More “strategic development” deals coming

The Government is working on several more “strategic development” deals similar to the Shangri La project in a bid to boost Foreign Direct Investment (FDI) flows in 2011 to top the US$ 1 billion mark.

“We are currently working on a pipeline of several initiatives that qualify to be treated under the ‘Strategic Development Projects’ Act,” Board of Investment Chairman and Director General Jayampathy Bandaranayake told the Daily FT.

Recently Economic Development Minister Basil Rajapaksa via a Gazette notification detailed the globally-renowned hotel chain Shangri La’s US$ 400-500 million investment in the country under the Strategic Development Projects Act No. 14 of 2008.

The BOI Chief said Cairn Lanka was the first project approved and classified under this Act whilst the Colombo South Harbour project with an estimated investment of US$ 500 million handled by Aitken Spence-China Merchant Holdings International will be notified via a Gazette.

He said that a minimum of three to four projects are in the pipeline covering tourism and infrastructure sectors such as ports and power and manufacturing.

As per the act, a Strategic Development Project is a project which is in the national interest and likely to bring economic and social benefit to the country, which is also likely to change landscape of the country primarily through the strategic importance attached to the proposed provision of goods and services which will be of benefit to the public, the substantial inflow of foreign exchange to the country, the substantial employment which will be generated, the enhancement of income earning opportunities and the envisaged transformation in terms of technology.

The BOI Chief said that the act has kept sectors into which a Special Development Project can be considered as well as the investment value open-ended for flexibility.  He said other projects or investments that may not be considered under the Special Development Projects Act would be treated and facilitated under the normal Inland Revenue laws of the country. He said this was part of reforms to the investment regime in the country.

He also said that the strategic development projects were aligned with the Government’s macro strategy of positioning and developing Sri Lanka into five strategic hubs; a knowledge hub, commercial hub, naval/maritime hub, aviation hub and energy hub, taking advantage of the country’s strategic location and resources.

These Strategic Development Projects will receive seamless servicing for promoters since all relevant line ministries and their agencies are involved.

Despite FDI inflows in 2010 falling to US$ 472 million, the lowest in recent years, Bandaranayake expressed confidence that the FDI flows in 2011 would be well over US$ 1 billion.

He said that in early parts of last year, due to many elections as well as institutional and policy reforms, investments as well as approvals were put on hold. There was a pick up in the last quarter, with positive growth being seen so far in 2011.

“We may not be approving 35 to 40 projects with low value per day as it used to be in the past; now our project numbers are smaller yet with higher value,” the BOI Chief explained. “In some cases we are also increasing the investment thresholds and commitments,” he added.

As part of restructuring, promotion and facilitation of investments are driven by clusters led by an executive director, incorporating different teams from the overall BOI. The BOI has set up separate leadership clusters focusing on ‘Tourism, Agriculture and Knowledge Services,’ ‘Infrastructure, Utilities and Education,’ ‘Apparel,’ ‘Regional Development and Services’ and ‘Manufacturing’.

BOI Chief post to be split;

full-time executive CEO coming

The currently combined post of Chairman and Director General at the Board of Investment (BOI) is to be split into two, with a full time executive CEO to be brought in to ensure continuity.

The move, which is on the cards as part of reforming the investment facilitation and promotion regime, will be announced after bringing amendments to the BOI Act.  In the past with regime changes or different ministers, the BOI was forced to have multiple heads at times shift in focus, etc. The new move will ensure the CEO or director general continuing and most likely only the chairman changing if necessary. The CEO or director general will report to the board.