Geographical location, access to regional markets:

Top attractions for foreign investors

Foreign investors find Sri Lanka's close proximity to the East-West trading routes and easy access to regional Asian markets to be the biggest attraction for investing in the island.

A survey conducted by the Economic Intelligence Unit of the Ceylon Chamber of Commerce revealed that access to regional markets as the top attraction factor by over one-third of respondents, and 'Geographical location' was ranked the highest among factors that shape their decision to invest in Sri Lanka.

The survey was conducted among prospective investors who attended the Ceylon Chamber's 'Sri Lanka Investment and Business Conclave 2016' in Colombo recently.

Among the other factors that investors looked for in Sri Lanka, 18 percent reported 'Economic policy certainty', 16 percent - 'Political stability' and 12 percent - 'Low cost of production'. 'Quality of infrastructure' was considered as a key factor by only six percent, possibly indicating that investors perceive infrastructure in the country as having improved, relative to other competing investment destinations they may be exploring.

Meanwhile, 'tax incentives' was also a low consideration, as only six percent of respondents, said it was a key factor for investment consideration.

Chief Economist, Ceylon Chamber of Commerce, Anushka Wijesinha said, "This has important implications for policies around investment attraction. Growing international evidence suggests that tax breaks are low on the priority list among top investors, compared to other factors that shape the investment climate such as policy predictability and political stability, access to markets, rule of law, and finding skilled workers."

"The fact that, overwhelmingly the investors we surveyed said Sri Lanka's location and access to big markets such as India, Pakistan, and eventually China, was a key attraction in their decision to invest here reiterates the case for focussing on our trade, investment and logistics policies. We must become an attractive regional hub," he said.

When asked to rank (on a scale of 1 to 5, with 1 being the lowest and 5 being highest) various factors that influenced their decision to invest in Sri Lanka, 'Geographical location' ranked the highest (4.33 on average), followed by 'Political stability' (3.96), 'Quality of the workforce' (3.88), 'Quality of infrastructure' (3.59) and 'Macroeconomic stability' (3.51). 'Geographical location' received the most number of respondents ranking it high at 4 or 5, and 'Quality of infrastructure' received the most number of respondents ranking it low at 1 or 2.

In terms of other characteristics of the respondents, the majority of respondents, accounting for 46 percent of the respondents said the key reason for attending the conclave was to meet potential investors and joint venture partners, while 37 percent reported that it was to gain market insight and 17 percent had come to meet government officials and decision makers.

The majority of the respondents (61 percent) were investors (including investment groups), while 19 percent were business support providers, four percent were from research institutions, two percent were buyers, and the rest did not classify.

The top five industry sectors the investors came from were export manufacturing (21%), infrastructure providers (including equipment) (19%), agriculture (8%), tourism and leisure (8%) and petroleum, telecoms, power and energy (10%).

The 'Sri Lanka Investment and Business Conclave 2016' attracted over 120 foreign investors, including large delegations from East Asian and Middle East countries and was the first such initiative by a Chamber in Sri Lanka.