Sri Lanka calling

The highest oversubscription ever seen for a Sri Lankan international bond in April and KPMG’s latest positive Change Readiness Index ranking for Sri Lanka show the growing international investor confidence in the country, which prefers patient investments to hot money.

“Sri Lanka has entered a new era of development thanks to the visionary leadership of President Mahinda Rajapaksa. The Sri Lankan banking giant Bank of Ceylon’s $ 500 million international bond was immediately oversubscribed to $ 3.86 billion last week, a 7.7 times oversubscription of the first international bond issued by a bank in the country which is a huge success,” said Minister of Industry and Commerce Rishad Bathiudeen.

“I am pleased to inform you that we are also now better prepared and adaptable, in that, on 26 April Sri Lanka was positively highlighted by the Global KPMG-ODI Change Readiness Index, which shows which countries are better prepared to face global change. Among 60 developing and emerging economies, Sri Lanka achieved rank 22, which is even above the rankings of some BRIC countries, thereby ensuring the capability of our government and the country as a whole to face international economic challenges,” he added.

Minister Bathiudeen was briefing the influential ‘Cross Regional Trade & Investment Roundup’ Executive Roundtable on 1 May, which was keenly waiting for Sri Lanka’s investment message at Dubai Annual Investment Meeting at the Maktoum Hall, Dubai International Convention and Exhibition Centre.

Among the roundtable members were Canada City of Montreal Mayor Gerald Tremblay, Kyrgyzstan Minister of Economy and Antimonopoly Policy Temir Sariev, Nigeria Minister of Trade and Investment Olesegun Aganga, Pakistan Trade Development Authority Chief Executive Pariq Puri, Dubai Department of Economic Development Director General Sami Al Qamzi and India Government of Andhra Pradesh Minister of IT&C Ponnala Lakshmaih.

AIM has now reportedly become a highly sought-after international level foreign trade and FDI staple event for emerging economies and frontier markets, due to its special focus on FDI and international trading for emerging economies in a recession climate, and has drawn wider attention.

More than 3,000 expert and investors, including 45 foreign trade and ministerial delegations were present at 1 May’s event in Dubai, showing the growing importance of the event. Only eight ministerial delegations attended in 2011. Organised by the Ministry of Foreign Trade of Dubai, AIM is reportedly the first event of its kind in the Middle East to bring on one platform investment opportunities from all over the world.

During the Executive Roundtable and thereafter, strong interest was shown by both members of the table and other international investment experts on FDI and investing in Sri Lanka. Interestingly, inquiries also focused on the investment facilitation procedure and processes and the nature and the term of investments Sri Lanka is looking for.

Responding to these inquiries, Minister Bathiudeen that Sri Lanka encourages ‘patient investments’ of 10- to 30-year terms, rather than ‘hot investments,’ which are short-term and also environmentally-friendly green investments.

In 2011, FDI inflows exceeded the Government’s target of $ 1 billion and the global banking giant HSBC reported that high numbers of potential investors from China, India and Singapore were making inquiries about Sri Lanka.

International investor confidence in Sri Lanka was also evident when Sri Lanka recorded the highest-ever gross inflows of FDI in 2011. FDI, including loans, increased to US$ 1,066 million in 2011 compared to US$ 516 million in 2010. During 2011, US$ 110 million of loans were received by the Board of Investment-approved companies compared to US$ 39 million in 2010.

Initiatives taken to streamline the approval process by establishing the ‘one-stop-unit’ concept and speed up development of prime infrastructure facilities resulted in higher FDI inflows. In fact a noticeable change is seen in sector-wise composition of FDI inflows.

The Hotels and restaurant sector (20%) attracted most FDI inflows in 2011 followed by the Telecommunication sector (18%), which used to be the dominant sector in recent years. The World Bank Doing Business indicators show favourable values on the factors of ‘Starting a Business,’ ‘Resolving Insolvency,’ ‘Protecting investors,’ and ‘Trading Across Borders’ for Sri Lanka.

“The Board of Investment (BoI) is the central facilitation point for overseas investors. Its companies account for nearly 65% of Sri Lankan exports. BoI carries a mandate encompassing the entire island. The provisions of an agreement with the BOI remain valid for the life of the enterprise and unlike in many countries successive governments cannot change these provisions, which ensure the stability of your investments.

The safety of investments by international investors from the 27 countries that signed bilateral Investment Protection Agreements with Sri Lanka is guaranteed by the Constitution.

“I am pleased to state that Sri Lanka reports single digit inflation in 2011 for the third consecutive year recording 6.7% inflation in 2011. In fact Sri Lanka believes that due to the uncertain outlook for global commodity prices a key challenge ahead for the country would be to maintain inflation at mid-single digit levels and has begun policy level adjustments to this end. Due to the new economic upswing since 2009 private consumption increased helped by demand for goods from the North and East Provinces. The low level inflation continues to promote consumption and I believe this is good news for the representatives of international trading houses who want to enter our market as well.”

Responding to what sectors are chosen, Minister Bathiudeen said that in 2011, incoming private investments focused on the sectors of tourism, telecommunications, manufacturing specially apparel, IT/BPO, housing and real estate. During the successful bilateral TIFA trade talks with the USA held in Colombo in the first week of April, Michael J. Delaney, the Assistant US Trade Representative of South and Central Asia announced that the US was pleased with the high quality of Sri Lanka’s apparel products and that the Expo 2102 international mega show successfully concluded in March could help bring more apparel investments to Sri Lanka.

“Sri Lanka is also entering the pharmaceutical manufacturing arena. Showing investor confidence in our pharmaceutical sector, global giant GlaxoSmithKline (GSK) started the first-ever solid paracetamol production facility by a multinational in the country on 24 April. The facility located in the suburb of Colombo has an annual volume of 2.5 billion of any solid tablet. The first exclusive pharmaceutical manufacturing zone is coming up in the city of Kurunegala in the North Western Province. My Ministry has already commenced preliminary work on this zone and we invite you to invest here and be entitled to the valuable government buyback guarantees for your pharmaceutical production output, coming from this zone,” Bathiudeen said.

Commenting on progress in the tourism industry, Minister Bathiudeen said that as a South Asian tourism destination, the country is targeting $ 2.5 b tourism earnings by 2016. Tourism is one of the top contributors to the country’s GDP similar to exports, which rose by 22.4% in 2011.

“Affirming confidence in our tourist industry even other important tourism destinations such as Maldives and Seychelles have already expressed their interest to promote joint tour packages with Sri Lanka. I should stress that both tourism and exports successes were achieved thanks to the valuable guidance provided to our economic progress by Minister of Economic Development Basil Rajapaksa.”

During the opening remarks, UAE Minister of Foreign Trade Sheikha Lubna bint Khalid bin Sultan Al Qasimi welcomed all participants. “The UAE had attracted $ 60 billion in the last five years, while its investments to foreign nations had exceeded $ 327 billion,” she said.

Vice-President and Prime Minister of the UAE and Ruler of Dubai Sheikh Mohammed bin Rashid Al Maktoum was also in attendance at the opening event.