BOI under spotlight as nearly half of projects become inactive

• BOI says investors exited from 354 projects due to numerous reasons which were beyond its control 
• AG recommends BOI to review the approval process and look for remedial action to attract quality investments 
• Out of over 4, 045 acres belonging to BOI zones, 721.5 acres remained vacant without being utilised as at end 2021

• By Nishel Fernando 

With the number of active Board of Investment (BOI)-approved companies falling by nearly 50 percent since the inception of the agency to 440 entities by end of 2021, the Auditor General (AG) has urged the BOI to review the approval process and look for remedial action to attract quality investments into the country.
According to the audited BOI 2021 annual report, the number of enterprises which had signed agreements for projects as at end 2021 in its 14 zones stood at 740 since the agency’s inception, while the number of closed, suspended or agreement cancelled enterprises rose to 440 at the end of the 
year under review. 

Therefore, the Attorney General’s Department showed that only 285 enterprises had been functioning by the end of 2021.
However, BOI noted that out of the 440-agreements cancelled, closed or operation suspended projects, 86 projects had either merged with another company or were taken over, and therefore they were technically operative.

BOI said investors exited from the rest of the 354 projects due to numerous reasons which were 
beyond its control.
“Reasons for balance 354 agreement cancelled, closed or operation suspended projects include noncompliance with the agreement, lack of orders, financial constraints, liquidation of companies most of which are beyond the facilitation limits 
of BOI,” it added. 

The total acres of land belonging to the 14 zones of the BOI stood at 4, 045 acres by end of 2021,and out of that 721.5 acres of land remained vacant 
without being utilised.
The Auditor General’s report outlined the declining and stagnant trend of FDI inflows since 2018 a result of the absence of  credible medium and short term plans to attract FDIs. 

It noted that BOI has also failed to formulate a credible medium term corporate plan to achieve its objectives while its annual corporate plan also lacked salient features of a corporate plan.
“A corporate plan should be a rolling plan effective for a period of not less than three years, and the Board had prepared a corporate plan only for the year 2021. Further, the salient features of a corporate plan such as the current resources available to the enterprise, organizational structure, SWOT analysis, and a review of the preceding three years’ operating results had not been included in the corporate plan prepared for the year 2021,” it stated. 

Meanwhile, the Auditor General also shed light on a number of irregularities and flaws in connection to the organisation’s operations and governance in 2021.
In particular, the total personnel cost of the BOI stood at Rs.2091.8 million at the end of 2021, contributing to 62 percent of its overall expenditure.
By end of 2021, BOI had 1, 253 in actual cadre with 128 vacancies and 82 excess staff including 07 contract basis positions, excluding the nine officials recruited as a ‘Special Team’.  

According to the Auditor General, in the recruitment process of the ‘Special Team,’ the BOI failed to obtain the approval of the Department of Public Enterprises and also failed to comply with the Scheme of Recruitment.
Meanwhile, arrears owed up BOI companies rose to Rs.737.30 million at end 2021, and Rs.170.39 million or 23 percent of these dues were over 
four years old. 
The Attorney General was against BOI’s move to make provisions worth Rs.418. 84 million or 57 percent of these dues, instead of focusing on actions to recover them.