Third time lucky for FDI?

Friday, 30 May 2014 00:40 - - {{hitsCtrl.values.hits}}

Govt. keeps $ 2 b FDI target for third year in a row
100% foreign inflow jump in 1Q, largest draw for tourism
Targets investors on domestic construction boom, plans international standard EPZ

By Uditha Jayasinghe Sri Lanka’s first quarter Foreign Direct Investments (FDI) jumped 100% from a year earlier to $ 442 million as the country targeted $ 2 billion in earnings for the third consecutive year. Sri Lanka’s Government has targeted $ 2 billion for the past two years but failed to achieve it. Despite the end of a three-decade war in 2009, the country has lagged behind in attracting FDI. In 2013 Sri Lanka attracted $ 1.39 billion in FDI, which is a 4% increase over the $ 1.33 billion in 2012. “We are confident we will meet the target of $ 2 billion this year. In fact we could have achieved it the previous year too but some projects got late to get off the ground,” Investment Promotion Minister Lakshman Yapa Abeywardana told reporters. He was referring to three hotel projects that included a $ 350 million casino by Australian gaming mogul James Packer that ran into severe criticism from locals, including Opposition politicians, resulting in negotiations for over a year.

BOI revenue grows 8%

Last year total export earnings by the Board of Investment (BOI) enterprises hit $ 6.6 billion, an increase of 8% from the previous year, latest data showed. At present, there are 1,723 projects in commercial operation under the BOI. BOI companies account for about 65% of Sri Lanka’s total exports, which is about $ 9.4 billion in 2013, according to the Central Bank. Three projects totalling $ 470 million have already been earmarked for implementation in 2014. The investors are from the UAE, Australia and Spain. Last year Sri Lanka’s highest foreign investor was China accounting for about 24% of all inflows.

However, the three projects amounting to over $ 1 billion was approved by Parliament earlier this month, providing a heavy boost to FDI. Since 2008 the Government has also approved 17 Strategic Development Projects (SDP) since 2008. These include Colombo Container Terminal, Sampur Coal Power Plant, Shangri-la Hotels, Steel Corporation and Cairn Lanka as well as the Waterfront, Lake Leisure and Queensbury projects. Abeywardana insisted the Government was turning the tide on its lacklustre FDI earnings with 38 investment agreements being signed in the first three months of 2014. Of these, 31 projects have already begun construction and 14 have started commercial operations. Sri Lanka’s booming tourism industry grabbed the lion’s share of first quarter investments with tourism attracting 36% of all inflows. Utility with 26% and infrastructure with 15% rounded off the top three sectors for FDI. Sri Lanka’s economy grew by 7.2% in 2013 and the Government has targeted 7.8% this year. However, Abeywardana emphasised that sustained 8% growth needed FDI of $ 4 billion and the Government was intent on reaching that target by 2016.

The Government has been criticised for inconsistent polices, nationalising 37 private companies in 2012 under a controversial Expropriation Act and failing to improve ease of doing business in the country. Nonetheless, the Minister assured that the Board of Investment (BOI) would relentlessly pursue foreign investment, especially focusing on companies that want to tap into the post-war construction boom. “We are carrying out a survey to decide how much of building materials will be utilised locally during the next five years and encouraging foreign companies to manufacture it. If there is a guaranteed local market, then they will be more interested in Sri Lanka,” he said. Under the survey, it is estimated construction material includes 600,000 metric tons of steel valued at $ 350 million, 365,000 metric tons of cement valued at $ 200 million, 500,000 doors at $ 100 million and 17,000 tons of aluminium worth $ 75 million. In addition the Government will also establish an international standard investment processing zone on par with models in Vietnam, Singapore and Dubai. While the location is yet to be confirmed, Abeywardana was confident it would boost investor interest.