Immense potential in SL for UK companies

Friday, 19 July 2013 04:17 - - {{hitsCtrl.values.hits}}

Visiting Sri Lanka for the first time, United Kingdom Trade and Investment (UKTI) Head of South Asia Unit Esther Williams noted that the development witnessed in Sri Lanka was much more than what she perceived it to be. In a quest to find business opportunities for UK companies in Sri Lanka, Williams commends the nation for its innovative approaches, especially in the apparel industry. However, despite the immense development, Williams opines that the nation is not flaunting its growth well enough to attract investments. Speaking to the Daily FT, Williams shared her views about the Sri Lankan economy, the opportunities, limitations and the improvements that should take place in the country so that the country’s economy could reach the next level. Following are excerpts of the interview: By Shabiya Ali Ahlam Q: What do you think of Sri Lanka’s economy? A: Despite the slight dip in 2012, Sri Lanka has been experiencing high growth rates for the past few years. These are growth rates that we are envious of as the UK and EU struggle out of the economic downturn. The main reason for my visit to Sri Lanka is to learn about the opportunities for UK companies in an emerging market. Having just visited Bangladesh and India prior to arriving in Sri Lanka, I was struck by the massive amounts of ongoing infrastructure development in Colombo. It is clear that infrastructure development is very high on the agenda for the Government. There are many UK companies that would like to tie up with local companies to share their expertise in this sector. Q: What do you think makes Sri Lanka attractive for such trade activity? A: Sri Lanka’s geographical location makes it an ideal logistical hub. The expansion of the Colombo Port and the addition of the new Hambantota Port and Mattala Rajapaksa International Airport are good steps to enhance the country’s ability to handle larger transhipment volumes. The business climate is viewed favourably and there is a perception that it is easier to do business in Sri Lanka then in some other

countries in the region. Sri Lanka is ranked higher in the World Bank’s Ease of Doing Business Index then India (Sri Lanka at 81 and India at 132). Transparency International scores Sri Lanka at 79, which is higher than India and Bangladesh. Such factors are attractive for companies when looking at Sri Lanka as a market. Sri Lanka also has the highest literacy rate in the region and a high skilled labour force, which is why you find companies like Marks & Spencer and Speedo producing technically advanced garments here. I was amazed to see the use of nano technology in creating lingerie. Speedo produced the ‘fast skin’ swimwear which was used in the 2008 Olympics by the likes of Michael Phelps. All these elements make Sri Lanka an attractive destination for investors. Q: How is the current trade activity between the UK and Sri Lanka? A: Sri Lanka and the UK have strong historical ties. Our modern bilateral trade relationship is also strong. There are already over 100 UK companies operating in Sri Lanka; some of them are expanding their businesses too. The UK remains Sri Lanka’s second largest trading partner by volume. In 2012, UK’s exports to Sri Lanka totalled £136 million and UK’s imports from Sri Lanka totalled £829 million, an increase of 12% from the previous year. Clearly, the trade balance is in Sri Lanka’s favour. Q: How do you think this can be improved? What should both countries do to take this further? A: Good governance is key to attract more FDI and increase trade between Sri Lanka and other countries as it instils investor confidence and boosts economic growth. I think the Government of Sri Lanka recognises the importance of improving the business climate. They have made some headway into this and it is important to keep the

momentum going on this. Once this in place, we will see more FDI flowing into the country, as it is the case in the UK. The UK bucked the trend of falling global FDI in 2012. FDI inflows into the UK have now increased by 23%, to almost £40bn. According to UNCTAD’s World Investment Report 2013, the UK was the most popular European destination for FDI flows last year. The UK is a natural partner for Sri Lanka in many sectors and we identify specific opportunities and promote these to our companies in the UK where they can add the most value. Q: Your visit to Sri Lanka was to find opportunities in the country for UK companies. What do you think the opportunities are and in which sectors? A: Tourism is an obvious sector but we see potential for investors in an already-developed ICT market, Business Process Outsourcing and manufacturing, particularly in apparel given Sri Lanka’s expertise in that area. We also see education as a key sector and the potential for Sri Lanka to become an education hub. There is also potential in renewable energy as Sri Lanka becomes energy independent. We have seen that UK investors have already seized these opportunities. For example, we have two big UK firms operating in the ICT sectors – the London Stock Exchange Group and Aepona – both providing software solutions to worldwide customers. We know of another major apparel manufacturer starting operations in Sri Lanka. Furthermore, the growing increase in infrastructure development in post-war Sri Lanka has provided a platform for major investments and we are seeing UK companies winning contracts for building bridges and flyovers in all parts of the island bringing communities together. Q: In terms of business environment, what challenges do you think UK companies would face when trying to establish here? A: A more streamlined process for new businesses to enter the market, a one-stop-shop, where all their administrative issues such as buying land, obtaining the correct permits for construction or setting up their tax system would be of great help. Companies have told me that the current system is rather confusing for those who are unfamiliar with the Sri Lankan system. The Board of Investment’s efforts to streamline the system are very much welcomed by those in the business community. In addition to this, there is a need to guard against arbitrary policy decisions. The Expropriation Bill risked creating a perception that the environment for inward investment might not be secure. Q: Do you think Sri Lanka is portraying its growth well enough for other countries to come in? A: Honestly, no. Looking at this from my perspective in London, companies know about India and they know the growth rates there. It’s a story that India is very good at telling. Obviously there is scale there and a huge market. I don’t think we hear the story about Sri Lanka, and that is a missed opportunity for the country. As Sri Lanka looks to attract more FDI, communicating the opportunities becomes more crucial, just as our British High Commissions and Embassies around the world promote the opportunities in the UK market. Q: You spoke about UK companies coming here; let’s talk about local companies going there. What is the scope for Sri Lankan companies in the UK? A: If Sri Lankan companies are looking to internationalise, they should definitely look to the UK as it is a gateway to Europe. Being in the UK means you can access European market. We are still the number one destination for FDI in the EU. We have a very open economy and we like foreign companies to come into the UK. As I mentioned before, it takes only 13 days to set up a business in UK. Overall, there are opportunities in the UK just as there are here in Sri Lanka. Q: How do you think South Asia is fairing in the digital economy and where do you think Sri Lanka stands in this regard? A: Looking at South Asia as a whole, I would say India is leading the way but Sri Lanka is not far behind. I think it is a growing sector and there is a growing participation across Sri Lanka. Accessing information digitally and online participation is increasing. The UK already has a strong footprint in the market as mentioned earlier and we look forward to working with Sri Lanka further to increase the advancement of the digital economy.