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Tuesday May 28th, 2024

Re-expropriation of Sri Lanka plantation land to violate property rights, scare investors

ECONOMYNEXT – Attempts to re-expropriate assets of Sri Lanka’s privatized commercial plantations on the pretext of being under-utilized will undermine property rights and discourage investors, officials and analysts said.

Sri Lanka’s privatized plantations which are on 50-year lease have only 70,000 hectares of land.

Plantations are an emblematic case in Sri Lanka’s post-independence economic decline where they were expropriated from foreign and domestic owners under ‘land reform’.

Many foreign owners were given land in African nations like Kenya where they set up tea plantations.

Sri Lanka state is now bankrupt and the President Ranil Wickremesinghe is trying to attract foreign investment into privatizations.

“When you give a signal to the market that the government is going to expropriate land it will further undermine the investor confidence because one of the main factors the investors are looking at is the establishment of property rights and in Sri Lanka,” Dhananath Fernando, Chief Executive of Colombo based Advocata Institute of free market think tank said.

Expropriation Fears

Renewed expropriation fears arose after reports that a proposal had been given to the cabinet to take-over so-called ‘under-utilized’ land of privatized plantations.

Sri Lanka in 2011 expropriated a number of private properties including publicly listed Pelwatte Sugar and Hotel Developers, claiming the land was ‘under-utilized’. 

Land of several Board of Investment firms were also taken back despite a constitutional guarantee that they will not be expropriated.

Given the past experience with nationalized plantations and other companies then President J R Jayewardene put in the guarantee to assure foreign investors, but the country has not been able to draw large scale foreign investors unlike East Asia.

Roshan Rajadurai, spokesman for Sri Lanka’s Plantations Association, representing managers of privatized plantations said there was left uncultivated other than those that were impossible to reach due to geographical issues further or land that were environmentally sensitive.

“We have 70,000 hectares of tea; the government of Sri Lanka owns 86 percent of our country’s land millions of hectares of land is there,” Rajadurai said.

“So-called uncultivated land is the land that we can’t cultivate. Either it is a slab rock, a steep area or it is a sensitive area and other lands with environmental and geographical limitations, reservations and roadsides.”

Though the land is on long lease to plantation companies, various political forces have been chipping away the farms, usually some of the best lands bordering accessible roads according to some in the industry.

Rajadurai says plantations have been willing to part with land for public purposes.

“Every two years and three years when there is a local governmental election they will say that now the government has already taken from each company almost 100 acres taken over for this purpose and that purpose,” Rajadurai said.
“And all the lands are abandoned. We couldn’t harvest tea or rubber neither there’s anyone made use of it.”

“Moreover, these planters have been very flexible and supportive to the government all these years. When the government ask for the lease lands for the public purposes and they always have been for it.”

Bankrupt State

Meanwhile Fernando doubted whether the government had any capacity to enhance the productivity of land, given its past track record. He said property rights have to be strengthened to improve land use, and restrictions removed.

Sri Lanka defaulted on its foreign debt in 2022.

“Basically the government definitely can’t improve the efficiency and productivity of the land,” Fernando said.

“Under private ownership only the land productivity will be improved so that we actually have to give land titles for the people.”

Sri Lanka expropriated peoples lands into the Janatha Estate Development Board and the Sri Lanka State Plantations Corporation from which the privatized plantations were hived off after taking monthly handouts from the Treasury to pay workers.

There are still two plantations companies in state hands making losses, raising questions as to how well utilized units like Elkaduwa Plantations is, according to critics.

In Sri Lanka, like most countries before freehold developed in Britain, land use was governed by various types of tenure and Rajakariya.

Sri Lanka did not have freehold until European rule. Freehold developed gradually under Dutch (accommodesans) and full-blown free hold later.

The Colebrooke Cameron Commission abolished service-tenure paving the way for broader land ownership.

However the British Waste Land Ordinance took over large tracts of land which were not being used by the people at a time when free hold was under-developed making the state a big owner of land.

After independence established private property was expropriated under ‘land reform’ making the state the largest owner of land and reversing freehold.  (Colombo/Dec13/2022)

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Sri Lanka president’s UNP proposes postponing elections by two years

The UNP party headquarters in Pitakotte/EconomyNext

ECONOMYNEXT — Sri Lanka’s United National Party (UNP) has called for a referendum to postpone both presidential and parliamentary elections by two years to extend President Ranil Wickremesinghe’s term to continue ongoing economic reforms.

UNP general secretary Palitha Range Bandara called on the main opposition Samagi Jana Balawegaya (SJB) and the leftist opposition formation National People’s Power (NPP) to support the move.

At a press conference on Tuesday May 28, Bandara said postponing the two elections would not be undemocratic as it would be the result of elected representatives in parliament passing a motion, followed by a referendum.

Defending the proposal, he recalled the controversial decision by then Prime Minister Sirimavo Bandaranaike to postpone elections in the 1970s, which resulted in the decimation of her Sri Lanka Freedom Party (SLFP)-led alliance.

Bandara said that all parties must understand that now is not the time for elections as the economy has yet to emerge from bankruptcy and that President Wickremesinghe must be permitted to carry out his reforms which have already brought stability.

The UNP’s latest statement is a far cry from its pronouncements as recently as last weekend that the presidential election would definitely be held between September 17 and October 18 this year, followed by the parliamentary elections in early 2025.

UNP spokesmen also boasted that Wickremesinghe would not only contest the presidential poll but would also win it.

Tourism and Sports Minister Harin Fernando told reporters that Wickremesinghe would definitely contest the election, in response to some speculation that the president may opt to sit out.

“I think President Wickremesinghewill himself reveal his plans next week or one of these days,” said Fernando.

“He will definitely contest. I said he would for sure. Not only will he contest, he will also win,” he added.

Labour Minister Manusha Nanayakkara concurred.

“President Wickremesinghe will definitely win the election,” he said, adding that the president has provided much relief and that the economy continues to recover having fallen to its lowest point. (Colombo/May28/2024)

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Sri Lanka reforms have started to yield positive outcomes: State minister

ECONOMYNEXT – Sri Lanka’s State Minister of Finance Shehan Semasinghe says reforms have lead to positive incomes, including an increase in reserves.

“The reforms have started to yield positive outcomes, reflecting significant progress in multiple areas. Sri Lanka’s gross official reserves have seen a significant increase, reaching USD 5.5 billion by the end of April 2024,” Semasinghe said on social media platform X (twitter).

“Additionally, the Sri Lankan rupee has appreciated by approximately 8 % against the US dollar so far in 2024. This will boosts investor confidence and enhances the country’s ability to manage external shocks and meet international obligations and enhance confidence on the economy.

“The appreciation of the rupee can help lower inflation and reduce the overall cost of living and make it easier for the government and businesses to service foreign debt, thereby improving our financial reputation globally. Further, will improve the trade balance by potentially reducing the trade deficit.”

Sri Lanka’s inflation was 1.5 percent in the 12-months to April 2024, measured by the widely watched Colombo Consumer Price Index, data from the state debt office showed.

The CCPI Index fell 0.8 percent, to 195.2 points in the month of April after falling 1.9 percent in March.

Sri Lanka’s central bank has been operating largely deflationary policy, since September 2022, except perhaps in December 2023, and also allowed the rupee to appreciate in the balance of payments surplus it created.(Colombo/May28/2024)

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Sri Lanka risks foreign retaliation over VFS visa deal

ECONOMYNEXT – The Maldives could take reciprocal action after Sri Lanka’s new system of outsourcing its visas, which requires the payment of “processing” and “convenience” charges of 26 dollars, even though the government does not collect any fees.

Maldivian authorities have reminded Sri Lanka of the long-standing bilateral agreement under which their citizens could travel freely between the two neighbours without any charges or bureaucratic barriers.

A one month stay is available without a fee.

Maldivians, who consider Sri Lanka their second home, often spend more than a month in the larger country, but are now required to pay 26 dollars to VFS Global, which has controversially been contracted to handle Sri Lankan visas.

“The Sri Lankan government will not charge a fee, but Maldivians still have to pay VFS after applying online for a visa,” a Maldivian government official said in the capital, Male. “This violates the spirit of our agreement.”

He said the new administration of President Mohamed Muizzu was taking up the issue with Sri Lankan authorities in both Male and Colombo.

In a worst-case scenario, the Maldives will be compelled to reciprocate the new cost of a Sri Lankan visa and charge Sri Lankans traveling to the archipelago. There are also expat Sri Lankans in the Maldives.

There are only a handful of countries to which Sri Lankan passport holders can travel without any visa restrictions.

Singapore is another country which could take action against Sri Lanka if the bilateral deal is found to be violated, according a source said.

Opposition parties have said in parliament that outsourcing the visa handling to VFS Global and their partners was a bigger corruption scandal than the bond scam of 2015 and 2016, when billions of rupees were stolen through insider deals. (COLOMBO/May 28, 2024)

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