Focus on investment

Foreign Direct Investments (FDI) are a vital lifeline for any country. Sri Lanka was one of the first countries to open its doors to foreign investors following the liberalization of the economy in 1977 and the establishment of Free Trade Zones soon afterwards. The Government also set up a Board of Investment (BOI), a one-stop facility for the benefit of investors. Today, Sri Lanka is seen as a prime destination for foreign investors and joint venture partners.

There are two main avenues for FDI. The first is the Colombo Stock Exchange, where foreigners are very active. The other is the more traditional method of setting up investments such as export-oriented factories. It is important to encourage both types of investment. Last year, Sri Lanka recorded around US$ 1.3 billion in FDI inflows. China, India, Singapore, Netherlands, UK, Japan, Malaysia, Sweden and Australia are among the leading investor countries. The manufacturing and services sectors have seen the larger share of FDI inflows – of nearly US$ 400 million while the infrastructure and utilities sectors received US$ 350 million. According to the Ministry of Development Strategies and International Trade, merchandise exports grew 10.3% to US$ 9.5 billion in the 10 months to October 2017 with monthly exports topping US$ 1 billion thrice.

These are impressive numbers, but we have barely scratched the surface as the potential for improvement is huge. In comparison, Singapore attracts around US$ 50 billion in FDI each year. This example is significant in several ways. First, Sri Lanka and Singapore are strategically located islands (Sri Lanka is the gateway to SAARC while Singapore is the gateway to ASEAN) which have excellent port and airport facilities. Second, Sri Lanka and Singapore have excellent air links with citizens enjoying visa-free access to each other’s countries. Third, Sri Lanka recently signed a Free Trade Agreement (FTA) with Singapore, which was its first with a South Asian country. The FTA should see increased trade and investment between the two friendly island states. Singaporean and Sri Lankan companies will enjoy potential tariff savings and other benefits through the FTA.

Fourth, investments from Singapore should see a further boost following the ‘Invest Sri Lanka’ Investor Forum which is being held today at the Four Seasons Hotel in Singapore. Prime Minister Ranil Wickremesinghe will deliver the keynote address, which will focus on Sri Lanka’s investment potential. He will offer perspectives on the outlook for Sri Lanka and investment opportunities across sectors in the Sri Lankan economy, with a specific focus on investment in the Sri Lankan Stock Market.

The investor forum organised by the Colombo Stock Exchange (CSE), the Securities and Exchange Commission (SEC) of Sri Lanka and the Singapore - Sri Lanka Business Association (SLBA) has attracted a large number of investors from all countries in the region. A number of Sri Lankan companies including, John Keells Holdings, Hemas, Hayleys, Commercial Bank, Access Engineering, Hatton National Bank, DFCC Bank, Laugfs, Softlogic, Lion, Walkers CML, Sunshine Holdings, Singer Sri Lanka, NDB Bank and Sampath Bank will also participate.

Investors will also be able to get insights from Dr. Indrajit Coomaraswamy, the Governor of the Central Bank, hear from foreign investors on the Sri Lankan experience, update themselves on investment opportunities in portfolio and direct investment and meet representatives of 15 leading Sri Lankan listed companies representing multiple industries on a 1:1 basis. Such one on one meetings are generally very productive and almost always result in a venture.

The investor forum cum roadshow has previously been held in the United States, Australia, New Zealand, United Arab Emirates, India, Switzerland and Hong Kong with tangible results. Many new investors have entered Sri Lanka following these forums.

Prime Minister Wickremesinghe’s participation at this forum will also send a strong signal to the international community, both business and political, that Sri Lanka has a politically stable administration. There was unfortunately some sort of uncertainty following the February 10 Local Government election, which had confused investors. The fact that both President Maithripala Sirisena and Prime Minister Wickremesinghe have pledged to continue and reinforce the National Unity Government has instilled confidence in the investor community, which was looking for political and financial stability. It is also vital to stabilize the Rupee and ensure other economic fundamentals to woo investors.

It is also essential to eliminate corruption if Sri Lanka wants to attract more foreign investors. It is a well-known secret that many foreign investors turned away from Sri Lanka during the previous regime because they could not grant the kickbacks demanded by some of the country’s key figures. The President and the Prime Minister have renewed the fight against corruption, which will be appreciated by the investor community. Eliminating red tape is another important step. No foreign investor will want to be driven from pillar to post when applying to set up a venture here. The BOI must be further streamlined to offer a more convenient and all-inclusive service to investors. A highly comprehensive investment policy is needed to attract more investors and ensure long-term economic development.