STRONG GOVERNANCE GIVES CONFIDENCE TO INVESTORS - ITC CHAIRMAN

Ease of doing business always encourages investment

It’s a journey. It is not something that happens overnight

We have a delegation of members -each one has actually come with a very specific business opportunity

Tourism is an area that Sri Lanka has got phenomenal strengths

Sanjiv Puri, the immediate past President of Confederation of Indian Industry (CII) and Chairman and managing Director of ITC Ltd is in Sri Lanka leading a delegation of a dozen Indian business leaders for high level engagements. 

In an interview with Daily Mirror, Mr. Puri talks about the investment climate in Sri Lanka, its potential for growth and plans for future investments. ITC Ratnadipa, a Luxury Collection Hotel, is his largest investment in Sri Lanka. 

Excerpts of what he discussed:

QWhen talking about Indian businesses and Indian investments in Sri Lanka, you have one of the largest Indian investments here. You initially started off this project. Then you had some issues initially. Now it is complete. In that context, how do you see the investment climate in Sri Lanka?

I think, as you are aware, Sri Lanka went through a period of instability in between. But now I think the recovery is quite commendable and the IMF (International Monetary Fund) itself has spoken about it and acknowledged it. So, certainly, I think the progress being made is appreciable. It is not just businesses here that are noticing it but more importantly, bodies like the IMF have acknowledged it. Your currency is stabilised.

So, macro stability has come in. That is the foundation for economic progress and macro stability. It’s very much in the right direction. Of course, the journey of economic transformation is a marathon. It takes time. There are many steps involved in it.

But we see that a very strong focus on macro stability usher in a new era of economic development. We got this opportunity to interact with the President when he visited India.

We had in CII (Confederation of Indian Industry (CII)) the opportunity to host him for a round table of the leading business community in India. It was a very, very encouraging introduction. In fact, he invited all of us to visit Sri Lanka.

With the very positive message that he delivered there, I think that’s encouraged a lot of businesses to come here. Today, we have a delegation of CII members that are here.

Each one has actually come with a very specific business opportunity, either about enhancing or expanding what they are doing. There are some who want to start afresh, make a fresh investment, fresh intervention in Sri Lanka. We span many, many sectors. I think that itself is a sign that things are in the right direction.

The investors were already here. We, ITC as a company, are more recent. But there are many Indian companies that have been around for a while. Some of them are also part of the delegation. They have also shared positive experiences.

Q As far as the investment climate is concerned, how do you see Sri Lanka’s potential for development in the hospitality sector?

In Sri Lanka, there are several opportunities. Tourism is a big one. Tourism is an area that Sri Lanka has got phenomenal strengths- with some of the natural beauty and the natural advantages you have. They are unparalleled, unique. Even the hotel that we have got here, this kind of view- they are unique and iconic. Sri Lanka has a lot of strengths. It has a very strong culture of welcoming tourists.

It has got much to offer also in terms of heritage I understand, two to three million tourists come to Sri Lanka. The potential is much more.

India is the largest source market. Within India, we see outbound tourism. There are 30 million tourists. But within India, the number of people travelling from one place to another is 700 million.

For some parts of India, this (Sri Lanka) is closer than taking an internal flight. So, even if you were to get a small percentage of that 700 million, we are talking of a few millions coming just from India. So, that’s the potential.

We would think that it’s an opportune time as things are stabilised here. Political stability is there, macroeconomic stability is there. It’s a good time for Sri Lanka to showcase what it has to offer in source markets like India.

The second is on the logistic side. There is tremendous opportunity for Sri Lanka. You see, you have a geo-strategic location. The ports in Sri Lanka have natural advantages of depth, etc. It can become a very strong, much bigger regional hub for transit, storage, some value addition, and then forwarding. That activity itself can become a big economic multiplier. It’s also a source of revenue, but also a big economic multiplier. There’s a tremendous opportunity. A lot of the traffic that comes here is also from India. India is the fastest growing economy.

The world is looking at resilient supply chains. We are seeing newer supply chains rise from India. We are also seeing that India has done FTAs in the recent past. Discussions are underway with Australia, UAE, then UK, and EU and US.

It opens up more opportunities for fresh supply chains or exports out of India. All these will naturally increase the inbound and outbound traffic into India. There’s a lot of potential in renewable energy. There is also a great potential of developing Trincomalee as an energy hub. We are aware of the trilateral MoU that was signed. 

As India is developing and integrating with global value chains, we can have seamless flow between Sri Lanka and India. Proximity gives the advantage. Manufacturers here can also be part of that. So, Indian investors are also open to coming. We have some in our delegation, who want to invest in certain areas. 

There are certain sectors in which Sri Lanka is very strong on agriculture also. For example, tea, cinnamon are some areas where Sri Lanka is very strong. India has about 500, 5,000 actually, agri-startups which bring cutting edge technologies to solve agricultural issues.

There is an opportunity for us to make connections to be able to improve productivity and quality here. In the same area you can get much higher vertical growth and also improve the quality. And, I think for all of this, what is very critical is the availability of skilled, right, qualified manpower.

The training ecosystem has transformed as the economy has evolved and newer technologies come into India- Artificial Intelligence. 

QWhat is your own plan for expansion of investment here?

For us, investment into a new country, into a location or new country is a journey. This is our first investment. It is certainly not going to be the only investment. But it’s a journey. So, we have to first stabilise this investment. Then, we will look at the next steps. For example, we entered Nepal some time back. We started with one line of business. Over time, we diversified into the second line. We just started to do a hotel there. We are managing a hotel there. We have signed MoUs for the others. We are also in the process of evaluating, building our own hotel there.

We started with some other business there. When you come to a place. You look first to stabilise the first investment, get to understand the place better and you look for more opportunities. That’s a natural process that will happen. 

Q With the change of government in Sri Lanka last year, the investment project by India’s Adani was cancelled. Has it eroded confidence among Indian investors?

I am not in a position to comment on the specifics because this is between a specific company and the government. So, I am not privy to the issues there other than reading what has come in the media.

So, I will not be able to really comment on that. But the fact of the matter is that, you know, in this delegation, there are people who want to expand, who want to make some investment - very specific projects, very specific areas. We have people from different areas that are examining this.

Q What are your thoughts on the improvement of the investment climate in Sri Lanka in terms of regulatory mechanisms, approval mechanisms etc?

That’s a good point that you’ve raised. Ease of doing business always encourages investment. But at the same time, I do understand that it’s a journey. It is not something that happens overnight.

What we are seeing is that, directionally, it’s absolutely right. Absolutely right. The foundation of all this is macroeconomic stability, which is in place.

We have had meetings with various ministers, including the Prime Minister. Then we also had a meeting in the Board of Investment. So, what we found was a very strong commitment to this journey of economic transformation and a very keen interest to deal with some of these very deep commitments to ease of doing business and the processes that would enable faster economic progress.

That is certainly a positive. We do recognise that it’s a journey. India also has undergone a journey under the leadership of Prime Minister Narendra Modi.

We’ve seen this in the last decade. Lots have changed. It is not that everything has changed at one go. It has been step by step, many things have happened. We are quite encouraged by the commitment and intent that is being indicated.

Q Sri Lanka is a small market with little more than 20 million people. It is not a big market for India. Still what prompts you to look at Sri Lanka for business operations?

If you look at India’s own journey, India also has been transforming over time. In the last 10 years, India has transformed at a very rapid pace under Prime Minister Modi. As India has transformed, Indian businesses have grown. 

They have become more competitive and cutting-edge in technology. They are more and more integrating beyond the borders. It is a natural process that companies are also looking at opportunities to grow beyond India.

When we do that, every capital will go to where it can thrive and multiply. So, people will examine various options. Based on the criteria that businesses have, they make their choices.

I think what works for Sri Lanka, first and foremost, is the fact that at the leadership level in the two countries, there is a greater alignment and keenness to have greater economic integration. That certainly encourages businesses to look at the opportunities here closely. That is number one.

Number two, there is this advantage of proximity and historical cultural ties. When you are going to a new place, I think operating in a new culture is also something one has to understand. So, cultural closeness is something that makes it easier for businesses to develop in newer areas.

Lastly, the fact of the matter is that there are opportunities. Even if there is cultural integration or sponsorship or leadership, without opportunities, nothing will happen. The fact of the matter is these are significant opportunities.

The headroom to grow is tremendous here. If you look at the per capita consumption, the headroom to grow is tremendous here. It’s a growth market. So, all of these factors work in favour. 

There are some specific advantages that Sri Lanka has got. You’ve got advantages on energy, tourism. You’ve got advantages on logistics. You have several FTAs besides the domestic market. We also look at this, you know, we have to look at this not purely from an investment, domestic market perspective.

It can also be about complementarities servicing the world. We have to look beyond that also. So, I think all these fit in well.

Q How important is it for any country to root out corruption, to encourage investments?

I think transparent systems, efficient systems, and strong governance always give confidence to investors.

Q Purely from a commercial perspective, how do you look at it the Colombo Port City as a place for you to put your money?

We are not considering any specific investment there. I have not studied what incentives or policies prevail in the port city.

But for any business, I’m sure we’ll study all the options that are available. So, you will look at several things. You will look at policy support.

You will look at logistics. You will look at availability of manpower, raw material. So, all these factors will be considered when you are doing the investment.

So, it will be studied. I don’t have anything specific to offer on this port city because I haven’t studied it. But if I was to look at an investment, at some point of time, we will also look at. We are in several sectors.

We are in agriculture, we are into consumer goods. So, some of these we will look at as we go along. But when we look at it, obviously, we will evaluate all the options objectively from a business perspective and then take what is the right decision.