The ‘Expropriation Bill’ drama



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The talk of the town last week was the so called ‘Expropriation Bill’ that the government has on he cards. A mighty furor has erupted over this piece of intended legislation, with critics and members of the opposition even comparing it to the Business Undertakings (Acquisition) Act No 35 of 1971, of execrable memory. There are also uncalled for acts by boorish government politicians like the invasion of Sevanagala Sugar Industries, a company coming under this proposed legislation which belongs to UNP politician and businessman Daya Gamage. Scenes like this were not seen in this country since the days of the expropriation oriented Sirima Bandaranaike government of the 1970s.


It’s not so much the "Revival of Underperforming Enterprises and Underutilized Assets Act" that will damage Sri Lanka’s image but acts by uncontrollable government politicians. It was just the other day that we wrote about the need to control Mervin Silva. Delayed action on that now appears to have spawned many more Mervin Silvas who think the way to win the heart of the president is to put on this kind of idiotic show. The damage done by the invasion of Sevanagala Sugar Industries is a hundred times greater than any damage done by the proposed legislation. It’s a great pity that the waters have been muddied by out of control, low-level government politicians.


Leaving the display of boorishness aside, if one looks only at the proposed legislation a different picture emerges. One of the arguments that has been put forward against this piece of intended legislation, is that with the government promulgating laws for the take over of businesses, foreign investors would be discouraged from investing in this country at a time when the country needed foreign investment.


What really is the legislation that the government has been trying to bring in? This talk of an expropriation bill refers to the proposed "Revival of Underperforming Enterprises and Underutilized Assets Act" that had received cabinet approval and had been referred to the Supreme Court for its opinion. The Supreme Court has completed its deliberations and conveyed its opinion to the speaker and the matter is to be discussed in parliament this week. The term ‘Expropriation Bill’ to describe this proposed legislation is not really warranted. The dictionary meaning of expropriation is "to officially take away private property from its owner, for public use". However, in the case of this intended legislation, the term "underutilized assets" refers to government owned land that had been conditionally allocated on freehold or leasehold basis to private enterprises on the basis that the business operations carried on will result in the generation of employment and foreign exchange earnings and other economic benefits.


The government is now trying to re-acquire such lands which have not been utilized in a way that yielded the expected benefits. In many cases the enterprises started on these lands have gone bankrupt and the lands have been unutilized for years. So the term ‘expropriation’ is unwarranted as far as the "assets" component of this legislation is concerned because the targeted lands had belonged to the government anyway and was given out only on the basis of certain conditions to meet certain national objectives. Re-acquiring recently and conditionally alienated government land is very different to taking over ancestral properties of individuals and company owned land that had been developed and utilized over a period of many decades as happed in the 1970s.


Even when it comes to the "underperforming enterprises" aspect of this intended legislation, they are not really targeting the private sector as such, but business enterprises in which the government holds shares, and where the government has paid off the liabilities of such enterprises and where the government may be involved in protracted litigation with such enterprise. This limits the number of enterprises that come under this intended legislation. So this largely a case of trying to get government owned assets and enterprises that have been allocated to private operators into order. Even though the fear has been expressed that this piece of legislation will be used to take over private land and enterprises across the board, that is made impossible by the way the terms "underutilized assets" and "underperforming enterprises" have been defined in the bill.


Besides, the "Revival of Underperforming Enterprises and Underutilized Assets" Bill applies only to a restricted number of properties which have been specifically named in the Bill itself. In fact the preamble of the Bill specifically states that the legislation will apply only to "identified" assets and enterprises. These identified assets and enterprises are named in two schedules in the Bill. One UNP parliamentarian told the present writer that the government can bring in other businesses into the operation of this legislation by simply adding new schedules through amendments to the Act. This however is not possible because of the way "underperforming enterprises" and "underutilized assets" have been defined.


For example, if an enterprise is to be declared an "underperforming enterprise" three conditions have to be fulfilled. Firstly, the government has to own shares in that enterprise. Secondly, the government should at some point, have paid off the debts of that enterprise. Thirdly, the government should be engaged in protracted litigation with such enterprise. Just one condition will not suffice and all three have to be present according to the definition of an "underperforming enterprise". There aren’t that many enterprises that would come within this strict definition. Even though some people have expressed fears that this legislation could be applied to the wider private sector, that is impossible given the limited scope of this Bill.


As a matter of principle, the present writer does not see anything objectionable in this proposed legislation. It seeks to take back into government control, assets and enterprises that have been conditionally given out to the private sector, but have not been achieving the intended result. The existing laws are obviously inadequate to deal expeditiously with such cases and special legislation has been resorted to. Moreover this legislation has provisions that will ensure that no injustice will be done to the private sector partners who have taken these government owned lands and enterprises for business operations. Clause 4(3) (a) and (b) of the bill ensures that "prompt, adequate and effective compensation would be paid on the basis of the value of the shares in the case of an enterprise or the value of the land in the case of assets brought under this Act.


A three member compensation tribunal appointed by the cabinet comprising of the Chief Valuer and two others experienced in commercial valuation would decide on the quantum of compensation to be paid. Clause 6(1) stipulates that compensation has to be paid within six months of the claim being received. Furthermore, appeals can be made to the Court of Appeal, on questions of law. A question of law in this case, would obviously include the issue of compensation because the legislation states specifically that the compensation has to be "prompt, adequate and effective". So there are safeguards to ensure that no injustice is done to the private sector partner. This piece of legislation is very different to the business acquisitions law of the 1970s.


The Business Undertakings (Acquisitions) Act No: 35 of 1971, was an expropriation law in the real sense of the term. It was promulgated by a government with Marxist partners who believed in expropriation. They were quite open about the fact that they were going to expropriate private enterprises. Even the preamble to the 1971 Act said that this legislation was to enable the government to acquire ‘either by agreement or compulsorily’, any business undertaking. The scope of this business acquisitions law was very wide. Unlike today’s proposed legislation on underperforming enterprises and underutilized assets, the 1971 Act was not restricted in application to government owned land which had been given out to private businesses and to enterprises in which the government owned shares.


The 1971 act applied even to businesses that had been built up from scratch and had been privately owned for generations. Moreover, unlike the proposed legislation which is aimed only at named, specific businesses and assets, the 1971 Act was an ongoing law which could be applied to any business at any time. Moreover, the 1971 Act had an executioner, an ‘alugosuwa’ appointed in the form of the Minister of Finance who could at his own discretion or at the request of another minister, direct the Secretary to the Treasury to acquire any business undertaking. Such orders could not be challenged in a court of law. And an appeal could be addressed only to the Minister of Finance who ‘may’ (even this referral was no mandatory) at his discretion refer the matter to a three member advisory board appointed by the President.


Under the 1971 business acquisition law, it was the Minister of Finance who would promulgate regulations for the payment of compensation for the acquired business enterprises. It was the minister who would decide both on the amounts as well as the mode of payment. Any person authorized by the Minister of Finance or any other minister, could enter any premises at any time to inspect the books and take an inventory for the purposes of the business acquisitions law. Thus the Business Undertakings (Acquisitions) Act No: 35 of 1971 was an expropriation law in the true sense of the term.


The foregoing comparison will show that the Business Undertakings (Acquisitions) Act No: 35 of 1971 and the proposed "Revival of Underperforming Enterprises and Underutilized Assets Act" are completely different both in terms of intent as well as operation. There has been much scare mongering to the effect that more and more enterprises will be brought within the proposed Act by means of amendments to the law, but we showed why that is impossible. Even though some people have been saying that this proposed legislation will scare off potential foreign investors, it is not so much the legislation as the scare mongering with the use of terms like "Expropriation Act" that will scare off the foreign investors. That perhaps is the intention behind much of this noise.


What we hear above all else, on his matter is the noise generated by the NGO lobby with boorish government politicians adding grist to their mill. Chandra Jayaratne has been leading the charge against the proposed Act. He is described as a former head of Sri Lanka’s largest trade chamber but nobody mentions his present designation which is Director, Transparency International.


It could be that Mr Jayaratne himself feels that mentioning Transparency International would somehow, undermine the case that he is trying to make. Being in an NGO is now "the profession that dares not speak its name" especially when one is seeking to influence public opinion! The moment you mention the name of an NGO, public opinion goes the other way.


The cause for concern for many in the business sector however appears to be the inclusion of Pelwatte Sugar and Sevanagala Sugar, in the list of properties to be re-acquired. Both these are profit making enterprises and therefore cannot be described as underperforming or underutilized. The government may however want more sugar and less molasses to meet national objectives. UNP parliamentarian Harsha de Silva had wanted to know why Pelwatte and Sevanagala was included and Hingurana was kept out. Perhaps it could be that Hingurana is producing sugar as they were supposed to be doing. The private sector however would see profit as the sole criteria. The trade chambers have had a round of talks with the government to iron out this issue of definition and to work out whether even profitable enterprises were to be deemed to be underperforming, if they did not produce what they were supposed to be producing.


The trade chambers have made some suggestions that the government is no averse to implementing. Once that issue is sorted out, there would be nothing objectionable in this piece of legislation. There is nothing wrong in fast tracking the process of re-acquisition of under performing enterprises or underutilized assets if the existing legislation results in long legal wrangles and delays. What is of concern however is the allegation that this piece of legislation was not drafted by the legal draftsmen’s department and was done by a private law firm. The last time the legal draftsman department was circumvented was with regard to the 17th amendment and that was not a good experience at all. But it has to be said that this Bill has been drafted more carefully than the 17th Amendment to the Constitution.


Mano Wijeratne


Mano Wijeratne, the affable politician from Kegalle, died the week before last. He was the SLFP organizer for the Dedigama electorate at the time of his death. Mano was probably the only third generation parliamentarian from the same family, his father and grandfather having also been in Parliament. More than anything else, Mano will be remembered as a gentleman in politics at a time when such people were becoming rare. One of the things about Mano and his wife Bharathi is that they lived in exactly the same manner whether they were in power or out of power. The Wijeratne ancestral home in Wellawatte which had been passed down to her by Bharathi’s father the tea baron Lofty Wijeratne, was one place that the present writer would frequent for chats with Baharathi and Mano. In power of out of power, Mano and Bharathi would be seated in exactly the same manner on their verandah and that would be one of the enduring images of Mano in this writer’s mind. If Mano happened to be in power, there would be some security personnel outside the gate. That was the only indication as to whether Mano was in or out of power.


There was no doubt about the fact that Mano and Bharathi were a matching couple with the wife as much interested in politics as the husband. Mano died unexpectedly at the age of 54. But he had been in Parliament for nearly two decades between 1989 and 2010 and in that sense he probably had his innings. Bharathi looked after him as a devoted wife would do during his brief terminal illness. The last time the present writer saw Mano during the last leg of the local government elections, he looked as robust as he had always been but then he went for a check up to Singapore and the terminal illness was discovered there and he died before he could return to Sri Lanka. Verily, how fallible is man! His funeral was attended by UNP and UPFA politicians alike. UNP dissidents past and present were prominent among the mourners. Even Ranil Wickremesinge who was at the receiving end of the 2006 rebellion in which Mano played a major role, was present at his funeral. Mano was never an abrasive man and even when he opposed someone, he did not do so in an offensive way. In many ways that was the kind of politician that this country needs. May he rest in peace.


Mervin Silva’s rejoinder


Minister Mervin Silva has sent in a note about a previous column which made some reference to him. It appears that he is mistaking the present writer for someone else. Even though he says that the present writer has approached him to get various things done, we were introduced to him only a matter of several weeks ago at a wedding, and we most certainly have not got any favours done through him. Anyway, the long and short of this whole thing is that Mr Silva has been putting up tough-guy performances on the streets for the TV cameras and once these are broadcast, he has been deliberately making certain that he goes and stands right next to president Mahinda Rajapaksa.


Mervin Silva was thus the only person in this country who could tarnish the image of the president and strike at the very centre of gravity of this government. That is the problem that we had with his behaviour. If someone makes it look as if the president is endorsing or even encouraging the acts of petty thuggery that Mervyn Silva engages in, that is going to tell on the president’s popularity. It is the weekly acts of thuggery that Silva insists on putting up for the TV cameras that constantly keeps the public reminded that there are thug types in this government. Even the shoot out between Duminda Silva and Bharatha Lakshman would soon be forgotten and forgiven by the public if it is seen as a one off, freakish occurrence.


However, if there is someone in the government who constantly keeps giving thug performances for the TV cameras they are not going to consider the Duminda-Bharatha shootout a freakish incident. They will consider it to be symptomatic of the present government’s whole outlook. The UNP too has had internal problems. In the Puttalam district, parliamentarian Palitha Range Bandara was set upon by a gang allegedly instigated an unsuccessful UNP candidate and he was slashed with swords and clubbed unconscious and left for dead.


Since that time, Range Bandara has been on the war path against Shantha Abeysekera, a provincial councilor from the same district insisting that the UNP take disciplinary action against Abeysekera. He had complained to the party leader, the party general secretary and has done battle in the working committee over this. But the UNP has done nothing except trying to diffuse the situation and keep both Range Bandara and Abeysekera in the party. When there are embarrassing clashes within the same party in this manner, the natural instinct in any political party is to sweep the whole issue under the carpet and keep both antagonists within the party. Because there is nobody in the UNP who does weekly thug performances for the TV cameras, the people have already forgotten the Range Bandara affair. In fact the UNP is now even going on the offensive asking the government to take action against Duminda when they themselves took no action against those who are alleged to have nearly killed Range Bandara!


The UNP has been able to do that because there is no one within their ranks who can remind the public on a regular basis about the thuggery in the UNP. Every time Minister Silva puts on a thug show, he brings to the forefront of the public consciousness not just that incident, but all the incidents that preceded it as well. Minister Silva was born in 1944, which makes him 67 years old – a senior citizen. If he at least acted his age, we wouldn’t have to write about him and he would not have to send in clarifications to the newspapers. People of my generation have never known a government that did not terrorize the public in one way or another. When we were children, it was the Sirima Bandaranaike government with all their expropriations and thuggery.


This was followed by the thuggery and autocracy of the J.R.Jayewardene and Premadasa regimes. The people of this country enjoyed a fleeting respite during the D.B.Wijetunga regime which was followed by thuggery under Chandrika Kumaratunga. It is with Mahinda Rakapaksa that people of my generation have enjoyed the longest period without the government terrorizing the opposition and the general public. It is perhaps not too much to ask minister Silva, not to put on these inane performances for the cameras, and above all not to destabilize this whole system by going and standing beside the president to ensure that the president too gets associated in the minds of the public, with thug types. The government will have to take serious cognizance of this ‘thug show’ issue. The Sevanagala incident shows that the contagion is spreading.


 
 
 
 
 
 
 
 
 
 
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