Lanka receives $ 340m FDI in first eight months of 2006

by Elmo Leonard

Sri Lanka got $272 million in foreign direct investment (FDI) in 2005, while India gained $7 billion, the highest achieved by that country, according to UNCTAD.

Sri Lanka government's current strategy is to help make the private sector attractive, whereby outside corporates would enter into joint ventures with local companies, Minister of Investment Promotion, Rohitha Bogollagama said, at the launch of the World Investment Report (WIR) 2006, put out by UNCTAD.

For investment into Sri Lanka, opportunities are rife. Even the agriculture sector is laden with many openings, an instance being, an excess of rice production. The private sector, in cooperation with foreign companies could harness this commodity, with foreign corporates, for processing and export. The fisheries sector is another potentiality, with a reserve of 22 times in sea area, as its land extent, Bogollagama said.

Oil exploration was another area, but Sri Lanka does not have the support industries to sustain oil exploitation, as steel mills for construction of oil wells and other corresponding technical services, or base for storage of extracted oil.

Sri Lanka has received $340 million foreign direct investment during the first eight months of 2006, while being hopeful of reaching its target of $1 billion in FDI by end-2006, Bogollagama said.

In 2005, global inflows of FDI rose by 29 percent to reach $916 billion, notwithstanding 27 percent growth in 2004, but remained far below peak of $1.4 trillion in 2000.

Inflows to developed countries amounted to $542 billion, an increase of 37 percent over 2004. For developing countries, $334 billion made it the highest ever recorded, being 59 percent of global inward FDI.

In general, growth had taken place in all sub-regions of the world, though the quantum differs. FDI inflow growth was effected in 126 of 200 economies surveyed by UNCTAD.

The top performer is UK, with an inflow of $165 billion ($108 billion in 2004). In second place is USA - $122 billion.

Among the developing nations is China ($572 million) and Hong Kong ($36 million), Singapore ($20 million), Indonesia ($5 million), Malaysia and Thailand ($4 million each). In their parts of the world, Mexico and Brazil have done well.

The EU leads regionally, with inflows of $422 billion, making up half of the world's total FDI. South, East and South East Asia received inflows of $165 billion, a fifth of the world total. The report confirms that the Asian region continues to be one of the most attractive in terms of FDI, although all other regions have done well. Global tensions in some parts of the world will add to uncertainty, the report says.

North America comes next with $133 billion FDI. West Asia, making up the Middle East and the Persian Gulf received inflows of $34 billion. Africa, $31 billion, the highest figure the region has ever obtained.

The WIR describes at length the important sectors of the global economy. FDI flows have been essential to the services sector and its most dynamic areas such as finance, telecommunications and real estate. While manufacturing declined by 4 percent, there was a sharp increase in the primary sector, especially petroleum.