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BoI negotiating US $ 4.5bn worth of investments: official

04 Aug 2015 - {{hitsCtrl.values.hits}}

From left: BoI Chairman Upul Jayasuriya, BoI Consultant Dhakshitha Thalgodapitiya and BoI Investment and Promotion Executive Director Renuka Weerakone
Pic by Pradeep Dilrukshana

By Chandeepa Wettasinghe
Sri Lanka’s state-run apex investment promotion agency the Board of Investment (BoI) is currently negotiating four foreign direct investment (FDI) agreements amounting to over US $ 4.5 billion, a top official said.

“At the moment there are three to four projects, which once implemented, will have an investment of over US $ 4 billion,” BoI Chairman Upul Jayasuriya said.
All four projects are in the transport and logistics sector.

He said that the investment by a Chinese company at the Hambantota Port has been increased to US $ 1 billion to include ship breaking, up from the US $ 400 million investment for a dockyard Mirror Business reported last month.

“In Trincomalee, it’s a Japanese investment of US $ 1.5 billion, which is not just for ship breaking but also for a steel mill. That is— break the ship, melt it, purify it and then make steel,” Jayasuriya added.

He went on to say that Colombo Dockyard PLC—of which the majority shareholder is Onomichi Dockyard Company Limited of Japan—has sought approval to expand the cranes at its facility at an investment of US $ 200 million, which includes additional land.

The largest project is a US $ 1.95 billion investment into the public transport system in the form of a monorail project.

“It’s a Sky Train, an elevated, high-speed monorail from Japan. They have taken the routes from the Colombo Transport Master Plan by Professor Amal Kumarage,” BoI Investment Promotion Director Vidarshan Fernando said.

He added that several Singaporean companies are also hunting for information on opportunities at Colombo, Hambantota and Trincomalee Ports. He also confirmed that negotiations are in the early stages with Middle East-based Gammon Group to develop a US $ 1.2 billion free trade zone in the Eastern Province of the country.

The new regime is of the firm belief that FDIs and exports will be the key drivers of the Sri Lankan economy, instead of foreign borrowings.

Vietnam, which had similar FDI levels to Sri Lanka in 2000, now averages over US $ 10 billion in FDIs, while Sri Lanka averages around US $ 1 billion.
Jayasuriya said that under the past regime, the country had attracted only US $ 1.6 billion in FDIs in 2014—including the loans coming in through the BoI companies—and the new project negotiations show the confidence placed in the new regime.

“We have a country now where we are considered equal. It doesn’t matter where the investment is coming from. When we do give concessions, it’s only based on merit. It’s different from what it was and it takes a little bit of time to get used to doing things the right way,” he added.

He said that the transparency processes, rule of law and the independence of the judiciary, which investors value, are now being followed, regardless of political affiliation.

Jayasuriya added that the one-stop-shop at the BoI will be reinstated before the start of the elections and that investors will be given a reply—whether positive or negative—within three days, which if not possible, within one week in the form of a letter.

New BoI Act on the horizon

BoI Chairman Upul Jayasuriya said a new BoI Act will be brought on by the United National Party-led government, if elected at the forthcoming election.

“(Law) has not been adapted so far. It has to be thought of. So, after August 17, there has to be a new law that has to be brought in,” he said.

He added that the BoI will consult professionals and the private sector in assessing the impact of new trends in areas such as investment, exchange control, land allocation, etc.

He said that the BoI has now reverted to the 2006 Act following the debacle of the 2014 Inland Revenue (Amendment) Act under which some investments were negotiated and signed, despite not being passed in Parliament.

He further said that the Strategic Projects Development Act has been discontinued but the benefits granted to projects under it will continue to be honoured.

He assured that all efforts would be undertaken to reverse any damage caused by the Inland Revenue (Amendment) Act, No. 8 of 2014, which had stated that concessions will only be provided if investments are made before March 31, 2015.

“It was as if we were asking investors to come in with one hand and asking them not to with the other. That did not boost investor confidence,” he said.

He also criticized the Revival of Underperforming Enterprises and Underutilized Assets Act of 2011, which nationalized 37 private companies.

Jayasuriya said that the future direction of the BoI will be decided after the elections and expressed that new laws are required to increase FDI inflows to the country.

“Even with the absence of a new law, the BoI is not without teeth by virtue of the 2006 gazette,” he said.

US $ 30mn Volkswagen project to be signed next week

Jayasuriya said that the agreement to set up a Volkswagen assembly plant in Kuliyapitiya will be signed next week.

“Volkswagen is a small project of about US $ 30 million. It’s an assembly plant that they’re doing at the moment.

It’s the branding that is there for us, of a world leader in the automobile industry coming to Sri Lanka,” he said.

Fernando said that Volkswagen will purchase certain components such as tyres and seats from Sri Lanka and employ local labour. This is to satisfy the 35 percent value addition regulation in place for foreign companies engaged in exports from Sri Lanka.

Jayasuriya said that exports will begin in two years.

“We have asked them to set it up and give them a period to get a feel for the country and then start doing exports,” he said.

Business Main

BoI negotiating US $ 4.5bn worth of investments: official

New BoI Act on the horizon

US $ 30mn Volkswagen project to be signed next week

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