The International Financial Corporation (IFC), a sister organization of the World Bank, will look to invest US$ 900 million in the next five years in Sri Lanka. The IFC through investments, corporate lobbying, and advisory functions is looking to steer the Sri Lankan economy into its next phase of growth.
IFC Vice President for Asia and Pacific Alfonso Garcia Mora said, “To meet external financing needs Sri Lanka needs to attract greater foreign investment. Especially in sectors that integrate with the global economy.”
Mora noted that Sri Lanka due to the pandemic had a debt to GDP ratio of 110%. He added, “In terms of foreign investment Sri Lanka needs US$ 4-5 billion every year till 2023. Sri Lanka needs to become a more open economy.”
Mora was addressing the Invest Sri Lanka forum held virtually yesterday.
Mora said, “Sri Lanka has been a development success story with the lowest poverty rates in the South Asian region, best human development indicators, almost universal access to basic services, and the highest per capita income in South Asia. Sri Lanka’s economic performance since independence has been a success.”
The key drivers of growth of the past decade were identified as being the apparel and garment sector. The post-war reconstruction boom was mainly funded through remittances. Mora noted that the Sri Lankan economy started entering the deceleration phase in 2013 with GDP growth in the five years to 2019 averaging 3.7% compared to 6.6% in South Asia. He also noted that there were market entry barriers to foreign firms due to restrictions and large existing state-owned enterprises.
The IFC has also played a role in drafting key policy documents with notable involvement in the development of the National Financial Inclusion Strategy and the Secured Transaction Registry.
The IFC through its investments also plays a large role in picking enterprises that succeed in Sri Lanka. Mora noted that the IFC began its investment into Sri Lanka through a US$ 3.25 million investment in the apparel sector. The IFC has also invested US$ 175 million into John Keells Holdings for the support of its hotel and retail sectors. The IFC is also a major funder of the Women in Work program.
This gives the IFC the power to push for a 33% growth in female appointments to the boards of the companies. There is an increase of 12,000 more women within companies that are under the Women in Work program.
The IFC also plays an integral role in the pricing of risk within the economy and the global borrowing of local corporations through its investment and ownership of Fitch Ratings Lanka. The IFC has already invested over US$ 1.6 billion in 30 sectors around Sri Lanka.
The IFC is pushing tourism growth as a strategy for more inclusive development of the economy. Mora said, “It is the sector that is most geographically diverse.” He advocated higher value-added tourism products. “Branding should not be low-cost or budget.”
The IFC helped LOLC to introduce group lending without the need for collateral in war-torn regions. The IFC is confident of Sri Lanka achieving a 3.3% growth rate in 2021. The IFC has played a role in encouraging wind power investments through its clout in the local banking and corporate sectors.
Add new comment