Financial Times

Uncertainty stalls investments
By Duruthu Edirimuni
More foreign and local investors have put their projects on hold because of the unsettled economic environment and the uncertainty about the forthcoming general elections.

Arjunna Mahendran, Chairman and Director General of the Board of Investment said that the country is losing US$ 30-40 million each month due to the uncertain political situation in the country. "Foreigners want a signal whether the country is committed to the peace process or not," he said.

The peace process has been stalled since last April when the Tigers pulled out and resumption of talks were further delayed by the power struggle between President Chandrika Kumaratunga and Prime Minister Ranil Wickremesinghe which ultimately led to parliament being dissolved and a snap general election.

Mahendran said that from the foreign investors' perspective they feel that the economic setting in a politically uncertain environment is not conducive for investment.

Mahendran said that Four Seasons and Hyatt Hotel chains, who were to carry out investment projects in the country, have put their projects on hold. The Sunday Times FT learns that two Business Process Outsourcing (BPO) call centres to have been set up by two British companies are also on hold.

Also, several foreign investment delegations have cancelled their visits. Mahendran said that local investors are more cautious than their foreign counterparts about investing.

He said that John Keells Holdings (JKH) who were to do shopping mall and condominium projects worth US$ 60 million have put on hold their plans because of the politically unsettled situation in the country.

However, when The Sunday Times FT contacted Susantha Ratnayake, joint managing director of JKH, he said that their plans are still being analysed and that they will announce anything new at the right time.

Mahendran said nearly 15,000 jobs could have been created within these five months since November 4, 2003 when President Chandrika Kumaratunga took over the three ministries, forcing companies to shelve their development plans because of perceived political instability.

Tile exporter Sprint Group (Pvt) Ltd. has "slowed down" work on a proposed $2.5 million investment by its subsidiary Sprint Tiles Exports, in collaboration with an investor from Monaco.

The group's Chief Executive Officer, Chanaka Mathew told The Sunday Times FT that he is worried about the business environment in the event an Alliance government comes to power. The project to manufacture and export tiles will generate over 250 jobs.

Tea Clan (Pvt) Ltd., Chief Executive Officer, Jayalal Dahanayake who was to set up a new tea packing plant is also holding on to his project due to the political climate in the country. Dahanayake was to start a packing plant with an investment of Rs. 5 million and generating 150 jobs.

A garments export project has also been delayed but mainly because of uncertain conditions in the US market. Dinesh Fernando, Chief Executive Officer, Austra Lanka Garments (Pvt) Ltd., and STY International Garments (Pvt) Ltd., Koggala said that the political situation is not the main reason to hold his new project. He said that there was an impact in the US market before the general election was announced in Sri Lanka. "The situation in the US market is not right at the moment for investment," he said. Fernando said that he was to launch a garment export project worth about US$ 4 million.

He said that he has been thoroughly let down by both governments as many promises were not kept by both the parties. Currently he employees 580 workers in both factories and had planned to generate 500 more jobs. Fernando said that he is watching the US market. "Once we are through 2004 we will make a decision."

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