Govt will safeguard local, foreign investments - Economic Development Minister

All property included in the Under Performing Enterprises and Underutilised Assets Bill is public property which belongs to the people and not private property, said Economic Development Minister Basil Rajapaksa when the Revival of Under Performing Enterprises and Underutilised Assets Bill was taken up in Parliament.

Excerpts from the speech:

“This should be stated categorically. These public properties have been vested in private industries or enterprises under various conditions at various terms in the past. This has even happened during the British period. Landless peasants in Giruwappatuwa had been given land on an annual permit on the condition that they should use this land for chena cultivations. Later they were given land on the basis of a land tax. There was a condition that they could not transfer them to their sons or relatives without the express permission of the DRO. They could not use the land for any other purpose either.

Middle class land were given from time to time for the cultivation of various crops. When former President, the late J.R. Jayewardene was a State Minister in the Dudley Senanayake Government, he established Tourist Zones and gave land under conditions to people engaged in the tourist industry. The first such land was given in areas such as Bentota. The conditions was that they should be used for setting up tourist hotels and for nothing else. If any attempt was made by a person to build a house in that land and occupy it, steps were taken to acquire the land by the Government.

Extent of the buildings

Other conditions included the extent of the buildings they should put up and the investment which should be made within a given period. When Maithripala Senanayake was Minister of Industries, in the Sirimavo Bandaranaike Government, he set up industrial zones and gave away State land for setting up varous industries.

Later during the Jayewardene era, several investment zones were set up and land given, not only for locals, but for foreigners as well for investment on certain conditions. A large amount of public funds was used to develop infrastructure in those zones which included roads, security fences and provision of electricity.

Privileges not available for an ordinary factory owner outside the investment zone were given to those investors by using State and public funds to develop infrastructure. When State or public property is given away, it is done with a host of conditions attached. Not only when leasing out State or public property, conditions were attached even when relief or privileges were given to an individual. For example when the President assumed office, the fertiliser subsidy was given to farmers at a rate of Rs. 350 per bag which actually was continuously given for six years, which meant 13 cultivation seasons. For example, a bag of fertiliser now costs around Rs. 3,500. When the farmer buys Rs. 350 per bag, the Government subsidises it to the tune of Rs. 3,150.

Then we imposed a condition that it should be only used for paddy cultivation. Through this subsidy, we hoped to attain self-sufficiency in rice which is the staple food of the people of this country.

However, when some breached this condition and got caught selling the fertiliser to gain an instant profit, they were taken to Court and jailed, and the fertiliser confiscated.

Furthermore, we had a target to make the people self-sufficient in food. The honour of this august assembly should go to the farming community who fulfilled their duty.

Apart from this, not only land, but ‘Mini Moke’ vehicles were also given for cultivation purposes during the Dudley Senanayake era. When those vehicles were seen parked near prestigious Colombo 7 schools, pictures were taken of them and the owners were asked why these vehicles were being misused.

Similarly, MPs were given tax-free vehicle permits on the condition that they could not sell the vehicles purchased for a specified period. If this condition is breached, sometimes there is a probability of MPs breaching it, there is a law to acquire the vehicles. Therefore, it should be categorically stated that through this Bill, we only become temporary trustees of State proper ty belonging to the people. Under the Constitution, we have a duty by the people to acquire such things if they are misused by breaching the conditions under which they were given.

Private property

What this Draft Bill means is that none of these enterprises are private property. I wish to reiterate that these are public property given to these entrepreneurs under certain conditions. If these conditions have been violated, we should categorically state that the same law applicable to the poor should be applicable to the capitalists too.

I saw certain people clamouring that they have a history of maintaining prosperous enterprises. A Business Acquisition Act was first presented in 1971. It was called the Business Acquisition Act No. 35 of 1971. That power was available during the time of Mrs. Sirimavo Bandaranaike. It was tabled in Parliament by the Minister of Finance. It stated that “2 (1) The Minister of Finance of his own motion or at the request of any other Minister. (a) may direct in writing the Secretary to the Treasury to acquire on behalf of the government by agreement any such business undertaking shall be specified in such a direction....”.

Not only that. There after, the J.R. Jayewardene Government brought the Urban Development Authority Act. This also enabled the acquisition of fixed assets at any time. During Black July, a special Act was passed which was called the Persons, Property and Industries Rehabilitation Authority Act. Under this, a large extent of land and buildings in Colombo were acquired by the private sector.

Thereafter, the Public Enterprises Reforms Act No.29 of 1990 was passed. This too was a similar Act. Then during the time of President Chandrika Bandaranaike, an Act was brought to acquire vested State lands. (See table)

Most of these institutes are in Export Promotion Zones. Huge public funds have been invested in these zones. Since these institutes remain closed, no optimum use could be made of them.

In many countries such premises will be acquired by the State.

The present position relating to Hilton Hotel needs no elaboration. It is known to all how it acquired its land, revalued it and transferred this to others, and the litigation it entailed. Last year, it recorded a loss of Rs. 10.3 billion. The hotel is in a very expensive land. Where the former Fort Police Station had been located. It has become unproductive today after various irregulaties. This is one of the prime hotels in Sri Lanka.

Repairs to rooms have not been effected for a number of years. The hotel has to be freed from its encumbrances. The hotel land is about 6.6 acres. Cornel Perera was selected on 7.2.1984 to invest in the hotel project. The UDA valued the project for Rs. 136 million on the same date. On the 15th, after a lapse of eight days, Cornel Perera transfers the project to Hotel Developers (Lanka), having valued the property for Rs. 250 million - the value having increased by Rs. 114 million within seven days or by reducing the previous value.

No instalments paid

Subsequently, shares were purchased, but the sum of Rs.136 million was not paid. He paid only Rs. 28 million, the balance was to be paid in instalments. However, no instalments were paid thereafter. Later several transactions followed.

A loan was obtained from a Japanese company. The amount pledged to invest was not forthcoming. Later, since the Government guaranty was not honoured, the responsibility fell upon the Government to settle the deal. Mr. K.N. Choksy appeared for the case.

We have taken back the land. This is public property which is economically important to the country. The Government is definitely committed to protect it and that is why we have listed it. I believe no representative of the people could raise objection to this.

There are several proprietors to the Sevanagala Institute including the husband of a Member of Parliament.

I never wanted to speak on Sevenagala due to personal reasons. However, in view of the matter raised here, even with reluctance, I shall speak a few words.

During its privatisation, two preliminary agreements were entered into - the Privatisation Agreement and the agreement with the BOI for tax relief.

In the privatisation agreement, the investor will include such conditions as the sum of money to be invested, areas of development, employment opportunities to be provided and the anticipated returns on the national economy.

The project proposal and the financial proposals will be examined by separate technical boards before the transaction is okayed. What has been projected under phase I and phase II should be completed before the specified dates.

Then there are other commitments such as modernisation of distillery, establishment of new bottling plant, waste water management system and nuclear plantation with irrigation facilities. It was stated that Rs. 929 million would be invested in phase I and Rs. 1,268 million in phase II, totalling Rs. 2,808.11 million.

Regrettably, none of these have been implemented. There is also the Agreement No. 7328 signed with the BoI, according to which the initial tax relief period is eight years, and 15 years thereafter. All machinery had been declared tax-free. The investors affirmed their project as an export-oriented industry.

Employment opportunities

According to the agreement, the investor is required to cultivate the total acreage of the land. The investment of the full amount as agreed, provision of employment opportunities numbering 1,599 are other conditions of the agreement. The current strength of the employees cadre is only 157. All these have to be complied with to be eligible for exemption from tax.

Since the investors had failed to fulfil these conditions, no tax-free certificate was issued to them by the BoI. Neither have they paid income tax, according to my sources.

Some people said that molasses too are manufactured during the sugar-making process. The investors have requested permission from the Excise Commissioner to import 250 metric tonnes of cane molasses. When the Excise Commissioner conveyed to the Sugar Research Institute, the investors’ request to import molasses, the latter ruled it out as completely wrong and cannot be allowed at any cost. The investors’ case against the Excise Commissioner is pending in the Court of Appeal.

Land was released to the investor only for cultivation and not to import molasses and manufacture arrack. The institute was set up for the benefit of the sugar cane cultivators - which is a public property. The Ven. Maha Sangha should know that the industry does not benefit the sugar-cane cultivators - instead moonshine is manufactured. All conditions stipulated in the agreement have been violated.

I should clarify this too. There are Mahaveli lands. Despite the delay in handing over the deeds of transfer, the beneficiaries of State land have taken over the possession of their allotments. Over 200,000 awardees of Mahaveli lands have not still been issued the deeds.

As provided for in the Mahinda Chinthana, all deeds have since been released to the land beneficiaries. About 250,000 deeds will be released soon. That the deed for this land had not been issued is not acceptable. The President obtained a Court Order within a day to have the deed released immediately. The President could have remained silent, but he acted with due deference to judiciary.

The Lanka Tractor Company which remains closed for a number of years was not a loss-making venture. It was privatised in 1994. It earned a profit of Rs. 25.5 million in 1989, Rs. 55.2 million in 1990, Rs. 29.3 million in 1991, Rs. 20.2 million in 1992 and Rs. 37.4 million in 1993. Such a profitable venture was privatised causing the ruin of a national property.

There were 550 employees there who lost their jobs. The corporation had been appointed local agents to Massey Fergusan, Kubota Tractors, and Tafe.

The employees were denied their gratuities. This Corporation was privatised for a sum of Rs. 148 million. We would not have taken this step had at least the two valuable blocks of land at Pettah and Narahenpita been made use of.

There is the allegation that State Enterprises are running at a loss. Some have incurred losses due to mismanagement attributable particularly to the UNP governments. The Electricity Board is run not solely for profit. It is a service. We have programmed to supply electricity for all by July 2012 in keeping with the concept, Electricity For all - under the guidance of President Mahinda Rajapaksa. To reach this target, we have commissioned rural electrification schemes, power generation ventures, new generation profits at Norochcholai, Kerawalapitiya and Upper Kotmale. Without solely depending on thermal power, we have used alternate sources such as hydro-electricity and coal-fired energy. We purchase electricity from some companies at the rate of Rs. 120 per unit and sell it to the consumers for Rs. 4.50. We are providing a transmission line to the North - from Vavuniya via Kilinochchi to Chunnakam and till such time we have to depend on the two private companies in the North for the supply of electricity at the rates determined by them.

The Petroleum Corporation incurs a loss of Rs. 20 per litre of diesel. We could show profit by merely increasing the price which we don’t do.

With regard to SLTB, I should say that we have deployed SLTB buses in difficult areas. There are separate school buses. The private buses ply on profitable routs.

Therefore in accordance with Mahinda Chinthana even with losses, their services will be maintained in the interest of the public.

Incurring losses

We have institutions such as Kurunegala Plantations, Chilaw Plantations and Lanka Phosphates which were incurring losses, but now run on a profitable basis. Institutions were privatised to share the private sector managerial skills in the development of the national economy. I would like to ask the Opposition what alternative is there for us to resort to other than taking over these assets, if they are not properly managed and have failed to earn profits?

You have also made the allegation that we might acquire temples, private houses, and business enterprises as well. We have never acquired any temples, but really developed them. It was the UNP which, acquired and barricaded the Getambe temple and the Gampaha Saama Maha Viharaya of Ven. Daramitipola Rathanasara Thera.

Then it was Ranasinghe Premadasa who acquired the residence of Minister Mervyn Silva. The entire stretch of land from the residence of Veteran Ayurveda Physician Pandit William Alwis upto the Duplication Road was taken over by the UDA to put up the Lucky Plaza.

Not only such properties, they also acquired the land where Premasiri Stores was housed, Andrew Donald’s premises where Unity Plaza is located and the die-hard UNPer Jinadasa Mudalali’s land at Warakapola, alleging that he displayed only the photographs of D.S. Senanayake, Dudley Senanayake and Rukman Senanayake but not that of J.R. Jayewardene.

Who took over the media? Did they not take over the media institute of Ranil Wickremesinghe’s brother Shan Wickremesinghe? All these were taken over by the UNP.

On behalf of the President, the Cabinet would like to give you an undertaking that we will never take over any private assets. Private sector includes even the pavement hawkers for whom we have provided self-employment to protect them as part of the private sector.

Recently, when the entire global banking system collapsed, it was imminent that we would face the same danger faced in Sri Lanka. Thousands of Seylan Bank employees were kept on agonising suspense due to the fear of loss of employment.

The depositors were equally affected. However, due to the direct intervention of the President, within 24 hours the Bank, its employees and depositors were relieved and protected.

The entire banking system was strengthened. That was the biggest relief provided to the private sector. People know that so long as the President is in power, their investments in banks are quite safe.

What was the fate of Pramuka Bank? The depositors were in an imbroglio. We reconstituted the bank as “Sri Lanka National Savings Bank” and won the confidence of all depositors.

We gave the fertiliser subsidy to the farmers. When the tea industry was in dire straits, we provided the fertiliser subsidy to the tea small holders of less than five acres.

Application of fertiliser

They were also benefited by the increased tea prices due to the application of fertiliser. Since May 1 this year, the fertiliser subsidy was extended to rubber and coconut estates as well. Sugar cane cultivator and sugar-cane companies too were benefited by the fertiliser subsidy.

What was the relief package provided to the tourist industry when it was in perilous straits? The Government directly intervened and reduced their electricity tariff; loans were written off; special interest-free loans were given to them.

Wide tax reforms were introduced for the first time after 1977. Thirteen items were deleted from the list of taxes since April this year. Interest rates were also reduced to 14 percent to help them wriggle out of the crisis.

We have also ensured the security of investments as well as foreign aid by an Act of Parliament.

We have also provided relief to rice-mill owners. Four years ago, the small-scale rice mill owners at Marandagahamula in the Gampaha electorate were in turmoil when their industry collapsed. As a relief measure, their loans were written off and fresh looans on low interest were provided to strengthen storage facilities.

We also improved the lot of local construction companies having de-monopolised the field dominated by a few foreign construction companies. Consequently, today, our local construction companies are in a position to tender for World Bank, Asian Development Bank and JBIC-funded projects.

Then there is the World Bank-sponsored system of Business Ranking to judge whether the environment in a country is conducive to investment. Sri Lanka ranked 98 in 2011 from 104 and today it is 89 in the overall ranking. In the sector-wise ranking such as starting a Business, Dealing with construction permits, Getting Electricity, Registering Property, Getting Credit, Protecting Investors, Paying Taxes, Trading Across Borders, Enforcing contracts and Resolving Insolvency, Sri Lanka has advanced to 46 from 74 in protecting investors.

We have also narrowed down the budget deficit. No country in South Asia, except Sri Lanka, has been able to supply electricity throughout 24 hours, seven days of the week and 365 days of the year!

Small-scale traders

Under the President’s Mahinda Chinthana, not only the mega entrepreneurs, but the small-scale trader, owner of a tea kiosk, three-wheeler driver, ‘DIMO Butta’ driver and even the pavement hawker were equally guaranteed of security of business.

Restoration of peace after the liberation of the country by the Mahinda Rajapaksa Government is the biggest achievement which benefited the business community. We have ensured the right of every citizen for free movement from Dondra to Point Pedro irrespective of ethnic, religious or caste differences. Our war heroes made the biggest investment with the sacrifice of their precious lives.

I would like to assure the private sector of this country that the Mahinda Rajapaksa Government would do its utmost to safeguard honest businessmen and their investments as well as their future progress. We will provide maximum support to our local investors while encouraging them to ensure high-level foreign investment into the country. We shall protect our people, the country’s environment, national heritage and customs and provide full protection to the investors.On behalf of the Government, I would like to appeal to you to extend your support to this Draft Bill.

Your support is necessary to make use of such assets to provide employment and ensure the country’s development.

Translated by K.D.M. Kittampahuwa and D.P. Wickramasinghe