Government puts six prime State-owned Colombo bungalows on the market for long-term commercial development, promising investment and better use of public property – but the real test will be valuation, transparency and who ultimately gets the keys
COLOMBO, Wednesday – Six State-owned bungalows in some of Colombo’s most commercially valuable areas are to be offered to private investors on leases of up to 30 years, opening another chapter in the Government’s attempt to extract economic value from public property that has traditionally been occupied or controlled by the State.
The properties are among former ministerial and State bungalows identified for commercial development, with the Government inviting private-sector proposals to convert them into ventures including restaurants, cafés and other tourism-related businesses. The stated objective is to put underutilised State assets to productive use while generating income and attracting private investment.
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The proposition has considerable economic logic. Prime Colombo land occupied by buildings producing little or no meaningful return represents an opportunity cost to taxpayers, particularly for a Government attempting to strengthen public finances while simultaneously encouraging greater private-sector participation in the economy.
But a 30-year lease is not an insignificant transaction. Three decades can transform both the commercial value of a property and the character of the neighbourhood surrounding it, making the method by which the State values the properties and chooses their eventual operators particularly important.
The Government’s initiative is also part of a considerably wider programme. Earlier this year it sought investors for 24 State properties under long-term lease arrangements, with possible uses including diplomatic premises, offices, boutique hotels and high-end restaurants.
There is therefore a distinction worth making between privatisation and productive utilisation. Leasing a property does not necessarily mean selling a public asset. If ownership remains with the State and a competitively determined lease generates substantially greater income than the property currently produces, taxpayers can conceivably benefit while the underlying asset remains public property.
That argument, however, depends upon the process being demonstrably competitive. The public should eventually be able to establish the independent valuation of each property, the minimum expected return, the number of competing proposals received, the criteria bywhich they were assessed and the financial terms offered by the successful investor.
The length of the leases makes those safeguards especially important. A poor commercial decision today could bind the State until well into the 2050s, while a properly structured agreement could produce income, investment, employment and improvements to properties that might otherwise deteriorate at public expense.
There is another consideration. Some former official residences occupy land whose value may substantially exceed the economic value of the buildings standing upon it. Decisions over redevelopment should therefore take account not merely of present rental values but of the long-term value of the underlying public land.
The Government should not be criticised merely for asking whether State property can earn its keep. Indeed, maintaining valuable buildings indefinitely at taxpayers’ expense simply because they have traditionally belonged to the State can itself amount to poor stewardship.
The scrutiny should instead concentrate on what happens next. Public property can legitimately be put to commercial use, but the public must be able to see that the consideration received reflects its true value.
Be that as it may, when the Government hands someone the keys to a public asset for the next 30 years, taxpayers are entitled to know not only who got the bungalow, but precisely what Sri Lanka got in return.
