TO REVIEW PUBLIC FINANCE COMMITTEE OF PUBLIC ENTERPRISES (COPE)
By John Amaratunge MP
Dailymirror
I thought of presenting this note, as I am a founder member of COPE in 1979 and one, who had been on its membership, without a break since then. I would like, specially, to draw attention as to why a separate parliamentary committee was found necessary in respect of Public Enterprises, to supplement the work of the Public Accounts Committee to function in a different way to the PAC
The Birth of the Committee of Public Enterprises.
The first PAC was established in Britain, by Gladstone in the 1860s. He found that Parliament, which represented the People- who are the owners of state institutions-, was the approver of funds for expenditure for these Government Departments. But it had no mechanism for checking on their expenditures or even whether these funds were expended for the purpose Parliament had appropriate them, though the People- as taxpayers- paid for their operations. The PAC was created, as a special committee of Parliament, to review expenditure by Government Departments and report on to it to Parliament. A post of Auditor-General was also created, to help the PAC in its task.
Under Sect 4(b) of our Constitution, the executive part of the sovereignty of the people is exercised by the elected President. Under Sect 42 of the Constitution, the President shall be responsible to the Parliament for the due exercise, performance and discharge of his powers. Under Sect 4(a) of the Constitution, the legislative part of the sovereignty of the people is exercised by Parliament. Sect 148 of the Constitution clearly lays down that “Parliament shall have full control over public finance”. It is Parliament that is constitutionally vested by the shareholders of public ventures ie the people, to have oversight over them.
As time went on, the State had to take an active role in development. Development and commercial activities of the State, were vested with new bodies, variously called Public Corporations (in the British tradition), Public Enterprises (in the Latin-American tradition), Para-Statal Organizations (in the Sub-Saharan tradition). These were all the same. But, there were vital differences between them and private sector organizations. The private sector is interested in financial efficiency. Its success is reflected in the level of profit these organizations earn. Public corporations/public enterprises have a broader interest, that of socio-economic efficiency ie the extent to which the People have benefitted from their activities. A classic example is the foundation of the Ceylon Transport Board (CTB). If the objective was to provide a mere commuter service, the private sector could have undertaken the job. But the CTB was vested with wider social objectives that of providing a service. This meant the internal transfer of profits made from high intensity city routes, to serve low profit earning rural routes. The CTB undertook this responsibility wonderfully. We have 15,000 villages. The CTB provides at least one bus service to each of these villages everyday.
The Parliamentary oversight of these development agencies needed new parliamentary institutions. A Public Corporation/ Public Enterprises had a Board of Directors (a Government Department had a head of department), a Public Corporation/ Public Enterprises had autonomy in taking its decisions, having a distinctive seal which authorized its legality to act autonomously (a Government Department had to get its approval from the Cabinet), a Public Corporation/Public Enterprises could sue and be sued (a Government Department could be sued only through the Attorney-General) The Constitution acknowledged this difference. In the interpretation section of the Constitution it is stated that a “public corporation means any corporation, board or any body which was or is established by or under any written law other than the Companies Ordinance, with fund or capital wholly or partly provided by Government by way of grant, loan or otherwise.” These were State organizations. They belonged to the People as much as Government Departments.
Hon Ronnie de Mel, the Minister of Finance, recognized the vital differences between private and public sector organizations and the structural divide between Government Department and Public Corporation. He realized that the review of the work of Public Corporations had to be entrusted to a body other than the PAC, a body which had special skills and aware of this vital difference. He, Therefore, sought Cabinet approval- and received- it to establish the Committee of Public Enterprises (COPE). In India, too, a similar Lok Sabha body had been established called the Committee of Public Undertakings (COPU).
Preparatory Work On Operationalising COPE
COPE was a new organization unknown to Sri Lanka. In its operations, it could easily have lapsed into mimicking the PAC. Hon Ronnie de Mel saw the danger. He therefore provided some effective and innovative support to enable it to strike out on new paths appropriate to its mandate. These were,
Training
The COPE members, though Parliamentarians, were given formal classroom training in all aspect of management control, as its main mandate was management review of Public Corporations. Hon Ronnie de Mel himself participated in it.
Experiential Learning of Similar Systems Abroad.
Extensive study tours were arranged abroad. Some of the countries visited were, India, USA, Costa Rica, Mexico, United Kingdom, France, Yugoslavia. After every study tour a report was prepared and submitted to Parliament and the Cabinet. Many recommendations made by COPE were adopted by the government.
Technology
In 1980, when COPE started its operations, the use of computers was unheard in Sri Lanka. COPE was given the first interactive computer system in the country. It was widely used in interactions with Public Corporations at the review sessions. The empowerment that this device provided COPE members was widely acknowledged.
Public Enterprises Division of the Treasury.
The PAC was served by the Auditor-General. His sole preoccupation was the past, reviewing the degree to which expenditure had been incurred in consonance with Parliamentary approvals and the integrity of this expenditure. COPE had a wider mandate. In addition to dealing with past, it also covered the present, ie current performance reviews, and the future, ie the corporate plans, Public Corporations had for their future Hon Ronnie de Mel made a vital institutional breakthrough. He allowed the Auditor-General to serve COPE with respect to the past, but he created a division in the Treasury the Division of the Public Enterprises (DPE) – to serve COPE with respect to the present and the future. This harmonious work relationship of the Auditor-General and DPE provided the institutional support for COPE.
New Situations
New organizational forms in public ownership have evolved. They are primarily in the form of 100 percent owned Treasury agencies. Because they are owned by the Treasury, their debt becomes sovereign debt. If a private sector organization goes bankrupt it is liquidated. But a 100 percent Treasury owned organization cannot be liquidated, for, that would mean the State itself has to be liquidated which is an absurdity. To diagnose early that such a possibility would not occur and to ensure that the service obligations of public enterprises are met, COPE would have review the ongoing functioning of these organizations. The Standing Orders of Parliament have to be suitably amended for this purpose. “Mihin Lanka” is a good example. New situations require new solutions. There is not much to be gained by applying old solutions for new situations. The arrival of Public Corporations, Owned by the People, introduced new players in the institutional arrangements of the State. Parliament, as the repository of review on behalf of the People, had to develop innovative means to do so. The Challenge produced the solution, in the form of COPE. COPE was established in 1980. In 2010 it would celebrate thirty years of existence. It may be appropriate to reflect on the past and offer suggestions for the future, the future which will see a resurgence of Public Corporations but functioning in a world of globalization and information integration.