"The Act potentially impacts listed entities, especially those in the property development sector, such as JKH and Overseas Realty (Ceylon) PLC"
By Dulasha Hettiarachchi
Sri Lanka’s business community renewed their calls to revisit the controversial Land Act enacted by the former regime limiting foreigners and foreign-owned corporates to outright owning lands, as it acts as a major deterrent to lure the much-needed foreign direct investments (FDIs).
“We are of the view that the ambiguity inherent in the Act and the uncertainty it creates as a result will be deterrents to capital formation and foreign direct investment in Sri Lanka and therefore, require urgent review,” John Keells Holdings PLC (JKH) Chairman Susantha Ratnayake said in his annual review.
The Land (Restrictions on Alienation) Act was passed in Parliament last October limiting the purchase of land by foreigners and entities with over 50 percent of foreign ownership with retrospective effect from January 1, 2013.
The Act potentially impacts listed entities, especially those in the property development sector, such as JKH and Overseas Realty (Ceylon) PLC.
However, Ratnayake was also of the view that it is necessity to monitor and manage the freehold sale of land to foreign nationals.
Meanwhile, the country’s premier business chamber, Ceylon Chamber of Commerce (CCC) Chairman Suresh Shah expressed similar sentiments and stressed the need to review the Act.
“The way it has been drafted is not in Sri Lanka’s best interest,” he said.
According to Shah, foreigners should be restricted from obtaining land for residential purposes but foreign investors should be allowed to purchase lands to establish industries because they generate jobs and create value in the economy.
It was only recently Senior Advisor to Prime Minister R. Paskaralingam gave the assurance to the business community that the controversial Land Act would be revisited.
The unity government, which came into power on January 9, 2015, is now attempting to recalibrate the country’s economic growth to an FDI-driven, private sector-led growth model from the previous government’s public sector-led, commercial borrowing-driven growth model. However, it is unlikely that anything to this effect would occur until after a new government is formed after the forthcoming parliamentary elections.
Meanwhile, Board of Investment Chairman Upul Jayasuriya, in a recant of his recent standing of protectionism, said that the Act was “senseless”.
“Companies with 50 percent of foreign shareholdings or individuals not being permitted to buy land is a huge drawback. They should be allowed to bid, so we can select the most ideal buyer. That won’t cause unnecessary problems because the process follows a certain agreement,” he noted.
The investment hungry nation has only been able to draw little over US $ 1 billion per annum in the post-conflict era and continuously fell short of its ambitious FDI targets. In contrast, the countries in the likes of Vietnam, which came out of a war, annually attract US $ 10 billion worth of FDIs.
Meanwhile, the National Chamber of Commerce Sri Lanka President Thilak Godamanna strongly disagreed on reviewing the Act.
“Anybody would want to buy land in Sri Lanka due to its favourable climate and abundance of other resources. Reviewing the Act would solely mean foreigners enjoying Sri Lanka rather than locals after some time,” he said.
Godamanna added that local entrepreneurs would not be able to match the foreign productivity, resources, technology, etc., and that the past governments allowing foreigners to purchase land had deteriorated Sri Lankan businesses.
“What Sri Lanka needs is political stability not a change in the Act,” he stressed.
It remains to be seen whether any new government formed after the upcoming elections would revisit the issue, as Investment Promotions and Highways Deputy Minister Eran Wickramaratne recently said that it would not be possible, since both the government, along with the opposition, had agreed to its principle before passing the Act.
Despite the Land Act is now in operation, the big ticket projects as well as some of the smaller-scale projects could be granted exemptions on a case-by-case basis considering the best interest and long-term development of the country.
