FDI flow increases 20 percent:

Sri Lanka on track towards 7.5 percent growth rate

By Shirajiv Sirimane

An artist's impression of the Krrish Tower

The plan of the Colombo – Katunayake Expressway (Peliyagoda Interchange)

Sri Lanka is on track to achieve a growth rate of 7.5 percent in 2013, which is one of the highest growth rates in the world for the year. This rate was 6.4 percent in 2012; Sri Lanka’s economy grew 6.8 percent during the second quarter this year.

In its monthly policy review, the Central Bank said foreign inflows from tourism, workers’ remittances, Foreign Direct Investments and foreign loans to local banks contributed to the economic expansion.

This is why the Opposition and certain elements try to generate negative publicity and try to put brakes to this development. One of the first targets in this drive was the Krrish Tower followed up by Shangri-La Colombo. These elements said these projects had got stalled and the investors are abandoning them.

The Krrish Group of India paid Rs. 150.8 million recently for their property at Transworks, the Fort. Minister of Investment Promotion Lakshman Yapa Abeywardena said they have to pay only Rs. 589.7 million more. “This would be paid by the end of the year,” he said.

Value of land

The Minister said, as agreed, the Krrish Group has also added the 12 percent fine that was imposed when the agreement was signed. The total value of the land was Rs. 4,495 million.

Minister Abeywardena last week put the record straight on Shangri-La and forwarded a document from the company, reassuring that they would continue with the project.

Vice Chairman of Shangri-La, Madhu Rao said the Sri Lankan Government's decision to relocate the military headquarters to facilitate a foreign investment project was the best testimony to show that the country is investor-friendly.

“What more testimony do you need from a government which has agreed to relocate its military headquarters to allocate land to a foreign investor?” Rao asked, when he addressed a group of Hong Kong-based fund managers at an event organised by the Colombo Stock Exchange and Securities Exchange Commission to help attract investors to Sri Lanka.

He said, when entering Sri Lanka, the company didn't have to deal with anyone else other than the Government to facilitate the proposed investment. The Shangri-La executive also said that the approvals sought were given quite fast and that the company has no complaints about the efficiency of the bureaucracy.

Shangri-La has invested US$ 500 million on two leisure properties which would come up in Colombo and Hambantota.

China - Lanka FTA

Sealing the relationship between Sri Lanka and China further, China, for the first time in Asia, will sign a Free Trade Agreement (FTA) with the island this November.

This is a unique and exclusive FTA, extended and offered only to Sri Lanka, giving the opportunity for Lankan entrepreneurs to export to the large Chinese market, thus opening a new era of trade. Sri Lanka's apparel sector would be one of the first beneficiaries while many other Lankan products too would see a new export market.

China's economy continues to grow and per capita income too is rapidly increasing. This has resulted in China no longer being a nation providing cheap labour. The result is that manufacturing is getting more expensive and it has become cheaper for the country to import goods.

The strong political relationship between the two countries is the main reason which has enabled Sri Lanka to sign this historic FTA.

‘Doing business’ ranking improves

Meanwhile, in the ease of Doing Business Rankings 2013, Sri Lanka is ranked the 81st most business friendly country out of 144 countries, ahead of India (132), Bangladesh (129), China (91), Indonesia (129), the Philippines (138) and Vietnam (99).

In addition Lanka’s poverty headcount was falling according to KPMG, which said in a statement that Sri Lanka’s poverty count is down and leads South Asia’s HDI with high literacy rates. Sri Lanka’s Prosperity Index has also improved.

International Ratings Section of BOI Website

Sri Lanka is the second highest improver in the Doing Business Index of 2013 of the IFC/World Bank. Sri Lanka, though rated 81st out of 144 countries, is ranked the 2nd highest in the countries that have made efforts to improve in terms of business friendliness after Poland.

Sri Lanka’s strengths are in the following areas:

1. Registering property
2. Getting credit
3. Trading across borders

Sri Lanka was placed second after Poland among the countries that had made the most improvements in the field of business friendliness.

FDIs increase by 20 percent

Foreign Direct Investment (FDI) flows to Sri Lanka, in the first half of 2013, reached US$ 430 million. It is expected to reach two billion US dollars after the completion of the year, according to the plan spelt out earlier this year. This is a 20 percent increase as against the previous year.

During the first half of 2013, most investments were made in the infrastructure sector, totaling US$ 284.2 million, followed by US$ 174.36 million for manufacturing, US$ 79.1 million for services and US$ 2.6 million for agriculture.

The single largest investment was on the Colombo International Container Terminal, a Chinese/Hong Kong project that represented an investment of US$ 116.2 million. It was followed by investments made by Cairn Lanka Pvt Ltd, from UK/Mauritius (US$ 29.4 million) and MAS Fabric Pvt Ltd, from Hong Kong (US$ 25.5 million), which were some of the large-scale projects approved by the Cabinet.

Another major investment was Waterfront Properties Pvt Ltd, by the John Keells Group, which is a mixed development project. The total value of the project will be US$ 850 million and would create 3,000 direct employment opportunities.

Lake Leisure Holdings Pvt Ltd is the second major project that was also approved by the Cabinet of Ministers and would also operate under the Strategic Development Act.

This is to be located at D.R. Wijewardene Mawatha and would become an integrated resort, with an investment value of US$ 350 million and would generate 2,600 direct employment opportunities and more indirect jobs. Both projects would be completed in 60 months.

Another project that would bring in more foreign exchange to the country would be the tallest building in South Asia, the Lotus Tower.

The height of the building will be 350 metres and it would be a free-standing tower with a podium four storeyes high. It has an eight-storeyed tower head and an antenna with a steel frame. The Foreign Direct Investments, while bringing foreign exchange and generating more revenue to the country, would help the country move closer towards its goal of becoming the Wonder of Asia.