Reducing the ‘‘burden’’ of the public sector

Finance Minister Basil Rajapaksa got roasted by the Opposition for a statement he made post Budget that the public sector was a "burden" on the economy and the country. In Sri Lankan politics, one cardinal sin is to say it as it is when in Government and an apparent virtue to play to the gallery when in Opposition.

The fact of the matter is that successive governments, whichever party is in office, have barely heeded the fact that the public sector is over-staffed to the extent of 1.5 million employees and is a burden on the country. This is in spite of the private sector frequently complaining about the shortage of labour. No wonder, as more than one in six of the employed labour force is in the Government or in State Owned Enterprises (SOEs). It is a classic case of stymieing the professed 'engine of growth', with misdirected Government recruitment policies.

All Governments have only talked of this perennial problem with the IMF, World Bank and the ADB; about public sector reforms including the oversight of SOEs, strengthening expenditure control and improving financial management. Alas, the political will and the guts were lacking in all of them to follow through with the right mechanisms to implement change.

Why it is blasphemous for this Minister to say what he said? Simply because his party rode to office promising not to interfere with or privatise public enterprises. Now he says it is a burden. It is this continuing pantomime from both sides of the political spectrum that is ultimately the cause for the huge financial crisis the country is faced with.

As we said last week in this space, state institutions have been the dumping grounds for Ministers and MPs to send 'chits' to get employment for their constituents in the already bloated public sector. According to a former chairman of the Port Authority, the Colombo harbour has thrice the number of workers needed. That is the same story everywhere. Excess baggage and huge wages bills. The transport, petroleum and electricity sectors are running at losses to the tune of billions. The national airline's losses are a saga of a different class. So, who foots all these bills? The common man and woman must.

There are a few success stories, however. Telecom was one of the best known examples. Credit goes to the then Minister Mangala Samaraweera for executing the exercise of privatisation painlessly. His unstinted efforts in promoting public-private partnership and simultaneously encouraging vigorous competition in the telecom sector resulted in both the state and the citizen being the ultimate winners. Telecom is no longer a burden on the country. Smaller entities such as Ceylon Leather Corporation, Ceylon Oxygen are other examples.

Corruption in state ventures is rampant adding to the burden on the citizens. One does not have to look too far. The recent scandal concerning Lanka Sathosa is a textbook case. The unemployed must not feel that the public sector including all SOEs is where job security rests with a monthly salary, overtime and a pension. The MPs’ 'chit culture’ system of patronage employment has to end. Printing of money to pay these bills has its limits if the country is to prevent galloping inflation.

What is the way forward, even if the Government hasn't the courage to bite external impositions from the IMF and others? As a first step, continuing ad-hoc recruitment has to stop and over a period of time, the size of the public service reduced through retirement. Hard budget constraints in the form of gradually withdrawing state guarantees, linking wages to productivity, and pricing of product to market are other critical measures for reforming commercial SOEs.

While the Minister of Finance’s warning sign on public service announced in the recent Budget is a step in the right direction, the problem has been recognised long ago. But will he, can he, do what it takes to implement the critical reforms of cutting the fat from the public sector in the face of political opposition within his own party, from the coalition partners and the unions.