Sri Lanka has an opportunity to swim against the negative tide of the current global crisis and be an exception as a destination for Foreign Direct Investments, said Jayamin Pelpola who was appointed to the board of the BOI last week.
“It is not an easy task but with resolute focus, it can be achieved,” he said, adding that with the good work initiated at the leadership level and at the BOI, we have built a pipeline that is twice the past 12 months’ trailing FDIs, with new agreements already signed. This is very good compared to our peers, but we can improve further,” Pelpola said.
He said this year has brought unprecedented challenges to the investment climate, even bigger than those challenges around the Global Financial Crisis in 2008.
In summary, the challenges of attracting FDIs have heightened, while the need for Sri Lanka to attract FDIs has also heightened.
At a tactical level, the value of near term FDI realised depends on two things - the ‘pipeline value’ of credible and strategic projects and the ‘time taken to deploy’ of what is in the pipeline. Covid-19 has caused a huge drag on both these aspects.
Cash available for investment on corporate balance sheets are down 46 percent globally.
Private debt financing available for cross-border projects are also down about 42 percent in the past three months.
People are also taking a wait-and-see approach on the capital expenditure commitments they previously budgeted for. “First, we can accelerate the execution of credible inbound proposals. Second, we need to solicit investments on strategic industries.
The BOI strategy identifies five to six priority sectors in line with national ambitions. To catalyse these sectors, a framework that attracts early investors is being identified. We invite investors to take advantage of these ‘first mover’opportunities and invest in Sri Lanka. We can now proactively start communication and outreach in this regard,” the BOI director said.
Proposing measures to position the country as a destination for investments, Pelpola said, “Our competition is partly regional, but increasingly global. For those sectors which are “hub” concepts, our competition may still be regional.
“Examples are logistics, maritime hub and the financial hub. Almost everywhere else our competition is global. Yes, it’s important to be attractive compared to our peers at a macro level. We already rank high on being “livable”, but not so high on being “investible”. I think many of us understand what we need to improve to win in the long term. Within an investment framework we need to work on efficient approvals for new investment projects, signalling policy consistency in investments, profit distribution and repatriation, creating liquid, financial market based exit options for investors, and trade incentives and FTAs.
“From a macro perspective, updating technology infrastructure in the country, improving factor cost competitiveness (in select industries) via international knowledge transfer, labour market reforms that pushes workers to reskill than be stuck in dead-end industries, and education reforms, especially in secondary education, to improve problem solving skills, technology literacy and entrepreneurship. “But macro attractiveness, in itself, is not sufficient for near term success. We have to be super attractive for our priority sectors. We have to play in games where we can win. At this stage we cannot win everywhere. But we need to win big somewhere - the priority sectors,” he said.
The BOI has signed FDI agreements to the tune of USD 1.5 billion so far this year and targets around USD 2 billion in agreements by the year end.