Whither BOI?

There were few public institutions more politically undermined under the previous Government than the Board of Investment (BOI). It was common for projects to be singled out by the most powerful ministers of that time, to be given preferential treatment of tax holidays and other perks, most of which were swiftly pushed through Parliament with little transparency and almost no public knowledge. Whether it was ill-planned casino projects or multimillion dollar hotels, success depended on whom investors knew within the former administration. Two years on under the new Government initial efforts to empower the BOI, provide its officials with independence and give all investors a level playing field have all but ended.

In the first two years little progress was seen in attracting Foreign Direct Investment (FDI). In fact in 2015 and 2016 Sri Lanka’s FDI plummeted and even though dozens of projects were officially started the overall numbers remained dismal. Previous complaints of applications taking too long and legal red tape delaying projects returned to echo but the Government re-proposed the setting up of a ‘one-stop-shop’, an effort that had also been rolled out during the previous Government of former president Mahinda Rajapaksa.

This was followed by a Cabinet paper in July submitted by Development Strategies and International Trade Minister Malik Samarawickrama with the support of Prime Minister Ranil Wickremesinghe that obtained approval for the BOI to embark on a joint venture with Singaporean housing company Surbana Jurong to establish a consultancy company to “offer multifaceted professional services and formulate structured projects where investors can start work immediately have been identified.”

Yet with the dawn of 2017 there are disturbing signs that efforts to improve the BOI and equip it to make transparent decisions in the best interests of the country are being put aside for political expediency. The first massive crack was the ‘Volkswagen’ vehicle assembly part, which was eventually proved to have no connection with the beleaguered auto manufacturer. The BOI had a responsibility to investigate the proposal submitted by the local dealer and announce accurate details to the public. Despite the deal being in the pipeline for more than a year, the BOI ended up as perhaps an unwitting contributor to the confusion.

It would appear that a second and maybe even bigger challenge is emerging due to the “sweetheart deal” for a $ 75 m tyre manufacturing plant in Horana. Not only is the Sri Lankan investor under shadow,  the Development Strategies Ministry and the BOI are planning to grant the venture a 99-year lease on 100 acres of land for an annual rent of just Rs. 100 an acre, among other massive concessions. It was reported over the weekend that the Government is planning to remove the 100 acres from the BOI to accede to investor demands.

If this were not enough, at a policy level there are efforts to introduce a Development (Special Provisions) Bill that seeks to give sweeping powers to a new Government body with the BOI only providing support services.

Last year policymakers also proposed a separate body for investments coming under the Megapolis project, though that has since dissipated. Cabinet last week approved a new division to be set up under the Development Strategies Ministry for public private partnership investments.

With each competing policy the power of the BOI diminishes and hopes for a transparent and competent investment body recede even further. Given this state of affairs both the public and investors could end up feeling short-changed.