The White Paper on FDI Landscape and Investor Sentiment in Sri Lanka 2018, presented by American Chamber of Commerce in Sri Lanka (AMCHAM) yesterday highlighted that Sri Lanka will need to address concerns voiced by the private sector.
Particularly concerns relating to policy instability and labour constraints needs to be addressed if the country looks to position itself as an attractive FDI and trade destination in its pursuit of economic reforms. If the concerns of the private sector are not addressed, the report revealed that vision of Sri Lanka being an attractive FDI and trade destination will likely remain a pipe dream.
Nevertheless, the white paper highlights that there are many positives to look forward to over the coming years in Sri Lanka as reform procedures are also being implemented to improve investment promotion and business conditions within the country, while negotiations are underway to improve Sri Lanka’s trade relations. Making a presentation on FDI Landscape and Investor Sentiment in Sri Lanka 2018, in Colombo, yesterday, Stax Founder and CEO Rafi Musher also noted that, for Sri Lanka to become an attractive FDI and trade destination, it is essential to ensure transparency and corporate governance, improve policy stability, bring in capital across all the industries and also to invest in education and vocational training to match the industry needs and potential.
Noting that foreign investors have a tepid view about overall economic conditions in Sri Lanka, Musher says it is also important to identify current FDI trends, perspectives of investors in the private sector, as well as the economic outlook for Sri Lanka if Sri Lanka looks to position itself as an attractive FDI and trade destination.While speaking on measures, need to be taken to attract more FDI into Sri Lanka, Musher stressed the need to have an umbrella organization for FDI while capitalising on Sri Lanka’s geo political positioning, economic conditions, quality of infrastructure, high literacy rates and Sri Lanka’s ability to access to key markets. According to Musher, improving the quality of data relating to FDI in Sri Lanka will also have a signaling effect on potential new investors and will lead to high FDI inflows.
The report states that while FDI into Sri Lanka has historically been low, FDI inflows began further declining from 2011-2015, with a -30% drop within this period , the largest decline being in 2015 which stood at USD 680 million.FDI inflows into Sri Lanka suffered during 2011— 2015 period, with regulators attributing the drop to uncertainty caused by the removal of existing tax concessions—although the introduction of a new concession scheme appears to have contributed to a rebound over the last couple of years.
FDI inflows into Sri Lanka primarily originate from Asia –although USA is among the top 10 countries of origin, they accounted for only -4% of Board of Investment (BoI) investments in 2017 . In 2016, Malaysia, India, Netherlands, China and UAE were among top five sources of FDI in Sri Lanka. Sri Lanka primarily ttracts FDI from Asia, with telecommunication, tourism, and manufacturing being key areas.With FDI in Asia increasing, and economic competitors such as Bangladesh and Vietnam showing continued growth.
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