FDI dreams

Wednesday, 15 May 2013 00:00 - - {{hitsCtrl.values.hits}}

Sri Lanka’s government is bouncing with confidence over the country’s Foreign Direct Investment (FDI) prospects but they still need to make the big deals happen in a transparent way that benefits all the stakeholders of the economy.

Despite attracting a relatively low US$ 218 million dollars for the first quarter of 2013, a top minister said on Tuesday that the island has received applications topping US$ 5 billion.

An upbeat Investment Promotion Minister Lakshman Yapa Abeywardena insisted that the post-war economy was doing well in terms of FDI, pointing out that in the first quarter alone 37 ventures with investment of over US$ 1 million and another 144 with less than US$ 1 million have been completed.

Investment applications have flooded in from Taiwan, Canada, Virgin Islands, the Netherlands, Singapore, U.K and Australia, which Abeywardena stated was evidence of the global interest attracted by Sri Lanka.

The allure of Sri Lanka is the main draw behind FDI rather than clear policies, adherence to law and order, minimised corruption or reduced red tape. Many of the tangles that beset the country since 2009 have not yet been adequately straightened out but have rather been bypassed by a system of political patronage that can be seen in the way investment offers are handled.

From the infamous CATIC deal to delayed payments on the Krrish project, not to mention rushing legal amendments through Parliament to facilitate the setting up of casinos in Sri Lanka with Australian gaming Mogul Kerry Packer, the Sri Lankan Government has chosen to largely ignore the checks and balances put in place for corruption-free, transparent and profitable investment for the country.

In fact the Board of Investment (BOI), which was initially tasked with attracting FDI, has not been all but sidelined with prominent ministers heading the way. Numerous attempts to make Government institutions such as Customs, the Inland Revenue Department and the Urban Development Authority (UDA) support the BOI to speed up projects, have fallen by the wayside with more and more personalised involvement replacing a streamlined process. The new minister would have us believe that these issues are in the past but his words need to translate into credible action.

According to economist Dr. Saman Kelegama, to maintain consistent levels of 8% growth, investment would have to grow to US$ 6-8 billion; a hefty task indeed. This places even more onus on the Government to streamline its various institutions to support a clear, transparent and efficient investment system that functions independent of political influence. It is a tough task, but one which is essential to meet the Government’s expectations of development.

Experts believe that banks need to re-evaluate land value in Sri Lanka and redirect attention from Colombo and Kandy. They have underscored the need to value land according to other attributes such as its biodiversity, exclusivity and scenic beauty. Improving infrastructure would then encourage more foreign investors to pick new areas and thus market Sri Lanka as a destination for high-end travellers.

FDI needs to follow a sustainable agenda because ultimately it must result in holistic development and not create billionaires supported by tax breaks that leave the poor out in the cold.