LIST AND LET LIVE
It is time our state-owned enterprises are listed on the bourse
When an emerging markets expert cum high profile investor says “Sri Lanka can re-achieve eight percent growth if the right policies are followed,” people will take note. In town at the invitation of Cinnamon Hotels & Resorts mid last month, the Founding Partner of Templeton Emerging Markets Group Dr. Mark Mobius recalled our island nation’s heady days when GDP growth was galloping at around the eight percent mark in the aftermath of the protracted civil conflict.
As for the year that ended on 31 December, growth projections hover at below three percent against a backdrop of a lacklustre external economy, the impact of the Easter Sunday attacks and political instability in the first three quarters of 2019.
To corroborate his expression of confidence in Sri Lanka, Mobius cited the wide-ranging stimulus package announced by the new caretaker government at the end of November and prevailing tight monetary policy regime whereby official interest rates continue to be pegged in the single digits. And Mobius believes there’s a window of opportunity for Sri Lanka to make the most of what he called an “almost deflationary” global macro environment because it will ease the nation’s debt repayment burden.
The stimulus package meanwhile, is estimated to cost the nation around Rs. 500 billion with the local arm of rating agency Moody’s – ICRA Lanka – recently affirming that the government’s fiscal package would boost demand in the short term although it cautioned that long-term instability may follow unless Sri Lanka’s tax net isn’t expanded.
Mobius also discussed the ongoing revamp of Sri Lanka’s state-owned enterprises (SOEs) and remarked: “You don’t have to privatise… Just increase transparency of SOEs by publicly listing the companies.” As he noted, this is a high priority because it is only then that the issues surrounding the nation’s public services – which include the mountain of losses that some of the largest utilities have accumulated over the years, not to mention persistent allegations of mismanagement and corruption – would be known and can be addressed.
Indeed, listing our SOEs would also bolster the state’s dwindling coffers and boost confidence in the often criticised ‘service factor’ too. A case in point from the past is the state controlled Sri Lanka Telecom (SLT), which raised Rs. 3,249 million when it was listed on the Colombo Stock Exchange (CSE) back in November 2002 in what was the largest IPO at the time.
Today, SLT is among the 15 largest listed companies in Sri Lanka, according to the recently released LMD 100 special edition. And the Government of Sri Lanka continues to hold a 50.5 percent stake in the national telecom utility, which registered a market capitalisation of nearly 57 billion rupees on 15 December.
So will the process of cleaning the SOE slate include listing some of their shares on the stock exchange, which is also in need of a boost to propel activity levels?
While this is unlikely to transpire in the near term, given the prospect of an early general election – and possibly an extension of the current parliamentary prorogation when the legislature meets on 3 January – one hopes that it will see the light of day during the course of 2020.