12 November, 2019

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Privatisation & Renationalisation

By Kumar David

Prof. Kumar David

Critical infrastructure and ‘common-goods’ should be in public hands: Privatisation and renationalisation

The purpose of private enterprise is to make profits; shareholders and managers are not asses who invest time and money to waste the former and lose the latter. Capitalism is not charity; rich people who wish to do good find a cause, to donate to, and/or work voluntarily with. Businesses are happy to do “their bit” such as sponsor scholarships, donate to good causes and feel virtuous about contributing to national development, but this makes sense only if the company is doing well, that is it is profitable. I am not discrediting the private sector, just making obvious observations.

This comment is a lead into the government’s intention to “privatise loss-making institutions”. But why would anyone but a plain lunatic wish to be saddled with a loss-making venture? Only if the state writes off loses of prior profligacy, as with Sri Lankan Airlines, and prices are raised to make the enterprise commercially viable; that is profitable for the purchaser. Or privatisation may be a way out for a government which dares not raise prices ‘for fear of losing the next election’. If you privatise the CEB or the railways and the new owner doubles electricity tariffs or quadruples train fares, you will have profitable enterprises with plenty of funds to reinvest. A third case is where a buyer runs an enterprise to ground and dumps the wreckage back on the state.

UK experiences

Privatisation of the Central Electricity Generating Board (CEGB) in UK was an example of the first type. British Railways (BR) and construction giant Carillion are doleful examples of the third model under Thatcher-New Labour neoliberalism. The CEGB, epitome of professionalism, planning and research, was doomed by the “rush for gas” when oil was found in the North Sea. Neoliberalism (Thatcherism) saw a golden opportunity to make a killing and forced a breakup of generation first; transmission and distribution were spun off into separate companies later. Suffice it to say that this has led to no efficiency gains, no fall in prices apart from fluctuations attributable to gas prices, no research and nothing useful in dispatch management. The consumer pricing system is a nightmare. Jeremy Corbyn has vowed to renationalise electricity supply when the Theresa May government falls and Labour takes office. So, privatisation will be followed by renationalisation!

Privatisation of British Rail has turned into catastrophe. BR was formed in 1947, in the spring of Attlee-Labour, by nationalising four great railways (LNER of Flying Scotsman fame, LMS, GWR and SR). Privatisation (1994) can only be described as neoliberal madness. BR was split into twenty-five passenger train operating companies and six freight operating companies – but the insanity doesn’t end there.  A private company called Railtrack took ownership of railway lines, signalling and stations. Railtrack franchised-out 2500 railway stations and subcontracted track maintenance and signalling. Train companies paid for use of track and station. Quality of service plummeted, delays proliferated, accidents increased, all due to the mule headed system. In desperation the government created an organisation called Network Rail under court orders; in effect Railtrack was renationalised.

BR was good, though not in the same class as the Chinese railway system, France’s famed SNCF, Swiss Federal Railways – all state owned – or Germany’s public-private Deutsche Bahn. But dear god it ran a decent railway. There is public outrage now and Corbyn has vowed to renationalise the entire railway system as soon as Labour comes to power, which now seems a certainty.

Carrying neoliberalism to ridiculous lengths has backfired in another sector, outsourcing. This is a popular, and on the whole a useful practice, since small operators and individuals can do a one-of job efficiently and cheaply. When your wife hires a small contractor to tear down and redo the kitchen, you may cuss and swear, but it’s outsourcing. When governments and companies outsource to cut employment, it may lead to complications. US telecom operators are pulling back call-centre spinoff to Asia due to customer dissatisfaction. E-commerce outfits outsource distribution and delivery but often, as in the case of Alibaba, it leads to chaos.

A recent giant scale disaster is Carillion PLC, a huge construction and enterprise management outfit executing contracts in UK, Ireland, USA and Canada. The Financial Times,15 Jan 2018 says: “Papers seen by FT show the insolvent construction company owes more than £1.3bn to banks, including £790m revolving credit and £349m private placement notes. It also had £630m bonding facilities and £350m invoice finance, taking the total exposure to above £2bn”. The Conservative government, hostile to National Health, and besotted with private enterprises like Ranil and Mangala, outsourced hospital management to Carillion. Now all hell has broken loose. Carillion also manages courts, schools, government infrastructure and is the biggest manager of military bases for the MoD. The jobs of 43,000 employees are at risk; hundreds of subcontractors and small businesses, owed money, will go under as Carillon flops. (Mis)managed hospitals, courts of law, schools and defence bases will falter.

CEB and SL railways

I am leading up to the possibility of this government privatising the CEB and the railways. The CEB can benefit from restructuring but privatisation will be an unmitigated disaster. The railways are a mess and need to be taken by the scruff of the neck and shaken. Capital from private or foreign-government (Chinese or Indian) sources needs to be injected, brain-dead old-timers should be shown the door. However, privatisation should not be considered in the light of experience elsewhere.

Chaos in electricity generation planning – potential power cuts stare us in the face – is the fault of government and the intellectually challenged, politically pressured, Public Utilities Commission. The mess is not a creation of the CEB which has kept its head above water and adapted/updated its plans as conditions evolve. I was impressed by a presentation “Present Status of the Power System” by Buddhika Samarasekera and Wijekoon Banda at the Institution of Engineers (SL) on 16 Jan. Three things are worthy of mention; the authors took a wholistic system-wide approach to power system expansion planning instead of banging on about irritants and controversies, second it was clear that the CEB is quick to update its plans in response to global price, technology and renewable trends (solar and wind advances, LNG-coal relative price swings). Thirdly, the presenters were sensitive to enhancing the role of renewables; 100 MW of wind power is in place or under construction and ambitious solar parks are on the drawing board.

This shows, that by and large, the CEB is a healthy and forward-looking organisation. Recall the old American adage: “If it ain’t broke, don’t fix it”, so it may be useful to consider restructuring, only in regional redistribution, for now. Instead of a monolithic (generation-transmission-distribution) corporate entity maybe it be better to loosen up and let regional distribution have autonomy; coupled at arms-length, or freely floated. What can we learn from the LECO experience?

The railways cannot be described as healthy or forward-looking. Management is as near death as the dilapidated trains. Here is what tourist says on a web-site “Sri Lankan trains are crap just like the rest of their country. Due to weight restriction per axle, bad state of tracks and speed restrictions there is very poor service. The tracks are unable to handle the tractive force of many locomotives. Due to the general low technology in Ceylon, the M2 and M4 locomotives of the 1950s and 60s have done well through maintenance. The high technology M9 locomotives on the other hand have not fared well at all”.

Dr. Prianka Seneviratne pointed out in a recent lecture that infrastructure resource utilisation in Sri Lanka railways is abysmal. He shows that it is a crappy waste of money and opportunity. A video put up on You Tube Barry Esteben comparing Sri Lankan and Indian railways is depressing.

Extracted from a table presented by Dr Priyanka Seneviratne

I add a personal note. On a recent visit to Jaffna I discovered that ONLY four passenger trains in each direction per day, and no goods trains at all, pass through the station. The entire Vavuniya to KKS sector carries only this amount of traffic. There are over a dozen stations staffed by maybe five hundred personnel (three shifts). If we including maintenance and engineering costs I reckon the public purse is burdened to the tune of Rs500 million a year on this bit of railroad junk. Ask staff at Jaffna station “why no better utilisation and more passenger and freight trains” (there is a big demand; trains are crowded, bookings are hard to make) and all you get is a shrug of the shoulders.

Is privatisation the answer? No, it is not; privatisation will achieve nothing because no private investor will buy and build a basic infrastructure enterprise for the sake of the public good. Yes, huge investment, probably syndicated with Indian Railways which is currently undergoing a massive ($6.6 billion) refurbishment, is essential. The simple lesson is that public goods and critical infrastructure should never be privatised. Huge investment in track, signalling, motive-power and rolling stock in the main system is essential and without a new suburban railway, gridlock in Colombo and its suburbs will reach standstill soon. All this envisages investment in the region of $1 billion. Well?

Bigotry sends wrong signals

Lanka is at the early-middle modernisation stage; energy and transport are critical. Cultural and intellectual obscurantism is an impediment to modernisation, but President Maithripala Sirisena is a bigot who revealed his mindset by banning liquor sales and jobs in service facilities to women. Backward, dishonest, hypocritical! Is it women who get stoned, perpetrate domestic violence and beat up husbands? Is it women in the President’s home town, Anuradhapura or wherever, who get pissed out of their minds and create a fracas on the streets? Let’s show this joker around Sri Lanka and welcome him to the real world. The Health Minister is an even shoddier fraud: “It’s against Buddhist ethics and our culture!” Those who bury their heads in counterfeit culture are humbugs, nor will the economies of such countries improve.

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Latest comments

  • 2
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    Yes Sir, you said it right. All bloody humbugs. In places like Dubai and Malaysia restaurants and tourists outlets sell liquor until late hours and wemon too are working in them. In Malaysia being Muslim Majority country liquor is sold even in licenced grocery stores, and they do full page beer ads. In Malaysia and Singapore they have casinos but with strick rules – no one under 18 allowed, number of visits for locals etc. MR government gave to the Packer with 5% of profit to state but Singapore takes 40% from gross turnover. For ever we can’t depend on our history, culture and nature to generate tourists income. They come to relax and enjoy so when night falls they want entertainments. One should go to Gentening and see the hoards of Chinese in Casinos. They come in plane loads. Dubai and Singapore created all what visitors want, millions are visiting them and they mint boat loard of money. So those in the tops in SL are real bloody humbugs, and all they do is cheap dirty politics, even the people and country go to dogs they least bothered.

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      Dubai and Singapore are business cities. vietnam, thailand like countries have prostitution a lot and many women entertain the Western tourists. Sri lankza is also going along that lane. MR govt also did not have a sense of how to develop the country. His manovering always was how to survive from the west (I read, the country was not developing economically since 2013. It is struggling). . He had too many enemies because he won the war. West, Tamil and opposition were those. Ranil, Mangala and CBK ass leaders together with people like , Rajitha, Ravi the Liar taking the country alone another way. High politicization too much trust in Neo-liberal economics such as privatization, austerity have been proven else where in the world not working. Just search and see views on neoliberalism. Ranil is trying the MCC/IMF/WORLD bank medicine but that is proven not to work. In Sri lanka high politicization even those party politics and ideology by professsionals has taken sri lanka closer to destruction. I quoted an article. there are more in the same web site, related articles. Read and see. Just think why the socialist block including India established organizations opposite to IMF/World bank etc., Is it just politics ?. West tried their way. It is not working. It is proven. they wanted even Bitcoin in India. Modi was intelligent. they gave up gold and went to stock market and floated the dollar. Now Dollar sucks, so bitcoin.

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      George and Kumar, you guys need to wise up to the fact that All the talk about women drinking or not a distraction from the main issue.. of BOnd scam Ranil Wickramasinghe’s massive fraud and corruption and our collective failure to impeach him.
      KD’s buddy Bondscam Ranil has been looting and selling public assets and/or piling on the debt as with Sri Lankan Airlines. The plan was to privatize Sri lankan Airlines to Texas Pacific Group – a dodgy hedge fund which has been since taken to court by the Australian Govt. for asset stripping and breach of trust in that country.- TPG would further asset strip Sri Lanka Airlines it and sell it back to GoSL this was the debt trap expansion plan with Fake advise on re-structuring from IMF , KPMG and PWC now banned in India and other Bail Out business global accounting companies.! All this was to be done on the advice of Ranil’s foreign Fake economic adivisors who work for the Trump Deep State.
      IN the final analysis Chinese loans are better than fake economic advise from Washington DC!

  • 1
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    Prof: Kumar David: I was reading an article about neoLiberalism is destroying former USSR, China, Pakistan and how the same Program is operating In sri Lanka. that is the Washington needs Srilankan enterprises and Lands sold to a conglomerate (an Oligarchy) of private people inside the country then that conglomerate sell shares to western investors. This is supposed to be a neoliberal Experiment .www.globalresearch.ca/Latvia-s-cruel-neoliberal-experiment/18636. Their aim is to destroy economically the Two major opponents and third world countries which are in debt and the major aim is to destroy socialist economic – advances in those countries. the program is as opposed to a program called Chicago boys club in chillie 1973. USa, Britain and Western Europe are involved. social welfare, Bank credit, Agricultural policy are their targets. I wrote a very short description. they simply want to show that socialist progress doe snot lead the countries to nowhere. Just read the link I provided. Sri lanka is in an advanced age in this program with respect to Lands, bank privatization and taken into the share market, giving up agriculture and importing even the staple food (note none of the developed countries import their staple food and they grow it). IMF, EU are major players. Very interesting article. Read and see.

    • 0
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      The economic system is rigged by the white man. Resources and labour of the third world flow in the west. While the third world gets paper currency and financial consultants from the world Bank and imf.
      The only way out is to produce as much what the nation needs locally. Especially food.

  • 1
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    I think the bank robbery has some Western influence. Ranil was caught in that. Probably Ravi the Liar and Arjun Mahendran fooled Ranil.That is why Ranil is attached to the seat like a Leech and is not quitting. I read, In other countries they tried to destroy the Central bank and see how it goes.

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    In Sri lanka as Ranil, because of IMF/MCC advice, does privatization most of the govt enterprises will not work. What is needed is removing politicization and handing over it to a capable management who are professionals and not their families and friends. Sri lankan politicians are very insecure. they all try to hire more politicians, more politicians, buying every one possible with bribes, changing electoral maps will work. Besides now every govt enterprise has a political authority. If the political authority doe snot have nothing happens in that department. Politicians have to change. Politicians have to understand they have to separate from insecure mentality.
    The most dangerous thing is the western on going western project on the socialist countries. Read my article and see.

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    Sri lanka’s problems are high politicization, appointing henchmen to support it, lack of management experience, lack of project management and therefore mismanagement of everything. Besides establishing a Political Authority to every enterprise is very detrimental to the progress.. If you check, even Railway has a political authority. so, all the work should go on as per their wish. So, it is not a business enterprise owned by the govt. In your article you should have mentioned whether the Indian Railway is profitable. Because, India also has lot of political influence and chief ministers use railway for their political needs.

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      All looters and destroyers of Sri Lanka is Catholics.(Prabakaran to latest Arjun Mahendiran).even entrepreneurs Hari to Alosius .

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        To understand sinhala Buddhist sentiment towards the Catholics, please read ,” that anti- Portuguese feeling by p.k balachandran. Who is a Tamil Nadu journalist. A Google search should be enough to find the article.

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        God who created the universe does not require man’s money. A man who truly believes in God, accepted the sacrifice of Jesus as sufficient exchange wiping out his karma through righteousness of Christ, is never greedy as he has access to God’s resources.

        The head destroyer of SAITM is a so called devout Buddhist struggling to give 700 student human sacrifices to the devil who promises nirvana. The comedy is that the buildings are to be gifted to the Buddha Sasana. Is this Buddhism or fantasy nirvana. Why not accept the one sacrifice of Jesus and go from karma to freedom Then no need to struggle to do good as the new nature flows out.
        President it is time to execute weird insanity to save citizens. Nationalisation of buses, railways, CEB etc. built up this profit crazy robbing nation to become blessed through good belief. SAITM must be transferred to the state. We not ready to handle privatization.

  • 1
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    Now tell us how Yahapalana can fill Galle Face Green with people. How many bus loads required? How much to be paid for. Each load? How much of arrack to be distributed? Isn’t that what you espoused in one of your recent articles. Disgusting anti democratic louse, you.

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