expropriation bill sri lanka | Eminent Domain | Constitution

1.

Discuss as to why some of the recent policy decisions of the government such as ‘Expropriation Bill’ and the ‘Private Sector Pension Bill’ have led to controversies and public unrest in the country. Propose ways to overcome such deficiencies in making public policies?

When some of recent policy decisions made in the country are observed, it can be identified that some of policy decisions caused heated debates even among general public in the society. Public unrest was seen many layers in the society. Working people such as farmers, factory employees and transport workers as well as intellectuals and academics were seen on streets protesting against some policy decisions and demanding changes in drafted policies. In the recent past when the response of the general public towards some of Issue Related Policies of the government is considered it can be observed some of them ended up resulting public agitations. This is evident in occasions where introduction of ‘private sector pension scheme bill’, ‘expropriation bill’, ‘making use of cages to transport vegetables in cages mandatory’, ‘making decisions to import coconuts and eggs’ and ‘granting permissions to establish private higher educational institutions’. Here paying particular attention to what is known as ‘Expropriation Bill’, it is going to be discussed why this policy decision of the government led to controversies results. What is known as ‘Expropriation bill’ among the business community of the country is officially named as ‘Revival of underperforming enterprises and underutilized assets act’ which was tabled by the government in last November, is now part of the law as it was passed by the overwhelming majority in the parliament of the country. But the news of coming ‘revival of underperforming enterprises and underutilized assets act’ alias ‘expropriation act’ confused the business community in the country finally leading to public unrest in the country. Wide section of the society representing respected religious leaders, business giants, economic analysts and academics as well as farmers, trade union members and villagers were seen in streets protesting against proposed policy changes of the government. At the same time pro-expropriation bill activists were also seen in streets in rallies supporting the proposed bill. There was a great rush shown from government side in the event of get this bill passed from the house. The bill was sent to the supreme court of the country to check the constitutionality as an urgent bill. Citizens were not given enough time to challenge the proposed legislation in the Supreme Court as this was tabled as an urgent bill. Furthermore

the public was horrified to know that even at the time Tuesday 8th November, Parliamentarians who were supposed to debate the Bill and vote on it by Wednesday 9th November had still not seen a copy of the Bill in any of the two National languages. Such urgency was shown in the actions of the government in the whole process related to the expropriation bill implementation. Under the provision of the act of ‘revival of underperforming and underutilized act’ 37 private companies/ assets were named to be acquired into government control naming them as underperforming companies or underutilized assets. The underperforming enterprise named is Hotel Developers (Lanka) PLC, the owning company of Colombo Hilton hotel. The underutilized assets named are the Pettah property of Charmers Granaries; the Badulla properties of Colombo Commercial Company; the Pettah and Narahenpita properties of Lanka Tractors Ltd; land belonging to Pelwatte Sugar Industries Ltd; and land owned by Sevanagala Sugar Industries Ltd. Companies named, Sinotex (Lanka) Ltd; Jaqalanka Ltd; Plymouth Industries (Pvt) Ltd; Cosmos Macky Industries Ltd; Kabool Lace (Pvt) Ltd; former Cashew Corporation land; Intertrade Lanka (Pvt) Ltd; Suchir NEB Projects (Pvt) Ltd; Ceylinco Leisure Properties Ltd; Seetha’s Fashion (Pvt) Ltd; D.C. Apparel (Pvt) Ltd; Needle Crafts (Pvt) Ltd; HY Fashion Garments (Pvt) Ltd; Collins Garment (Pvt) Ltd; Ruhunu Putha Apparels (Pvt) Ltd; Sanjaya Garments (Pvt) Ltd; Macfa Apparel (Pvt) Ltd; Yobeedha Associates (Pvt) Ltd; Dynamic Clothing (Pvt) Ltd; 609 Polymers Exports (Pvt) Ltd; Cosco Polymer Lanka (Pvt) Ltd; Great Wall Thread Manufacturing (Pvt) Ltd; Adamjee Extractions (Pvt) Ltd; Data Food (Pvt) Ltd; Tendon Lanka (Pvt) Ltd; Rican Lanka (Pvt) Ltd; Composite Tower Solutions (Pvt) Ltd; Health Food Products (Pvt) Ltd; Sri Chirag (Pvt) Ltd; Royale Exports (Pvt) Ltd; and Continental Vanaspathi (Pvt) Ltd, set up and operated under BOI agreements and regulations are also named as underperforming enterprises and so in line for acquisition by the government. Although there were heated debates and public demonstrations regarding possible outcome of the bill as well as against the bill, now it has become a part of the law of the country. But why such a resistance was generated in the society and how the policy formulation could have been arranged so that it would become more accepted in the society are remained a matter of interest.

The explicit objective of the revival of underperforming enterprises and underutilized assets act was, getting best use of underperforming and underutilized assets and turning them for economic development of the country thus the economy of the country would be boosted and then the general public would be benefitted. The term ‘expropriation’ generally means that taking private properties for public use. But in the Lanka Puwath website, the Central Bank of Sri Lanka explained “It is applicable only to those 37 named enterprises, and not to any other enterprises whatsoever. The Act provides for the appointment of a Competent Authority which will control, administer and manage the enterprise or asset so as to ensure the revival of the named enterprise or asset, through means such as restructuring or entering into a management contract. Accordingly, the Revival of Underperforming Enterprises and Underutilized Assets Act does not, in any way, constitute the nationalization or the expropriation of private assets, but instead, is designed to ensure the productive use of assets that have hitherto been lying abandoned or have been seriously underutilized” further consolidating its position CBSL has said in the same website on 17th November 2011, that Act do not refer to private lands, but to lands which have been provided to private operators for specified purposes, while the ownership of the land continued to remain with the Government or a Government Agency. In such context, it would be fair and reasonable to expect the operator or user of the land or asset to utilize the land or asset for the specified purpose for which the land or asset was initially entrusted to them. And, if not so done for a lengthy period of time, it would also be fair and reasonable for such land or asset to be placed under the control of a Competent Authority who will ensure that the identified land or asset is utilized for the purpose it was originally provided. Further elaborating on acquiring entities formed under BOI, CBSL has said to the same website that although named companies were had been given generous tax concessions, agreements with the BOI have been breached and/or operations have ceased, leading to the operators abandoning their properties and allowing the assets to remain idle without being put to the intended use for several years. Based on explanation given by the Central Bank of the country it can be concluded that explicitly the government had a clear objective of getting best use of limited resources of the country. In other words, the government had identified one of major problem directly affecting to the economy of the island that is under utilization of limited available resources of the country. But problems lies here are that weather policy formulated to address this problem that is ‘expropriation’ bill is the most suitable answer for the identified problem and

implementation of the perceived solution of the government that is again the ‘expropriation’ bill was done in the best possible way. It can be observed that bill was rushed through the parliament as an urgent bill. Although there is a constitutional provision for presentation of an urgent bill, it still remains unclear why cabinet of the country wanted to a bill related to economic activities, to be presented as an urgent bill. Generally constitutional provision for an urgent bill should be invoked only where an urgent situation like war with another country or massive natural disaster like Tsunami has arisen. Furthermore when this constitutional provision is exercised, opportunity for affected parties to challenge proposing legislation in the Supreme Court is becoming limited as whole process is going to taking place within a short span of time. For an instance to check the constitutionality of the Revival of Underperforming Enterprises and Underutilized Assets act, the Supreme Court was given only 48hours of time. Even parliamentarians who were supposed to debate on the proposed bill were unaware about the content of the bill till the last moment. This unnecessary rush was one of reason that casted doubts among concerned citizens weather real intension of the policy makers is only the explicit objectives of the bill. There were fractions of the general public who opposed not only to the content of the ‘expropriation’ bill but also to the non standard procedure of the implementation of the bill. It is visible for concerned citizens that policy making mechanism of the government is seeking short cuts in the event of legalizing policies. This was further evident that government made major constitutional changes such as abolishing 17th amendment and introducing 18th amendment proposing them as urgent bills to the parliament. If the normal procedure is followed, under the article 78 (1) of the constitution, every bill is required to be published to the public in the Gazette at least seven days before being placed in the order paper of the parliament. This constitutional provision for a citizen to challenge a bill proposing to be passed in the parliament prior it becomes part of the law is having vital importance in terms of ensuring rule of the law, protecting fundamental rights and liberties of the people of the country. But under the ‘fast tracked’ procedure provided under article 122 of the constitution practically the Attorney General is only granted opportunity to make submissions to the Supreme Court in the event of assisting the court. But in the practical context the Attorney General represents requirement of the government. So it is clear that steps taken in the event of pushing the bill through parliament have made the general public suspicious that ended up as a public unrest.

On the other hand selection or categorization of 37 enterprises and their assets as underperforming and underutilizing had been done without a clear base. Among these 37 enterprises and assets there were two public quoted companies as well. The general public or even present owners of enterprises were not informed giving reasons why those assets were categorized by the government as underperforming or underutilized. Sugar factories, which were under taken by the government, can be regarded as examples showing holes in categorizing assets as underutilized or underperforming. Sewanagala sugar factory which was sold by the PERC (Public Enterprise Reform Commission) to Daya group in 2002 had a turnover of Rs.350 millions and was making a loss of Rs. 149 millions. Now at the time of retaking of the company by the government under the ‘expropriation’ act, Sevenagala sugar factory in 2011, is having a turnover of Rs. 1100 millions and is making a profit of Rs. 200 million. Other sugar producer retaken by the government was Pallawatte sugar factory which is owned by Melstacorp a subsidiary of the Distilleries Company of Sri Lanka a public quoted company with many shareholders. The unaudited financial estimate for the Palawatte sugar was net profit of Rupees 857 million at the end of the 2nd quarter 2011. In the case of above two sugar factories operating profitably it is inconvincible why a government will attempt to takeover assets of companies which have made a turnaround and poised to grow strongly. But in the Lankapuwath website CBSL has given their explanation as these sugar factories had diverted from their main business that is sugar production and had paid more attention about producing Molasses. This argument may be appealing to the general public, but to the business community in the country this argument may seem baseless. Because enterprises operating in a competitive market would not be able to survive unless they go for profit maximizing production approaches. On the other hand, Higurana sugar industries one of major shareholder as the Brown group was not considered as an underperforming enterprise or underutilized asset in the ‘revival of underperforming enterprises and underutilized assets act’. It is known that Higurana sugar industries is still struggling to set up production after it is handed over to new investors. Due to these contradictions, justification of two different policies regarding above three sugar factories, may be difficult in the face of general public and the business community. And also this may be seen as using double standard by the government and thus

general public and the business community may be suspicious weather explicit objectives are the actual intension of the act. Not providing any transparent mechanism or way of benchmarking to determine how an enterprise is classified as an underperforming is another failure of policy makers in the event of conveying explicit objective to the general public. It is said in the parliament during the debate on the bill that government made these enterprises as underperforming even without looking at balance sheets of companies. At least there can be seen some validity in this argument regarding Sevenagala and Palwatte sugar factories. Another debatable approach can be seen with the implementation of ‘revival of underperforming enterprises and underutilized assets act’ that is under normal procedure parliament only decide on policies and not on operations. But here it seems parliament has decided what properties or enterprises are underperforming and whose properties to be undertaken. Referred to Lanka business online website on 11th November 2011, opposition MP and lawyer Wijedasa Rajapakshe has said in the parliament that “ this bill has been drafted with no regards to basic process of legislating” further he has elaborated that “unfortunately both executive and judicial powers have been included in this bill” further explaining the expropriation bill the same lawyer has added “if the task of judicial determination was given to the judiciary, if we respect the separation of power in our constitution, then we ought not to take this up and pronounce upon a matter that is entirely within the competence of the court”. Furthermore it is said that controversies ‘private sector pension scheme bill’ as well as this ‘revival of underperforming and underutilized assets act’ was drafted not in the office of legal draftsman. If this is the case then it can be understood that concerned citizens may view this bill as attempt of violating not only their rights of owning properties but also as a threat to the rule of law. So it should be expected a resistance to the bill from those who highly concern about rule of law and liberties of people. On Lankapuwath website the central bank has tried to justify their move as following way “It is applicable only to those 37 named enterprises, and not to any other enterprises whatsoever. The Act provides for the appointment of a Competent Authority which will control, administer and manage the enterprise or asset so as to ensure the revival of the named enterprise or asset, through means such as restructuring or entering into a management contract. Accordingly, the Revival of Underperforming Enterprises and Underutilized Assets Act does not, in any way, constitute the nationalization or the expropriation of private assets,

but instead, is designed to ensure the productive use of assets that have hitherto been lying abandoned or have been seriously underutilized.” But no matter what is the justification given, in a context where government is seeking more investments in terms of either domestic or as foreign direct investments (FDI) to propel the economy of the country in order to reach 8% or more growth in GDP, bad signals going out with this act are more likely not to be desirable. In other words it will be really difficult to change negative perception of investors. Especially in a situation where Zimbabwe like occupation was conducted perhaps by ruling party activists in the lands of Sevanagala sugar factory, prevention of negative sentiments of local and foreign investors will be difficult. And also possibility of amending ‘revival of underperforming enterprises and underutilized assets act’ and taking more enterprises under the control of act is also there. This short of possible discouragement of investments may be considered as unintended consequences of the bill and so indicates a weakness of the policy formulation.

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