SL urged to go for quality than increasing number of investment zones

• Verité Research Economic Policy Group raises red flag over expansion of investment zones under Economic Transformation Bill

The Verité Research Economic Policy Group yesterday said Sri Lanka needs to focus on quality over quantity in terms of investment zones, an expansion of which is envisioned in the Economic Transformation Bill (ETB).

“More investment zones will not solve Sri Lanka’s critical problems in being competitive. Building better quality zones that overcome the current constraints and encourage private sector initiative is Sri Lanka’s path to being competitive in attracting investment,” the Verité Research Economic Policy Group said in a new research note.

It outlines three measures that Sri Lanka can take to improve the quality of investment zones.

First, enacting a separate, overarching legislation to govern zones – other countries have dedicated legislation focused on establishing and managing zones and providing clarity, consistency, and transparency of investment rules within and beyond the zones.

Second, enhancing the quality of zones by mandating minimum quality standards and establishing minimum criteria for selecting investors to develop and manage zones.

Third, encouraging private sector initiative in creating investment zones by separating the roles and responsibilities of regulators, developers, and operators, and establishing a level playing field between zones. In such contexts, investment zones developed and managed by the private sector have outperformed their public counterparts in economic yield, market access, and quality of amenities.

The recommendations address three critical problems that have made Sri Lanka fall behind many of its regional peers. 

First, Sri Lanka has under-invested in both the quantity and quality of zones. Second, it has exclusively depended on the public sector to build and manage zones. Third, the country lacks an appropriate regulatory framework to attract private sector investment into zones and enhance their quality and performance.

Underlying the proposals in the research note is the recognition that Sri Lanka needs to have a more robust regulatory framework than the ETB, gazetted on 14 May and expected to be taken up in Parliament on Thursday, 25 July. The note argues that the need for the above quality improvement measures is higher in Sri Lanka, given the scarcity of land and intense competition in the Asian region for foreign investments.

The Verité Research Sri Lanka Economic Policy Group’s core group consists of Institute of Development Studies Professorial Fellow Prof. Mick Moore, Georgetown University Professor of the Practice of International Development Prof. Shantayanan Devarajan, Verité Research Executive Director Dr. Nishan de Mel, and University of Peradeniya Professor of Economics (Chair) Prof. Dileni Gunewardena.

The research note released under the guidance of the policy group is authored by Bulani Weerawardane, Mathisha Arangala, and Subhashini Abeysinghe.