Friday Nov 22, 2024
Friday Nov 22, 2024
Monday, 20 May 2024 03:42 - - {{hitsCtrl.values.hits}}
The All Union Alliance of the Board of Investment of Sri Lanka yesterday warned that the proposed Investment Transformation Act to be submitted to Parliament on 22 May will plunge the investment sector into a severe crisis.
In a statement, the coalition warned that implementing this act, which caters to the interests of a few individuals, without consulting experts or investors in the field, will create a perilous situation where investors, who have remained despite the economic crisis, will choose to leave the country. Therefore, it is emphasised that the act should be revised transparently, involving directly affected parties as well as economic and investment experts.
Though it is claimed that this act will bring about significant economic transformation, it is evident that the real purpose is to secure financial benefits by transferring the 15 profitable and well-operating Investment Zones under BOI to their associates before the elections.
The danger of this act lies in the immediate repeal of the Sri Lanka Board of Investment Act No. 4 of 1978 once it is tabled in Parliament. This will severely impact the operations of both foreign and domestic companies currently governed by the Board of Investment Act.
This Act will establish five entities: the Sri Lanka Economic Commission, Sri Lanka Investment Zones, Office for International Trade, National Productivity Commission, and Sri Lanka Institute of Economics and International Trade. Within this framework, three separate boards of directors will be appointed for the two investment-related institutions—the Economic Commission Council and the Sri Lanka Investment Zone—as well as for the private entity “Invest Sri Lanka,” which will be created under the Economic Commission. Additionally, 25 senior positions at high paid salaries will be created. Despite the expected influx of investments through this act, it is evident that it sets the stage for awarding high positions to their associates.
In this plan, the Board of Investment of Sri Lanka will be divided into two institutions: one Institution will manage the zones and provide facilities for projects within them, while another will handle investment projects outside the zones. It is evident that this bifurcation has been proposed without practical understanding of the operations of the Board of Investment projects.
To adapt to the concept of providing single window facilities (One Stop Shop Concept), when competing countries are planning, the Board of Investment is adapting to it and digitising the provision of investor facilities. A suitable environment cannot be created at all.
While the Board of Investment of Sri Lanka is planning to align with the concept of providing single window facilities (One Stop Shop Concept) through digitisation, similar to competing countries, this strategy of dividing investment facilities between two institutions cannot create a conducive environment for attracting investment.
Unions said it is surprising that those involved in this decision are not aware that many projects belonging to the Board of Investments operate their factories simultaneously inside and outside the Investment Zones. Splitting the functions of the Board of Investment, which facilitated all these enterprises under one umbrella, would create a very critical and uncertain situation for the existing investors.
Foreign and local enterprises operating under BOI are still unsure of how they will be facilitated in future and if this uncertainty persists, it could seriously jeopardise ongoing investment projects.
Privatisation of profitable investment zones
The Act itself empowers the entity “Sri Lanka Investment Zones” established by this Act to entrust the establishment, management and operation of Investment Zones to another private entity as a partnership, joint venture or under a management agreement.
Currently, there are 15 investment zones governed under the Board of Investment of Sri Lanka. Out of these 15 investment zones, about 95% of the land in 12 are currently occupied by investment projects, and those projects are being maintained very well with the support of the Board of Investment.
It is no secret to investors that the Board of Investment worked tirelessly day and night to ensure that all BOI zones were fully operational during the COVID pandemic. BOI employees played a crucial role by providing essential services such as fuel, curfew permits, transportation, and establishing medical centres for COVID patients.
Furthermore, all 15 investment zones under BOI are currently operating profitably. Therefore, what is the rationale behind privatising these zones? Could this be merely an endeavour to create a legal framework to sell profitable institutions to personal acquaintances and extract funds surreptitiously?
“If this Act is passed suddenly, introducing such a new organisational plan without a proper feasibility study and practical implementation plan, nearly 2,000 investment projects under the Board of Investment will be left crippled without a specific institution to provide the necessary operational facilities,” unions warned.
At present, the Board of Investment of Sri Lanka offers all amenities, such as water, electricity, and waste management, to investment projects within the zones at reasonable rates. However, with the privatisation of the zones, investors will likely incur additional expenses for these facilities.
Also, as a Government agency, the Board of Investment of Sri Lanka is directly involved with the Labour Department on the occupational rights of employees working in factories in the Zones. But who will stand up for workers’ professional rights after they are assigned to another private entity or individual?
Investment approvals in the hands of politicians! Legal protection for fraud and corruption!
Currently, the Board of Investment of Sri Lanka grants approvals for investments after obtaining approvals from other line agencies related to the projects. The time taken by the line agencies to give such approvals for projects varies and this affects the delays in granting Board of Investment approvals. However, the Board of Investment of Sri Lanka will never take over the power of line institutions and give approvals to investments that are harmful to the country in terms of environment, society or economy.
In spite of that, this Act empowers the Minister in charge of Investment subject to the approval of the Minister of Finance to approve and implement the projects which are rejected by the line institutions, touted as a strategy to expedite the approvals of the line institutions, and the Cabinet approval for the same is not required. Isn’t this a protection of the law for financial or other forms of corruption? We hope that the attention of all the line institutions and the legal field, as well as all those who love the country, will focus on this article of the Act.
We view this Act as childish and immature, aiming to attract investments to the country by simply dividing the well-established institution of the Sri Lanka Board of Investment, which has a 45-year history, into two.
The primary problem in attracting investment to Sri Lanka has been the absence of a consistent investment policy. Sudden changes in tax and other policies applicable to investment projects, high production costs and Sri Lanka’s low ranking in the global business and financial sectors have greatly affected this situation. It is ridiculous to predict that investment can only be attracted through restructuring and privatisation, without taking the necessary steps to remove these obstacles.
“While we strongly acknowledge that we must change strategically, politically and institutionally to improve the investment environment in Sri Lanka, we are also committed to supporting any reforms that are genuinely made for this effect. However, while strongly condemning such actions which are carried out based on the personal interests of a few people, we are ready to take every possible step to defeat them. We believe that all those who love the country will join hands with us,” the unions said.
