‘Outlook positive for FDIs’ | Sunday Observer

‘Outlook positive for FDIs’

Sri Lanka could look forward to many positives in the years to come in driving the much needed Foreign Direct Investments (FDIs) to the country, a whitepaper on the FDI landscape in Sri Lanka notes.

The report released by the American Chamber of Commerce (AMCHAM) in Sri Lanka in collaboration with the global strategy consulting firm Stax last week, stated that key investment projects such as the Hambantota port and the Colombo Financial City are likely to provide the much needed boost to FDI inflows which are expected to trend positively in the next five years.

Sri Lanka has commenced implementing reform procedures to improve investment promotion and business conditions in the country, new tax incentives have been introduced focusing on capital formation while negotiations to improve trade relations are underway, the report noted.

However, the study highlights that while the reform processes undertaken are positive maintaining policy consistency and stability are key factors to position the country as a destination for FDIs.

The report further notes that sustained policy stability over a number of years before investors begin to have confidence in the process will be needed, while outside this solving the labour problem in the country will be a primary concern for the regulators.

Founder/CEO Stax, Rafi Musher in his observation on Sri Lanka said that investments in education, universities and vocational schools are key to build talents which investors look for in their destination for investments.

Responding to a query on how the country could be attractive for FDIs when pre-colonial laws which prohibit women working in bars still exist, Board of Investments of Sri Lanka (BoI) Director General Duminda Ariyasinghe said there is an overall need to change legislation relating to the labour force in the country.

“There should be flexibility in legislation with regard to the workforce in the country as in the US. However, I cannot comment on specifics with regard to women being barred from seeking employment in liquor bars,” Ariyasinghe said.

FDIs inflow to Sri Lanka has stalled over the past couple of years due to the withdrawal of tax concessions offered to investors. FDI inflows in 2016 were supported by telecommunication, tourism and manufacturing sectors. FDIs recorded one of the lowest in recent history notching US$ 898 million in 2016.

“Sri Lanka should focus on South East Asia and not be confined to South Asia to drive foreign direct investments. The economic fundamentals of the country are in place today and the BoI has taken steps to boost investment facilitation,” the BOI DG said.

He said the BOI conducts follow up meeting on Mondays to address bottlenecks impeding FDIs to the country. The Board launched the single window investment platform to get investment approvals under a single window. However, we need all institutions to work together to make it a success,” he said.

FDIs, a key indicator in assessing growth of a country has been a vital pillar for Sri Lanka in driving economic growth. However, the report reveals that for potential investors evaluating the country several concerns such as multiple sets of data on FDI which could confuse investors and unfavourable business conditions in the country according to local stakeholders are factors that dissuade foreign investments to the country.

Having clarity on the FDI landscape and identifying potential barriers and possible solutions to facilitate continued investments within the country are key objectives of the whitepaper. The report comprises various FDI related statistics from multiple sources to present a comprehensive view on FDIs to Sri Lanka.

Dialog Director/ Group Chief Executive Supun Weerasinghe said Sri Lanka has better talent compared to some of its neighboring countries. However, we feel nervous towards the end of the year when the budget is presented. Consistent tax policies have a significant bearing on attracting FDIs. No amount of damage control attempts at post budget level could minimise the damage that has been done to lose confidence among investors.

The report also takes a look at recent developments that impact the quantum of FDI flows in the next few years which include a couple of flagship investments projects and reforms such as the new tax incentive scheme. It notes that in addition to reforms undertaken at a regulatory level, issues such as transparency and corporate governance in the local business environment need to be looked into to improve FDI inflow from the US. 

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