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Sri Lanka's asset acquisition bill may increase investor uncertainty in the post-war economy and hit the country's credit rating as it creates doubt about private property rights, Moody's Investors Service said on Monday.
Sri Lanka's parliament on Wednesday passed a controversial law that will allow the state to acquire enterprises or assets it deems underperforming or underutilised.
The government, however, specifically listed one underperforming enterprise and 36 underutilised assets in the bill, mainly either leased or sold by the state at a discount in the past, and assured it will be a one-time event.
"The government's seizure of assets creates ambiguity around the protection of private property in Sri Lanka," Moody's said in its Weekly Credit Outlook.
"Despite authorities' statement that this is a one-off move ...the measure may undermine the predictability of future policies and increase investor uncertainty, which would make it credit negative for Sri Lanka," Moody's said.
President Mahinda Rajapaksa's administration was strongly criticised by opposition parties and leading business chambers for expediting the bill without public discussion or allowing the properties' holders to argue their side.
"The use of the fast-track procedure, which we believe limits public scrutiny, largely reflects the tendencies of the current government to exert strong and direct influence over the economy," Moody's said.
Since the end of its 25-year civil war in 2009, Sri Lanka has been working to improve the investment climate, including making fiscal and tax reforms under the guidance of the International Monetary Fund.
http://www.reuters.com/article/2011/11/14/srilanka-moodys-idUSL3E7ME1B020111114
Sri Lanka's parliament on Wednesday passed a controversial law that will allow the state to acquire enterprises or assets it deems underperforming or underutilised.
The government, however, specifically listed one underperforming enterprise and 36 underutilised assets in the bill, mainly either leased or sold by the state at a discount in the past, and assured it will be a one-time event.
"The government's seizure of assets creates ambiguity around the protection of private property in Sri Lanka," Moody's said in its Weekly Credit Outlook.
"Despite authorities' statement that this is a one-off move ...the measure may undermine the predictability of future policies and increase investor uncertainty, which would make it credit negative for Sri Lanka," Moody's said.
President Mahinda Rajapaksa's administration was strongly criticised by opposition parties and leading business chambers for expediting the bill without public discussion or allowing the properties' holders to argue their side.
"The use of the fast-track procedure, which we believe limits public scrutiny, largely reflects the tendencies of the current government to exert strong and direct influence over the economy," Moody's said.
Since the end of its 25-year civil war in 2009, Sri Lanka has been working to improve the investment climate, including making fiscal and tax reforms under the guidance of the International Monetary Fund.
http://www.reuters.com/article/2011/11/14/srilanka-moodys-idUSL3E7ME1B020111114
