HOME to some of the most unique cultural icons, abundant with it’s own specific natural resources, a spectacular landscape of natural beauty and a very fast evolving and adapting economy with equally unique work force, Sri Lanka could be described in many ways an enigmatic fusion of cultural attraction that forever retains it’s identity and modern day advancements that never keeps slowing down.
Whilst the country is poised strongly and etched forever in the minds of many a tourist as “The Land like No Other,” the country has set up a very strong, potent and effective infrastructure to woo and facilitate foreign investments. The Board of Investment (BOI) is designed as the primary extension of the government in this respect; structured to function as a central facilitation point for investors, it operates as an autonomous statutory body that is directly responsible to the president of Sri Lanka. It has a Board of Directors drawn from the private and public sectors and is assisted by a Ministerial Committee on Investment Promotion.
The country is known as a priority manufacturing hub for the apparel industry, with local manufacturers already in significant tie ups with brands such as Victoria’s Secret, GAP, Diesel just to name a few. In addition, the hassle free regulatory system allows every link in the supply chain to function independently and thereby ensuring a timely and efficient process that in turn translates into viable returns. Whilst other countries are restricted operationally with factors such as labor skill, environmental protection and political alignment, Sri Lanka continues to score high with it’s work force and stringent quality assurance techniques.
The country is and will always remain a green and eco friendly destination as tourism ranks amongst the highest revenue earning industries; all concerned regulatory bodies are at constant work to ensure the balance is maintained between industry and nature. From the sourcing of raw materials to regulations when shipping out the final output, Sri Lanka has become the destination of choice for many prominent brands in the apparel world. The Island is also the logical location for manufacturing and service organizations that wish to establish a presence in what is fast becoming an economic powerhouse in the region. It is ideally located as the gateway to the vast Indian subcontinent — home to a quarter of the world’s population. In addition, trade barriers are falling throughout the region. The seven countries which comprise the South Asian Association for Regional Cooperation (SAARC) have resolved to progress toward a South Asia Free Trade Arrangement (SAFTA), which looks set to continue for many years to come.
To further facilitate the investment process, the BOI sets out incentives and perks which cement the government’s drive. Significantly, when you sign an agreement with the BOI, the specific incentives granted to an eligible company — which may include tax holidays or preferential tax rates, exemption from customs duty and foreign exchange controls — remain valid for the life of the enterprise and to underline the stance of investor centric rationalization, it further states that the provisions and the spirit of the Agreement cannot be changed by successive governments. This is the fundamental strength of a BOI agreement which few other countries can offer or match. To date, more than 1,000 companies which have signed agreements with the BOI are still in commercial operation making sound gains. A conservative estimation puts the share of industrial exports by enterprises with foreign equity participation, which number more than 600, at 54 percent. In addition, the services of the BOI operate in such a wide scale that it offers you everything from advice on Visa regulations, environmental protection, industrial relations, setting up and operating employee chambers to Facilitating import/export clearance and customs procedure for import of capital goods, raw materials and the export of the final product.
The economy has grown over 6.6 percent during the first half of 2008 compared to a growth of over 6.3 percent during the same period in 2007. The Randora program provides the basis for economic development within the Ten Year Horizon Development Framework 2006-2016. The rapid growth in the telecommunication sector has been facilitated by healthy competition with many local and international players entering the market.
Foreign investors are pumping millions of dollars into Sri Lanka, despite years of ethnic violence, officials say, as reported in the New York Times of Feb. 1, 2009. At least 103 projects totaling about $930 million were worked out in 2008, said a spokeswoman for the Greater Colombo Economic Commission. Companies based in Japan, South Korea and Hong Kong are the leading investors, lured by raw materials and inexpensive labor.
In the first half of 2008, there was a growth in the number of new projects to 230 compared to 223 in the previous year. In addition, a total of 129 new agreements were signed by the BOI with investors, representing 16 percent increase from the corresponding period in 2007. The estimated value of agreements signed in January to June 2008 was 140,144 million Lankan rupees which was an increase of 27 percent from the previous year.
The most important investment generating country as at September 2008 was Malaysia with investments valued at $101.6 million. Malaysia was followed by 40 other countries of which the principal ones were the Netherlands ($87.7 million), Luxembourg ($55.8 million), India ($50.6 million), Hong Kong ($37 million), the USA ($29.4 million), China ($25.8 million), Sweden ($21.5 million), Belgium ($17 million), Japan ($15.8 million), Singapore ($14.5 million) and the UK ($12 million).
Private investors are active in telecommunications services such as cellular telephone services, wireless local loop systems and pay telephone networks. Investments in the power sector, ranging from mini-hydro systems to large-scale generation plants and the port sector are also being implemented. Other opportunities in infrastructure investments include housing and property development, hospitals, voice and data communication systems, public transport and environment. Foreign ownership up to 100 percent is allowed in these ventures. Airtel, India’s communication giant, has started operating its mobile service in the island.
Sri Lanka has all the required attributes for successful investment in the electronics industry. For example, the status of Sri Lankan workers as among the best educated and most trainable in South Asia is especially relevant. Many industries manufacturing for export are already located here. Products manufactured include head-stacks for computer disk drives, magnetic heads for audio and video equipment, ferrite core transformers and household appliances. Research and development facilities and “troubleshooting” expertise for the electronics industry are available locally at the Arthur C. Clarke Center for Modern Technologies. The Center will also prepare and deliver customized training packages. Studies undertaken in Sri Lanka show that the local light engineering industry compares well internationally for both its efficiency and competitiveness. This is of significance as manufacturing operations in light engineering products are among the first to move to lower cost locations when labor costs increase.
There are several investment opportunities in the manufacture of products such as electrical machinery, house ware such as fans, room air conditioners, refrigerators, small engines and metal furniture. Investments also can be made in fabrication subcontracting for many products. Sri Lanka has a long tradition in the manufacture of machinery used in the tea industry. These skills can be harnessed and easily extended to the manufacture of all types of food processing machinery. Each year, Sri Lanka’s education system produces a large number of workers proficient in the skills requited for the light engineering industry. The country has a large pool of young educated people with skills in computer programming. Software engineers qualified in computer science offer levels of skills that are among the best in the world. The government has actively encouraged the spread of computer literacy by providing duty concessions on all hardware imports.
The island is the world’s fifth largest exporter of natural rubber, generating over 100,000 tons annually. More than 60 percent is exported in an unprocessed form. On the manufacturing front, Sri Lanka is the world’s leading supplier of solid rubber tires for off-road vehicles. Major investments have also been made by producers of healthcare and surgical rubber products, where high quality raw material is of primary importance. Globally, there is good demand for rubber tiles and floor coverings. In addition, shoe producers obtain rubber heels and soles from Sri Lanka. Opportunities for investment include the manufacture of tires, tubes and automotive rubber products, especially by relocating these facilities from high cost industrialized or industrializing countries.
The country already serves as the headquarters for one of the largest software development companies in Southeast Asia. Furthermore, low cost offshore data entry operations have thrived here since the early 1980s. Investors can now take advantage of increased sophistication and knowledge to set up offshore software development units. Software development is carried out in most current languages.
This environment is further enhanced by modern data transmission and telecommunication systems and complementary hardware. The island exports products such as precision tools, moulds and electrical enclosures and manufactures high quality water pumps and agricultural machinery for the local market. Sri Lanka’s tropical climate is ideal for large-scale export-oriented investments in areas such as foliage, cut flowers and exotic fruits and vegetables.
East Asia also offers an expanding and adjacent market for shellfish and other products of mariculture and aquaculture. In addition to primary production, Sri Lanka also requires processing and storage facilities to help exports.