Idle State Firms, Active Losses: Sri Lanka’s Hidden Corporate Drain

Sri Lanka’s state-sector reform rhetoric risks being hollow when confronted with the reality of multiple non-operating enterprises still burdening the public purse.

 As at 30 July 2024, there were 10 public companies and 2 public corporations officially categorised as non-operative, yet their names, financials and formal resolutions remain elusive  a silent fiscal time-bomb.

 According to official disclosures, the Sri Lanka Rubber Manufacturing & Export Corporation (SLRMEC) has already been closed and its Elpitiya Foam Rubber factory leased out; likewise the Co‑operative Wholesale Establishment (CWE) had all employees retired by 30 Sep-2023 but no liquidation action taken. 

The Board of the dormant entities has decided some be liquidated contingent on a Cabinet decision while others be voluntarily dissolved owing to sustained losses. Yet by 31 July 2024, of the four companies scheduled for dissolution only the liquidation process had begun and for the remaining six, no process at all.

Attempts to identify the full list of the 12 entities face significant information gaps. Publicly available sources name some: for example, lists of dormant SOEs include the Janatha Estates Development Board (JEDB) and Sri Lanka State Plantations Corporation (SLSPC) among long-non-viable commercial entities.“While the closure of 33 dormant SOEs is a step in the right direction two examples are JEDB and SLSPC which have long ceased to operate as viable commercial entities Another dataset shows the non-operative list includes Lanka Cement Corporation Ltd, Selendiva Investments Ltd and Magampura Ports Management Company (Pvt) Ltd among entities to be shut down. srilankamirror.com+1

The lack of a comprehensive, verified listing raises urgent red-flags. The most recent official study reports that twenty SOEs incurred losses totalling around Rs 850 billion. If even a subset of the non-operating firms contributes to such loss accumulation, the fiscal drag remains material.

Governance and resolution remain weak. The fact that six of the ten dormant public companies had not commenced any liquidation as of mid-2024 speaks volumes about implementation failure.

 A commentary on the delays in SOE restructuring described the process as a “huge responsibility” facing the Ministry of Finance but with “delays” persisting. 

For Sri Lanka to restore fiscal credibility and free up resources for productive use, the following actions are essential: publish the full list of dormant entities with their latest financials; assign each an exit status (revive, merge, and liquidate) with timelines; and start the liquidation/closure process without further delay. These “zombie” enterprises are not inert they carry costs, liabilities and opportunity losses. And time is no longer a friend.