Expropriation Act will revive underperforming enterprises- Central
The Central Bank of Sri Lanka in a press release said that the main
purpose of the Revival of Underperforming Enterprises and Underutilized
Assets Act is to revive thirty seven (37) identified underperforming
enterprises or underutilized assets where the land belongs to the
Government or a Government Agency. It is applicable only to these 37
named enterprises, and not to any other enterprise.
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.
The Revival of Underperforming Enterprises and Underutilized Assets
Act does not, in any way, constitute the nationalisation 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 underutilised.
It is important to emphasise that the assets specified in the 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 a context, it would be fair and reasonable to expect the
operator or user of the land or asset to utilise the land or asset for
the specified purpose for which the land or asset was initially
entrusted to them.
And, if it has not been done in that manner 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 utilised for the purpose it was
originally provided. It should also be noted that several enterprises
specified in the Act are situated in Free-Trade Zones, where agreements
have been entered into between such enterprises and the Board of
Investment (BOI), and where the agreements have specified conditions
such as the minimum investment to be made, the number of jobs to be
created, the minimum extent of land to be developed, etc.
In exchange for the fulfilment of such conditions, generous tax
concessions, and in some cases, even exemptions from the Exchange
Control Act, have been granted. But unfortunately, in the case of many
of the named enterprises, these 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.
In the case of the two sugar plantations (Pelwatte Sugar Industries
PLC and Sevanagala Sugar Industries Ltd.), it is noted that the total
extent of land cultivated by the operators has been only a fraction of
the total extent that was entrusted to them. Further, it was noted that
the operators were focusing on subsidiary objectives instead of
concentrating on the primary objective of producing sugar which was the
purpose for which the land was provided to them.
Ceylinco Leisure Properties Ltd. had also been identified for
revival, since it is a project that originally contemplated the
construction of a mega five star hotel facility cum apartment complex,
but which had been half built and abandoned for over two years. The
project has been the subject of protracted litigation, which had
crippled the project from progressing. The partly constructed building
and the land is situated in the heart of Colombo, overlooking the Indian
Ocean, and has been deteriorating.
Hence there was an urgent need to recommence the project to avoid
further financial losses and physical damage.
In this regard, as provided for in the Act, the Competent Authority
will be expected to undertake the task of reviving this project and
ensuring that the purpose for which the land was entrusted to Ceylinco
Leisure Properties Ltd. by the Urban Development Authority, would be
duly and expeditiously accomplished.
From the above, it will be clear that there has been no expropriation
or nationalisation of private assets as has been suggested by some
quarters, and that this new legislation will actually facilitate the
recommencement of productive economic activity in hitherto abandoned or
severely underutilised lands and assets.
In addition, it should be noted that the process as set out in the
new law, would not deprive the existing operator or company from
reaching an understanding or agreement with the Competent Authority to
operate the asset or enterprise in keeping with the original purpose of
In such an event, there may not even be a change in the operator, but
only a change in the mode of operation, with the existing operator being
provided with the opportunity to ensure that the original intention of
the agreement is fulfilled.