UL corruption scandal shows urgent need for deep structural SOE reforms: Advocata

„Welcomes President’s order to investigate alleged corruption deal „Srilankan’s accumulated losses tops Rs.69bn since 2009 Colombo-based free market think tank Advocata says the recent Srilankan Airlines corruption scandal aptly shows the urgent need for deeper structural reforms in the country’s State-owned Enterprises (SOES).

It has recently been revealed that Airbus SE paid the wife of a Srilankan Airlines executive US$ 2 million, out of a US$ 16 million bribe over a large Airbus deal.

Following this, President Gotabhaya Rajapaksa has ordered an inquiry over these allegations.

“While Advocata welcomes the President’s decision to order investigations, we also urge the government to attend to the deeprooted issue of systemic misgovernance embedded in Sri Lanka’s State Owned Enterprises (SOES),” the think tank said in a media statement.

SOES such as Srilankan Airlines continue to remain a large burden on Sri Lanka’s debt-ridden treasury.

Srilankan Airlines has accumulated a net loss of Rs.17.2 billion solely for the year 2018. To-date, the airline has accumulated losses worth Rs.69 billion since nationalisation in 2009.

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 and 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 Srilankan Airlines scandal.

The think tank proposes three key recommendations to address the issue. They are; proper functioning of the National Procurement Commission, implementation of e-government procurement and introducing procurement auditing to public procurement to prevent fraud and ensure reliable financial reporting. “There is no pride having a corrupt 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,” advocata Institute Chief Operating Officer Dhananath Fernando said.