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‘Sri Lanka is not bankrupt’

30 Apr 2022

  • BOI Chairman says country has $ 402 b worth of assets
  • Assures investors are not leaving the country due to social unrest
  • Optimistic about getting new investors due to ongoing discussions with IMF
  • 38 investment proposals worth $ 1.4 bn received so far this year
  • 13 project expansion agreements signed
  • Notes Sri Lanka has ‘much more’ to offer than Singapore, Dubai
By Yakuta Dawood Despite negative comments on Sri Lanka being bankrupt due to being unable to meet its foreign debt obligations with very little reserves remaining, Board of Investment (BOI) Chairman Raja Edirisuriya has a different, counteractive perspective.  Speaking to The Sunday Morning Business in an exclusive interview, Edirisuriya affirmed that Sri Lanka was not bankrupt as declared by various individuals and organisations, emphasising that in a business, a company did not only check the revenue but also the assets available.  He explained that Sri Lanka had ranked 58 in the world in terms of wealth according to the report published by Credit Suisse and McKinsey Global Institute. With reference to the report, Sri Lanka has $ 402 billion worth of assets and a $ 51 billion total external debt position.  “So, when we have $ 402 billion worth of assets and a $ 51 billion total external debt position, do you think Sri Lanka will ever go bankrupt? This is a wrong statement that is spreading and it is impacting our work in terms of attracting investments into the country,” Edirisuriya highlighted.  What’s the investment status? Amidst the prevailing economic and political unrest within the country, a rising concern is whether the country is still getting potential Foreign Direct Investments (FDIs) and whether the existing investors are already leaving for better opportunities outside Sri Lanka.  Commenting in this regard, Edirisuriya agreed that the country was facing challenges, but confidently noted that it did not mean investors were leaving as they were situated here for long-term business goals and were pretty resilient to any potential challenges based on an evaluation of the worst case scenario versus the best case scenario. Highlighting the present situation, he said that investors not only considered the stability of the Government but also the geostrategic location of the country, the human capital and the talent pool Sri Lanka has to offer, the availability of natural resources, the market access, and whether they would make a profit in return.  Thus, emphasising investor confidence in Sri Lanka, he noted that since the above factors remained unchanged, investors had not left the country so far and new investors would keep coming to invest, especially now that the situation was soon to be changed for the better with the involvement of the International Monetary Fund (IMF). Providing new statistics, he said that the BOI had received 38 investment proposals worth $ 1,433 million as of mid-April 2022. Accordingly, this value included investments in 25 new projects in diverse sectors in energy including fuel and renewable sources such as solar and wind, as well as heavy industry, logistics, and IT infrastructure sectors.  In addition, he noted that 13 project expansions had been signed. Moreover, the BOI stated that the number of new investment proposals received in the first quarter of 2022 had shown an 80% increase over the corresponding period in 2021. However, Edirisuriya noted that the BOI might face difficulties in meeting the expected targets for this upcoming quarter due to the current situation. “I may not be able to get investors for manufacturing or infrastructure, but I may be able to get investors for other sectors. I am looking at diversifying the investments that we attract. For example, we focused on the pharmaceutical sector in the beginning, but now it might not be the time. So, I can look at the energy sector in which investors from India and Japan are interested. This quarter and even the following quarter we are working on projects that may not have much of an impact on the prevailing situation of Sri Lanka but will be rewarding in the long term,” Edirisuriya said.  Strategic plans set  The BOI has launched a corporate strategic plan from 2022 to 2026 to attract foreign investors to Sri Lanka.  One measure was to introduce a virtual One Stop Shop (OSS), which is implemented for project facilitation to solve existing problems such as ad hoc policy changes, lengthy line agency approvals, obsolete labour laws, and identification of high utility costs.  Basically, the BOI would provide all services under one roof for investors to minimise the hassle that existed prior to this implementation.  Similarly, having identified the importance of expediting the investment approval process – both internally and externally to attract much-needed FDI to the country – a special unit named the Investment Facilitation Centre (IFC) was conceptualised and work is in progress to implement the same. It is expected that this unit would function as the central facilitation unit to grant all necessary approvals in an expedited manner with the active participation of relevant line agencies.  BOI, on par with the global trend, is focusing more on attracting re-investments over greenfield investments, with work in progress to conceptualise effective promotional mechanisms. According to Edirisuriya, this programme will consist of a number of dedicated teams assigned with the task of identifying existing companies with great potential for project expansions.  Further, in order to address the issue of the scarcity of developed lands for investors, BOI has also taken initiatives to develop four zones focused on agro-processing, electric and electronic appliances, steel and heavy industry, and the ICT sector, in Hambantota, Henegama, Sooriyaweva, and Mirijjawila.  “Pharmaceutical businesses might not come at a time like this, but the IT businesses will, because it costs less to set these up, and they can tap into the human capital that is readily available in the country. These are the sectors we have looked into attracting for the next couple of years until things become settled in the country,” he said.  As mentioned above, Memoranda of Understanding (MoUs) were signed with leading investors to conduct feasibility studies on major investments into the renewable energy sector of Sri Lanka from India, Marubeni from Japan, and some other proponents. Moreover, successful discussions were held with potential investors on the establishment of techno-parks within identified areas of the country. As a result, Edirisuriya stated that an investment application had been received to establish five techno-parks in Galle, Kurunegala, Nuwara Eliya, Kandy, and Anuradhapura. Edirisuriya added that Sri Lanka had been facing difficulties since April 2019, first with the Easter Sunday attacks which were immediately followed by the Covid-19 pandemic in March 2020, and now the current economic situation.  He highlighted that regardless of such challenges, the BOI had exerted consistent efforts to promote and attract new investments into the country while facilitating and prioritising existing investors and expeditiously easing operational hindrances of investors. For instance, the BOI had ensured that there was a continuous supply of fuel for zonal companies to carry out operations without disruption and that BOI registered companies faced no difficulties in importing required raw materials as BOI had managed to obtain permits related to most of the Government import restrictions. “With tourism and foreign remittances being shot, if we lose our BOI zones now, then what will remain of the economy? This is why we have to protect our existing investors. Hence, we give the highest priority to them without letting them face any interruptions in the supply of fuel, gas, or electricity,” he emphasised.  What’s the FDI status? Meanwhile, comparing Sri Lanka to Singapore and Dubai in terms of investments, Edirisuriya emphasised that Sri Lanka had much more to offer due to the cheaper cost of living, ability to tap into a better pool of workers, and cheaper labour, which could earn more return on investment as the per capita income was much lesser.  “Dubai, for example, is a saturated market with existing competitors. Investors now look at emerging markets so people can make money with less expenditure. So, if investors are to make a return, Sri Lanka is a gold mine,” he added.  In addition, he stated that even though overall global FDI had increased and an upscaled recovery had been recorded globally, the recovery growth was significantly uneven when regions were compared.  Providing an example, he said that out of the total increase in global FDI flows in 2021 ($ 718 billion), more than $ 500 billion, or almost three quarters, had been recorded in developed economies, while developing economies, especially the least developed countries (LDCs) had shown a modest recovery growth. He added that South Asia had marked a negative growth rate of FDI in 2021, with total FDI inflows in 2021 dropping by 24% when compared to the preceding year. Thus, keeping in mind this global trend of FDI flows, Edirisuriya highlighted that Sri Lanka too would be able to recover gradually against the economic downturn experienced due to the Covid-19 pandemic and the prevailing war between Ukraine and Russia. “We also believe that the prevailing economic and political unrest within the country will be resolved soon and a favourable investment climate will be established, enabling the country to attract much-needed FDI,” he concluded optimistically. According to the International Trade Administration (ITA), FDI into Sri Lanka decreased to $ 548 million in 2020, compared to $ 793 million in 2019 and $ 1.6 billion in 2018. Recent FDI was concentrated in real estate, mixed development projects, ports, and telecommunications sectors.   The tourism sector, with around two million tourist arrivals per year (before the global Covid-19 pandemic) and a variety of cultural, wildlife, and outdoor offerings, is a priority sector for the Government’s post-pandemic economic recovery plan. The Business Process Outsourcing (BPO) sector is also growing and has strong involvement from US firms. With a growing middle class, investors also see opportunities in franchising, retail, and services, as well as light manufacturing. The uncertainty surrounding the Covid-19 pandemic will likely continue to curtail tourism and Foreign Direct Investment. The Government has vaccinated 51% of the population as of September 2021.  “President Gotabaya Rajapaksa and his administration’s economic goals include: positioning Sri Lanka as an export-oriented economic hub at the centre of the Indian Ocean (with Government control of strategic assets such as SriLankan Airlines); improving trade logistics; attracting export-oriented FDI; and boosting firms’ abilities to compete in global markets,” the ITA website added.    


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