Ushering in investment era to solidify status as regional hub
Published: Feb 4, 2011 00:17 Updated: Feb 4, 2011 23:47
While the country holds more space in one’s mind as the ‘pearl of the Indian ocean’ (enchanting travelers from the time of Ibn Batuta) for its scenic beauty, Sri Lanka has also established itself as a priority destination when it comes to investments and trading.
Since the end of the civil war in May 2009 and prevalence of political and social stability, the country has bought itself onto the discussions of many global corporate giants across the world. Already, renowned as one of the leading hubs for garment manufacturing (with brands like GAP, Victoria’s Secret having long-standing manufacturing contracts with Sri Lankan companies), the end of the war meant countless new opportunities and previously unexplored streams of businesses opening up.
The country is actually not a stranger when it comes to direct foreign investment.
Malaysian companies invested $150 million in Sri Lanka in 2008, making the country the biggest foreign direct investor in Sri Lanka during the year, according to the Board of Investment of Sri Lanka (BOI).
India ranked second with $126 million as Bharti Airtel Ltd, the nation’s largest mobile-phone company, started operations in Sri Lanka. China was placed ninth with $27 million of investments.
With the current governments’ prudent investor-friendly strategy, these figures are expected to soar in the near future.
Most of the credit for the surge must be given to the BOI, a government sanctioned body set up for the sole purpose of incremental investments.
Structured to function as a central facilitation point for investors, for more than 33 years the BOI with its mandate encompassing the entire island has ensured this objective was met with a steady pace.
With clear set goals of increasing foreign investments and parallel economic growth, the BOI functions with the highest service levels.
A high-powered cabinet sub-committee inter-ministerial leadership providing a form for investor assistance has been set up to strengthen the BOI, clear all bottlenecks and ensure speedy clearance of investment approvals so that investors can implement projects in a hassle-free atmosphere.
The BOI companies today employ more than 470,000 workers, accounting for nearly 65 percent of Sri Lankan exports and 86 percent of the country’s industrial exports.
The BOI is therefore a significant agent of change and its quarter century existence has radically transformed Sri Lanka both economically and socially, placing the country in a position where it can compete in an increasingly globalized world (source BOI website).
The most significant aspect of working with the BOI is that when you sign an agreement with the BOI, the provisions embodied in the agreement remains valid for the life of the enterprise.
Successive governments cannot change these provisions, ensuring a degree of stability that few other countries can offer or match. Further, a contract with the BOI means concessions on taxes and duties, which are appropriated according to the level of investment.
Further, the BOI has established a series of free trade zones and trade parks at strategic locations, which provide business owners the most conducive atmosphere for manufacturing purposes.
With the country being ranked as one of the fastest growing trading hubs and as the economy with the most liberal policies, investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100 percent repatriation of profits and total foreign ownership available in most of the areas of the island nation.
With regard to the manpower found on the island, the primary indicators are stronger than ever.
The literacy rate in the country is one of the highest in the world at 91 percent, most of the skilled labor having an apprenticeship or technical knowledge at the diploma level.
Ethical practices, which aim for the triple bottom line and ensuring the balance between employer and employee benefits, are maintained and form the foundation for a longstanding workforce, which rarely shifts organizations.
While the labor cost is affordable, the quality of work is among (if not the) best in the region.
As a practice, the government and subsidiary bodies conduct and encourage continuous training programs at specific industries aimed to sharpening the workforce knowledge.
With the cultural conditioning and mindset, Sri Lankans are rated with one of the highest levels of dedication and commitment.
The island has found traction in terms of investments flow from the period of June 2009, with new opportunities in sectors such as water purification and supply, mini hydro power, mining, properties, the famed Sri Lankan teas (better known as Ceylon Tea), eco-tourism, rubber, agriculture, gems and industrial raw materials.
With the change of direction in the government’s economic policy since 1977, foreign investment has flowed more freely into the private sector.
Sri Lanka enjoys a free trade agreement with both India and Pakistan, which provides unique business opportunities.
Investors can have the best of both worlds with, for example, access to India’s market and products, and Sri Lanka’s advantageous location as a base.
Due to these reasons, the country has a reputation for being a strategic access point for other crucial markets as well.
The country and its environment has also a perfect fit for specialized industries such as electronics, light engineering, computer software with many new investors in these segments signing up with the BOI.
An often underrated investment opportunity is the agricultural prospects in Sri Lanka.
The tropical climate and the renewed opportunities in foliage, cut flowers and exotic fruits and vegetables with an export oriented market is paving the way for an influx of like minded investors into the country.
Specifically, the climate in the mountainous central district is deemed ideal for agricultural ventures.
One fact that captures any investor’s eye is the phenomenal growth of stock market, in the last five years the market capitalization of the Colombo Stock Market improved from $5 billion to $15 billion.
The market capitalization and liquidity is expected to grow in coming years with new listings and other forms of financing by existing listed entities.
With the expansion, integration and access of the northern areas, economic growth is expected to be at the range of five to seven percent.
US Investment legend Jim Rogers has rated Sri Lanka and China having better investment opportunities than other countries.
With security and stability assuring investors, the market has been on an all time high with returns far exceeding expectations.
The past year has seen a prolific increase in trade related visits by countries such as Belgium, the US, Iran and China. China, being a major partner, has stakes in development of crucial areas such as power and energy. The Norichcholai Coal power plant is being commissioned by a prominent Chinese company.
Another sector experiencing a boom is related to the hotel and leisure industries.
The recent signing of the Movenpick group to construct a star class hotel within the city is just one of many projects in the pipeline.
Catching onto the growing trend of eco-tourism, many groups are looking at initiating eco-tourism projects in the green zones.
The Cinnamon Lodge, Habarana and Heritance, Kandalama are two prime examples of successful star class hotels with every amenity and an eco focused theme. With tourist arrivals sky rocketing, this segment is proving to be a major money-spinner.
What truly sets apart Sri Lanka from other investment destinations is the efficiency and the smooth, streamlined processes that go with starting up a business in Sri Lanka, lion’s share for this credo goes to the BOI which assists investors from the first boardroom discussion to the construction site.
With the government taking an aggressive stance with trade delegations, individual B2B businesses, participation in trade fairs and the president himself making many visits to other countries in search of trade partnerships, this is truly an ushering in of a new era of unprecedented prosperity.
With more concessions and specific benefits planned for foreign investors, the nation gears itself for another year with even greater growth in all key indicators.
The end of the war also meant the channeling of the funds toward internal development such as highways and rebuilding or improving townships, which in turn mean improved logistics and transportation capabilities.
The Asian Tribune (Asia’s leading news website) is planning to organize a Sri Lanka Investment Forum in a bid to showcase the country’s tremendous opportunities to the world.
Aiming to become the Wonder of Asia, Sri Lanka is on its way to achieving that accolade sooner than expected.