Lanka risks losing image, investment

Expropriation Act


Governance activist Chandra Jayaratne says the secretly hatched Expropriation Act, approved by the Cabinet and reviewed by the Supreme Court outside the usual channels of drafting and developing legislature, would harm the country’s image and could deny the economy the private investment needed to achieve the double digit growth targets of the government.

According to a draft presented to the Cabinet, the Bill is deemed urgent and in national interest whereby the government would take over underperforming or underutilized assets of 37 enterprises, including 2 listed companies. The assets are mostly land and the enterprises would be compensated for the takeover, but resistance would be dealt with criminal proceedings with a sentence of not less than 10 years (see yesterday’s, Nov. 1, The Island Financial Review)

"The need for this bill to be deemed an urgent Bill needs to be properly justified by the Executive and unless so justified, it appears to be so classified with mala fidei interests to by pass democratic good governance expectations of society. The secrecy surrounding the bill and its reported compilation outside the purview of the usual drafting sources adds further grounds to the belief," Jayaratne, former chairman of the Ceylon Chamber of Commerce and now vocal activist for good governance in both the private and public sectors, said.

Jayaratne said the selective criteria as defined for the application of the classification of under performing enterprises and under utilized assets could be applied to many other listed and unlisted private sector entities whose enterprise names and assets can easily be added in the future.

"This raises amber lights in the eyes of investors, entrepreneurs and business decision makers locally and overseas and will lead to lower rankings of Sri Lanka as an attractive destination for investment, to do business and operate in. This bill will raise significant risks-linked signals and country profiles in the minds of business leaders, decision makers and entrepreneurs, both local and foreign of the much feared Business Acquisition Act applied viciously in the past till it was removed from the statute books," Jayaratne said.

"Investors, entrepreneurs and business decision makers locally and overseas will fear to invest in new businesses in Sri Lanka after this experience, especially start up businesses, green field operations and long gestation period investment businesses and businesses subject to and impacted by global economic factors, seasonality factors, commodity price fluctuation linked business, business with high risks and businesses even with more than moderate risks," he pointed out.

He warned that because of manner in which the Bill was a large majority of privately owned business may come within the underutilised assets class definition. 

"There are no appeal provisions in the Bill to contest in Law any mala fidei or illegal or incorrect inclusion of business entities and assets under Schedules I and II. With the Constitution not having provision for Judicial review, there is no way in which this proposed statute can be challenged in the future, if found now by the Supreme Court to be valid in terms of the Constitution and enacted by Parliament," Jayaratne pointed out.

"If shareholding in companies set up as private sector entities as made by the EPF, ETF and other para-state authorities are included within the definition of a company in which the Government has shares then a large number of private sector entities will fall in a category capable of being included as under performing enterprises in the future with a simple amending bill being enacted in Parliament if they face litigation or have significant debt or serious loss of capital due to normal business risks," he warned.

In order for the economy to register growth rates as envisioned by the government private sector investment, especially foreign direct investment would be crucial.

"A significant issue for all stakeholders in governance, business, professions and society will be to assess at this stage is how this proposed bill will impact on the future needs for national development and prosperity of people due to risk ratings of doing business in Sri Lanka being perceived to become significantly higher and investor confidence and image perceptions as a satisfactory destination for investment may take a serious dip," Jayaratne said.

animated gif
Processing Request
Please Wait...