Sri Lanka's president has vowed to turn his war-battered nation into the "miracle of Asia," but a controversial new nationalisation law is seen as a major blow to hopes of wooing foreign capital.
The government says the move will boost investor confidence in the south Asian country, hungry for foreign investment as it recovers from decades of ethnic bloodshed that came to an end in 2009.
But the plan has provoked comparisons to Robert Mugabe's seizure of white-owned land in Zimbabwe, which heralded the collapse of that country's economy.
President Mahinda Rajapakse’s government is set to introduce the bill, aimed at reviving "under-performing" and "under-utilised" assets, this week in parliament, where his party holds a two-thirds majority.
Colombo already has earmarked 37 firms for take over under the legislation, including the company that owns the Hilton hotel in the capital, and another firm currently constructing a high-rise that is due to accommodate the first Hyatt hotel in Sri Lanka.
"When they (foreign investors) see we're putting in place systems to ensure better management, they should be encouraged to come and invest here," government spokesman Keheliya Rambukwella said.
But the usually divided and splintered opposition has united against the law, saying it is a "politically motivated land-grab", with concerns also voiced by business groups and Sri Lanka's influential Bar Association.
Opposition MP and former foreign minister Mangala Samaraweera said the bill "is against all principles of an open economy".
"This affects economic freedoms of the people. It also sounds the death knell of foreign investment," he said.
Sri Lanka has been trying to attract investors to rebuild its war-shattered infrastructure after defeating Tamil Tiger rebels in 2009 and declaring an end to nearly four decades of ethnic violence that killed up to 100,000 people.
But attempts are already faltering, even before the proposed bill becomes law. Central bank figures show the island drew $516 million in foreign direct investment in 2010, down from $601 million the previous year.
The planned new law appears to be politically driven, said Charu Hogg, an associate fellow at the Chatham House think-tank in London.
"The move fits in with the recent state policies to tighten control over the political opposition as some of the 37 companies listed for takeover appear to be linked to the opposition UNP (United National Party)," she said.
"The lack of clearly defined criteria in deciding what constitutes an under-utilised and under-performing asset could become a potential political tool against non-compliant corporations," Hogg added.
Already last week ruling party supporters stormed a sugar factory owned by an opposition politician and earmarked for takeover, evicting the management and damaging property, the owners said.
The Marxist JVP, or People's Liberation Front, which usually supports state ownership of assets, echoed Hogg's view, saying it felt the bill was aimed at weakening the opposition.
Opposition lawmaker Harsha de Silva was quoted by the private Lanka Business Online website as comparing the bill to Zimbabwe President Robert Mugabe's expropriation of lands belonging to white farmers.
One poster on the website commented: "Welcome to Sri Lanka, the Zimbabwe in the Indian Ocean."
A Western diplomat, who declined to be named, said the legislation would send the wrong signals to potential investors.
Business groups urged the government on Saturday to withdraw the law.
"This bill has the potential to push the country into a deep economic crisis by discouraging both local and foreign investors," the Consortium of Trade and Industry Chambers of Galle district said in a statement.
Sri Lanka's Bar Association issued a similar statement.
The country is already facing international criticism over its refusal to allow an independent probe into war crimes allegedly committed by both government troops and Tamil rebels in the final months of fighting.
Western nations have stopped direct aid to the government until Colombo improves its rights record.
But despite the warnings, Rajapakse is acting from a position of growing strength. He has won every election since overseeing the defeat of the Tamil rebels, tightening his grip on power.
He is also the minister of finance and his immediate family members hold key positions with authority over the day-to-day running of the economy, the military and parliament.