SLIF woos FDI: Presents big bets on SL growth story
President Gotabaya Rajapaksa speaking at the investment forum.
The who’s who of the state and the private sector aggressively courted foreign investors this week with an investment-friendly business environment and accelerated moves to open the country’s capital markets at the virtual three-day Sri Lanka Investment Forum (SLIF).
President Gotabaya Rajapaksa promised policy stability, consistency, and doing away with unnecessary bureaucratic red tape for greater ease of doing business.
”We welcome investments into new farming practices which increase yields in healthy, organic and sustainable ways.”
Prime Minister Mahinda Rajapaksa said the aim is to attract US$15 billion to the Colombo Port City project in the next five years. “We have already established the legal and business facilitation framework through a new Act. Investors will be able to obtain all the services from one counter.”
He said that businesses in the country endured hardship amid the COVID-19 pandemic in 2020, which resulted in a 3.6-percent contraction of gross domestic product (GDP), adding that there was a need to turn the country into an active worksite again, and to attract investments to develop infrastructure and increase the production capacity of the country.
The government introduced measures to boost exports to $12 billion this year and targets $15 billion by 2024 and $20 billion by 2028, Dr. P.B. Jayasundera, delivering the keynote, said.
The country cannot sustain a $10 billion trade deficit with exports being $10 billion and imports amounting to $20 billion, Dr. Jayasundera said noting the targets will be achieved via export diversification and greater local value addition. The COVID-19 pandemic hit Sri Lanka exacerbated by declined economic growth which slumped to 2.3 percent in 2019 from 5 percent in 2015.
“We have been averaging 5-5. 5 percent growth during the 30-year conflict and grew around 7-8 percent post-conflict, which confirms Sri Lanka’s potential and resilience,” Dr. Jayasundera pointed out noting that COVID -19 saw a 4 percent economic contraction in 2020 despite several initiatives such as tax reforms, public expenditure reforms etc carried by the government.
These were dwarfed by the COVID impact, adding to a higher public health expenditure but now Sri Lanka is ready to regain the growth momentum it lost since 2015, he added.
Finance, Capital Markets, and State Enterprise Reforms State Minister Ajith Nivard Cabraal urged firms to strike partnerships with foreign investors, build spaces and reserves which will boost their ability to go forward with Sri Lanka.
The Sri Lankan government has taken measures to build a strong local pharma industry to cater to the country’s needs, and to build a new export vertical taking advantage of the skilled talent pools, existing pharma operations as well as geopolitical shifts “we” have all seen and experienced. Chairman Board of Investment, Sanjaya Mohottala, in his address, said.
A state of the art 400-acre pharma zone is being built adjoining the Hambantota port and the international airport, with easy access to both sea and air logistics, he said noting that environmental and other pre-clearance allow for any type of drug manufacturing to take place from APIs to generics to oncology, thereby reducing set up time significantly for any potential investor. “To support this strategic initiative, the government is offering generous tax breaks up to 10 years and customised incentive packages will be offered for larger investors.”
Promising to create a high ease of doing business (facility), he said there is a concerted effort underway by the government to push Sri Lanka to the top tier in the ease of doing business, he said noting that legal reforms are being carried out, the appointment of committees to investigate de-regularisation, a commission for customs reforms, a cabinet subcommittee to support investments in place and many more.The new addition to Colombo’s Central Business District, the Colombo Port City with its newly minted legislation, aims to be on par with Dubai, Qatar, and Labuan (a free port in Malaysia) to facilitate service sectors and encourage business to set up regional HQ’s to serve close to 3 billion consumers in the region. The Port City is a joint venture between Sri Lanka and China to develop a service-oriented Special Economic Zone (SEZ) on 269 hectares of land reclaimed from the ocean and annexed to the city of Colombo.
IFC’s Vice President for Asia and Pacific, Alfonso Garcia Mora called for a greater focus on the private sector to support Sri Lanka’s aspiration to return to the upper-middle-income status in the medium-term and fully develop islands of excellence in the long term, delivering a keynote session via a video link.
Sri Lanka can realise its development aspirations by promoting a private sector-led growth model—one that spurs further growth and creates jobs for its people through innovation and agility, he said.
“Sri Lanka has been a development success story, but the outbreak of COVID-19 has exacerbated an already challenging environment of low growth and fiscal pressures. As Sri Lanka moves on the road to recovery, challenges remain. Now, more than ever, Sri Lanka needs to focus on a growth model that provides for a much greater role for the private sector.”
A bigger role of the private sector is crucial to boost growth and enhance productivity, at a time when the government does not have the resources to make the investments necessary to propel Sri Lanka to an upper middle income country. A greater contribution of the private sector can also be a source of much needed fiscal revenue that would allay some of the current fiscal pressures, Mr. Mora said adding that a new wave of growth could be fuelled by sectors such as ICT, resource-based and light specialised manufacturing industries—as recommended by an upcoming report by IFC and the World Bank, the Country Private Sector Diagnostic (CPSD) for Sri Lanka.
Finance Secretary S. R. Attygalle, in a discussion, said that Selendiva, styled after Singapore’s Temasek, formed an SPV, Selendiva Leisure to consolidate the Grand Hyatt, Grant Oriental, Hilton, and several other prime properties. “The public listing of this company is due in the Colombo Stock Exchange (CSE) hopefully by the end of this month.”
Several valuable properties such as the building of the Ministry of Foreign Affairs are also set to be given away for these investment projects alongside the hotels.
Viraj Dayaratna, Chairman Securities and Exchange Commission (SEC) said the SEC is in the process of vetting crowdfunding and peer-to-peer lending which can be enabled through the e-wallet kicking into place once phase 2 of the digitalisation is through. Mr. Dayaratna said paper gold will be introduced through the over-the-counter platforms of the CSE.
The new SEC Act will enable trading in unlisted securities, he said.
To augment investor protection, the SEC is in the process of introducing a dispute resolution mechanism between investors and stockbroker firms. ”The CSE intermediary rules will be revised to bring more clarity, predictability, and consistency,” Mr. Dayaratna said.
SLIF was organised by Sri Lanka’s Board of Investment, the Ceylon Chamber of Commerce, and the Colombo Stock Exchange to attract high-quality investors from around the world. The virtual investment forum was held with foreign participation of 2,200 from 85 countries and 2,500 local participants.