Sri Lanka’s much-publicised state-sector reform agenda is now under serious scrutiny, as the latest audit by the Auditor General’s Department reveals a catalogue of stalled closures, missing data and mounting hidden liabilities in the state -owned enterprise sector.
As of 30 July 2024, the government records list 10 public companies and 2 public corporations officially designated as “non-operative”. Thus far remarkably, basic information such as their formal resolutions, current financial statements and even full identity remains elusive effectively turning them into untracked fiscal liabilities.
According to the report, for example the Sri Lanka Rubber Manufacturing & Export Corporation (SLRMEC) has been shuttered and its Elpitiya foam-rubber factory leased out; and the Co‑operative Wholesale Establishment (CWE) voluntarily retired all its staff by 30 September 2023.
But critically, no formal liquidation process has yet been initiated for several of these dormant entities.
The audit illustrates a dual failure: on one hand, government boards of the defunct firms have approved liquidation or voluntary dissolution as strategy responses yet by 31 July 2024 only four of the twelve entities had begun formal liquidation, leaving six with no visible action 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.
Other lesser-known entities such as Lanka Cement Corporation Ltd, Selendiva Investments Ltd and Magampura Ports Management Company (Pvt) Ltd are awaiting for their closure.
The auditor’s findings set off urgent governance alarm bells: one official study cited in the audit reports that 20 state-owned enterprises (SOEs) incurred combined losses of approximately Rs 850 billion, and if even a portion of that reflects the non-operating firms, the fiscal drag remains substantial.
As the Auditor General’s Department emphasises, “these firms are not inert they continue to carry costs, liabilities and opportunity losses”.
Moreover, the Ministry of Finance is described as bearing a “huge responsibility” in resolving this issue, but the sustained delays “speak volumes” about implementation failure.
But as Sri Lanka seeks to restore fiscal credibility and unlock resources for productive investment, some recommendations from the auditor are clear:
1. Disclose a complete and updated list of dormant entities, including the latest financials.
2. Assign each entity a definitive exit status whether to revive, merge or liquidate with formal timelines.
3. Initiate the liquidation or closure processes without further delay.
Until these actions are taken, the “ghost” enterprises of the state sector will remain a stealth burden on the nation’s finances—and a potent symbol of reform inertia.
