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EDITORIAL-Targets set but not met; what’s gone wrong?

8 June 2014 07:07 pm - 0     - {{hitsCtrl.values.hits}}

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Investment Promotion Minister Lakshman Yapa Abeywardena during a recent news briefing announced that Sri Lanka was setting up a US$2 billion Foreign Direct Investment (FDI) target for 2014, but wasn’t US$2 billion the target set for last year as well?

 According to the Treasury, the total FDI in 2013, including loans, amounted to US$1.42 billion against US$1.38 billion in 2012. Despite the original target being US$2 billion for 2013, the government altered the target several times throughout the year and re-set it at US$1.5 billion, a figure it still failed to achieve.

 Sri Lanka has an impressive record of setting herself ambitious targets and quite often missing them by a large margin. Apart from the FDIs; the GDP, inflation, budget deficit, trade deficit, and tourist arrivals have also gone through this cycle. But since of late, some of these figures, specially GDP growth and tourist arrivals have been able to meet their targets amid charges of official data being massaged and interpreted using different criteria, abandoning the formulas that had been used for ages.
Inability to attract enough FDIs to the country has always been a sore point. In fact the phenomenon is common to the South Asian region. According to statistics available in South Asia, FDIs have been less than two per cent of their GDP for the last decade. This is one of the lowest in the world. In Sri Lanka’s case, the number remains at a modest 1.5 per cent of the GDP.







Earlier we thought or were given to believe it was because of the war that the FDIs were not flowing into the country. But even five years after the ending of the war, the FDIs are still lagging behind the projected target. So, it appears that something’s not right.

 According to experts, the requirements to attract adequate FDIs are simple and straightforward. They are -- political stability, proper infrastructure and transparent tax policies, lack of corruption and red tape and trade liberalisation. It should be noted that human rights or war crimes are not in the list.

 The added advantage of enough FDIs is that it tends to improve good governance in a country. Besides, FDIs are always better than the money coming into the country’s capital market because they don’t flee the country at the first sign of trouble like the hot money that comes into capital markets.

 Sri Lanka has now built a good road network and other infrastructure. Therefore it is evident that the problem lies at a policy level. It is high time that the regime holding office comprehends this, and does the needful to bring about a better investment climate with clear-cut investment policies, if it wants to see adequate FDIs coming into the country.
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