BOI clarification on ‘Justice must be served equally to all’

We refer to the article by ‘Outsider,’ titled ‘Justice must be served equally to all’ and published in the Daily FT of 30 August.

With reference to sections of the said article dealing specifically with the Board of Investment of Sri Lanka (BOI), the BOI wishes to clarify as follows:

1. Valuation of land

It is stated that the payment of approximately $ 11,500 per acre is unusually low and well below the normal price of $ 40,000 per acre expected for such a land. 

A value in the range of $ 40,000 as mentioned would be for lands which have been developed and provided with essential infrastructure. 

This was not the case of the land in question which is categorised as undeveloped, and did not comprise any of the infrastructure usually provided within a BOI Export Processing Zone. 

This is reflected in the Government Valuer’s pricing of $ 11,500 per acre (approx.). In fact, the investor paid a total of Rs. 210 m approx. which is higher than the Government Valuation of Rs. 170 m approx., which translates to $ 14,000 per acre. 

2. Lease premium

The above mentioned payment of Rs. 210 m is the total lease value for the land in question, for a lease period of 99 years, and this amount was paid up-front by the investor.

In such a situation, an annual ground rental is not charged. However, a lease rental is indicated by the Valuation Department on a nominal basis. This practice is only to place on record an annual reminder of the lease agreement to the relevant authorities. It is this nominal payment that was valued at Rs. 10,000 per annum.

3. Tax holiday

The proposal for the project in question was submitted on 28 March 2016. However, delays in finalising the allocation of land resulted in the agreement not being signed before the deadline for granting of tax holidays (26 April 2016) given by Cabinet. 

Therefore Cabinet approved an eight-year tax holiday, also taking into consideration the long gestation period involved in similar investments, and the need to enhance the country’s investment climate through significantly high value export-oriented investments of this nature.