Efficient management of state-owned utilities

Posted on January 29, 2015  /  1 Comments

This is a problem that comes up in countries that LIRNEasia works in. In Bangladesh and India, where the government-owned telcos were not privatized, they are on life support. Based possibly on comments made by entities such as LIRNEasia, the government of Myanmar has chosen to effectively hand over the management of its government-owned telco to KDDI.

Here is a discussion of the problem in general terms, discussed in the Sri Lankan media in the context of the good governance debate that is running through the country in the aftermath of the recent Presidential election:

Is the Government willing to list a majority of the commercial organisations it owns in the stock market? Is it willing to allow the Sovereign Wealth Fund (SWF) to divest or acquire shares in the market as needed? Without that there will be no way to set performance standards.

Is the Government willing to establish independent regulatory authorities that will treat the SWF-owned companies no differently from those that they compete against? Is the Government willing to let the SWF-owned companies to set their own prices and make their own procurement decisions (paying for any social objectives through competitively neutral subsidies from the Consolidated Fund)?

Temasek has been in existence since 1974 and can draw from a pool of excellent former government officials. It is well known that Singapore has some of the best trained and efficient Government officials. Where will the Sri Lankan SWF draw its efficient and incorruptible officials from? And even if they are honest and efficient, will they survive the first downturn in returns or the next political change?

Temasek is not a solution that is appropriate for a country where the basic government does not work well. What happens when the model is transferred without the necessary pre-conditions being present can been in the case of Druk Holdings in Bhutan, now seen as a failure.

The Financial Times column.

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