Private sector prospers from free flow of FDI

Updated 04 February 2014
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Private sector prospers from free flow of FDI

The end of insurgency has been a boon for the Sri Lankan economy as the island nation ushers in a new era of investments aimed at consolidating its reputation as a regional hub.
The end of the war in 2009 meant countless new opportunities for the Indian Ocean island nation and previously unexplored streams of business are opening up further.
The country has succeeded in establishing itself as a priority destination when it comes to investments and trading since the end of the Civil war in May 2009, paving the way for political, economic and social stability.
With the Sri Lankan government taking an aggressive stance with trade delegations, individual B2B businesses, and participation in trade fairs, and President Mahinda Rajapaksa himself making visits to other countries in search of trade partnerships, this is considered a true ushering in of a new era of unprecedented prosperity.
The flow of foreign direct investment (FDI) in the island state has gone up with many global corporate giants exploring the Lankan market for new ventures.
The credit for the surge goes to the Board of Investment (BOI), a government sanctioned body set up for the sole purpose of incremental investments.
Structured to function as a central facilitation point for investors for over 33 years, the BOI with its mandate encompassing the entire island has ensured this objective was met with a steady pace as the investment board, with clear set goals of increasing foreign investments and parallel economic growth, functions with the highest service levels ensuring flow of FDI.
Moreover, a high-powered cabinet sub-committee of inter-ministerial leadership has been constituted to serve as facilitator for investor’s assistance, which further strengthen the BOI, clear all bottlenecks and ensure speedy clearance of investment approvals so that investors can implement projects in a hassle-free atmosphere.
The BOI companies today employ about 500,000 workers and 65 percent of the companies represent Sri Lankan exports and, to be specific, nearly 90 percent of the country’s industrial exports.
The BOI, is therefore, a significant agent of change in the Sri Lankan economy with more than three decades of its existence.
It has radically transformed the island nation economically as well as socially, placing the country in a position where it can compete in an increasingly globalized world.
Sri Lankan economic experts believe that the most significant aspect of working with the BOI is that, when you sign an agreement with the board, the provisions embodied in the agreement remains valid for the life of the enterprise.
Successive governments cannot change these provisions, ensuring a degree of stability that few other countries can offer or match. Further, a contract with the BOI means concessions on taxes and duties, which are appropriated according to the level of investment.
Moreover, the BOI has established a series of Free Trade Zones (FTZs) and trade parks at strategic locations, which provide business owners the most conducive atmosphere for manufacturing purposes.
The island state has found traction in terms of investment flow from June 2009, with new opportunities in sectors such as water purification and supply, mini hydro power, mining, properties, the famed Sri Lankan teas (better known as Ceylon Tea), eco tourism, rubber, agriculture, gems and industrial raw materials.
Foreign investment has flowed more freely into the private sector.
The country enjoys a Free Trade Agreement (FTA) with both India and Pakistan, which provides distinct business opportunities. Investors can have the best of both worlds with, for example, access to India’s market and products and Sri Lanka’s advantageous location as a base.
Due to these reasons, the country has a reputation of being a strategic access point for other crucial markets as well.
The country’s environment also is a perfect fit for specialized industries such as electronics, light engineering, computer software with many new investors in these segments signing up with the BOI.
An often underrated investment opportunity is the agricultural prospects in Sri Lanka. The tropical climate and the renewed opportunities in foliage, cut flowers and exotic fruits and vegetables with an export-oriented market is paving the way for an influx of like minded investors into the country.
Specifically, the climate in the mountainous central district is deemed ideal for agricultural ventures.
The major factor that captures any investor’s eye is the phenomenal growth of stock market in the last five years as the market capitalization of the Colombo stock market improved from $5 billion to $20 billion.
The market capitalization and liquidity is expected to grow further in coming years with new listings and other forms of financing by existing listed entities.
With the expansion, integration and access of the northern areas, economic growth is expected to be at the range of 5 to 7 percent.
Interestingly, US Investment legend Jim Rogers has rated Sri Lanka and China with better investment opportunities than other countries in the region.
With security and stability assuring investors, the market has been on an all time high with returns far exceeding expectations.
The past year has seen a prolific increase in trade related visits by countries such as Belgium, the US, Iran and China.
China being a major partner, has stakes in developments of crucial areas such as power and energy (the Norichcholai Coal power plant is being commissioned by a prominent Chinese company).
Another sector experiencing a boom is the hotel and leisure industries, the recent signing of the Movenpick group to construct a star class hotel within the city is just one of many projects in the pipeline.
Catching onto the growing trend of eco-tourism, many groups are looking to initiate such tourism projects in the green zones.
The Cinnamon Lodge, Habarana and Heritance, Kandalama are two prime examples of successful star class hotels with every amenity and an eco-focused theme.
With tourist arrivals sky rocketing, this segment is proving to be a major money spinner.
Therefore, the country holds more space in one’s mind as the pearl of the Indian ocean (enchanting travelers from the time of Ibn Batuta) for its scenic beauty.
What truly sets apart Sri Lanka from other investment destinations is the efficiency and the smooth, streamlined processes that go with starting up a business in the country, and the lion’s share for this credo goes to the BOI that assists investors from the first boardroom discussion to the construction site.
Sri Lanka being ranked as one of the fastest growing trading hubs and an economy with the most liberal policies, investors to the country are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100 percent repatriation of profits and total foreign ownership available in most of the sectors.
With more concessions and specific benefits planned for foreign investors, the nation gears itself for another year with even greater growth in all key indicators.
So far as the manpower found on the island is concerned, the primary indicators are stronger than ever before. The literacy rate in the country is one of the highest in the world at 91.2 percent and most of the skilled labor have an apprenticeship or technical knowledge at the diploma level.
Ethical practices, which aim for the triple bottom line and ensuring the balance between employer and employee benefits, are maintained and form the foundation for a longstanding work force which rarely shifts organizations.
The government and subsidiary bodies conduct and encourage continuous training programs at specific industries aimed at sharpening the work force knowledge and vocational training.
Since the end of the civil war in May 2009 and prevalence of political and social stability, the country has bought itself onto the discussions of many global corporate giants across the world.
The country is one of the leading hubs for garment manufacturing.
Its companies have long-standing manufacturing contracts with brands like GAP and Victoria’s Secret.
When it comes to the FDI, BOI statistics show that Malaysian companies invested $150 million in the country in 2008-2009, making the country the biggest foreign direct investor in Sri Lanka during the fiscal year. India ranked second with $126 million as Bharti Airtel Ltd., the nation’s largest mobile-phone company, started operations in Sri Lanka. China was placed ninth with $27 million of investments.
With the current governments’ prudent investor friendly strategy, these figures are expected to soar in the future.
The end of the war also meant the channeling of the funds toward internal development such as highways and rebuilding or improving townships which in turn meant improved logistics and transportation capabilities.


Boeing reports jump in 1Q profits, lifts 2018 forecast

Updated 25 April 2018
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Boeing reports jump in 1Q profits, lifts 2018 forecast

  • The aerospace giant reported that earnings surged 56.9 percent from the first three months of 2017
  • Boeing has often been seen as vulnerable to a trade war between Washington and Beijing

NEW YORK: Boeing profits jumped, and the company upgraded its earnings forecast for this year Wednesday amid a strong commercial aviation market and as executives expressed optimism the US and China will avoid a trade war.
The aerospace giant reported that earnings surged 56.9 percent from the first three months of 2017, rising to $2.5 billion. Revenues rose 6.5 percent to $23.4 billion.
The upbeat report sent the company’s share price higher, and reflects the health of the airline industry as flying becomes much more common in the Middle East, Asia and other developing regions.
A big player in China, Boeing has often been seen as vulnerable to a trade war between Washington and Beijing, a possibility that topped Wall Street’s list of worries earlier this month but has receded of late amid softer rhetoric between and the prospect of talks in coming days.
Boeing chief executive Dennis Muilenburg said he was encouraged that the US planned to send a high-level trade team to Beijing. President Donald Trump confirmed Tuesday that Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer will travel to China soon.
“We know aerospace is very important to both countries and while some initial statements have been made about potential tariffs, none of those severe actions have been implemented,” Muilenburg said on a conference call with analysts and reporters.
“And we’re frankly encouraged by the continuing dialogue and we’ve heard from leadership in both countries that both are seeking to find negotiated positions that will be productive for both countries.”
Muilenburg said Boeing’s supply chain had not been significantly affected by tariffs on aluminum and other measures that have been implemented.
In the quarter ending March 31, Boeing notched higher commercial plane deliveries compared with the year-ago period. Planes with gains included the narrow-aisle 737 and the 787 “Dreamliner.”
The aerospace giant has been consulting with customers on launching a possible “middle market” plane that would fall between its narrow-body model, which carries up to 200 people, and its wide-body design, which typically flies around 300.
The company said it would raise production for the Boeing 767 plane to three a month from 2.5 due to strength in the cargo market as industrial demand picks up.
Earnings in Boeing’s defense division were lifted by strong weapons volume. The company won new business from Kuwait and said it was on track with the KC-46 tanker program, a US Air Force transport aircraft contract that has led to unexpected cost increases in prior quarters.
A report earlier this month by the US Government Accountability Office warned that deliveries of the first fully capable KC-46 tankers could slip to May 2019 from the current timetable of October 2018, citing a number of risks to the timeframe that need to be mitigated.
But Muilenburg said the company was making “steady progress” on the project and toward delivering the first 18 tankers this year.
Other key questions surrounding Boeing include the status of talks with Brazilian company Embraer on a potential collaboration that must be blessed by the government in Brasilia.
Boeing also could be impacted if President Donald Trump scotches the nuclear agreement between Iran and major governments that opened the door to commercial plane sales in the sanctions-constrained country.
Muilenburg said Boeing has delayed deliveries of 777 planes to Iran in line with the US government process and its targets for 2018 had not accounted for them.
“The plan that we outlined for your is not dependent on the Iranian orders,” he said. “If those orders do come to fruition, if we do ultimately deliver airplanes, those represent opportunities for us.”
Shares climbed 2.3 percent to $336.58 in midday trading, the biggest gainer in the Dow.