FDI from India to touch $1 b in two years, says EDB Chief

After bringing down the nearly-25-year-old civil war, Sri Lanka is now working towards improving its investment climate. The economy is now in a high-accelerating mode, on the back of the political will and stability in the new era. India will play a big role in this development and will be a key partner for Sri Lanka, Janaka Ratnayake, chairman and chief executive of the Sri Lanka Export Development Board, tells TE Narasimhan. Excerpts:

Q: After the internal conflict ended in 2009, how is the Sri Lankan economy growing?

A: During the LTTE problem, the country witnessed a 4-6 per cent growth. We expect to grow at eight per cent during the current fiscal. The growth is well on target till October. The FDI flow crossed $1 billion during the current year, as compared to $560 million last year. Last week, a senior delegation from Qatar visited Sri Lanka and said that they could invest around $1 billion in Sri Lanka. The overall trade is expected to touch $10 billion by end of the current fiscal.The new phase of accelerated development and growth is underpinned by political stability, a favourable investment platform for foreign investment, and strong socio-economic fundamentals.

Q: Apart from giving an end to the internal war, what are the resources, which the Sri Lankan government got back from the LTTE?

A: When it comes to land, only 70 per cent was in the hands of the government, while the remaining was with the LTTE. Similarly, 40 per cent of the coastal areas, which offer rich fishery, was in the hands of LTTEs. The major resource is human capital. With the fall of LTTE, we now got access to 400,000 people who can be trained and be made employable.

Q: What has been the contribution by India to Sri Lanka’s growth story? Where does the trade between India and Sri Lanka stand now and how is the FDI inflow?

A: India is the second largest partner and investor for Sri Lanka. Trade between Sri Lanka and India was $2.93 billion in 2010 and will touch $3.5 billion in 2011. Of this, exports from Sri Lanka were $450 million, which will be doubled to $900 million by 2015. The cumulative FDI from India is currently $600 million and is expected to touch $1 billion in the next two years. The top investments include Cairns India (oil exploration), Bharti Airtel, Indian Oil, Piramal Glass, TATA group’s Tata Communications and Taj Hotel, Ashok Leyland, Ultra Cement, CEAT, L&T, Asian Paints and Dabur. Besides, four banks, including State Bank of India, Indian Overseas Bank, Indian Bank and ICICI, have branches in the island nation.

Q: Which sectors in Sri Lanka are attractive for investors?

A: Infrastructure, tourism and healthcare are the key sectors to attract investments. For instance, the number of tourists to Sri Lanka is expected to touch 2.5 million by 2016 from 900,000 at present. The number of rooms available is only 15,000 at present, which will be increased to 50,000 in the coming years. On the infrastructure front, apart from road and rail, renewable energy offers good potential. Some of the companies like Shriram EPC from India have already started exploring the opportunity.

Q: What are the challenges that you see?

A: Implementation of agreements between the two countries is one of the key challenges. For instance, the free trade agreement, which was signed in 2000, was not used effectively. Currently, both the governments are working on a new comprehensive economic partnership agreement to boost trade and investment between the two countries. (Business Standard, India)