The companies were privatized in the 1990s as they were mismanaged after expropriating from foreign and local investors resulting in monthly losses to the Treasury.
Prime Minister Rajapaksa claimed that plantations firms contributed about 25 percent of production while small holders have expanded.
“Under these circumstances, steps will have to be taken to encourage plantation companies that have become more successful and to review the privatization agreements of unsatisfactory plantation companies and to setup alternative investments that can be commercially developed,” Prime Minister Rajapaksa said in a budget for 2021.
“I also propose to increase the daily wage of plantation workers to Rs. 1,000 from January 2021.
“I intend to present to Parliament in January a legal framework that will change the management agreements of plantation companies that are unable to pay this salary and provide opportunities for companies with successful business plans.
He said smallholders were producing more.
However, plantations companies have said smallholders are giving productivity base wages of 30 rupees a kilo where workers were plucking over 30 to 40 kilos a day, while plantations workers were doing about 22 due to daily wages which are imposed mostly with government interference.
Two firms that are still in state hands have EPF in arears and are still bailed out by tax payers.
Sri Lanka has a history of expropriation which has hurt private investment and kept economic growth down.
Undermining private property rights is a form of the economic barrier killing business confidence which economists call ‘regime uncertainty’, where government policy is uncertain or threatens property rights.
“Such attenuations can arise from many sources, ranging from simple tax-rate increases to the imposition of new kinds of taxes to outright confiscation of private property, explains Economist Robert Higgs.
“Many intermediate threats can arise from various sorts of regulation, for instance, of securities markets, labour markets, and product markets.
“In any event, the security of private property rights rests not so much on the letter of the law as on the character of the government that enforces, or threatens presumptive rights.” (Colombo/Nov17/2020-sb)
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