The Economist Intelligence Unit has stated in a report that Sri Lanka’s latest expropriation laws would only serve to further harm the economy and scare off any potential investors.

It comes as the Sri Lankan President Mahinda Rajapakse announced plans to acquire 37,000 acres of land from plantation companies and redistribute them among certain farmer families in the country.

The report said that even though Sri Lanka assured investors this would be a one-off move, it “undermines the predictability of policymaking” and would “raise significant concerns amongst foreign investors”.

Comparing Sri Lanka with Venezuela, the report noted “Sri Lanka's expropriation law is likely to be economically counter-productive".

Noting that the stock market hit a 14-month low after the law was passed, “despite the government's apparent efforts to boost market confidence by buying shares”, the report went on to say,

“The legislative process itself raises two key concerns.

Firstly, the passage of a law which specifically lists assets to be expropriated, rather than a general set of principles to be applied, appears to conflate the roles of the executive and the judiciary with that of the legislature.

Secondly, the speed with which the legislation was pushed through will add to the political opposition's concerns that the government is using its two-thirds majority (it enjoys the support of 160 MPs in the 225-member house) to consolidate its grip on power.”