Thursday, 21 August 2014 00:00
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IN the first half of 2014, Foreign Direct Investments (FDIs) had risen by 51% to $ 817 million by the end of the second quarter from a year earlier, latest data from the Investment Promotion Ministry has revealed. However, consistent oversight on policy, streamlining bureaucracy and other reforms remain largely in the shadows.
Despite consistently underperforming in the FDI sphere since the end of the war, the Government is ever-optimistic, with Investment Promotion Minister Lakshman Yapa Abeywardene spouting inflated numbers that are often unsupported by reality. Even with just three months to go before 2013 ended, he was confidently telling media that $ 800 million could be attracted before December. In the latest move the Government has targeted $ 5 billion by 2016 despite not meeting a $ 2 billion aim in consecutive years. When these hyperbolic targets fail, the Government deviates to unsolicited proposals that are rightly causing concern.
Sri Lanka’s archaic and cumbersome bureaucracy together with a politicised public service has created an environment where unsolicited proposals are grabbed with both hands. The latest World Bank rankings for Sri Lanka have seen it slip six places because reforms are not taking place fast enough, even though the Government had pledged to push it ahead significantly.
Instead of having universal rules for investors, the Government has made it clear that certain parties can come, negotiate independently and get better deals including sizeable tax cuts. Yet on one hand such systems not only make international investors wary, they also cost much in terms of good governance. The latest dimension of this ‘one-on-one’ policy is issuing privilege cards to investors, a move outlined by the Minister during a press conference this week.
Clearly, 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 possible casinos and port cities, 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 been all but sidelined, with prominent ministers heading the way. Numerous attempts to make Government institutions such as Customs, Inland Revenue Department and 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. While the Minister has insisted yet another attempt to revamp the BOI is in the works, this will provide little confidence unless it is attached to larger reform.
This is especially true given good governance activists have repeatedly pointed out impartiality and lack of transparency in the work of the Central Bank, Securities Exchange, price control authorities and Public Utilities Commission need to be questioned. FDI as a political appendage needs to end if publicly-beneficial investments are to become a sustainable reality.
