COPE Chief Calls For Finance Ministry Intervention

• Burden On Banks By Loss Making SOEs

By Mandana Ismail Abeywickrema

The Parliamentary Committee on Public Enterprises (COPE) has warned that failure by the authorities to immediately address the situation at several loss making state institutions that are on the “verge of collapse as entities” would in turn affect the banking sector in the country.

According to the COPE Chairman, Senior Minister, D.E.W. Gunasekera it is evident that massive non-performing loans by state institutions would have a severe impact on the country’s banking sector be it state or private.

When The Sunday Leader inquired as to how these state institutions would be able to carry out operations if bank loans were not forthcoming, Gunasekera said that the Finance Ministry would have to step in and address the issue of minimising losses in the state sector without burdening the banking sector.

COPE revealed that 98% of the losses in public enterprises are borne by four State companies – the Ceylon Electricity Board (CEB), Ceylon Petroleum Corporation (CPC), national carrier SriLankan Airlines and Mihin Lanka.

The report has also noted that the CEB, CPC and Mihin Lanka are on the verge of collapse.

COPE Chairman, D.E.W. Gunasekera explaining this observation told The Sunday Leader that the Finance Ministry would have to address the issue of loss making state enterprises since they are mostly dependent on bank loans for survival.

He said that the granting of massive loans by state banks to a few state sector enterprises that incur heavy losses has had a severe impact on the state banks.

“However, this situation was remedied to some degree after Cabinet decided not to allow state banks to grant loans to loss making state institutions,” Gunasekera noted, adding that it was an action that the Central Bank of Sri Lanka should have initiated.

He added that the loss making institutions were now obtaining loans from private banks.

 

No Action On Previous COPE Findings

The COPE in August 2007 had revealed that the country had lost Rs. 600 million due to financial malpractices in 20 state institutions.
Then COPE Chairman and MP, Wijeyadasa Rajapakshe informed parliament that this was a blatant wastage of public funds.
According to COPE among the institutions that financial malpractices took place were Foreign Employment Bureau, Sri Lanka Cashew Corporation, National Housing Development Authority, National Gem and Jewellery Authority, Export Development Board, Building Materials Corporation, National Transport Commission, Associated Newspapers of Ceylon Ltd., Sri Lanka Rupavahini Corporation, Sri Lanka Broadcasting Corporation, the Consumer Affairs Authority and the Mahapola Higher Education Trust Fund.
A previous COPE report by the Committee headed by Rajapakshe had also revealed a loss of Rs. 1.5 billion due to corruption that took place in 26 government enterprises.
The COPE under Rajapakshe submitted two reports in January and August 2007 that examined 46 public sector enterprises and found corruption in 16 of them.
Rajapakshe at the time noted that the 2007 COPE report found corruption running into Rs. 300 billion, out of total government revenue of Rs. 760 billion recorded in 2007.
The 2007 COPE report was unanimously adopted by parliament but investigations by bribery and corruption officials were stalled three or four months later when key officials were transferred.
COPE itself faced its share of problems after the 2007 reports with the post of the head of the committee remaining vacant until Senior Minister D.E.W. Gunasekera was appointed to the post in 2010.
According to Rajapakshe, the 2007 COPE reports eventually led to individuals petitioning the Supreme Court regarding corruption in the privatisation of the Sri Lanka Insurance Corporation and Lanka Marine Services – the transactions that were subsequently reversed.