Superb Political climate:

Major factor in investor confidence

by Shirajiv SIRIMANE

Foreign direct investments is the livelihood for any developing country since any nation needs foreign funds to rebuild one's country. Sri Lanka is no exception to this norm.

One of the main attractions in Sri Lanka, in addition to its geographical location, is the skilled labour force that is on offer. High literacy rate is another feather. These have prompted high tech companies in electronics, computing and other specialised areas to invest here despite all odds.

Another advantage is the tax incentives and the infrastructure that are being offered to the investors. The export processing zones which originated at Katunayake has now spread to Biyagama, Koggala, Sithawaka, Pallekelle in Kandy and many areas too woo the investors. The air links connecting Colombo to the rest of the world and the Colombo Port is another plus point for Sri Lanka.

Investors also look at the political climate of the country as they do not want to see governments changing all the time which result in new laws, which sometimes on most occasions are not investor friendly.

Though a few investors did have second thoughts to invest in Sri Lanka due to the uncertainty during the time many foresaw the future potential and decided to stay as they believed in the saying 'Invest during bad times to reap benefits during good times'.

When it comes to FDI the free trade agreements Sri Lanka has with India and Pakistan can also play a major role.

The focal point on FDI is the Board of Investment and is the first place where the investor has to step in.

The Board of Investment of Sri Lanka completes 30 years of existence in 2008. Since inception, it has acted as an engine of growth creating a considerable impact on the country's economic development.

The organization had its origins in the Greater Colombo Economic Commission, which was set up in 1978 to generate development in the outskirts of Colombo. Fourteen years later, in 1992, the Commission was reconstituted as the Board of Investment of Sri Lanka (BOI) with its mandate encompassing the entire island.

An entrepreneur of diversified businesses, Dhammika Perera heads it and one of the first steps he took was by taking over the BOI to provide approval for projects within 24 hours for any project proposal. This sent very positive signals to the investor, whereas in the past they had to wait for months till all the paperwork was completed by moving through several line ministries but today approval is given just over the counter so that the investors can move on.

Last year despite the war it was a record year for the BOI as they reached US$ 889 million, which was the highest Sri Lanka had ever succeeded in reaching.

Speaking to the Sunday Observer Dhammika Perera said that since the war ended there is renewed confidence in the Sri Lankan economy and the BOI expects this trend to lead to increased levels of FDI inflows. The BOI's forecast: Sri Lanka will attract FDI worth US$ 1 billion in 2009 and US$ 1.2 billion in 2010.

Investors are of course attracted to a predictable and stable business environment that now exists, since the war has ended.

"We expect high levels of investment from India and China as they are the economic powerhouses of Asia, but also from other important regions as well such as western Europe, the Middle East and South East Asia," he said.

He said that in addition to their missions to Indonesia to woo more investors, Sri Lanka has also hosted many foreign delegations to Sri Lanka.

"They have conducted extensive research in our business climate to determine how healthy it is."

"We are also targeting the Sri Lankan diaspora, as Sri Lanka is now not restricted to the confines of this island. There are over a million of our nationals overseas and many of them may wish to invest in Sri Lanka. There is an especially large Tamil community overseas and to facilitate their investments in the island, the BOI will shortly open an office in Jaffna."