Deputy Minister of Investment Promotion Eran Wickramaratne said that the government would look for the simplification of tax structure as part of its efforts for creating an investment-friendly environment in the country. He said the matters concerning the Port City Project could be sorted out based on recommendations by experts. Highlights of the interview;
When you were in the Opposition, you used to criticise the then government for failing to attract Foreign Direct Investments (FDI) sufficiently. Now you are in charge of the investment portfolio. What are your plans for investment promotion?
There are two main things that are being done in this respect. One is giving incentives for investors to come. The second aspect is to improve the environment for enabling investments.
Despite having tax concessions, even after the end of war in May, 2009, there is hardly any significant increase in investments. At the end of 2014, the country got only one billion US dollars in terms of FDI. If you take comparable countries such as Malaysia and Vietnam, on a per capital basis, they get volumes of FDI two or three times higher than Sri Lanka. Our FDI level has been low for a long time.
The reason is the lack of rule of law. That is one of the things investors were looking at. Then, on the rule of law, we have restored the independence of Courts. The most Senior Judge on the bench has been appointed as the Chief Justice. It is visible. The Court has given judgments against the government. Confidence level is going up. That is an important plan of enabling environment. Then, doing business index should be kept improving. There are some of the issues as to why Sri Lanka is ranked low in this index.
In the South Asian context, we are 80 in the ranking. We want to be between 18 and 30.
The Chinese companies have to understand that there is a democratic change in this country. As part of democratic process, the government has an obligation to look into this matter with public outcry. There are no projects without problems. If the problem is curable, we will allow time to cure it
That is the goal we have. Complexity of taxes is a matter of concern. There are too many taxes, complications. We are trying to simplify the tax structures. It cannot be done immediately. It has to be looked at closely at the next budget. On the other hand, it takes a long time to register a land. It has to be streamlined.
On the cost side, Sri Lanka has got investments mostly in the service sector - telecommunication, tourism etc.
Yet, it is important for us to attract investments in the manufacturing sector as well. In the service sector investments, the multiplier effect is low. In the manufacturing sector; this effect, the creation of jobs and all, are higher. We need to attract investments in the manufacturing sector as a result.
The cost of energy is high for the industrial sector here. It is one of the issues. The cost of electricity for the lowest usage group is low. For every other group, particularly for the industrial sector, the electricity prices are high compared with a lot of other countries which are competing with us. But it has come down slightly. Earlier, we depended mostly on hydro-power. Then, we shifted to thermal power. Now, we are replacing them with coal power. Coal power generation is not the ideal solution because it has environmental issues. So, we are opting for other low energy sources, particularly oil and gas.
If we extract such energy, even within a few years, it would make a paradigm shift.
Recently, we were in Singapore. We wanted to understand why the Japanese investors come to Singapore, and it really helped us.
But, this is a transitional period of the government. Then, how can you make tangible plans for investment promotion without any political certainty?
Yes, investors are not going to put their money on the ground till a general election is conducted. We are focusing on the investments already in the pipeline. We are pursuing other approaches and will move on them after the general election.
What are the investments you attracted under the new government?
We have a list of things we have worked out. There are others in the pipeline.
Also, there are some investments initiated by the previous government; highway projects in particular. What would happen to them?
The waterfront mixed development project by John Keels and Shangri-La are going on. We have smoothened the processing of ones that are in the pipeline. When an election is due, most of the people would not be interested in investing. We will streamline the processing of those which are coming in and will continue to help. We have done the targeted ones.
Then, a delegation from Honeywell International Inc, USA, a Fortune 500 company came and met me on May 9. People are watching the changes that are taking place in Sri Lanka in the global context. They are showing interest. In the past, top companies were not looking at.
Now, they are interested. In the past, it was a debt driven situation. Yet, we will minimize debts.
We will go ahead with the Outer Circular Road, a Chinese investment. As for the extension of the Southern Expressway, there is some discussion going on. But, we really look at the construction of Central Highway. Designs are being drawn at the moment. We are basically looking at it. Most probably, we would go for Private- Public Partnership in the execution of the project. It would have several stages linking towns, such as Meerigama,Pothuhera, Kandy and Dambulla.
You called it the Central Highway Project, not the Northern highway as called by the previous government?
This is the central highway. It is not going to Jaffna. So, you cannot call it the Northern highway. It is misleading.
Whom are you targeting to approach for investments in the road project you have just mentioned?
We are going to advertise. We have called for expression of interests. It would be a competitive process. Already, we have received expression of interests. Japan in one of them as well as the Asian Development Bank. Besides, companies from different countries have shown interest.
How has the suspension of the Port City Project affected investor confidence?
It is a temporary suspension. It has not affected the investors’ confidence at all. It was suspended because, during the election period, due to public outcry and by the tourism industry that there may be environmental damages.
We gave an undertaking to people that we will examine it. A committee has been appointed. We will have to satisfy ourselves. Most of the issues are resolvable. You can negotiate everything else; but not the environment. Experts have to decide. The Coastal Conservation Department and the Urban Development Authority (UDA) are looking into it.
The Court has given judgments against the government. Confidence level is going up. That is an important plan of enabling environment
The Chinese companies have to understand that there is a democratic change in this country. As part of democratic process, the government has an obligation to look into this matter with public outcry. There are no projects without problems. If the problem is curable, we will allow time to cure it.