FDI and tourism

Friday, 26 April 2013 04:46 - - {{hitsCtrl.values.hits}}

TOURISM is the bright beam guiding post-war economic growth. The Government is banking on the industry to boost public expenditure and make Foreign Direct Investment (FDI) numbers look more impressive, but there is still much to do before the two aspects of tourism and FDI synergise to create sustainable development.

Dutch Bay Resorts Director Marketing and Promotion Neil D’ Silva in a recent interview with the Daily FT highlighted the struggles still being faced by the industry to attract FDI. In particular he remarked on the need for investors to feel safe about their investment and for transparent systems that inspire confidence to position Sri Lanka as an attractive FDI destination.

These are points that have been repeated numerous times to the Government by a variety of stakeholders. Having failed to meet the US$ 2 billion FDI target for 2012 the Central Bank has set its sights on US$ 1.2 billion for this year. It cannot be denied that the bulk of the FDI in 2012 and very likely 2013 will come from tourism, but it is more destination driven than policy attracted.

The allure of Sri Lanka is the main draw behind tourism 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 rushing legal amendments through Parliament to facilitate the setting up of casinos in Sri Lanka with Australian gaming Mogul Kerry Packer, 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 not 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 project have fallen by the wayside with more and more personalised involvement replacing a streamlined process.

According to economist Dr. Saman Kelegama, to maintain consistent levels of 8% growth, investment would have to grow to US$ 6-8 billion – a hefty task indeed. This places even more onus on the Government to streamline its various institutions to support a clear, transparent and efficient investment system that functions independent of political influence. It is the tough task but essential to meet the Government’s expectations of development.

D’Silva also noted that the banks need to re-evaluate land value in Sri Lanka and redirect attention from Colombo and Kandy. He underscored the need to value land according to other attributes such as its biodiversity, exclusivity and scenic beauty. Improving infrastructure would then encourage more foreign investors to pick new areas and thus market Sri Lanka as a destination for high end travellers.

The spread of tourism needs to follow a conservation agenda as well but the points are worthy of consideration not only because they provide fresh ideas but because they enforce old needs.