Justice Minister Dr. Wijeyadasa Rajapakse speaks at the Economic Summit
By Dinesh Weerakkody
Justice Minister Dr. Wijeyadasa Rajapakse very boldly stated at the Sri Lanka Economic Summit on Wednesday that the Board of Investment (BOI) should be shut down. The BOI is Prime Minister Ranil Wickremesinghe’s brainchild and an offshoot of the Greater Colombo Economic Commission (GCEC).
Wijeyadasa went on to say the one-stop shop has now become a one more stop and is destroying the economy. He may sound very harsh but that is very much the reality. It has outlived its true purpose and no longer connects with our economic needs of our country, other than putting more barriers for foreign direct investment (FDI) and costing the taxpayer more and more money.
The proposed Agency for Development once enacted should hopefully pave the way to radicalize the way we attract FDI into the country and hopefully pave the way for the BOI to be absorbed into the agency. Sri Lanka no longer looks more attractive than some of the other FDI destinations in the region because they have now all caught up with Sri Lanka.
The BOI was set up in 1992 to showcase our comparative advantages over the other countries and to attract significant amounts of FDI, increase employment opportunity for our youth and to drive up our exports. Today, to successfully promote our skill sets and national resources in exchange for FDI requires significant investment from government in knowledge management, building skills and also leadership to develop new industries and exploit our current or potential comparative advantages.
We have so far hardly addressed any of these issues other than at talk shows or on paper. The BOI to be effective needs to have well established links to education and industry skills, policymaking and technology development to make a meaningful contribution to the progress of the country. The lack of genuine measurable success is highlighted by the limited amount of real growth in FDI in the last three years.
For a cash-trapped economy like Sri Lanka, foreign investment is a significant driver of economic development. FDI fills the savings-investment gap and enhances investment and economic growth. FDI contributes to improving work ethics, discipline, skills and knowledge of workers. It is an important means of technology transfer and transmission of best practices in management and often brings with them international markets.
It is the realization of these economic benefits that has made the former communist countries like China and Vietnam and the formerly inward-looking Indian economy to actively seek foreign investment. For example, China attracted around US $ 60 billion in 2015 and US $ 66 billion in 2016, India around US $ 63 billion and Vietnam around US $ 23 billion.
Private sector development
Despite the policy reforms introduced to facilitate private sector development, the private sector investment is constrained by several factors, which need urgent corrective action, especially the institutional set up. If Sri Lanka is to achieve 6 percent + growth, foreign investment has to increase to around 20 percent of gross domestic product (GDP).
In Sri Lanka, during periods of relative economic and political stability, foreign direct investment inflows have responded positively. Sri Lanka expects foreign direct investment to quadruple to US $ 4 billion by 2020. To achieve this we need new thinking, a new institution, which has no baggage of the past and new leadership to position Sri Lanka for the future.
Sri Lanka is strategically placed to benefit from a fast-changing global marketplace and trade routes. We are between Europe and Far East on the major East-West shipping lanes. We have easy access to lucrative Middle Eastern markets and rising African markets, while the growth engine that is India lies just 20 miles away.
However, if Sri Lanka is to attract any significant FDI, the investment promotion policies need to be complemented by appropriate policy changes with respect to education and skill development, research and development, regulation and leadership.
(Dinesh Weerakkody is a thought leader)