I’ve honestly never liked the Hilton. Photo by Dhammika Heenpella
What assets are getting nationalized in Sri Lanka? According to Lakbima News (via Jeyaraj), it’s Hotel Developers (Lanka) PLC, the owning company of Colombo Hilton. That company was run pretty dubiously, I guess, but there are also properties and assets being taken from sugar, tractor, and apparel companies galore. 37 institutions in all, including private ones.
Who
The underperforming enterprise named is Hotel Developers (Lanka) PLC, the owning company of Colombo Hilton. The underutilized assets named are the Pettah property of Charmers Granaries; the Badulla properties of Colombo Commercial Company; the Pettah and Narahenpita properties of Lanka Tractors Ltd; land belonging to Pelwatte Sugar Industries Ltd; and land owned by Sevanagala Sugar Industries Ltd.
Also, the property of:
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What?
Is getting seized, bitches. The reason could be that “Once passed, the law will free up thousands of acres of land around the country for development, including prime plots in Colombo and its suburbs,” or that people in the government want to make a bit of money. Probably a bit of both. I guess that would answer the why.
As an example, it sounds atrocious seizing the Hilton, but that franchising company – Hotel Developers (Lanka) PLC – has been on the default board of the stock exchange for years, meaning it hasn’t filed annual reports or financials. The accumulated loss there is like Rs. 10.3 billion (FT). They basically hadn’t paid rent to the government for years and were recently put under majority government control.
The other companies I don’t know.
Where
All over I guess. Some of the big plums seem to be Colombo.
The underutilized assets named are the Pettah property of Charmers Granaries; the Badulla properties of Colombo Commercial Company; the Pettah and Narahenpita properties of Lanka Tractors Ltd; land belonging to Pelwatte Sugar Industries Ltd; and land owned by Sevanagala Sugar Industries Ltd.
When
Like nowish I guess. The bill was highly dubious, drafted by a private company and effectively sealed until the last minute to preclude debate.
How
Dubiously. This bill wasn’t done the right way, but then, neither was the war. I think most people won’t care how it’s done as long as the government improves the economy. I think the model they’re going for is Singapore but with more corruption. Is that China?
Basically, the government has been rolling back privatizations (Water’s Edge, Sri Lanka Insurance) and taking control of companies and lands for years. This bill formalizes the practice. The Lakbima report by Namini Wijedasa is worth a read (I read it on DBS Jeyaraj’s blog). That paper is owned by a government MP so I assume whatever bill they got is legit.
Previously:
Bill To Takeover Enterprises And Assets
Assets The Government Has Already Taken Over
Phuck this, I am going to Kenya to grow tea! This sounds like bad news for investments in SL unless you are in tune with the ruling class. But the problem is that ruling class itself shooting each other and there is no guarantee of a safe haven even if you are the biggest thug.
I do know but this bill sounds like one of the nails on democracy coffin. It sucks but I wish USA has such a bill! :) (Hey I am looking out for myself)
Just about all of those companies are very much run down.
Hmmm.
There was an article that Gazprom was going to explore for oil and build hotels. Looks like they have been having deep and meaningful conversations with the owners of Gazprom, eh?
This has obviously been in the works for a while. Wonder who the legal firm was?
The list includes many garment factories that have closed, presumably they don’t intend to start manufacturing garments, only to dispose of the land.
Implications: many, but for a start
1. Who will apply for incentives in future under BOI ?
2. Will a loan from a State owned bank be viewed with favour? What IS a state owned bank?? Would the privatised DFCC and NDB be included?
3. All previously privatised entities, which owned land “land that was once owned by the government but alienated to any person by outright sale, lease or through a divestiture” would fall under this category. The question is what is under-performing and who determines this? Apparently the Competent Authority, but on what basis.
Was the interest in the Mayoralty connected with this in some way?
Soon there’ll be vultures crowding around the Competent Authority, making him offers he just couldn’t refuse.
From what I know, Tendon Lanka (Pvt) Ltd is out of business. Some time back banks had put up paper advertisements to auction out some of their property to cover up loans that they defaulted.
SL companies can get large areas of state owned lands for long term lease. If these are the properties that government is taking back I got nothing against it provided that these companies do not utilize those to their potential.
I think all depends on what conditions govern which properties are up for grabbing and also the definition of ‘underutilized’. By the way, Is there any link to this bill some ware?
That’s the thing. While Lakbima says it has the bill, it doesn’t seem to be released to the public. I never read the bima so I wouldn’t have known unless dbs jeyaraj blogged about it from Canada. Which shows how opaque the process is
“SL companies can get large areas of state owned lands for long term lease. If these are the properties that government is taking back I got nothing against it provided that these companies do not utilize those to their potential.”
The Cashew corporation was set up by the Government, it is still with the Government but under some ministry. Its current status (bust) tells us a lot about how good the Government is of managing assets. Mihin, Lankaputhrabank were both started recently, both are bleeding money, Airlanka has been doing the same since takeover.
You can expect more brilliant service ala Ceypetco (Contaminated fuel), CEB (blackouts, brownouts, one non-functioning coal power plant) or Laksathosa (recently revived) after takeover.
Some commentary of the circumstances of the Colombo Commercial Company, at the point of takeover by the Government.
http://www.island.lk/2009/06/21/features9.html
It was formed in 1848 and taken over only in 1976.
It does not seem to have taken the state very long to have run it down, it was privatised in a botched sale in 1994 and renationalised in 1996.
See also
http://sundaytimes.lk/010311/newsm.html
http://repub.eur.nl/res/pub/18879/wp179.pdf
http://www.sundayobserver.lk/2003/07/06/bus04.html
True! I am not saying that government should be running any businesses. They have proven again and again that they are not good at it. But think about it this way. Government is the largest land lord of the country. Government’s assets must be managed at the best interest of the tax payers. Having them locked under non performing institutes is not going to do that. But then again as you said we cant expect much even after these takeovers.
@ Indi
Have you messed anything up with your blog recently?. When I posted both of my comments I got HTTP 500 Internal server errors. But the comment went through. Or is it just me?
Sorry bout that, added some caching. Let me know if you have further issues.
Sorry CC was formed in 1876, not 1848.
Rakhitha, yes, ensuring that assets earn a decent return should be the prime objective for the GoSL.
The best way to ensure that would be to put all new leases up for auction, preferably online. Prices are transparent and apparent to all, the GoSL can have a reserve price, which if not reached, the transaction fails. Land sales could be handled in a similar manner, there is no need for the GoSL to get involved in the running of businesses.
Lol! I think a few of my fathers old friends actually run commericial now. They bought it from the government long ago. It was convoluted transaction & terrible business decision. They should have done what walkers did.
I have just one question: Was the title deliberate?
yeah. deffa
I would support this if I had any confidence that the government can run things a better … obviously not the case.
Ooh how things have changed since I used to live in SL. The cashew corporation had a shop near my house in Kollupitiya. Funnily enough we went there to buy tea!
Air lanka was privatized with emirates buying a nice chunk of it and taking over control. They changed they name to sri lankan as well. Now it’s back in govt. hands? How strange!
Anyway I came to this blog after reading about the expropriations on lanka business online. Absolutely terrible stuff. Taking over private property is just not done in this day and age. Looks like Rajapakse has indeed turned into a dictator.
http://www.ft.lk/2011/12/01/land-sale/
“”lands in and around Colombo which will be assigned to the UDA, the rest would be opened up for competitive bidding with Request for Proposals (RFPs) sought from the private sector.””