By Uditha Jayasinghe
Sri Lanka needs to be better than India to attract Foreign Direct Investment (FDI) stated IMF resident representative yesterday calling for better ease of doing business ratings to fast track development.
Delivering a presentation to the Institute of Chartered Accountants Sri Lanka (ICASL) titled “Economic Outlook and Policy Issues” International Monetary Fund (IMF) Representative for Sri Lanka and the Maldives Dr. Koshi Mathai noted that even though there is much argument over the relevance to ease of doing business rankings in gaining FDI there is little doubt of where Sri Lanka stands.
“People have asked me why Sri Lanka should bother to increase its ease of doing business rankings when India has managed to attract the same FDI with lower rankings. But the reality is that Sri Lanka can never offer the same economy of scale as India can. Therefore Sri Lanka must be better than India to attract FDI,” he said.
He also backed the Comprehensive Economic Partnership Agreement (CEPA) and told the ICASL that it together with other professional associations should not be insecure about opening up the market to Indian professionals. He insisted that the chances of the local market being flooded with Indian workers was minute as the agreement was structured according to certain categories and that such concerns should be ironed out as much as possible.
In a wide ranging speech he pointed out that Sri Lanka needs to strengthen its reserves and reiterated the IMF call for a flexible foreign exchange regime. He also observed that exports need to diversify, both in terms of variety and target marketed. Sri Lanka currently exports 56% of its goods and services to the US and EU while only 1% goes to China and 5% to India that are the two fastest growing economies in the world.
“One might argue that other countries do not export much to their neighbours but Korea sends 35% of its exports to Asian countries,” he said outlining a graph and insisted that these are trends that Sri Lanka needs to look at as well. “We have a saying that IMF stands for “it’s mostly fiscal” he quipped stressing that Sri Lanka must continue to concentrate on reducing its budget deficit.