April 01, Colombo (LNW): The Sri Lankan government is actively pursuing equitisation as a strategy to improve the governance of state-owned enterprises (SOEs) and stimulate capital market liquidity, rather than opting for full privatisation, which has historically faced strong public opposition.
This approach was outlined by Securities and Exchange Commission (SEC) Chairman, Senior Professor Hareendra Dissabandara, who spoke at the Invest Sri Lanka Forum held in Colombo last week.
Prof. Dissabandara explained that whilst privatisation typically involves a complete transfer of ownership, equitisation offers a more gradual and structured approach, where SOEs can raise capital through the stock market whilst remaining under state control.
He cited Vietnam as an example of a country that has successfully leveraged equitisation to modernise its state enterprises.
Privatisation remains a contentious issue in Sri Lanka, often linked to political disputes, concerns over corruption, and fears of job losses. Recognising these challenges, the government aims to gain public trust by ensuring transparency, safeguarding worker rights, and tackling governance issues.
Labour and Economic Development Deputy Minister Dr. Anil Jayantha reinforced the government’s openness to reforming SOEs through mechanisms that enhance efficiency without triggering social backlash.
The Colombo Stock Exchange (CSE) is poised to play a key role in this process through its Catalyst Board, which allows SOEs to list shares whilst adhering to minimum listing criteria.
Unlike full privatisation, this approach would involve partial divestment, with 20 to 30 per cent of shares being made available to investors. Prof. Dissabandara noted that listing SOEs on the stock market would not only provide access to cheaper capital but also introduce greater transparency and accountability, aligning these enterprises with international corporate governance standards.
To further strengthen market oversight, the SEC has acquired an advanced surveillance system from Nasdaq, which is expected to be operational by mid-June.
Prof. Dissabandara highlighted that this system would significantly enhance the SEC’s ability to detect fraudulent activities, market manipulation, and financial irregularities, reinforcing confidence in the Sri Lankan financial sector.
Meanwhile, SEC Director General Chinthaka Mendis stressed the importance of integrating Sri Lanka into global financial networks to attract foreign investment.
He warned that imposing excessive restrictions on market operations could make the country less competitive, as international investors seek markets with greater flexibility and efficiency.
With a combination of equitisation, regulatory modernisation, and digital transformation, the government hopes to revitalise SOEs, strengthen market confidence, and position Sri Lanka as a competitive player in the global financial landscape.
