Investments from China, India, Japan:

FDIs picking up

by Lalin Fernandopulle

Foreign Direct Investments (FDIs) which have been drying up for over a year will get a fresh boost with investments anticipated from China and other regional countries this year, Finance Minister Ravi Karunanayake said before his departure to Washington to attend the 2016 spring meetings of the IMF and the World Bank Group.

He said Sri Lanka is not impacted by the global economic meltdown that has crippled many major economies across the world. The government’s negotiations with the IMF for an Extended Fund Facility (EFF) is an impetus to attract FDIs as it gives confidence to foreign investors.

“When negotiations are complete and the agreement is finalised investments will come in fast. There will be investments from China, Japan and India in multi-disciplines for value addition and job creation,” the Minister said.

Sri Lanka received FDIs to the value of US $ 1.42 billion in 2013 and US$ 1.68 billion in 2014. Last year’s figure is not available as yet. FDIs have been falling short of the two billion dollar target since 2013. Most investments have been grabbed by infrastructure, manufacturing and the services sectors.

“Manufacturing, tourism development, logistics, IT/BPO and ICT development are some of the sectors that would receive investments,” Karunanayake said.

With regard to the terms and conditions of the IMF package, he said there are no such terms and conditions as speculated by some. The IMF has called upon the government to enhance revenue to its coffers.

There has been speculation that more taxes will be imposed on the public who are already burdened with the high cost of living.

When asked about moves to introduce fresh taxes, the Minister said nothing has been finalised in this regard but the government would look at it soon to ensure the least impact on the people.

President Maithripala Sirisena in a recent speech at Polonnaruwa to mark the New Year, said he would not permit any measures to burden the people with taxes. Sri Lanka is seeking IMF assistance to tackle the burgeoning budget deficit and fast depleting foreign reserves triggered by the decline in export revenue.

On the economic growth forecast for this year, the Minister said the country will record a 6.5 percent economic growth this year. However, according to the IMF, the GDP growth projected for this year is five percent.

The IMF team that concluded its mission this month in Sri Lanka, said the real GDP growth this year is expected to remain at around five percent and inflation in low single digits. Over the medium term, there is potential for growth to rise closer to Sri Lanka’s estimated potential output level, but prospects will hinge on a policy upgrade in the near term and removing bottlenecks to trade and investment.

The World Bank projects Sri Lanka’s economic growth, driven by increased public investment and postponed FDI last year, to increase to 5.3% this year and beyond, amid challenges managing external balances and implementing the proposed revenue measures to reduce the Budget deficit.Central Bank Governor Arjuna Mahendran told a recent media briefing that growth for this year would remain in the 5%-5.5% category but stressed that the restart of key investment projects such as the Port City could boost growth in the second half.

The resumption of fish exports to the European Union could also give respite to the unimpressive export numbers.

With regard to the investigations on the ‘Panama Papers’, Karunanayake said investigations have already been launched to bring the culprits to book. It’s not easy especially when dealing with an outside party to nab fraudsters.

He said there is no evidence of the quantum of money stashed through the Panama firm which has been a haven for tax evaders across the world.

“We are continuing our investigations on around 222 files which have gone missing from State institutions,” he said.