Abstract:
State-owned enterprises (SOEs) play a critical role in the growth of economic and
social infrastructure development in Sri Lanka. Out of the 52 major SOEs, 18 reported
losses in 2022, contributing to a cumulative loss of Rs. 1.64 trillion between 2013
and 2023, thereby contributing to fiscal inefficiencies. Although successive
governments have implemented several policy attempts aimed at enhancing financial
sustainability, efficiency, discipline, and autonomy, these initiatives have failed to
deliver sustainable outcomes. Hence, the question of why such reforms fail remains
to be addressed both empirically and theoretically. Thus, the objective of this study
is to explore the internal and external structural, political, and institutional barriers
that hinder reform outcomes and to analyse the gap between policy execution and
implementation by focusing on five key loss-making SOEs – CPC, CEB, SLA, SLTB,
and SATHOSA – which together account for over 95% of total cumulative losses. To
deal with the research subject, the study employed the content analytical method with
an employed thematic review of 75 institutional and policy documents covering the
2013–2023 period. The review results revealed that proposed policy attempts at Sri
Lanka’s SOEs – cost-reflective pricing, digitalisation, and improved audit functions
have been delayed by institutional weaknesses & constitutional constraints and the
absence of an effective, robust regulatory framework. Persistent barriers, including
politically influential trade unions, bureaucratic resistance, political interference, and
weak managerial control, have reinforced inefficiencies and fiscal dependence.
Financial instability is caused by external shocks, low global competitiveness, high
dependence on imports, and poor maintenance of assets. An incoherent policy
narrative and ad hoc decision-making have sustained a cycle of Treasury-subsidised
losses, burden on fiscal deficits and undermining of long-term sustainability. The
study concludes that addressing these structural and governance constraints is
essential to transform SOEs into financially sustainable entities. Strengthening
institutional accountability, policy coherence, and competitive entities capable of
contributing to long-term fiscal stability and economic growth.
