Sunday Observer Online


Sunday, 13 November 2011





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Government Gazette

No adverse effect on industries performing well:

Loss making industries will be taken over – Lakshman Yapa Abeywardene

Economic Development Deputy Minister Lakshman Yapa Abeywardene said the Revival of the Underperforming Enterprises and Underutilised Assets Act will not have an adverse effect on industries run by private investors and entrepreneurs which are performing well. The Deputy Minister in an interview with the Sunday Observer said the Opposition however attempted to give a wrong interpretation about this Act by describing it as an attempt made by the Government to take over the private sector industries.

He said that some of the industries which are listed in this Act, are running at a loss after the particular State-owned business venture was vested with the private sector.

It is the responsibility of the Government to safeguard all State owned properties. A State owned property is vested with a private sector investor through an agreement for a certain period. No State property has been given to the private as permanent property. If any private sector investor is not acting according to the agreement, the Government will have to take a decision regarding that company.

It is also recognition given to that country. Sri Lanka has also got the opportunity to host the Commonwealth Leaders’ Summit. This is a clear indication that countries have endorsed the stability created in Sri Lanka.

Q: There are many controversies about the Underperforming Enterprises and Underutilised Assets Act. Can you explain the actual situation?

A: This Act will not have an adverse effect on industries of private investors and entrepreneurs which are performing well.

However, the Opposition attempts to give a wrong interpretation about the Act by describing it as an attempt made by the Government to take over private sector industries.

Some of the industries which are included in this Act are running at a loss after that particular industry was vested with the private sector.

If such companies have utilised Government property, then they have not been able to give any benefit to employees or the country. Some private industries have curtailed employee rights and are solely based on earning profits without making any development to the property vested to them. A similar situation can be seen in some plantation companies as well.

If these plantation companies have been given State lands, they have not utilised these lands for any productive purpose.

The Government through privatisation of some State owned institutions intends to continue that industry to function without being a burden to the Government and also to pay salaries and other benefits to employees. Therefore this Act will only affect industries which have not realised these targets.

It is the responsibility of the Government to safeguard all State owned property. Because State property has been given to a private sector investor through an agreement only for a certain period.

No State property has been given to the private sector as permanent property. If a private sector company is not acting according to the agreement, the Government will have to take a decision regarding that company. Even Court decisions were given on some underperforming industries as they have not proceeded according to the agreement. But nobody challenged these Court rulings.

If the Sri Lanka Insurance Corporation (SLIC) had earned profits, a Court ruling was given to vest it in the Government. This ruling was given when Sarath N. Silva was the Chief Justice. As a result, SLIC turned into a fully State owned institution, but nobody argued about that.

Now when a Act is moved by the Government, various arguments and problems are created. There is a political motive behind these arguments. Opposition Leader Ranil Wickremesinghe has said that there is no problem of taking underperforming private industries to the Government, but says that his problem is taking some private industries to the Government.

If the Opposition Leader has a policy, he cannot have different views and have problems pertaining to some private sector industries. The Government has a responsibility to operate an industry and gain income to the country by safeguarding employees. The Government by introducing this Bill has fulfilled that responsibility.

Q: Why was a law of this nature introduced?

A: The Government which has laid emphasis on the economy, State properties vested to the private sector should also be utilised in the country’s development process. The Government made a thorough investigation about institutions running at a loss or mere underperforming. After the end of three decades of terrorism, measures have to be taken to develop the economy. To strengthen the economy, State resource has to be utilised by the Government. If any State owned industry vested in the private sector is not performing well, the Government has to take it over.

Q: Is there a possibility that this new law will scare potential investors local or foreign? Can this be extended to any other venture?

A: Not at all. This Act will have no effect on local and foreign investors who are successfully running their business ventures in Sri Lanka.

These industries to be taken over are State-owned properties. All resources in these companies lands, buildings and equipment belong to the Government. The Government has no right to take over any private property owned by a local or foreign investor.

It has only taken over some State properties vested to the private sector which have been underperforming or is underutilised. A wrong picture should not be given to the people regarding this issue.

Q: The Opposition says there are so many underperforming institutions which have been closed over the past several years. They ask why instead of introducing this new Act, why not take over these under performing institutions and develop them?

A: The Government will take steps to develop these underperforming institutions as well.

If thousands of acres of State owned lands have been given to some private sector investors, they have utilised a certain section of those lands to gain profits. We have to look at the contribution made by these investors through their industries over the past several years? For example, did they increase local sugar production? When we analyse these industries, they have not made any contribution to the economy. The Government wants to utilise these resources to develop the country. That is what we are doing at the moment.

Q: The COPE report has shown that nearly 250 Government institutions are running at a loss. What are your plans to uplift them?

A: The Government intends to join hands with more foreign investors. At present, the Government has signed an agreement with a foreign company to increase production at Oruwala Steel Company.

The Government has restructured and decided to develop some State institutions with the assistance of local and foreign investors. Attention has also been focused on how to bring more foreign investment to the country as well.

The Government has not neglected any of these sectors. At present the Government is making these changes step by step.

Q: The Budget for 2012 will be out soon. What kind of people-friendly initiatives can we expect from the budget?

A: The Budget will provide concessions to all sections connected to the country’s production sector.

It will also provide assistance to develop the tourism industry. Assistance will also be given to farmers to develop their products and find markets for them.

Special concessions will be given for raw materials which are used to manufacture export-based products and other locally manufactured products.

The Government through this budget intends to create the necessary environment to exceed the 10 percent limit of economic growth. We have already achieved 8.2 percent economic growth. This budget will lay the foundation to increase this to 10 percent and increase the per capita income to US$ 4000 within the next four years.

Q: The Opposition demands that the Government should increase salaries of public servants in keeping with the rising cost of living at the forthcoming budget. Do you think this is a reasonable demand made by the Opposition?

A: The people who live in rural areas are not burdened with a high cost of living as they are able to obtain a very good price for tea, rubber, cinnamon and minor export crops. The Government admits that public servants face a rise in the cost of living. The forthcoming budget will have the maximum possible pay hike which can be given to the public servants.

Q: The Southern Expressway is to open shortly. You are from the South. What kind of economic and social benefit will this bring to the South?

A: Now it takes about four hours to go to Matara from Colombo. After this expressway opens, it will take only 55 minutes to go to Galle from Kottawa.

The second stage would enable people to go to Matara from Kottawa within one hour and 20 minutes. Then the four-hour journey to Matara will be reduced to one hour and 20 minutes.

The expressway would help promote investment, reduce the time spent on travel and transport the products made.

It would then provide so many benefits to the people. The opening of the expressway would also help investors to travel as well as transport containers up to Galle without traffic congestion.

The Galle harbour will also be developed. Under the second phase, it will be linked to Matara and Hambantota as well. The construction of this expressway has developed the entire area which from Kottawa to Galle. I see this expressway as a giant move towards the country’s development.

Q: Can you explain why the deal with CATIC of China was cancelled and there are reports that Sheraton Hotels has signed a deal instead. Can you explain the benefits of this?

A: The Opposition attempted to create a misconception among the people that the Government is going to sell State lands to private investors.

This is an attempt made by the Opposition to gain political mileage. During the UNP regime, some floors of the World Trade Centre building had been given for an annual rent of Rs. 400 or Rs. 500. Even the Hilton hotel pays an annual rent of Rs.500 while the Taj hotel pays Rs. 170. However, one perch of land was given to Shangri La by the Government for Rs. 8.2 million. Through this Shangri La deal the Treasury could gain an income of Rs.1350 million per acre. The income gained from ten acres of land given to Shangri La could be calculated. The income from the deal comes to the Treasury. This money has been utilised to construct the new Defence Secretariat.

When we estimate the value of the lands in Colombo which have been given to the private sector for a pittance to set up various industries and hotels, we cannot get proper rate and value for these lands for another hundred years.

Thirteen acres of the former Wellawatta Spinning and Weaving Mills had been given for Rs. 170 million. This is not a deal made in a fraudulent manner, but this is the actual amount of money earned by the country from this deal. But an attempt was made to give a wrong impression that Government lands were sold on a permanent basis.

The Intercontinental hotel has been given a 30 years lease. When we look at this deal there is an owner and he will continue it by extending the agreement. What has happened is the Government has not been able to get the proper rate and value for these properties vested to private investors.

Therefore a decision has been taken by the Government to give lands to investors to set up hotels only under 99 year lease. CATIC which did not agree to our condition withdrew from the deal.

Then the Government offered an alternative to CATIC. At present they are negotiating for it. The Government has also obtained an investment proposal from Sheraton. This will be submitted to Cabinet and will be implemented in the near future.

Q: Even the Opposition has admitted that they could find nothing wrong in the deal signed with Shangri La Hotels. What kind of benefit can we expect for tourism and the economy by bringing in chains like Shangri La?

A: Shangri La has a hotel chain spread in 70 countries with 30,000 hotel rooms. When “Shangri La in Sri Lanka” appeared on the web, CATIC and several other investors also expressed their willingness to come to Sri Lanka. Shangri La is one among the first five world leading investors in the hotel field. It has a strong link in tourism.

After Shangri La is established in Sri Lanka with 500 rooms, tourists in those countries will come to Sri Lanka as well. A new shopping complex will be set up in Colombo.

All these projects will help commercialise Colombo. After Shangri La and other hotels are established, Sri Lanka will be turned into a commercial capital. The decision taken by Shangri La to invest in Sri Lanka is very good for us.

Q: What kind of policies helped the Government to withstand global financial pressures and still record over eight percent growth?

A: One is appropriate decisions taken by the Government. When Seylan Bank collapsed, a decision was taken to take it over to Bank of Ceylon. We have been able to maintain a higher percentage of repayment of loans.

If we have obtained loans, we have settled those loans on time. At present our economy has become stable in the agriculture and production sectors. We have been able to produce food locally. The European economy collapsed as it is based on an industrialized economy.

But our economy is connected to several key sectors such as agriculture, tourism and industries.

As a small country, we have been able to form a strong economy which has the ability to successfully move forward with the help of these key sectors. The Government has also taken decisions at the appropriate time. Decisions which were not taken by any other country were taken by the Government to defeat terrorism as well. As a result, the Sri Lankan economy has been able to reach to a very stable level.

Q: The Opposition alleges the recent fuel hike has seriously affected the people and all key sectors of the economy. Your comments?

A: The increase of the fuel prices may affect the people to some extent. At present world fuel prices have gone up. Fuel is provided to the people by the Government at a loss.

We are a country that has offered maximum relief measures to the people including free education, health, fertiliser subsidy, Samurdhi, nutrition package, free school textbooks and uniforms. However, the Treasury should also have some sort of income.

There is no possibility of continuing the petrol and diesel subsidy. It may affect the society to some extent. But the Government has provided maximum relief measures to people free of charge. I think we are not subject to huge pressures due to fuel issue. We have achieved significant progress in production.

Instead of doing so, there is no other alternative. At present, most of the income generating avenues of the Government have been blocked as relief has been given. No country in the world has given this kind of relief to the people free of charge.

When infrastructure facilities are developed, it will also help reduce expenditure to some extent. If we further reduce the tax imposed on petrol, there won’t be a system from where we can get money to the Treasury. Therefore the fuel hike will not make a serious impact on the people.

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