Sri Lanka receives $1.42 billion as foreign direct investment in 2013

Updated 07 December 2014
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Sri Lanka receives $1.42 billion as foreign direct investment in 2013

Islamic Finance has garnered an increased interest in the last few years and has the potential to develop the capital markets of Sri Lanka and assist in the development of infrastructure along with encouraging foreign investment in the island state, according to an economist in Sri Lanka.
In an interview with Arab News, Suresh Perera, tax and regulatory principal of the KPMG Sri Lanka, said Islamic Finance was first introduced to Sri Lanka as early as 1997. However, the landmark evolution was the amendment made to the banking act (No. 30) of 1988 in the year 2005 where it allowed both commercial banks and specialized banks to operate on a Shariah-compliant basis. Amana Bank is a full-fledged Islamic Finance Bank in Sri Lanka. Islamic Finance windows have been established in state banks such as Bank of Ceylon and in large private banks. Instruments such as mudaraba, murabaha, ijara, and diminishing musharaka are common in Sri Lanka.
Perera, who will be presenting a paper at the forthcoming KPMG Middle Eastern and South Asian Conference (MESA), being held in Dubai from Dec. 9-10, said Sri Lanka remains an attractive destination for foreign investors.
The MESA conference would attract many clients from across the MESA region and also key KPMG regional partners. The conference would provide valuable inputs in relation to structuring Middle Eastern investment, outbound investments and strategies, trade and customs, tax and regulatory developments in Saudi Arabia and other middles eastern countries, tax updates, and investment opportunities in South Asia, including Sri Lanka .
“Sri Lanka has a fascinating web of taxes and laws restricting foreigners acquiring land, but any foreign investment that would obtain the status of strategic development project (SDP) could enjoy sweeping tax benefits as well as exemptions from laws that restrict foreigners acquiring land to carry out the project.
All the projects that have received SDP status so far such as oil exploration projects carried out by Cairn, hotel projects by Shangri La, Sheraton, Hyatt and mixed development projects by TATA group, waterfront properties and Avic International, coal power plant, and UCLAN (UK based University) in the education sector have received various tax exemptions.”
He said preferred areas of investment include education, tourism, infrastructure, utilities, knowledge and Agriculture.
“It must be pointed out that even under the normal tax regime field of agriculture enjoys special tax incentives. Projects entailing cultivation of vegetables and fruits for export market using modern technology could be an area of investment for the Middle Eastern market.”
Sri Lanka earned $1.42 billion as foreign direct investment (FDI) in 2013 while in 2012 it earned $1.38 billion as FDI. The highest FDI source in 2013 was 24 percent from Chinese investors. The FDI target for 2014 is $ 2.5 billion.
Sri Lanka recorded an exhilarating gross domestic product (GDP) growth rate of 8 percent in the years 2009-2010 and 2010-2011, exhibiting the powers of its new found freedom, soon after the end of the three-decade long cold war, which ended in 2009.
Sri Lanka’s GDP growth rate in 2013 was 7.3 percent and 6.3 percent in 2012. Sri Lanka’s aim is to achieve economic growth of 8 percent in the year 2014 and this rate of growth is the highest in Asia.
“One of Sri Lanka’s main advantages is the high quality of workers. The literacy rate in Sri Lanka is 92 percent, the highest literacy rate in south Asia and overall one of the highest in Asia,” he said, adding that the island state is one of the safest countries in the world for investment due to a number of mechanisms in place to protect investors.
Sri Lanka has signed bilateral investment protection agreements (IPA) with 28 countries. Sri Lanka also has bilateral double tax avoidance agreements (DTA) with over 40 countries. Out of the Gulf countries, Sri Lanka has entered into DTA with Kuwait, Oman and the UAE, and a limited DTA covering air transport with Saudi Arabia. Sri Lanka is party to many free trade agreements such APTA, SAPTA, ISFTA and IPFTA.


Upping ante, Trump threatens new tariffs on Chinese imports

Updated 32 min 41 sec ago
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Upping ante, Trump threatens new tariffs on Chinese imports

  • Trump said that if China responds to this fresh round of tariffs, then he will move to counter “by pursuing additional tariffs on another $200 billion of goods.”
  • Gary Cohn, Trump’s former top economic adviser, said last week that a “tariff battle” could result in price inflation and consumer debt — “historic ingredients for an economic slowdown.”

WASHINGTON: President Donald Trump directed the US Trade Representative to prepare new tariffs on $200 billion in Chinese imports on Monday as the two nations moved closer to a potential trade war.
The tariffs, which Trump wants set at a 10 percent rate, would be the latest round of punitive measures in an escalating dispute over the large trade imbalance between the two countries. Trump recently ordered tariffs on $50 billion in Chinese goods in retaliation for intellectual property theft. The tariffs were quickly matched by China on US exports, a move that drew the president’s ire.
“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Trump said in a statement Monday announcing the new action. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.”
Trump added: “These tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”
Trump said that if China responds to this fresh round of tariffs, then he will move to counter “by pursuing additional tariffs on another $200 billion of goods.”
It wasn’t immediately clear when the new tariffs could be put in place, as the trade office has yet to identify the Chinese goods to be penalized or conduct a legal review. The first round of penalties announced by both nations is set to take effect July 6.
The intellectual property sanctions were the latest in a spate of protectionist measures unveiled by Trump in recent months that included tariffs on steel and aluminum imports to the US and a tough rhetoric on trade negotiations from North America to Asia.
The escalation in the dispute with China may also serve as a warning to other trading partners with whom Trump has been feuding, including Canada and the European Union.
The move quickly drew praise from former Trump senior adviser Steve Bannon, who told The Associated Press: “President Trump told China and the world tonight that America will not back down when it comes to economic aggression.”
But Wall Street has viewed the escalating trade tensions with wariness, fearful they could strangle the economic growth achieved during Trump’s watch. Gary Cohn, Trump’s former top economic adviser, said last week that a “tariff battle” could result in price inflation and consumer debt — “historic ingredients for an economic slowdown.”
Trump’s comments came hours after the top US diplomat accused China of engaging in “predatory economics 101” and an “unprecedented level of larceny” of intellectual property.
Secretary of State Mike Pompeo made the remarks at the Detroit Economic Club as global markets reacted to trade tensions between the US and China.
He said China’s recent claims of “openness and globalization” are “a joke.” He added that China is a “predatory economic government” that is “long overdue in being tackled,” matters that include IP theft and Chinese steel and aluminum flooding the US market.
“Everyone knows ... China is the main perpetrator,” he said. “It’s an unprecedented level of larceny.”
“Just ask yourself: Would China have allowed America to do to it what China has done to America?” he said later. “This is predatory economics 101.”
The Chinese Embassy in Washington did not respond to a request for comment.
Pompeo raised the trade issue directly with China last week, when he met in Beijing with President Xi Jinping and others.
“I reminded him that’s not fair competition,” Pompeo said.
President Donald Trump had announced a 25 percent tariff on up to $50 billion in Chinese imports. China is retaliating by raising import duties on $34 billion worth of American goods, including soybeans, electric cars and whiskey. Trump also has slapped tariffs on steel and aluminum imports from Canada, Mexico and European allies.
Pompeo on Monday described US actions as “economic diplomacy,” which, when done right, strengthens national security and international alliances, he added.
“We use American power, economic might and influence as a tool of economic policy,” he said. “We do our best to call out unfair economic behaviors as well.”
In a statement, Trump says he has an “excellent relationship” with Xi, “but the United States will no longer be taken advantage of on trade by China and other countries in the world.”
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Karoub reported from Detroit. AP writer Ken Thomas contributed.