BOI bungles

• Investors warn country could lose billions as approval process gets delayed, employees protest while apparel sector awaits promised tax and land concessions to go north 

By Uditha Jayasinghe

Burdened with internal strife, the Board of Investment (BOI) came under more fire yesterday for letting its restructuring process delay the approval process for ventures worth billions and undermining Sri Lanka’s global competitiveness. 

As the staff of the BOI launched a protest yesterday against the restructuring of the organisation, investors, particularly from the apparel industry, were quick to urge a speedy conclusion to the new arrangement so that Sri Lanka could fast track new projects and attract the much needed Foreign Direct Investment (FDI).

Despite the end of the war almost two years ago, Sri Lanka’s FDI levels have remained stagnant at US$ 602 billion in 2009 and predictions are that the actual numbers for 2010 will be lowest in five years to below $ 500 m though statistics are yet to be released.

Orit Apparels Lanka Managing Director Channa Palansuriya told Daily FT that he, along with eight other companies, was awaiting a response from the BOI to establish factories in the north – a venture that could result in billions of investment for the war-affected region.

However, essential assistance on taxation and infrastructure including land are yet to be finalised. Palansuriya warns that if the BOI does not get its act together soon, potential investors will start considering other countries.  

Brandix Limited, Hidramani Limited, Timex Garments Limited, MAS Holdings and Omega Line Limited are some of the other companies keen on investing in the north.

Critics are also disgruntled about the BOI’s inability to make a strong pitch for global investor attention, pointing out that the 24-hour approval facility that had a one page application form has now been extended to seven to eight pages, making the process more complicated and dispensing with simpler business procedures that aimed to increase the BOI’s “ease of doing business” rankings.

The BOI website is also censured for not being up-to-date. One disappointed visitor pointed out: “This site lists old investments as its achievement and it is a site that tries to ‘showcase’ BOI rather than helping the people who would visit the site to consider investing. The incentives are unclear and many details are not given. At a time when 100 odd countries are trying to attract FDI, this site has to play a major role together with BOI ads in Newsweek, Asiaweek, Times, etc., directing people to the site.”

He also pointed out that the BOI should work harder to maximise on the exposure generated by the World Cup.

“The BOI announced that nine apparel companies are interested in opening factories in the north. This is a positive development that is being encouraged by the Joint Apparel Associations Forum (JAAF) since it reduces production costs while giving an economic boost to war-ravaged areas. Yet the BOI has not expedited its duties,” Palansuriya said, stressing that the company had already spent six months on the US$ 12 million project. Orit Lanka hopes to establish a factory in Vavuniya and expend the investment over two years.

The officials of leading garment factories who are willing to set up their factories in the Northern Province visited Vavuniya on 28 October 2010 and had discussions with Northern Province Governor G.A Chandrasiri at the District Secretariat, Vavuniya. Omanthai, Nelunkulam and Cheddikkulam are among the areas selected for potential investment.

Of these companies, Timex and Fergasam are considering establishing a factory in Mannar at an investment of Rs. 1.5 billion this year.

“We are focusing on constructing the buildings in six months with another three months allocated for staff training. So we were hoping to start business during the latter part of 2011,” company representatives noted, adding that once the factory was established, they would consider moving to Achchuveli with another Rs. 1.5 billion venture.

“We are keen on this because of the tax advantages and the shortage of labour we face in other regions. The initial investment will be comparatively small, but in another two years we are hoping to expand with a Rs. 3 billion venture.”

Brandix already has a garment factory in Punani in the Eastern Province and is eyeing the north as well. However, the company was reluctant to divulge details until the project was finalised. When contacted, Hidramani officials also preferred to remain tight-lipped.

Meanwhile, MAS Holdings sources revealed that the project was currently on hold, but confirmed that their representatives had discussions with Government officials for a proposed venture.

BOI boys go to streets

By Cheranka Mendis

Board of Investment (BOI) employees yesterday took to the streets, holding a protest against the restructuring process that was announced recently.

The employees claim that the process is informal and being carried out without prior notice to the workforce.

BOI takes...

President of the Union for the Protection of BOI A.S. Subasinghe speaking to Daily FT claimed that the restructuring move had cancelled out three departments in the BOI — the Promotion Department, Investment Department and Monitoring Department.

The employees of the departments in question have supposedly not been given any instructions on where to stay and what to do and are said to be wandering around aimlessly after punching in. A total of 90 employees work in the three departments.

“The new appointees do not know what they are doing. They have no idea about the running of the BOI,” charged Subasinghe.

He stated that the BOI had limited investment projects to mega projects above Rs. 300 million.

“Prior to the arrangement, investment projects between Rs. 25 million to Rs. 200 million were accepted. Due to this at least 25-30 proposals came in for investment projects for a month. With the new regulation, this has come down to one or two and none in some months,” Subasinghe said.

“We were against giving over part of the Investment Service Department to Sri Lanka Customs. However, this has been done and there are talks for the entire unit to be given over as well. This situation is not helpful for the country.”

It was noted that the union had spoken to Treasury Secretary Dr. P.B. Jayasundera raising their concerns in this regard and had been told that there would be no restructuring of the BOI. They also claim to have sent a written petition to the President, with no response yet.