Renewed approach for bilateral investment treaties urged

From left: World Trade Institute (WTI) Prof. Rodrigo Polanco, Department of Commerce, Director General Sonali Wijeratne, Central Bank Senior Deputy Governor Dr. P.N. Weerasinghe, Board of Investment (BOI) Executive Director-Research & Policy Advocacy Champika Malalgoda, EU- Sri Lanka Trade- Related Assistance- National Project Coordinator  Dayaratna Silva
Pic by Kithsiri de Mel

• Commerce DG says SL has become victim of investor-State relations 
• Govt. urged to achieve greater clarity in bilateral investment chapters of FTAs

 The Department of Commerce (DoC) yesterday called for a renewed approach to bilateral investment treaties, as Sri Lanka has become a victim of investor-State disputes in the backdrop of a surge in investment treaties-based disputes globally.

Highlighting the downsides of Foreign Direct Investments (FDIs) at the opening session of a workshop on investment negotiation under the EU – Sri Lanka Trade-Related Assistance Programme yesterday, Department of Commerce (DoC), Director General (DG) Sonali Wijeratne said, “We can observe countries experience increasing investor-State disputes mainly based on the bilateral investment treaties.

Given the surge in recent Investor-to-State dispute cases, several countries including both developed and developing, have been reviewing their approach to investment treaties. 

Governments are looking at ways of keeping their policy space to fulfil obligations to the general public by reducing their legal liability under bilateral investment treaties. Sri Lanka is also one of the victims of such investor-State relations.”

Simultaneously, Wijeratne noted that there are ongoing discussions at international level on the need for reviewing and reforming international investment laws.
Board of Investment (BOI) Executive Director, Research and Policy Advocacy, Champika Malalgoda also insisted that Sri Lanka should put more effort in achieving a greater clarity in bilateral investment chapters of Free Trade Agreements (FTAs) as Sri Lanka has planned several FTAs , after signing the country’s first comprehensive FTA with Singapore this year.

Referring to the World Investment Report 2018 – UNCTAD, Wijeratne also asserted that a chapter on investment liberalisation in a FTA, for an example, cannot stand alone from a holistic and integrated industrial and agricultural policy, which has to contain detail pragmatic recommendations and timelines for action with clear delineated division of responsibilities among public and private sector stakeholders.

Malalgoda also agreed with Wijeratne’s comments which stressed the need for greater clarity for each commitment of investment chapters.

She also stressed that de-regulation and liberalisation initiatives alone wouldn’t drive structural transformation to facilitate investments via creating a conducive environment for investments to boost economic productivity, growth potential, employment creation and eventually to achieve higher standards of living.
“It is important to realise that governments around the globe have re-designed and re-invigorated their industrial policies through multiple instruments ranging from trade to education. Foreign investments are the catalysts that build and upgrade these industries mainly due to the update of existing investment policy instrument that include investment, incentives, special economic zones, investment facilitation and foreign investment screening mechanisms,” Wijeratne added. (NF)

Special treatment for foreign investments 

The Central Bank Senior Deputy Governor Dr. Nandalal Weerasinghe has insisted that preferential treatments should be provided for foreign investments, including foreign financing of local investors, to encourage more foreign investments to the country, if Sri Lanka is to achieve a 6 percent growth.

Though some view these preferential treatments as a discrimination against local investors, Weerasinghe pointed out that in order to bridge the gap between low domestic saving rate and required investments, Sri Lanka needs to rely on foreign investments to reach the potential economic growth.

However, Weerasinghe said that local investors who finance their investments through foreign financing should also be given the same preferential treatments, as they bring savings of other countries to Sri Lanka without crowding out the already limited savings of Sri Lankans. 

He noted that JKH’s Cinnamon Life is such a project, which is partly funded through foreign debt financing.

He elaborated that Sri Lanka has failed to attract sufficient equity investments through FDIs due to various constraints while the government performed well in getting foreign loans from the bond market, which has clear rules. 

However, he noted that these loans are volatile and not long-term investments.