March 26, 2015, 7:14 pm
By Dinesh Weerakkody
The former administration unlike any other previous regimes made a conscious effort to extend its dominance in many economic spheres.
All governments in Sri Lanka in the last 25 years have in many forms tried their hand in running commercial enterprises. Overall, it has been a terrible experience and a costly exercise for the taxpayers. The recent revelations by the Prime Minister of the total mismanagement within Sri Lankan Airlines is a case in point. The general thinking worldwide nowadays, especially after the financial crisis is that government should not run commercial enterprises, no matter whether they are profit-making or not, and the government should only limit its involvement to simply running essential public utilities. We all know it’s not the government’s job to run businesses. It should act as a regulator and facilitator. Over the years successive governments have dumped hundreds of millions of Rupees just to prop up loss making state-run corporations and as a result increased our public debt many times over.
Why they fail?
Governments usually fail in business because politicians, not business executives, run governments. Politicians can only make political decisions, not economic ones. They are, after all, first and foremost in the re-election business. Because of the need to be re-elected, politicians are always likely to have a short-term bias. What looks good right now is more important to politicians than the long-term consequences, even when those consequences can be easily foreseen. Most politicians therefore tend to favor parochial interests over sound economic sense while markets, will always deal efficiently with shortages and gluts. Politicians as we all know too well need big headlines; but letting the market work doesn’t produce favorable headlines and, indeed, often produces the opposite. Then, governments use other people’s money to run businesses. Companies have to manage with their own money. Generally, cost management does not work well with bureaucracies. Indeed, when cost efficiencies are inescapable, bureaucracies often make cuts that inconvenience the public, generating political pressure thereafter to reverse the cuts.
Freedom to operate
Usually, the CEO of a private sector company has the power to manage independently. He decides company policy, recruits the right people, and allocates resources very much as he thinks best to achieve the set objectives for the year. The board of directors, generally does nothing more than reviewing the strategy, the risks, challenge some of the initiatives of the CEO and then ratify his moves, and will certainly fire him, if he fails to deliver the promised results. This allows a company to act quickly when needed. The next issue is the government is regulated by the government. It is the government’s job to make and enforce the rules that allow a society to function effectively. But it has a dismal record of regulating itself. Therefore, while we all know capitalism isn’t perfect. Indeed, to paraphrase Winston Churchill’s famous description of democracy, it’s the worst economic system except for all the others. But the inescapable fact is that often it is the profit motive and competition that help to keep enterprises lean, efficient, innovative, encourage meritocracies and stay customer-oriented.
Regulator
For example take the five big loss makers which were once categorized as the ‘biggest monsters’ by a former Minister of Finance, they have made operating losses amounting to billions of Rupees. This is however not new for Sri Lanka. Many public enterprises continue to make big losses and get away with total impunity. For instance, the two transport enterprises, Railways and SLTB, have made operating losses year after year since 2000 amassing cumulative losses of billions of Rupees. If a private company ran them, they would have been rendered bankrupt many years ago.. However, all these enterprises have been able to continue their business because the taxpayers have been forced to fund these institutions. Either way, it is the public who has to bear the burden of such losses eventually.
Therefore when state enterprises make losses it is undoubtedly ‘bad news’ for all Sri Lankan. This is why many people these days do not want the government to run businesses, simply because, they are not good at doing that. Instead they want them to act as a regulator and as a facilitator and leave commercial enterprise for the private sector to manage.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=122088
» CCS.N0000 ( Ceylon Cold Stores)
» Sri Lanka plans to allow tourists from August, no mandatory quarantine
» When Will It Be Safe To Invest In The Stock Market Again?
» Dividend Announcements
» MAINTENANCE NOTICE / නඩත්තු දැනුම්දීම
» ඩොලර් මිලියනයක මුදල් සම්මානයක් සහ “ෆීල්ඩ්ස් පදක්කම” පිළිගැනීම ප්රතික්ෂේප කළ ගණිතඥයා
» SEYB.N0000 (Seylan Bank PLC)
» Here's what blind prophet Baba Vanga predicted for 2016 and beyond: It's not good
» The Korean Way !
» In the Meantime Within Our Shores!
» What is Known as Dementia?
» SRI LANKA TELECOM PLC (SLTL.N0000)
» THE LANKA HOSPITALS CORPORATION PLC (LHCL.N0000)
» Equinox ( වසන්ත විෂුවය ) !
» COMB.N0000 (Commercial Bank of Ceylon PLC)
» REXP.N0000 (Richard Pieris Exports PLC)
» RICH.N0000 (Richard Pieris and Company PLC)
» Do You Have Computer Vision Syndrome?
» LAXAPANA BATTERIES PLC (LITE.N0000)
» What a Bank Run ?
» 104 Technical trading experiments by HUNTER
» GLAS.N0000 (Piramal Glass Ceylon PLC)
» Cboe Volatility Index
» AHPL.N0000
» TJL.N0000 (Tee Jey Lanka PLC.)
» CTBL.N0000 ( CEYLON TEA BROKERS PLC)
» COMMERCIAL DEVELOPMENT COMPANY PLC (COMD. N.0000))
» Bitcoin and Cryptocurrency
» CSD.N0000 (Seylan Developments PLC)
» PLC.N0000 (People's Leasing and Finance PLC)
» Bakery Products ?
» NTB.N0000 (Nations Trust Bank PLC)
» Going South
» When Seagulls Follow the Trawler
» Re-activating
» අපි තමයි හොඳටම කරේ !
» මේ අර් බුධය කිසිසේත්ම මා විසින් නිර්මාණය කල එකක් නොවේ
» SAMP.N0000 (Sampath Bank PLC)
» APLA.N0000 (ACL Plastics PLC)
» AVOID FALLING INTO ALLURING WEEKEND FAMILY PACKAGES.
» Banks, Finance & Insurance Sector Chart
» VPEL.N0000 (Vallibel Power Erathna PLC)
» DEADLY COCKTAIL OF ISLAND MENTALITY AND PARANOID PERSONALITY DISORDER MIX.
» WATA - Watawala
» KFP.N0000(Keels Food Products PLC)
» Capital Trust Broker in difficulty?
» IS PIRATING INTELLECTUAL PROPERTY A BOON OR BANE?
» What Industry Would You Choose to Focus?
» Should I Stick Around, or Should I Follow Others' Lead?