At least two listed companies in Sri Lanka have been named among several dozen, in a secretly hatched law to expropriate assets of firms deemed by the state as ‘underperforming’ or ‘underutilized’, a media report said.
The two listed firm named in the secret law in Hotel Developers (Lanka) Plc, a listed company that owns the Colombo Hilton hotel and Pelwatte Sugar Industries, Lakbimanews, an English language weekly, said.
The bill seeks to take-over by competent authority several dozen firms which have been privatized, given tax breaks by the Board of Investment, state land or state guarantees, the report said.
A person who refuses to hand over the assets, or opposes a state take-over could face a summary trial before a magistrate and be imprisoned for up to 10 years.
The state intended to compensate the owners of nationalized properties, according to the report.
“The shares held by all shareholders of any underperforming enterprise or underutilized asset will vest in the Treasury Secretary for and on behalf of the government,” the Labimanews report quoted the proposed bill as saying.
“The shareholders would be promptly, adequately and effectively compensated. All claims will be directed to a cabinet appointed Compensation Tribunal.
The bill which has not been released to the public but was rushed to the Supreme Court as an ‘urgent bill’ without public debate.
The underutilized assets named are the 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, Labimanews said.
Hotel Developers Lanka Plc was also named. It is state controlled and there are disputes with one of the promoting shareholders, over unpaid dues to the Urban Development Authority. Several others were privatized firms, or which have been re-vested earlier.
Others included the property of 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 (sic) 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.
Suchir NEB Projects (Pvt) Ltd, is an Indian connected firm that proposed to build a high rise in a joint venture with the state. Some of the others are manufacturing firms that have since gone under, with foreign investment in some cases.
According to earlier media reports, some of the named enterprises already have creditors, including banks who have loaned them money.
After independence from British rule Sri Lanka first violated property rights of foreign investors amid a rise in nationalism. Then private domestic enterprises were targeted.
A land reform law took over the assets of people who had held them from the time of Sri Lanka’s ancient kings. Another even took over multiple houses built by citizens, including salaries employees who had used their savings and loans to build houses to rent.
Sri Lanka already has liquidation laws to deal with failed enterprises, and there have been requests for’ US chapter 11-style’ laws and to streamline resolution of failed businesses.
But the draconian proposed nationalization law on the pain of imprisonment came as a surprise to many observers.
Though the law proposed now is limited to named enterprises, once a precedent is set no enterprise that has received a tax break will be safe from the state, analysts say.
Media reports said the proposed law has not been written by the government’s legal draftsman but by a private law firm.