SL unable to build business environment - Prof. Abeyratne

By Lalin Fernandopulle

Sri Lanka's FDIs fell short of the one billion dollar mark last year. The BOI expects around two billion dollars by the end of this year with future incentives.

However, analysts say, political and economic stability should be maintained at a high level to attract Foreign Direct Investments (FDIs) at a time the country needs it most to drive infrastructure development.

Prof. Sirimal Abeyratne of the Department of Economics, University of Colombo said the current scenario with regard to FDIs not coming to the country to spur economic growth reflects the country's inability to build a business environment.

"Investors look for policy direction, consistency, predictability and political stability. Investor confidence eroded during the past few years and we were unable to reverse it. We have failed to convince investors with a bold, purposive and comprehensive reform process," Prof. Abeyratne said.

Institute of Policy Studies (IPS) Chairman Dr. Razeen Sally said the government must come up with a trade and FDI Bill, a blueprint for unilateral trade-and-investment liberalisation. Para-tariffs such as cess on imports and exports should be abolished. Import tariffs should be simplified to one or two bands and reduced to a lower average. Customs procedures should be simplified - for which digitisation is a core solution. Procedures also need to be simplified to attract big-ticket foreign investors. In particular, shipping and tea should be opened fully to foreign investment. The foreign-equity restriction on shipping agencies (presently 40%) should be abolished to encourage foreign shipping lines to establish hubs in Colombo Port. And Sri Lanka should encourage - not ban -- foreign investment for tea-blending operations.

Ceylon Chamber of Commerce former chairman Chandra Jayaratne said the fundamentals such as political and economic stability, consistent and reliable policies, effective judicial and governance procedures and competitive advantages over other nations are key to woo in investors.

"The fundamentals to lure in investors have been absent in the country for the past one and half years. The two Budgets presented by the government failed to convince foreign investors of a sound plan to achieve economic stability. The Prime Minister laid out the economic policy for the country last year but it did not have any connection with the budget presented in November. There is no one voice with regard to investors whether they are local or foreign and the expertise to implement the port city renamed as financial city," Jayaratne said.

However, the chief of the Board of Investment (BOI) Upul Jayasuriya responding to the lull in FDIs to the country said there was a similar situation prior to 2015. "The protection extended by the BOI to private investors vanished with the introduction of the Under Performing Act to acquire the assets of private investors. In such a scenario who will come to invest in the country. This law is still in existence. It would be timely and advisable for the government to consider or reconsider the Act."

He said a large number of mega investments in theme parks, IT parks, LNG projects, light and electric rail are in the pipeline.

With regard to the Volkswagen assembly plant in Kuliyapitiya he said the BOI handed over the land to the investor on April 8 this year and added that the investor is going ahead with the drawing of the architectural design. The preliminary steps are being taken to commence work on the plant probably by October this year. About views expressed in various sections that the investor has given up the project, Jayasuriya said such comments are from those who do not want to see the factory coming up. With regard to the delay in getting the project off the ground he said there no delay. The investor was looking for land and we offered various options. The land we found finally was a private land entrusted with the Public Trustee. The acquisition procedure to acquire the land had to be initiated starting from Section two notice of the Land Acquisition Law. It had to be published several times in the gazette.

"Even the survey of the land by the Survey Department had to be permitted by a gazette notification entitling the survey general to enter the land. It is nothing unusual as the acquisition procedure according to the Land Acquisition Act is lengthy and cumbersome. However the legal procedure had to be complied with and adopted," he said.

State Enterprise Development Deputy Minister Eran Wickramaratne told the media last week the process of setting up a Volkswagen assembly plant in Kuliyapitiya is progressing and added that the next move of the investor is to construct the plant.