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 17 th 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 11 th 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.