By Nishel Fernando 
Sri Lanka’s Board of Investment (BOI) is likely set US$2 billion foreign direct investment (FDI) target for 2020, as the estimated FDI inflows have fallen to around US$ 1.2 billion last year, well below the initial US$ 3 billion target, amid Easter Sunday attacks and political uncertainty. 

The board of directors of the BOI is scheduled to hold its first meeting on January 14 under the leadership of the newly appointed Chairman, Susantha Ratnayake. 

“We still haven’t set the target for the year as we need to be more aware of the new government’s policy. The FDI target will most probably be US$ 2 billion for the year. However, we have to discuss it in the board first and accordingly we will fix the target,” an informed government source told Mirror Business. 

Sri Lanka set US$3 billion FDI target for last year. However, that target was revised to US$ 1.5 billion in the aftermath of the Easter Sunday attacks in April.

According to Central Bank (CB) data, FDI inflows inclusive of foreign loans obtained by companies registered with the BOI, declined by 61.3 percent year-on -year to US$ 553.2 million during the first half of last year.

As per BOI estimates, Sri Lanka has missed the revised FDI target by around US$ 300 million with estimated FDI inflows at US$ 1.2 billion for 2019, the lowest since 2016. 
Sri Lanka attracted its highest ever FDI inflows of US$2.1 billion (inclusive of foreign loans obtained by companies registered with BOI) in 2018. 

However, a BOI official noted that the recently introduced tax cuts as well as attempts to simplify taxes with removal of certain taxes such as the Nation Building Tax (NBT) will be helpful in attracting new FDI inflows to the country. 

Sri Lanka was ranked at 142nd position in the paying taxes sub-index of the World Bank Group’s Doing Business Index 2020 mainly due to the number of tax payments and high tax rates. 
The number of tax payments in Sri Lanka was at 36 on average per annum compared 26.7 payments in South Asia and 10.3 in OECD economies. 

The total tax and contribution rate as a percentage of profit was recorded at 55.2 percent on average compared to 43.9 percent in South Asia and 39.9 percent in OECD countries. 

Meanwhile, the BOI is also awaiting the government’s policy direction to move ahead with two big-ticket oil refinery projects, which were signed by the previous regime. 

They were a US$ 3.85 billion oil refinery project by a Singaporean investment vehicle owned by India’s Accord Group and another US$ 24 billion project by Hambantota Oil Refinery PVT Ltd., an affiliate company to Singapore-based Sugih Energy International Pte Ltd.

The export revenue envisaged upon commissioning of the two refineries is projected to be over US$ 15 billion, annually.  

Following the Presidential elections last year, the newly elected President Gotabaya Rajapaksa instructed the government to review all agreements signed during the tenure of the past government and re-negotiate them if they had violated the country’s Constitution.

“The investors are still interested. The BOI is waiting the government’s policy directive,” a BOI official told Mirror Business on the grounds of anonymity.