billion earned by the Electricity Board due to price increases and Rs. 33 billion earned by the Petroleum Corporation.
Addressing Misconceptions
The Deputy Minister also addressed misconceptions about the financial health of the country. He clarified that the Rs. 20 billion given to SriLankan Airlines was taken from its profits, not from taxpayers’ money. He emphasized that it is a lie to say the country is going bankrupt because of the airline.
Conclusion
The Deputy Minister’s statements underscore the importance of state-owned enterprises in Sri Lanka’s economic strategy. By focusing on efficiency, transparency, and long-term sustainability, these institutions aim to provide significant economic and social benefits to the country. As the government continues to implement reforms and legislative measures, the role of SOEs in driving national development remains critical.