Investors must feel this is a place, where they can get speedy action

Address by Dr. Sarath Amunugama Minister of Enterprise Development and Investment Promotion to the Staff of the Board of Investment of Sri Lanka on February 19, at the BOI auditorium.

TENURE: It is a great pleasure for me to be back in the BOI as the Minister in charge. I was the Minister in charge for about two months, some time ago. I hope this time my tenure will be longer.

I also recall the time when BOI was started. I was then Secretary to the Ministry of Information and Broadcasting, located in the old Indian Bank building, in Fort, when Upali Wijewardena started the BOI on the fourth floor of the same building. He used to tell me of his hopes for BOI.

Today, it is no exaggeration to say, that the future prosperity of Sri Lanka will depend on how we at BOI

 function. As a former Minister of Finance, I am aware of two things.

The first is that our domestic income is sufficient only to pay salaries of Government servants, pensioners, to repay our debts and to look after a few maintenance requirements.

We are financing our budgetary gap with foreign assistance. At the last donor meeting, it so happened that we were able to get USD 4.5 billion worth of commitment over a three to four year period.

But it is very obvious that, that type of donor funding needs to be renewed, because our annual debt repayments are mounting. The grant component in this funding is very little compared to the mid-term and long-term credit element.

So we can’t go on borrowing much longer, as the economy cannot be sustained on the basis of such bi-lateral and multilateral borrowings. That leaves us only two options.

One option is to drastically reduce consumption, reduce salaries, reduce development programmes and cutting down to the bare necessities which countries like North Korea, Albania, Cuba, the hard-line Communist country, and so on, are presently doing.

I don’t think anyone in Sri Lanka will envisage a future where we can sustain our economy based entirely on domestic savings.

So we have no option, but to go for a rapid expansion of foreign direct investment. All our future prosperity, job creation and economic growth will depend - I say it very seriously, on how successful the BOI is, in drawing foreign investment.

When BOI was started, the foreign direct investment scenario was limited. There wasn’t much money in Asia and it was largely the push and pull of the garment and textile centers that drew investments into Sri Lanka, and the BOI and the Industries Ministry was largely driven by the textile industry.

But today, the picture is totally different. Asia is full of money. China does not know what to do with its money. India has a lot of excess capital. The Middle East is awash in money. Japan is in surplus.

Countries like Thailand, Singapore, and Malaysia are now becoming countries, which invest abroad. Eastern European countries are financing in a big way. Hungary for example, is now a major donor to Sri Lanka.

Austria is a major bi-lateral contributor. So there is no question of want of money. I think, you know it better tan I do, that it is so, if you look at the number of projects that are being submitted to BOI. Not of the bottom end, but at the top end.

I am very happy to say, to take example from the power sector and the petroleum sector; we are getting projects hitting one billion US dollars each.

We can reach our target of 2 billion US Dollars FDI, even with two projects, which are already before us. One is the refinery in Hambantota and the other a power project which is also 1 bn US Dollars which will be negotiated with China.

So when I say our target can be raised from about 400 Mn or 500 mn to 2 billion in one year, I am saying it very optimistically. We already have on the table two projects, which, if we don’t foul up, will bring us up to the 2 billion mark!! BOI should in a matter of two years begin to talk in terms of 4 billion US Dollars, in FDI.

Sri Lanka must think big. Countries like Singapore and Malaysia grew because they thought big. BOI cannot be run on Chinese restaurants and Indian restaurants; we must think big.

As I have already ordered we should begin to classify projects. I think a circular will come to you soon, to categorize 5-star, 4-star, 3, 2 and 1-star projects. 5-star will be projects drawing more than USD 100 million.

That is eminently do-able. But there is one condition. Investors must feel that this is a place, where they can get speedy action. We must always remember that investors are risk takers.

If they don’t want to take risks, then they can join the BOI as officials. But since they are not so easy going, they know what to do. Our job is not to tell them, not to take risks. That is not the job of the BOI. So I have initiated a procedure.

That is, within 48 hours, of any project coming into BOI, please ensure that the project is on my table. I must take responsibility for all foreign direct investment into Sri Lanka.

When I look at that, I will decide on the officer, who should be pursuing that project. We should be putting emphasis on the 5, 4 and 3 star categories. I am very worried over projects that are over 100 million US Dollars.

We must look at some projects coming up for over USD 250. USD 250 Mn was the target of BOI for one whole year. We can achieve that with one project. So please don’t delay projects.

I am told there are 550 pending projects with BOI. So from tomorrow, starting with the 5-star category, I want the relevant officer to please speak to me, with all those projects on which no action has been taken; beginning with the projects which are costing more than 100 Mn USD.

Then I will know personally, whether projects are going forward or backwards and what action has to be taken, I will take that action and if necessary discuss it with the President.

But I want to know what we are going to do with those projects and why the 550 projects have been sitting on somebody’s desk.

So please help me on that. If there are genuine problems, difficulties, you can discuss with me. I myself have been a public servant, and a decision-maker and hence we can mutually discuss and arrive at a satisfactory solution.

Already the Chairman knows, we have had discussions and some of the longstanding disputes have been settled. So please work on the basis that we can solve matters.

What is not permissible is to hang on to files and create a feeling in the country that BOI is an inefficient and corrupt organisation. I want to leave this organisation after removing those two stains from the BOI!

It cannot be corrupt, cannot be inefficient because this is an issue much bigger than us. Because the whole future of Sri Lanka and the business environment in this country, will depend on how the BOI functions.

We have to facilitate investment and for that I want to propose two institutions. One is the Land Bank. We have to collate information on all the land available for the BOI.

There are so many zones where there are vacancies, some areas where the land allocation is simply too big for a factory.

We have all UDA allocations set apart for development. I will request the government to help us extend a large number of BOI zones so that an investor as he comes in, can come and see where the lands are available.

The present practice where he goes all over in search of land and then comes to us for approval should be discouraged. We must have a ‘Land Bank’, to which in a week or two the investor will have access. That is absolutely necessary.

I am just coming after a meeting with investors in Singapore, with the Stock Exchange people. I told them that there is enough land for them. Sri Lanka is the only capital, which can offer, immediate access to land.

I recently spoke to one of the richest Japanese investors who was quibbling about the Hilton. What other country or other institution can offer 7 acres of land which is within quarter of a mile from the sea, quarter of a mile from the Presidential palace, quarter of a mile from the Secretariat and quarter of a mile from the BOI. I don’t think anywhere in the world, you can get such land.

So what we consider the most problematic by the BOI, should actually be our biggest strength. If we can get these things right we should be able to send the message throughout the world that if you come to Sri Lanka, you can get the sites for investment, within a month.

Now they have to spend two years, three years, and even four years to get a block of land. Fortunately I was Minister of Public Administration before I came here, and I warned my Officers (AGAs) that if they don’t release land for investment, they would be dealt with.

We were able to give land in Mirijjawila for the 1 Billion refinery project within 24 hours. You can imagine how much it would have taken under normal circumstances. Now investors go back and talk to the other people about it.

One week later they emailed me and said they were interested in opening a Sugar Refinery in Trincomalee.

Don’t forget that Sri Lanka is not the only girl on the beach! There are so many countries which are fighting for investment. Chinese development is not based on internal savings. Chinese development, which is a miracle, is due largely to foreign investment.

The country that is drawing the most capital investment in the world even more than America, is China. India is developing today not on domestic savings. The idea that you can unplug yourself from the world economy is a big joke.

Actually, we have to plug ourselves on to the global economy. Look at the development pattern in Sri Lanka today. The Western province i.e. Colombo, Kalutara and Gampaha districts are accounting for 54% of Sri Lanka GDP.

The hospitals are here, the schools are here, the factories are here, the hotels are here, in the Western Province and it is plugged on to the global economy, and as a result the lowest unemployment figures, in Sri Lanka are in the Western Province.

Today you go to any of these big factories, you go to any BOI sites, they are saying ‘find us more employees’.

Today they are bringing Chinese workers to Havelock City. I said, then show it in Shanghai, at our Investment Forum. Which other country can say they are bringing workers like that! Our workers are going to Korea, to Singapore to the Middle East,. So isn’t that a sign of a vibrant development system? We have nothing to complain.

So only we can stop the growth of Sri Lanka, by being inefficient and corrupt. Only BOI can be the obstacle to growth in Sri Lanka.

I want to ask you to just draw a line about the past. I want you to cooperate with me and very earnestly, with great humility, I am calling upon all of you to help us develop this country.

This cannot be done by me, or the Secretary or the Chairman alone! Each one of you in the BOI is a valuable partner in this growth process.

Think how lovely it would be ten years later to say, “When we were hitting 4 billion USD in FDI into this country, I was working for BOI”!! I think it will be a tremendous legacy to your children.

I want to, with all my effort, to convert BOI into that. There is no other future for Sri Lankan economy without foreign direct investment. You can ask any economist, you can ask Prof. Watawala, because that is basic economics.

We don’t have enough domestic savings, we cannot bilaterally or multilaterally borrow, we have come to the end of that. So either we have a slashing of our living standards which is not politically acceptable.

So the only alternative is to draw in foreign direct investment. China, India and all Eastern European countries are doing it.

We must make sure that the culture of investment and growth in this country gets away from this stilted, public corporation sort of idea where nothing happens, everybody is slow, everybody is on leave and, nobody is willing to take responsibility.

Files grow on their tables, workers never come to work on time, and as a result they pull the country down to complete chaos.

I have already said when I was Minister of Finance, very openly, that the major public corporations are the biggest impediments to growth in Sri Lanka.

They are inefficient, bankrupt and so not offer a good service to the public. As Minister of Finance at the end of every month I had to hand over cheques to all the big corporations to pay their salaries.

That is not a very good thing for a developing economy. In India and China, the slogan is Perform, Reform or Perish. These are the words of the Communist Chief Minister of West Bengal.

So the only answer is to make sure that the risk-takers come. We cannot take money from the public, and simply hand it over to bankrupt government corporations. We have to stop that. We should begin with BOI. I know we have a lot of talent here, lot of commitment, lot of feeling that we can do something in this country.

So please help me. I want to work with you and whatever has been in the past, please let us get out of this feeling, which is universally held in Sri Lanka and abroad, that BOI is an inefficient and corrupt organization.

You must help me to show that it is not so. Prove it is not so. And there the target is to achieve 4 Billion USD foreign direct investments in Sri Lanka.