COLOMBO: Sri Lanka’s Supreme Court has decided that proposed legislation to acquire underperforming enterprises and underutilised assets is consistent with the country’s constitution, parliament was told on Tuesday, despite some concerns it amounts to nationalisation.
The government’s ‘revival of underperforming enterprises and underutilised act’ which was presented to the legislature on Tuesday, will see the state acquiring 37 private businesses it has defined as underperforming.
The bill is expected to be passed tomorrow in parliament, where the government has a two-third’s majority.
President Mahinda Rajapaksa referred the proposed act to the Supreme Court last week to see if it was consistent with the constitution, a procedure followed by the government before when introducing a new act in an urgent manner.
”The Supreme Court has informed its decision that, subject to the drafting of errors, the bill has not been found inconsistent with the constitution,” Deputy Speaker Chandima Weerakkody told parliament, relaying the court’s decision.
Weerakkody did not elaborate on what the court had referred as ‘errors’, but the leader of the house Nimal Siripala de Silva said the bill will be presented to the parliament on Wednesday with relevant corrections.
The government has said the new legislation was in the national interest and would provide effective management for listed one underperforming enterprise and 36 underutilised assets.
The properties include listed Hotel Developers Lanka Plc , which owns five-star Hilton Colombo hotel building in the main commercial heart of Colombo, a 6,300-hactare land owned by listed Pelwatte Sugar Industries Plc .
Since the end of its 25-year civil war in 2009, Sri Lanka has been working to improve the investment climate, including fiscal and tax reforms under the guidance of International Monetary Fund.
Though Rajapaksa has assured the bill will be a ‘one off’ act to acquire the specified properties, economists, investors, state officials and opposition have raised concerns over it, saying it could damage business confidence.
”These kind of adhoc and anti-investment policies are going to drive away potential investors coming to Sri Lanka,” a top state official who has been dealing with foreign investors told Reuters on condition of anonymity, citing the sensitivity of the topic.
The government’s acquisition effort comes after it annulled a 500 million dollar hotel deal with a Chinese firm over a land dispute and transferred a top Securities and Exchange Commission (SEC) official on complaints from politically-connected investors. Sirimal Abeyratne, a professor in economics at University of Colombo, said the move was similar to destroying a whole tree instead of getting rid of some rotten fruit. (UNI)
Sri Lanka’s foreign direct investment doubled in the first half of 2011 to $413 million year-on-year, mainly from Honk Kong based Shangri La Asia for a luxury hotel in Colombo.
”This government has a split personality. It is trying to sell the people one story and sell the investors another story,” Harsha de Silva, a main opposition UNP legislator and an economic expert said.
”They themselves are stopping the investors. When you do things like these, who would willing to invest?. Even Shangri-La could be nationalised if they don’t perform well.”
However, junior economic development minister Lakshman Yapa Abeywardena said there will not be a problem for any investors and the government might consider better investor who can perform efficient and use the lands for optimum utilisation.