By Shabiya Ali Ahlam
As Sri Lanka is currently exploring the possibility of entering into a preferential trade agreement with Korea, Korean investors and officials are of the opinion that the current operating climate in Sri Lanka is not conducive enough for them to enter the country.
Pointing out that Sri Lanka does not offer attractive incentives to pull FDIs, Korean investors said the support given by the Sri Lankan government is “not good enough”.
“The trade regulations are strict here. Sri Lanka’s offering is not attractive compared to what Vietnam and Cambodia extends to us. We find they are flexible and offer us better business opportunities. This is a key reason why Korean companies don’t prefer to establish here,” Korea Trade-Investment Promotion Agency (KOTRA) Director General Weoncheol Koh told a seminar on strengthening economic cooperation between Korea and Sri Lanka hosted by Pathfinder Foundation in Colombo.
The seminar that featured Korean Ambassador Chang Won-Sam as Chief Guest was also attended by senior officials of the Board of Investment (BOI), Department of Commerce, Export Development Board (EDB), Ministry of Finance, Ceylon Chamber of Commerce, and Colombo-based economic think-tanks.
FDIs from Korea reached its peak in 2001 with US $ 21, 685 million, but declined drastically to US $ 674 million in 2002. While FDI’s from Korea is observed to be largely fluctuating, recent statistics show investments are on a declining trend and stands at US $ 615 million in 2015.
Explaining the reasons for withdrawal, a Korean investor said it was an “inconvenience” to run a businesses in Sri Lanka as three key areas were yet to be developed.
The first he said was the transport network. “Sri Lanka does not have proper infrastructure for transport outside Colombo other than the Southern expressway. There is no proper network and the increasing traffic congestion only worsens the situation,” he said.
The second area highlighted was efficiency in electricity. “Electricity is one of the main issues we are faced with. The cost is the same as in Korea. Almost 30 percent of the manufacturing cost goes for electricity, and that is not attractive.”
The third he said was labour. He noted that not only is labour expensive, but also the productivity levels are not as expected, thus leading to delays and inefficiencies in operations. “Before you invite investors you must develop the manufacturing sector. The current setup isn’t as attractive as said,” he stressed.
Another potential Korean investor said they don’t have access to correct information on setting up ventures in Sri Lanka.
“I went to the BOI seeking information on trade regulations and minimum investment required for my business. No one was able to assist me in that regard. One officer said US $ 1 million, while another said US $ 150,000. Another officer said she will call me with the correct amount and I am still waiting. It is imperative to give the information,” said the investor, sharing his experience.
Charting the way forward, Former BOI Chairman Thilan Wijesinghe emphasized that if Sri Lanka and Korea were to enter into a FTA, it is essential for the authorities to look at it in a strategic manner.
“We need to look at focusing the FTA primarily on the services and technology, based on the fact that we can be a technology sector. Scientists and technical labour are available at relatively cheaper cost here.” The former BOI Chief also stressed to look at both the nations based on their position today, instead of assessing based on the performance posted a decade ago.
BOI to boost investor confidence reducing red tape
The Board of Investment (BOI) recently expressed confidence in its ability to successfully offer potential investors with the ‘confidence factor’, stating it has put in place a number of measures to offer a full package in overcoming bottlenecks.
With the nation moving forward in full steam to lure in more Foreign Direct Investments (FDIs), BOI Executive Director Project Implementation D.P. Ariyasinghe said: “We have put in place mechanisms to address the challenges investors face. Our strong relationship with the Provincial Councils takes that a step further.
“If any issue springs up while executing investment projects, the BOI is in a position to immediately provide investors with the answers and immediately course-correct.”
He added that the agency strives to identify the needs of investors and conceptualise plans to not only attract FDIs, but to also encourage diverse segments to set foot in the island nation.
“If there is one thing that investors are looking for when they come to a country it is confidence. If we can provide them with the confidence that the money that they bring in can be invested in a well-planned manner, we are already successful in our efforts,” said Ariyasinghe during a press briefing held recently to promote investments to the country’s Eastern Province.
He opined that if the process of overcoming barriers could be expedited, investors would gain confidence about the investment climate.
Noting that challenges are common in all countries that strive to attract FDIs, the senior official said Sri Lanka being a relatively small nation is advantageous as it allows overcoming bottlenecks in a relatively easier manner.
When looking at the overall numbers, 60 to 65 percent of the inflows coming into the country as FDIs are re-investments. Ariyasinghe said this indicated that the agency (BOI) had been successful in its efforts.
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