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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Can The Government Take Away Your Business????? Two Listed Firms Named!

Can The Government Take Away Your Business????? Two Listed Firms Named!

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Rapaport

Rapaport
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Sri Lanka planned expropriation law under fire
Nov 01, 2011 (LBO) - A secretly written expropriation law which has not yet been presented to parliament has come under fire from a lawmaker and an ex-chamber chief for undermining freedom of citizens and future investment prospects.
The proposed bill, which was reportedly written by a private law firm, seeks to vest in the state 'underperforming enterprises and underutilized Assets' in what was called the 'national interest'. The assets listed are mainly land.

Several of the enterprises are defunct but it also includes two listed companies.

The bill has slated for state take-over 6,300 acres of Pelwatte Sugar Industries Ltd, a firm now controlled by Harry Jayewardene's Distilleries group and Hotel Developers Lanka Plc, which has the Colombo Hilton franchise and is largely state controlled.

Chandra Jayaratne, a retired business executive who is now active in campaigning for citizens liberties and just rule of law said the 'selective criteria' defined classifying underperforming and underutilized assets could be applied to many other listed and unlisted firms.

No private investment would be safe because the list could in the future be expanded by simple parliamentary majority by the administration, he said.

Amber Light

Jayaratne warned that the proposed law raised "amber lights in the eyes of investors, entrepreneurs and business decision makers locally and overseas" and will degrade Sri Lanka "as an attractive destination for investment, do business and operate in."

It is not clear why Sri Lanka's administration decided to enact an expropriation law when violations of property rights of citizens has severely setback countries from the time they were first tried out in Europe in the latter part of the 19th century.

Nationalization also helped destroy Sri Lanka's economy after independence. Sri Lanka is now actively seeking foreign investment after the end of a 30-year civil war.

Sri Lanka has in the past, repealed a 'Business Acquisition Act' which killed private entrepreneurship and investment and made Sri Lanka's a lagging economy in Asia. Ironically information about the law emerged days after Sri Lanka's ranking in an international 'doing business' survey was lifted.

The state also used a now controversial device where Supreme Court approval was sought to bring the bill parliament as an 'urgent bill'.

Jayaratne unless it could be justified why the law should be an 'urgent bill' it appeared to an attempt to "pass democratic good governance expectations of society."

He said the secrecy surrounding the bill gave ground for such a belief.

Unbelievable

An urgent bill means no discussion, Harsha de Silva, a lawmaker representing Sri Lanka's main opposition United National Party said. He said it was "unbelievable" that Sri Lanka could act this way and it was an action more suited to Zimbabwe.

"We are slowly but surely losing our economic freedom in the land that is supposed to be free," de Silva said in a statement.

"It is wrong to legislate this way. Surely it violates the constitution and the rights of the people."

De Silva questioned the arbitrary definition of an asset as under-performing or under-utilized and it being selectively applied to some enterprises and not others.

De Silva said no objective criteria has been given and "only some subjective and opaque nonsense written up including 'prejudicial to the national economy."

The law comes as state enterprises themselves are making losses and are surviving on tax breaks and tax payer subsidies.

"How come only some have been listed while some others have been spared," he questioned.

"Who evaluated the performance? Were the companies involved requested to participate in the evaluation? Did the evaluators even visit the factories to see if the assets were utilized? Did the powers-that-be even go through the accounts?

"What is going on? Our Constitution says every person is equal before the law (presumably with the exception of HE the President) but this clearly does not reflect that equality."

A fundamental tenet of rule of law is that a rule applies equally to everyone.

Sri Lanka's current constitution, brought by the current opposition and an earlier constitution in 1972 has been blamed by many legal analysts for destroying Sri Lanka's public sector and contributed to undermining rule of law and freedoms of citizens.

There has also developed a troubling process of parliamentary absolutism in Sri Lanka where oppressive laws, including constitutional changes that undermine the liberty of citizens are passed by administrations using their majorities.

Crossed Line

"We have to stop this Bill from becoming an Act of Parliament," de Silva said. "It can be Hotel Developers and Sevenagala Sugar today; but who is to say it cannot be any other private company tomorrow.

"The mere availing oneself to BOI (Board of Investment) tax breaks qualifies a company to be expropriated by the State."

De Silva said listed Pelwatte Sugar and Sevenagala Sugar, a privatized enterprises now managed by an entrepreneur connected to the opposition deleted has been listed in the bill but not Hingurana Sugar, a deal which was done by the current administration has been spared.

"What is the logic?" de Silva asked.

Pelwatte Sugar is now in the process of raising additional cash from a rights issue to cut debt built up under its previous owners, which include the state.

"The State has crossed the line with this Bill," de Silva said. "Who is to say that tomorrow the State can't bring in a Bill to take over your house and mine? Just like they are doing with the poor man's dwelling with no respect for the law?"

De Silva was referring to earlier forced evictions in illegal settlements in Sri Lanka's capital Colombo in the style of Zimbabwe's Operation Murambatsvina. The evictions landed the current administration in unnecessary trouble and have now been stopped.

Jayaratne questioned the logic of bringing a special law to expropriate assets of under-performing enterprises when a US Chapter 11 type of restructure provisions has been left out of the statute books despite requests for it.

He warned that business and people may eventually be sorry that the bill was adopted in haste.

Article Source www.lbo.lk

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