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increasing interest in Sri Lanka’s investment and business opportunities. Because of the conducive environment after the end of the conflict in the country, Sri Lanka has become the most popular destination focus for their businesses among all other emerging economies of the world.
In harnessing the increasing interest on Sri Lanka’s businesses, the Embassy has initiated the annual business event for the sharing of bilateral business and investment opportunities of both Sri Lanka and Switzerland from the year 2012 on the interest for Swiss investors and industrialists. The first and the second Swiss Sri Lanka Business forums were held in 2012 and 2013 on the themes of ‘Sri Lanka: A Land of Thousand and One Opportunities’ and ‘Foreign Direct Investment: Needs, Possibilities and Strategies’ respectively. The 3rd Forum was meant to be an ongoing business oriented dialogue, to address the needs of as well as possibilities and strategies for increased foreign direct investment from Europe to Sri Lanka.
Due to the overwhelming interest and the outcome of the previously held forums on Sri Lankan businesses among the Swiss businessmen, the 3rd Swiss Sri Lanka Business and Investment Forum was focused on Sri Lanka’s investment climate, country specific risks and the exchange rate stability.
Sri Lanka’s investment climate
The keynote speaker of the forum, the Governor of the Central Bank of Sri Lanka Ajith Nivard Cabraal, outlining Sri Lanka’s monetary policy, spoke on Sri Lanka’s investment climate and the country specific risks and exchange rate stability, for which it seeks to attract foreign investment, and explained how most of the key economic figures like inflation, external debt and growth have improved over the last 5 years.
He pointed towards the policies and support mechanisms with the goal to make life easy for foreign capital investment such as the absence of limitations and complications to repatriate profits. He referred to the Board of Investment of Sri Lanka designed to be a ‘one-stop-shop’ for all needs of industries and investors seeking to engage themselves in Sri Lanka.
Sri Lankan monetary authorities represented in the forum, the interactive discussion and the networking session with the Governor of the Central Bank of Sri Lanka were Dr. W.M. Hemachandra, Assistant Governor, Dr. Roshan Perera, Deputy Director/Economic Research and Dr. P.K.G. Harischandra, Deputy Director/Economic Research of the Central Bank of Sri Lanka.
Stock market investment opportunities
The presentation on the investment opportunities in the Sri Lanka stock market was made by Vajira Kuletileka, the incumbent Chairman of the Colombo Stock Exchange. He explained that the outperformance of the ASPI compared all major western indices as well as most Asian markets is a reflection of not only the growth potential of Sri Lankan companies but also of the improvement of the macro-data, which the Governor had already explained.
Sri Lanka was poised for growth, he said, but most growth sectors/companies still traded at discount, offering an early mover advantage to discerning investors. Apart from equities, Sri Lanka offered a vibrant OTC market of LKR-denominated government securities. Swiss Franc-based returns on LKR-denominated debt were attractive even after taking to account foreign currency transaction variations. The significant boost towards the further developing debt market in Sri Lanka had not gone unnoticed by foreign players, he added. Large Swiss insurance companies had been buying into the market recently. Similar to investable bond indices, the CSE was also working on issuing stock indices and ETFs.
Global investor perspectives
Apart from the presentations on Sri Lanka, the Development Financial Institution of the Swiss Government (SIFEM) and WM Partners Vermögensverwaltungs AG Zurich made presentations on investment strategies of global investors and their engagement in South Asia, particularly Sri Lanka, in their perspectives.
Thomas Germann, Manager of WM Partners, explained that their interesting focus of the fund and true performance driver are investments in the subsidiaries of multinationals listed on the local stock exchanges such as Colombo Stock Exchange and other key frontier markets. Jan-Henrik Kuhlmann of SIFEM acknowledged the remarkable economic progress Sri Lanka has made in the past years and said that the SIFEM has now declared Sri Lanka a target investment destination and would closely evaluate the investment opportunities arising there.
Kuhlmann among other criteria emphasised the reliable political stability as a key prerequisite and highlighted the availability of local private equity funds and the availability of well structured and well managed local projects, to which the Fund’s capital can be dedicated to.
Dr. Robert Chanson, Chairman/Biomass Group, Zurich shared his story of his successful investment in the renewable energy sector wide across the country in Sri Lanka.
The panel discussion was held with interactive Q&A raised from the presentations and on the present investment and business climate in Sri Lanka. Mark Dangel, Sri Lanka Chapter President of the Swiss Asian Chamber of Commerce, chaired the forum and moderated the panel discussion.
Sarath Kongahage, the Ambassador of Sri Lanka to Switzerland and Germany, made his opening address, highly welcoming this platform to increase an exclusively business-focused dialogue to foster more cooperation between the two countries. He emphasised the five-hubs-development policy of the ‘Mahinda Chinthana’ and explained that Sri Lanka has become the gateway for all roads leading to emerging Asian opportunities for European investors.
Dr. Urs Lustenberger, the President of the Swiss Asian Chamber of Commerce, held the welcome address of the event and stressed the increasing awareness of the members of Swiss Asian Chamber on Sri Lankan opportunities.
Sri Lanka-dedicated PE Fund
Another important event of the forum was the formation of a private equity fund to invest in Sri Lanka. Vajira Kulatileka, CEO of NDB Capital Holdings PLC, Sri Lanka, held the presentation to the Swiss investors on the need of this new asset class and elaborated on the growing opportunities and strengths of this private equity.
Sri Lanka needed an estimated $ 80-90 billion in form of equity and debt over the coming 10 years in order to finance and produce the anticipated growth rates of over 8% p.a., he said. A large number of infrastructure projects were creating a massive demand for private sector participation in asset light infrastructure ancillary services.
Kulatileka especially mentioned Colombo Port City ($ 15 billion), Colombo Kandy Highway Phase I ($ 1 billion) and Hambantota Port Phase 2 ($ 800 million). But because the local debt was expensive due to high and volatile interest rates on the one hand and because of the limited bankability, small companies have also little access to equity, he added.
This funding gap could now be met through private equity funds that were investing into these SMEs in a structured way. In addition to provision of capital, PE funds could assist SMEs in transitioning to a professionally run organisation with assistance in areas such as business strategy, governance and financial management.
The first Sri Lanka-dedicated PE Fund is in formation. For its first closing it will raise approx. $ 50 million, which it will invest in 10 to 12 portfolio companies of $ 2 to 6 million in size and hold them over a period of five years, after which it will exit them via trade sale, IPO or buy-back option. Few interested members of the Swiss Asian chamber of commerce, foreseeing the timely needs and benefits of a private equity for the well-performing companies in Sri Lanka have come forward to bridge the capital needs of fast-growing small and midsize Sri Lankan companies, which lack the affordable and cost-effective bank loans for the expansion of their businesses.
Successful event
Altogether 41 Swiss participants from financial houses, capital and wealth management companies, chambers of commerce, legal consultants, investment advisers and leading banks attended the event. Participants unanimously welcomed the venue for setting aside politics and focusing on finding positive ways of business cooperation between the two countries and appreciated the business-focused practical approach of the forum. In the end, the networking event among the participants, guest speakers and invitees was facilitated with authentic delicacies and dishes of Sri Lankan cuisine.
The forum led to several-follow on meetings on Sri Lankan opportunities. During his visit to Zurich, the Central Bank Governor Cabraal too had two closed-door meetings with the Governor of the Swiss Central Bank Dr. Thomas J. Jordan and Walter Kielholz, Chairman of Zurich Reinsurance Company and former President of Credit Suisse Group, Switzerland.
Finally, the Swiss Asian Chamber appreciated the excellent collaboration provided by the Embassy of Sri Lanka (Trade) in Germany for materialising this successful event and concluded with the assurance to assist in the positioning of Sri Lanka businesses internationally at the World Economic Forum in Asia and Davos eventually.
