Amended Land (Restrictions on Alienation) Act No. 38 of 2014: Challenge for Gotabaya and Sajith

“First, the US and the MCC will not buy, own any land under this agreement. It is illegal under Sri Lankan law for foreigners including Americans to buy or own land here. Second, MCC compact has no connection with US military,” MCC Sri Lanka Resident Country Director Jenner Edelman told members of the Sri Lanka-USA Business Council of the Ceylon Chamber of Commerce in Colombo in August.

One wonders what Edelman would say now as the cabinet has passed the Act to allow foreigners to buy land in Sri Lanka, should it be passed by the Parliament. Of course the MCC will not be able to buy any land as it does not hold any shares in a company listed in the Sri Lankan stock market, but individuals and companies listed, irrespective of the foreign shareholding and possibly even 100% foreign holding companies will be able to buy land in Sri Lanka. 

This Act has to be viewed within the context of three agreements that have been the focus of discussion and debate. The Millennium Challenge Corporation (MCC) Agreement, the SOFA and ACSA agreements. It appears that this Act has given a new lease of life to these three agreements 

The Daily FT reported on 8 October that the new amendment to Land Act has received Cabinet approval. This Act reportedly incorporates legal provisions to enable foreigners and companies listed on CSE with more that 50% foreign shareholdings to purchase lands in Sri Lanka. It also gives retrospective effect to land acquisitions carried out prior to 1 April 2018

The news item says Cabinet has given its approval to present in Parliament the amended Land (Restrictions on Alienation) Act No. 38 of 2014, incorporating the necessary legal provisions to allow companies listed on the Colombo Stock Exchange to purchase lands in Sri Lanka. Cabinet gave approval to the proposal, made by Finance Minister Mangala Samaraweera last week, to publish the draft Bill prepared by the Legal Draftsman in the Government Gazette and present it in Parliament for approval.

The Cabinet proposal was first presented by the Finance Minister in June as companies listed on the CSE with 50% or more foreign shareholding were prohibited from purchasing lands in Sri Lanka by the Land (Restrictions on Alienation) Act No. 38 of 2014.

While these prohibitions were removed by an amendment to the Act in 2018, its provisions were set apart for land transactions done after 1 April 2018 and no such provisions had been provided for the acquisitions carried out prior to that date.

The new Bill for the removal of the prohibition imposed under Act No. 38 of 2014, was approved by the Cabinet.

It appears that as a consequence of this Amendment, there could be renewed interest for non-nationals buy land in Sri Lanka and for companies with more than a 50% shareholding buy land in Sri Lanka.

It also does not appear that this Act or the predecessors to it have been investigated in depth and the objective of selling land to foreigners have been clearly spelt out by successive governments.

Neither is there any evidence of a cost benefit analysis done to justify why land should be sold to foreigners. 

This Act has to be viewed within the context of three agreements that have been the focus of discussion and debate. The Millennium Challenge Corporation (MCC) Agreement, the SOFA and ACSA agreements. It appears that this Act has given a new lease of life to these three agreements.

The MCC document stated: ‘Land Project – The Government has recently prepared two draft legislative acts that seek to convert permits and grants to state land to absolute land grants given for the use of households to marketable and bankable titles and to establish an authority that gathers information on State lands and facilitates investment in underutilised state land. MCC at the time stated that the Acts, as they were written, would not achieve the objectives set out in the agreements and suggested revisions before the acts are sent to Parliament. The substance of these suggested revisions centre on decentralising authority for the approval of absolute land grants, simplifying procedures, and ensuring gender equality in the issuance of absolute land grants, among other factors. The MCC also included two conditions precedent to the disbursement of compact funds to address legislative gaps that will inhibit the success and sustainability of the Registration of Land Grants and Deeds Conversion Activity.’

One wonders whether the Act as presented and approved by the Cabinet which reportedly incorporates legal provisions to enable foreigners and companies listed on CSE with more that 50% foreign shareholdings to purchase lands in SL, and which also gives retrospective effect to land acquisitions carried out prior to 1 April 2018, now meets with the pre-conditions set out by the MCC.

These agreements (MCC, SOFA and ACSA) all contain provisions for far reaching changes to what Sri Lankans have not been accustomed to in agreements with other countries. The agreements, particularly SOFA and ACSA reportedly do not require periodic renewals as previous agreements had been subject to. This means that they are there for perpetuity. If this is correct, and the public has no way of knowing whether these assertions are correct or incorrect, as they are not publicly available agreements, the present generation and the many to come would be bound by what is in these agreements.

It is the land project in the MCC Sri Lanka Compact that has caused concern to many analysts, and in particular the mention of a Colombo-Trincomalee economic corridor and the granting of absolute land grants, the setting up of a State Land Bank Commission, privatisation of some State land where such land does not yield a profitable return to the country. These are some of the inclusions in the agreement which are suspicious primarily because of the paucity of information. 

It is appropriate to quote here an extract from an article written by Neville Ladduwahetty in the Island on 2 June titled ‘The Millennium Challenge Corporation Compact with Sri Lanka’: “Since the stated aim of the MCC is to ‘reduce poverty through economic growth,’ it is necessary to explore whether the Compact aims to benefit areas that are in fact currently classified as those that qualify for assistance on the basis of the National Poverty headcount index of 4.1, as determined by the Census and Statistics Dept. of Sri Lanka, for overcoming the poverty trap.”

“Under the land administration project, preparation of parcel fabric map and inventory of state land, improvements of deeds registry, improvements in the land valuation system, land grants registration and deed conversion activities and land policy and legal governance improvement activities will be implemented in Kegalle, Kandy, Matale, Kurunegala, Anuradhapura, Polonnaruwa and Trincomalee, along the identified Colombo-Trincomalee economic corridor. Parties are currently negotiating to include the Gampaha District under the said category as well” – The Sunday Observer, 12 May.

Of the eight districts listed above, the poverty headcount index of five of them, namely, Matale (3.5), Kurunegala (2.9), Anuradhapura (3.8), Polonnaruwa (2.2) and Gampaha (2.0) are below the national headcount index of 4.1. Therefore, only three Districts, Kandy (5.5), Kegalle (7.1) and Trincomalee (10.0) qualify, since their poverty indices are high and well above the national average of 4.1.

The strategy of “growth corridors” have left out several districts where the poverty headcount index is considerably higher than the national average, and therefore requiring of attention. For instance, Districts such as Ratnapura (6.5), Monaragala (5.8), Badulla (6.8), Batticaloa (11.3), Kilinochchi (18.2), Mullativu (12.7), Jaffna (7.7), Nuwara-Eliya (6.3) are well above the National Poverty Index. 

These districts with higher levels of poverty than the national average are located on either side of the Colombo-Trincomalee economic corridor. Under the circumstances, it would be inevitable for existing disparities to exacerbate as a consequence of the economic growth within the corridor, thus setting in place social imbalances that could become a cause for social unrest on ethnic lines.

Commenting on the impact of the Compact within the economic corridor, Emeritus Professor Nimal Gunatilleke of the Peradeniya University states: “Some of the districts in which the MCC and the National Plan Corridor project earmarked for development are located in areas where the Mahaweli Development Project influence has been in existence for over several decades… Some sections of the proposed economic corridor seem to cross the paths of the ecological corridors established for facilitating elephant migration during the USAID funded environmental component of the Mahaweli Project” – The Island, 4 May. It is evident that the planners of the economic corridor have shamefully ignored the ground breaking legacies left behind by their predecessors.

What warnings that some politicians had sounded about the land project appears to have come true considering that tracts of State land could be sold to foreigners as absolute grants for them to set up industries in the Colombo-Trincomalee economic corridor. If this happens as it well can if this law is passed, and the nature of such industries is not defined, a gateway could be opened for any kind of industry including Military industries. 

The MCC Sri Lanka Compact is essentially a commercially oriented document that is intended to increase the efficiency and effectiveness of Sri Lanka’s economy. Investments will naturally have to come from overseas as Sri Lankans do not have such investment resources to justify a return for the $ 480 million that the MCC Sri Lanka Compact will invest in Sri Lanka as a grant. 

The safety and security of such overseas investments and the investors will have to assured and protected, and this is potentially where the SOFA and ACSA Agreements come in. As they say, the Devil is in the detail, and these two agreements reportedly are in substantial detail with several annexes in addition to what is in the body of the documents. These details are not known to the public.

Imagine a scenario where foreigners, specifically US citizens and/or where a company listed in the Sri Lankan stock market with a US stock holding in excess of 50%, is sold land in Sri Lanka for them to set up businesses, Military or otherwise, and there is some unrest and these businesses are threatened in some way. If the SOFA and ACSA (revised agreement) have been signed and the US Military are called into provide security to such businesses as the agreements clearly allow, and as the agreements clearly says that the US authorities are not subject to Sri Lankan law or jurisdiction, and are able to act as they will, they could stay in Sri Lanka as long as they wish to secure the US owned businesses “at the invitation of Sri Lanka”.

This may be a hypothetical situation, but it need not be so, if the objective of getting these three agreements signed is not bona fide and it is in line with another agenda as some suspect, based on the very unfortunate experiences in other countries. 

It is of paramount importance for the two main presidential candidates, Gotabaya Rajapaksa and Sajith Premadasa, to spell out their position on these three agreements in unequivocal terms so that the public would know and could keep them accountable to what they say if one or the other were to be the president of Sri Lanka on 17 November.

Sri Lanka does need investments but it needs its sovereignty, its culture, its natural fauna and flora, and its natural beauty even more. The USA has a history of just over 200 years compared to our history of more than 2,600 years according to some accounts and even longer by other accounts. True we are not as materially endowed as the USA, but chances are that many Sri Lankans are content with what they have and would prefer economic prosperity to occur at our own pace without compromising who we are. 

Besides this, Sri Lanka cannot become a battle ground for warring super powers and we should not provide the stage for them to act out their play and leave us in ruins. 

The MCC Sri Lanka compact on its own would not have raised many eyebrows except for its open promotion of private enterprise and the reduction of the role of the State particularly in the area of land policy. 

There is time between now and 16 November for both presidential candidates to have their expert teams to study these three agreements in detail, very definitely the entirety of the three agreements including all the annexures which no one or very few have seen. If this is not done and the new Act is passed in Parliament, and the three agreements are signed, the horses may bolt and closing the stable doors would be a fruitless exercise. Sri Lankan land which must belong to Sri Lankans will not be there for the present and future generations of Sri Lankans, and we may end up with a permanent foreign military presence in Sri Lanka.

The camel has got his head in. It will not be long before it is inside the tent unless Sri Lankans are smarter than the camel.