The Board of Investment (BOI), Sri Lanka’s premier investment promotion agency is in a state of limbo after officials were instructed not to proceed with new investment project proposals in eight sectors until the presentation of the budget on November 22, highly-placed government sources said.
The sources were unable to say what these sectors were. A senior BOI official confirmed, reluctantly however, there was a suspension of projects in these eight sectors but declined to name the areas. The official said new budget proposals which would impact on current tax holidays were also one of the reasons for a delay in approvals.
The sources, who declined to be named, said, new investors had been told to wait till the budget to proceed with their proposals. “The BOI is in a state of flux,” one source said, adding that necessary legislation to replace the BOI with a new investment promotion authority was being drafted by the Legal Draftsman.
However, the planned changes have been delayed by a dispute between some top government officials as to whether the BOI should be replaced or strengthened under the same structure, the source said. “With this uncertainty, the fate of the BOI would only be known when President Mahinda Rajapaksa presents the budget,” he added.
The Government is to introduce far reaching tax reforms in the budget by cutting down tax incentives currently available to foreign investors, the sources said. Plans are underway to re-define the BOI’s strategic position in the country’s development programme, leveraging on its acknowledged strengths and working on areas in which the organization has lost effectiveness, either through internal inefficiencies or changes in the surrounding legislative and procedural framework.
The Finance Ministry and the Economic Development Ministry have identified laws and regulations obstructing investment, and together with the BOI and the Department of National Planning are jointly working out a new investment strategy to ensure that projects supported under a new investment incentive regime are carefully selected and better targeted.
The aim is to shift the emphasis from a heavy reliance on tax concessions
towards greater predictability of the investment regime and increasing the ease of doing business, mainly by coordinating development activities of different ministries, public institutions and other agencies, the sources added.
The Greater Colombo Economic Commission (GCEC) was created in 1978 to approve foreign investment in Export Processing Zones (EPZ) , encourage foreign investors and provideattractive tax concessions and other incentives. In 1982, the GCEC was reconstituted as the Board of Investment of Sri Lanka (BOI). Its main role was to promote investment and facilitate, evaluate and assist investors wishing to set up projects in Sri Lanka. |
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