Sri Lanka state officials occupy sugar firm: listed company

Wed, 19 June 2013 18:31:03

20 Feb, 2012 07:09:51

Feb 20, 2012 (LBO) - State officials are occupying land of a listed Sri Lankan company, the parent firm of Pelwatte Sugar Industries told shareholders, despite it falling the outside the definition of a controversial law to expropriate citizens' property.

Land leased to Pelwatte Sugar Industries (PSI) Plc, a unit of Distilleries Corporation of Sri Lanka was included in an expropriation law passed in Sri Lanka's parliament last year.

The legislation, which resumed violations of citizens' property rights by rulers after a long absence, also came under fire for being ad hominem or specially targeting pre-identified firms and arrogating the powers of the executive.

The law applied to once-state owned land sold or leased to citizens or non citizens within the last 20 years.

Distilleries Company said in interim accounts filed with the Colombo Stock Exchange that after the expropriation law was passed in parliament in November 09," state officials are occupying the land leased to PSI Plc."

"As the leasing of the land to PSI PLC was done in 1985, and the abovementioned Act empowers the vesting of land leased during a period of 20 years before the enactment of the Act, the Company believes that the land that was used by PSI PLC have not been vested in the state," the firm told shareholders in interim accounts.

"At this moment we are unable to comment further on the implications on the ruling as we await instructions by the Secretary to the Treasury."

The ad hominem law also gave no judicial redress to affected citizens, which legislators said was an arrogation of judicial powers as well.

During feudal times, all land belonged to the king and citizens had no property rights. During the industrial revolution in Europe, property rights of citizens began to be established.

Economic analysts point out that private property rights was a key reason that allowed Europe to pull ahead of the Asia - which has always led the world - as liberalism swept Western Europe in particular during the last millennium.

As property rights went to citizens, the king or, the nation-state, which had then started to become established, began to tax citizens instead.

In the late 19th century Japan, during the so-called Meiji restoration ended a feudal system and established private property and taxation, setting the stage for industrialization.

In Eastern Europe however, Marxian ideology gave rise to expropriation, and collectivization leading to widespread violation of property rights, resulting property going back to the state, which had by then replaced the sovereign.

Fascist-nationalist states in Europe also violated citizen's property rights with expropriation but there was no collectivization.

Citizens then had to pay taxes, but did not have property rights either, leading to economic stagnation and lagging behind other nations. In recent years socialist states in Asia have reversed collectivization and started to re-establish citizens' property rights.

Vietnam for example has established a system of land use certificates, which helped not only set the stage for industrialization with investment by foreign citizens, but which has also created an agricultural and inland fisheries productivity boom in rural areas.

Economic analysts say what Sri Lanka's rulers now call 'state land' is mostly 'Crown land' of the British colonial period.

Sri Lanka started violating property rights of citizens and non-citizens after independence from British rule. The 2011 expropriation law was passed in parliament despite the existence of a constitutional guarantee against violation of property rights.

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READER COMMENT(S)

16. Martin Aiya Feb 21

"i always believe these so called buzz words and concepts associated with "private property rights" or "rights" should have limitations.' Really ihi? So rights of private citizens have be limited. The arbitrary power of the state and politicians should be expanded? Beautiful. Absolutely beautiful. Not for nothing do we people say that we get what we deserve.

15. ihi Feb 21

@mw
i am just going to make one last comment...about you statement that "governments taking over companies and giving you pink slips without due process"

well haven't we seen this happening recently in many so called "good" countries like US, UK, etc.

but have can we recall anything closer to that here ?

14. ihi Feb 21

@mw,
I like to comment on your statement "I hope you stand by that thought when one day, some political party led government (forbid, a MW lead government!) takes over the company (MW lead government would think of a reason) you work for, and give you the pink slip without any due process or compensation (forgive me if I am wrong, but you don't own a company - as in an entrepreneur, are you?)""

well haven't we all see what you mention above happening in a lot of countries recently (UK, US) but i cannot recall anyting at least closer to that happening here? .

FYI, am an entreprenuer

13. mw Feb 21

@ihi: I am sorry, I am not going to re-invent the wheel: better qualified folks have already written about this (on LBO, and a few blogs).
I share their sentiments, and you could probably read them - which will explain why the required rate would go up (risk premium increases because dot dot dot).

As for "i always believe these so called buzz words and concepts associated with "private property rights" or "rights" should have limitations." - I hope you stand by that thought when one day, some political party led government (forbid, a MW lead government!) takes over the company (MW lead government would think of a reason) you work for, and give you the pink slip without any due process or compensation (forgive me if I am wrong, but you don't own a company - as in an entrepreneur, are you?)

This is my last comment on this matter. I just thought it prudent to give a thumbs up to folk who speak out at injustice... my duty, as a free rider, is done. Thank you, for listening.

12. ihi Feb 21

@mw, please tell me how this can increase "cost of capital" and discourage investments ?

I do not know how one could cross their wires and define these as private property. my understanding was that these were leased out properties for specific purposes by state. i believe only where there was no such leased land rom state, there are other "issues" that warranted some intervention. for example can someone argue against the decision to allow that uncompleted ceylinco building to remain like that. besides that was built with "private" money taken from "private" citizens using various methods.

i always believe these so called buzz words and concepts associated with "private property rights" or "rights" should have limitations.

11. mw Feb 21

@ihi: the thing is, though on the surface it seams as if a only a few "private" parties were affected by this, it is not so. Quite a few people are going to think a bit more (than they should) when deciding on places to invest, and may also impute a higher cost of capital rate when evaluating projects.

As for me, I'd rather be a free rider and allow LBO / author, and other civic minded people to discuss opposing views. And mind you, all of these folks are picking a bone with both UNP and SLFP lead administrations and not only of this government. They are picking a bone with the culture of impunity and callousness. This; takes guts - for there won't be powerful people out there to look after them (from either side, for these folks would side with what they believe - and not a political party; unlike, I).

Martin Niemöller said: First they came for the communists, and I didn't speak out because I wasn't a communist.

Then they came for the trade unionists, and I didn't speak out because I wasn't a trade unionist.

Then they came for the Jews, and I didn't speak out because I wasn't a Jew.

Then they came for me and there was no one left to speak out for me.

10. Martin Aiya Feb 21

Mw, you are absolutely right. ihi you are engaging in standard statist propaganda against individuals outside the state mechanism using the word in a pejorative sense to denigrate them and make them second class to the so-called public sector.

That Harry - a rich man - is treated in this way completely outside the law, should be a warning to all us lesser mortals.

Permit me to give a slightly amended version of a famous quote with apololgies to Martin Niemöller.

First they came for the "private" parties, and I didn't speak out because I wasn't a "private" party.

The they came for the communists, and I didn't speak out because I wasn't a communist.

Then they came for the trade unionists, and I didn't speak out because I wasn't a trade unionist.

Then they came for the Jews, and I didn't speak out because I wasn't a Jew.

Then they came for me and there was no one left to speak out for me.

9. ihi Feb 21

@mw,
you you are changing the subject totally. LBO/author are losing sleep not for an issue that has greater social cost but over grievances or injust to some of "private" parties.

8. mw Feb 20

@ihi: well, actually, those with a civic conscious would lose sleep.
I have long since stopped believing that any of these politicians care two hoots about what is right, and what is wrong; and hence am devoid of worry for I no longer care. So, I don't loose sleep. My civic minded friends, and apparently, LBO do, and would - and I would benefit from all of it, without having to worry one bit. Remember EPF? This white collar worker was comfortably seated in front of his branded laptop; while lesser beings dot dot dot.

7. keera Feb 20

@Salman
You are confusing 'eminent domain' with expropriation. The two are different concepts.

6. ihi Feb 20

I am sure it is only LBO that is losing sleep over this issue...not even harry.

let me ask one question from the author. Suppose you lease your house to an ordinary family to live, and you find out later that the house is actually used to run a brothel ?

would you want to terminate the lease and take back the house ?

5. Sampath Feb 20

Sumedha
you are calling for greater transparency.

This is an excellent idea. Any dealings in public property, whether buying or selling, need to done through open auction.

4. Vince Feb 20

@ Sumedha,
You hear the same crap repeated all the time, because the illiterate, Megalomania, corrupt politicians voted into power by the illiterate, none productive, mainly none taxpaying electorates keep repeating the same mistakes.

The governments leased those lands, since they did not have the money, management skills, nor the creative thinking to develop those lands. So stop the crap that you are talking , since you have no point of view to talk about.

3. saliya Feb 20

This is a very illuminating article. Keep up the good work. If this information was more widely known may be such disastrous policy actions would not have been taken. I had no idea Japan had created property rights.

2. Salman Feb 20

Under the present Constitution there is no guarantee of property rights.State is empowered to take over private land for "public purpose" at any time.

1. Sumedha Feb 20

We hear the same crap over and over again. Let's hear a different point of view. Let's hear why and how the state land was sold to the private sector under which conditions. I want to know the government's logic as well. Reporting these days is so skewed it isn't acceptable