Sri Lanka was the focus last week both locally and internationally due to a bill being passed in parliament. The revival of the underperforming enterprises and underutilized assets bill now holds an important place in the law and its implementation.
The bill was presented as one which was urgent and thus prevented anyone going to court to seek redress if he had one. Why such an urgency? The urgency was to target certain individuals politically. Certain actions should be taken against underperforming enterprises. It is necessary for the future development of the country. Underperforming enterprises and underutilized assets could be defined as enterprises which are loss making and not utilizing assets 100 percent. The act does not state the measuring index used to identify this. The Greater Colombo Investment Commission or the Investment Board, paragraph 29 of business undertakings (Acquisition) act, and the Companies (Special provisions) law clearly states that the underperforming act is not relevant. Also under the constitution chapter 157 clearly gives protection to foreign businessmen/ companies who invest here. The underperforming and unutilized assets act violates both these two acts
There are many enterprises which were profit making. The Sevanagala sugar factory which comes under the Daya Group of Companies was running at a loss of 149 million when he purchased it. Within a short period of time he was able to turn around this factory and at present is earning a profit of Rs. 200 million. The government’s argument is that this factory was purchased at a very low price, the numbers of workers have been reduced, the production of sugar has not reached its expected targets and the factory was solely manufacturing spirits. When Daya Gamage purchased this factory in 2001 it is true there were bids high than that of his. But none of the other bidders was able to meet the financial obligations. Private organizations do not carry out business like state institutions where there are large numbers of employees and most of them are paid salaries for doing nothing. To make a 145 million loss making enterprise to a profit making 200 million venture it is a well-known fact that private organizations will reduce the number of employees to make it profitable.
The reason for not reaching the expected target of sugar production was though the factory administration was transferred the land was legally transferred only in June 2011. For the past nine years when sugar cane has not been grown not reaching the expected target is understood by any one. When you do not possess the land to distribute to the farmers to grow sugar cane, how can a Sugar producing businessman produce sugar?. It could have considered true and reasonable if after two years of transferring the land if the targeted sugar was not manufactured. With all these obstacles in place Daya Gamage has now been able to pay Rs.4,000 for a tonne of sugar cane while the price for a tonne os sugar cane in 2002 was only Rs.1,200. If this company was getting income by producing molasses, the investment board could have taken action to rectify this. It is unjustifiable after taking over these assets to make these allegations.
Pelawatte Sugar Company at the end of March 2011 had made a profit of Rs.857 million and also settled dues to around 2 billion payable to employees, banks and the income tax department. This year the company expects to produce 30,000 tonnes of sugar and the following year they expect to increase it to around 40,000 metric tonnes. The 5,700 investors in the Ceylinco Leisure Company or the Ceylinco Tower are in a situation where they risk losing their investments. This building belongs to the Ceylinco Homes Company and 55 per cent of the shares belong to Ceylinco Shri Ram. Some 5,700 investors had invested deposits in the Ceylinco Shri Ram and before the takeover, the company had been valued at nine billion rupees. The company was sold for six billion rupees and a plan was made to settle the 5,700 investors. After the takeover it will be the responsibility of the government to pay back the depositors and might turn out to be a dream for the investors of getting their money back.
Lanka Tractors was purchased in 1993 by private businessman Daya Wettasinghe a close relative of the Rajapaksas. The property and assets were not transferred for the past 17 years and when legal proceedings were initiated in the Colombo Commercial Court it ruled that Rs. 385 million be paid as damages up to 2003 due to the non-release of property and assets. The government appealed against this decision and the case was heard before the current Chief Justice Dr. Shirani Banadaranayake who rejected the appeal and the payment of Rs.385 million was reaffirmed on 30th March 2010. The reason for this company to incur losses was due not because of the activities of this businessman but the actions of the government. The government has disrespected the judiciary by not acting on the decision given by the courts. It is an offence which is punishable under chapter 105 of the constitution and is liable to a jail term of 7 years with hard labour. In addition a court case is pending with regard to the Hilton hotel and in a few days a judgment is expected to be delivered by the courts.
It is ironic that while the government is acting to take over underperforming private sector enterprises, no decision has been taken with regard to state-owned underperforming enterprises. Last year 106 state owned enterprises suffered losses to the tune of Rs.61,938.3 million and the biggest unutilized asset in South Asia belongs to Sri Lanka which is the Hambantota Harbour. In addition the Kantale and Higurana Sugar Factories have continued to suffer losses for the past 17 years. Mihin Lanka has incurred losses of up to Rs.6,810 million. In addition under the COPE commission the Lanka Puthra Bank was established solely for village entrepreneurs. The bank which has given out loans the non-recovery percentage though alarming has been considered as very minute. In 2007 the budget presented by his President Mahinda Rajapaksa allocated Rs.1,000 million to revive garment factories that had been shut down. Out of this allocation Rs.750 million was given to Tri- Star Apparel garments and up to now not even five cents have been repaid to the government. According to the reports presented by the COPE commission loans were given to Bettans amounted to Rs.250.1 million, United Fisheries Thrift and loan cooperative Society Rs.71 million, Tissa weva hotels Rs.42 million, Crescent Buttons Manufacturing (PVT) Ltd Rs.39 million and another Rs.232.2 million to another 16 enterprises.
Where money is freely given to close associates of the Rajapaksa regime, when 106 state owned enterprises are suffering losses and huge sums of people’s money is being spent on projects which have no value it is laughable when the government is taking over 37 enterprises for the sake of development. The end result of this act and the persons who will get these companies are left to be seen. The prospective investors will be decided solely by the Rajapaksas.
Comments - 1
DNH Wednesday, 16 November 2011 08:40 AM
yes, yes indeed whatever happens in SL has to be disided by MR, whats wrong with that? He if the only, and i mean the only only politition with the back born ever rised for the occatiotions.. all the other people befitting from the outcomes.
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