HR issues no bar on investing in Sri Lanka: Nivard

Tuesday, 3 June 2014 01:50 - - {{hitsCtrl.values.hits}}

CB Governor tells BBC claims investors have been put off by HR issues ‘entirely untrue’
Defends Chinese financing for mega development projects
Foreign investment managers contend HR is a stumbling block

Central Bank Governor Ajit Nivaard Cabraal has dismissed claims that human rights issues plaguing Sri Lanka post-war is impacting the country’s bond market and investment climate, amidst fears by overseas capital managers that the climate could drive investors away. Sri Lanka is set to face an international investigation by the UN Human Rights Council that will kick off this month, to determine if major human rights abuses or war crimes were committed by either side during the last seven years of the civil war. Speaking to the BBC during a visit to London to market the country to international investors this week, Cabraal said Sri Lanka had issued 6 billion pounds in bonds to investors around the world, 70% of them from the US, UK and Europe. “The idea that they have been put off buying because of human rights issues is entirely untrue,” the top official told BBC.

Biz confidence gains lost ground

“The exclusive barometer of business sentiment reverses course, yet again, with confidence in the economy and investment prospects proving to be key factors in the corporate psyche,” notes LMD’s forthcoming (June) edition. It adds: “Business sentiment continues to fluctuate, with the latest LMD-Nielsen Business Confidence Index (BCI) heading back to higher ground, as opposed to the drop in the index witnessed in the previous month.”

The index registered 142 in May, reflecting an increase of eight basis points. “The latest results also mark a 13-month high for the index, albeit that it is a mere two notches higher than where it was in March,” the business magazine notes. A spokesman for LMD’s publisher observes that “Nielsen’s MD says that respondents have a positive outlook on economic growth and that the favourable interest rate regime is also playing a part in sustaining confidence at around the 140 mark.” As for the economy, LMD reports that 44% of survey participants say that conditions are likely to improve over a 12-month horizon. It continues: “This proportion mirrors last month’s collective view, but is higher than the count earlier this year. A further 28% are of the view that the economy will maintain its current momentum.” “There appears to be greater optimism regarding the prevailing investment climate, with 35% (up from only 23%, in April) of respondents giving it their thumbs up,” it notes LMD is the flagship of Media Services, which announced that the June edition issue of the pioneering magazine will be released to leading bookstores and supermarkets across the island on Friday 6 June.

Human rights was “not at all” a block on investments in Sri Lanka, the Central Bank Governor emphasised. “There are a few who have asked the question – but not all. And every time they have asked the question we have explained to them in detail what is taking place and they have been satisfied with our answers,” Cabraal said. Defending Chinese financing of mega infrastructure development in the country, the Central Bank Governor told the BBC that the funding was central to Sri Lanka’s economic development. “If the Chinese are the guys who are coming with the cash – are we to stop them?” he said, at the same time insisting “the door is open” to anyone to invest. China had never raised questions about Sri Lanka’s human rights record, the BBC said.

The World Bank has the country ranked 85th in its ‘Ease of Doing Business’ tables. However, Cabraal brushed this away saying the country was ranked 105th just three years ago. “We have been working away at this very diligently,” the BBC quoted Cabraal. The BBC also quoted Hardy Jamaldeen, a Director of Steradian Capital, which advises foreign investors on property investment in Sri Lanka, who said the human rights question was very real. “It’s one of the hazards we are fighting on a regular basis. I’ve been here over the past week meeting with a group of core investors and a few of them say, ‘I’m very sorry Hardy but we will not be coming in because of these issues,’” Jamaldeen told the BBC. The investment manager said the war “did not end particularly well” and that reconciliation needs to happen. But he believes foreign investment can be a power for good – many of his investment opportunities are in the north, the BBC said. However, Jamaldeen said the profits were real: “I wouldn’t look at an opportunity unless you are looking at 30% in terms of IRR (internal rate of return). You can find that in a comfortable environment. There are other trading environments where you are making multiples. There are real opportunities in property.” Jamaldeen said that once the investors go to Sri Lanka 94% or 95% are converting. “But actually getting them out is the hindrance – because of the overhang of the UN position.” The BBC said the Central Bank had achieved much in recent years, with inflation coming down and currently below 5%. The report said interest rates were lower, foreign exchange reserves have never been higher, and GDP growth has averaged between 7% and 8% over the last three years. However, the report said foreign direct investment (FDI) lags. Last year the Government had hoped for some $ 2 billion (£ 1.2 billion) in FDI. It got $ 1.3 billion.