Sri Lanka’s Ambassador Ibrahim Sahib Ansar feels that there is an enormous scope for growth in the bilateral relations with Saudi Arabia, since Sri Lanka has emerged as a major Global Logistics Hub in the South Asian region for trade, investment, communications, and financial services. Known as the Colombo Freeport, it provides integrated air, sea and road services linked to state- of- the-art distribution parks. Construction of the Freeport was completed in January 2002.
In an overview of Saudi-Sri Lankan relations, he said multinational companies could also consider investing in Sri Lanka, which has signed a free trade agreement with India. The agreement creates multiple investment opportunities for local and multinational firms based in Sri Lanka seeking to enter the Indian market. The underlying premise of the agreement is to create a free trade area through the complete or phased elimination of tariffs, which will occur over defined phases.
Other factors conducive to overseas investment include the Sri Lankan work force which accounts for 35 percent of the total population. Sri Lanka, the ambassador said, boasts high levels of education. It has the highest literacy rate in South Asia (92 percent) and approximately 50 percent of the students who have completed their higher education are trained in technical and business disciplines. English is widely spoken in the country and is the main language used by the business community. In addition, according to the World Bank Development Indicators 2000, Sri Lanka has the lowest labor cost per worker in manufacturing.
In the EIU’s country forecast, Sri Lanka’s overall score in the business environment rankings improves from 4.99 for the historical period (1997-2001) to 6.03 for the forecast period (2002-2006). The country’s global ranking has improved from 49th to 45th and its regional ranking moved from 14th to 13th recently. The higher rankings, he pointed out, are indicative of the more attractive investment climate in the country, with Sri Lanka’s score in most of the categories used to evaluate the business environment improving significantly. For instance, Sri Lanka is ranked highly for its liberal approach to foreign investment, with its global & regional rankings moving from 36th to 27th (out of 60 countries) and 8th to 4th (out of 16 countries) respectively. According to him, Sri Lanka is ranked as the most liberalized economy in South Asia. Investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100 percent repatriation of profits.
Total foreign ownership is welcome in almost all areas of the economy, with only a few areas limited or restricted to foreigners.
Sri Lanka leads the South Asian region in terms of human development indicators, with its high literacy rate of 91 percent placing it way ahead of other South Asian nations and on par with those of Southeast Asia. Its national health indicators are comparable with those of the developed world.
This is underscored by the relatively high ranking the country has received in terms of GDP per capita (PPP), which at $3,530 is higher than that of India ($ 2,358), Pakistan ($ 1,928) and Bangladesh ($ 1,602).
Sri Lanka was placed 89th (Medium Human Development Category) out of 173 countries in the Human Development Indicators constructed in 2002, ahead of China (96th), Vietnam (109th), Indonesia (110th), India (124th), Pakistan (138th) & Bangladesh (145th).
The Human Development Index (HDI) measures a country’s achievements in three areas of human development viz: Longevity, knowledge & a decent standard of living. Longevity is measured by life expectancy at birth. A combination of adult literacy & the combined primary, secondary & tertiary gross enrolment ratio is used as a measure of knowledge while GDP per capita (PPP) is used to measure the standard of living.
On the investment front, he pointed out that the safety of foreign investment is guaranteed through the acceptance by two-thirds majority of Parliament of the Constitutional Guarantee of Investment Protection Agreements. Under article 157 of the country’s constitution, the agreement enjoys the force of law and no legislative, executive or administrative action can be taken to contravene it.
Bilateral investment agreements are valid for 10 years, and are extended automatically unless terminated by either party. If the agreement is terminated investments already made are protected for another 10 years, he added.