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* SriLankan corruption scandal shows need for deeper structural reform at SOEs: Advocata
Wed, Feb 5, 2020, 10:06 am SL Time, ColomboPage News Desk, Sri Lanka.

  • Weak governance has led to large scale corruption in state enterprises.
  • Sri Lankan airlines has made Rs. 169 billion in losses since nationalization in 2009.

Feb 05, Colombo: Advocata, the Colombo-based independent think tank working on sound public policy, yesterday called on the Sri Lankan government to attend to the deep-rooted issue of systemic misgovernance embedded in Sri Lanka’s State Owned Enterprises (SOEs) such as national carrier, SriLankan Airlines.

It has recently been revealed that Airbus SE paid the wife of a Sri Lankan Airlines Executive US$ 2 million, out of a US$ 16 million bribe over a large Airbus deal. Following the revelation, President Gotabhaya Rajapaksa has ordered an inquiry over these allegations.

The think tank in a statement issued yesterday, welcoming President Rajapaksa’s decision to order investigations, noted that SOEs such as SriLankan Airlines continue to remain some of the largest burdens on Sri Lanka’s debt-ridden treasury.

According to Ministry of Finance Annual Report, 2018, Sri Lankan Airlines has accumulated a net loss of Rs. 17.2 billion solely for the year 2018. To date, the airline has accumulated losses of Rs. 169 billion since nationalization in 2009.

The think tank noted that in 2018, a special report on the airline by the Auditor General’s Department found various accounts of malpractice across the enterprise, including:

  • Failure to follow procurement guidelines in the selection of consultative companies
  • Failure to introduce formal control systems for the implementation of plans
  • Lack of proper cost-benefit analysis in validating expansion of the fleet of aircrafts
  • Failure to conduct proper analysis on the method of selection for acquiring aircrafts
  • Failure to follow government procurement guidelines in the acquisition of aircraft

Advocata’s recent report on The State of State Enterprises in Sri Lanka reveals that SOEs are vulnerable to mismanagement and corruption because of potential conflicts between the ownership and policy-making functions of the government, and undue political influence on their policies, appointments, and business practices, as evidenced by the recent Sri Lankan Airlines scandal.

Recommendations to address serious problems in procurement:

  • Proper functioning of the National Procurement Commission. Commission should be independent and should enforce their mission of formulating “fair, equitable, transparent competitive and cost effective policies, procedures and processes for the procurement of goods and services, works, consultancy services and information systems performed by the Government Institutions in a timely manner”.
  • Implementing E-Government Procurement to address prevailing constraints in Sri Lanka’s public procurement marketplace pertaining to information asymmetries, anti-competitive practices, and high transaction costs (Verite Research, 2017)
  • Introducing Procurement Auditing to public procurement to prevent fraud and ensure reliable financial reporting (Sri Lanka Auditor General’s Department Procurement Audit Manual, 2016)

“There is no pride having a corrupted and a loss-making airline burdening the taxpayer. It’s a national liability rather than a national asset. A national financial crime rather than a national pride. There is institutionalised corruption, mismanagement and lack of accountability in these enterprises that demand urgent reform,” Dhananath Fernando, Chief Operating Officer, Advocata Institute said.

Advocata, an independent policy think tank based in Colombo, Sri Lanka, conducts research, provides commentary and holds events to promote sound policy ideas compatible with a free society in Sri Lanka. Visit advocata.org for more information.

 

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