'Positive growth rate attracts UK investors'

By Lalin Fernandopulle

The strategic location and people-to-people ties makes Sri Lanka an attractive destination for UK investors British High Commission Head, UK Trade and Investment, Michael Halpin told the Sunday Observer.

Excerpts of the interview:

How does Britain see Sri Lanka as a destination for trade and investment?

The UK and Sri Lanka have a good trade relationship. Last year UK exports to Sri Lanka increased by 20 percent to £155 m while exports from Sri Lanka to the UK rose 14 percent to £804 m.

The UK is Sri Lanka's second largest trading partner and over 100 UK companies operating in Sri Lanka including Standard Chartered, Marks and Spencer, De La Rue and HSBSC.

Sri Lanka's growth in recent years, its high literacy rate, strong business, cultural and people-to-people ties that already exist between our two countries and its strategic location makes Sri Lanka an attractive destination for UK investors. So the bilateral trade relationship is strong.

What is Britain's view on the current business environment in Sri Lanka?

Sri Lanka and the UK have strong historical ties and we share many similarities. We can now see the peace dividend following the end of terrorism in 2009 and the opportunities available are diverse.

UK investors are expanding their businesses and new potential investors are attracted by Sri Lanka's positive growth rate and continuing business opportunities.

Sri Lanka's unique location makes it an ideal logistical hub. The expansion of the Colombo port by UK Company Scott Wilson and the new Hambantota port and international airport enhance Sri Lanka's ability to handle larger transshipment cargo.

There are lots of opportunities for UK investors. Tourism is an obvious sector but we also see potential for investors in an already developed ICT market, Business Process Outsourcing and manufacturing, particularly in apparel, given Sri Lanka's expertise in that area.

We see much potential for Sri Lanka to become a regional educational hub and in renewable energy, to become energy independent. Some UK investors are already seizing these opportunities. For example, Vedanta has concluded drilling off the coast of Mannar and has found natural gas deposits. There are also two big UK firms operating in the ICT sector: the London Stock Exchange Group and Aepona, both providing software solutions to customers worldwide.

Infrastructure development in Sri Lanka provides a platform for major investment and we have seen two UK companies, Mabey Bridge and Cleveland Bridge, winning contracts to build bridges and flyovers in all parts of the island, bringing communities together.

What is your perspective on the ease of doing business in Sri Lanka?

The business climate is looked on favourably and there is a perception that it is easier to do business here than in some other countries in the region. Sri Lanka's high literacy rate, legal system and skilled workforce are also beneficial to investors. These are things that we highlight to potential investors.

Could it be better?

Yes. A more streamlined process for new businesses to enter the market, a one-stop-shop, where all administrative issues such as buying land, obtaining the correct permits for construction or setting up a tax system would be of great help. The current system is rather confusing for those who are unfamiliar with the Sri Lankan system.

The Board of Investment's efforts to streamline the system are welcomed by those in the business community.

Are British investors satisfied with the conditions here?

I think in general terms they are; the increase in investment shows they have confidence in the Sri Lankan market.

What are the obstacles to boost trade and investments?

Good governance is a key to instilling investor confidence and boost economic growth. The Government needs to tackle the perception of corruption and lack of transparency.

This is a requirement and the Government has already made some headway in this regard. In the Transparency International's Corruption Perception Index for 2011, Sri Lanka was ranked 86th out of 180 countries, an improvement of five places from its ranking in 2010. In the South Asia region Sri Lanka ranks better than India at 95 and Bangladesh at 120. It's important to keep this momentum and not to become complacent as it prevents Sri Lanka from becoming a hub for international commerce.

The bureaucratic red tape in setting up a business in Sri Lanka can seem daunting to potential investors. This is why I highlight the need for a one-stop-shop to make it easier for new companies to enter the Sri Lankan market. British Prime Minister David Cameron recently spoke of how development relies on the 'Golden Thread'.

The next stage is to ensure the presence of good governance, property rights and the rule of law, effective public services and strong civil institutions. Once these are in place it will lead to free and fair trade and open markets, which in turn will lead to a strong and sustainable economy.

Sri Lanka has started its journey along this 'Golden Thread' and it is crucial that it doesn't deviate from it if it wants to encourage and attract new investors.

What role does the High Commission play in promoting bilateral trade?

Our role is to support and promote British business interests. We identify key sectors where we see much potential for the UK's expertise and promote it. We assist UK companies from the initial inquiry stage, doing market research to setting up a physical operation. Our scope of work is expansive and detailed to meet the customer's needs.