The Sri Lanka Investment Forum 2021 (SLIF 2021) was organised by the Board of Investment, the Ceylon Chamber of Commerce and the Colombo Stock Exchange of Sri Lanka. The aim of this forum was to facilitate trade and investment between foreign investors, Foreign Direct Investment (FDI) project promoters and listed corporates. The 3-day virtual event from the 7th – 9th June 2021 featured sessions and presentations by senior government leaders, top leadership of public and private companies, global experts, investment bankers, and advisory firms and was concluded with registration of close to 5000 participants.
At the Inauguration, President Gotabaya Rajapaksa, expressed his vision for a decade of growth culminating in the doubling of the economy, and the pivotal role local and foreign investors would play in the rapid transformation of the economy. He invited investors to seize the window of opportunity to benefit from Sri Lanka’s strategic location as the gateway to South Asia, high quality human resources, unique tourism potential and progressive policy environment among other factors.
Chairman of the Board of Investment, Sanjaya Mohottala highlighted the unique advantages of trade and investment in and with Sri Lanka, including its strategic geo-location with a proximity market of close to 3 billion consumers in South Asia and East Africa, as well as being a skills powerhouse, with the best living environment in South Asia. Mohottala presented a detailed overview of the investment climate in Sri Lanka and in concluding his presentation noted, “Growth is enabled by low cost of doing business … The 2021 budget gives certainty for investors beyond attractive tax holidays that have been provided to equalize or better incentives that are offered by competing countries … Sri Lanka offers one of the lowest productivity adjusted labor costs across all segments, the labour force is far more loyal compared to competing destinations and salary inflation is one of the lowest in the region. For investors, BOI provides tax free capital good importation, reducing startup costs and more importantly, the lowest power cost in the region. All of this, combined with location advantages provide a compelling investor value proposition in Sri Lanka”
USA Country Session:
The country session dedicated for the United States of America (USA) on the 9th June 2021 was graced by the Sri Lanka’s Ambassador to the USA Ravinatha Aryasinha, while Chargé d’ Affaires of the US Embassy in Colombo Martin Kelly delivered the keynote address. Delivering the Opening remarks for the session, Ambassador Aryasinha noted that “the US is presently the 10th largest investor in Sri Lanka … The US being Sri Lanka’s largest export destination accounting for 26% of exports worth 2.5 Billion US dollars in 2020, there is always the potential for greater US investment” Further, the Ambassador referred to the recent ‘Trade Shifts’ Sectoral Study released by the American Chamber of Commerce in Sri Lanka (AmCham SL), where he observed that “Sri Lanka stands to benefit from an estimated US Dollars 150 billion worth of business estimated to be shifting over the next five years” and that the Sri Lankan Embassy in the USA continues to pro-actively engage and encourage those who have the potential to invest in Sri Lanka.
In his Keynote address, Chargé d’ Affaires of the US Embassy in Colombo Martin Kelly noted that “The U.S. Government has long been supportive of Sri Lanka’s efforts to broaden and modernize its economy … promoting trade and investment opportunities is one of our Embassy’s top priorities. It’s a vital component of our efforts to encourage private sector-led development and to forge stronger ties between our people.” Speaking more in detail the CDA noted that “The Sri Lankan people, its democracy and business community, have proven their resilience, time and again … accruing the highest standard of living and most advanced development indicators in South Asia … [and] has also steadily upgraded its air, sea, and telecom infrastructure to position itself as a regional base of operations for technology and manufacturing – with an eye to attracting investment”. He concluded that despite those positive indicators FDI from the USA has remained mostly flat over the past five years due to concerns about transparency and the regulatory framework “I’m confident that, … concrete efforts will begin to improve ‘ease of doing business’ and ensure a level playing field for U.S. investors”.
AmCham SL Presentation on Investment Climate in Sri Lanka
Presenting an overview of the investment climate in Sri Lanka specific to US investors, General Manager and Head of Secretariat of the American Chamber of Commerce in Sri Lanka Ms. Vrai Raymond, highlighted the emerging opportunities for investment in Sri Lanka, the progressive commitment of the GoSL, and the passion and professionalism of Sri Lanka’s people. She drew attention to Sri Lanka’s status accruing the highest standard of living and most advanced development indicators in South Asia in 2019 and 2021, and the country’s continued transition from an agricultural commodity-based economy to become a world leader in textiles and apparel, a major exporter of IT and communication-related products and services, and a world class destination for international tourists.
As key takeaways of the presentation, she provided overviews of the investment climate, tax incentives, talent and education, ease of doing business, market access, quality of life and infrastructure, location advantage, and competitiveness and productivity.
Deriving key economic data on Sri Lanka and USA business relations, Ms. Raymond noted that the USA is the largest single-country export market for Sri Lanka with a tax treaty in place since 1985 and a bilateral investment treaty since 1991. She also highlighted that “to support US investors in Sri Lanka, the American Embassy, the AmCham Sri Lanka and the Board of Investment provide commercial information for interested investors and advocacy for US companies with projects or proposals to help companies enter specific sectors, and to identify potential Sri Lankan partners, while US investors can also access several US Government options to help develop and finance large scale infrastructure projects, such as the Trade Development Agency (USTDA) and the Development Finance Corporation (DFC), among others.”
She concluded by noting to potential investors, “if you are seeking talented, qualified, competent, creative, passionate people who will continuously evolve, adapt and innovate to nurture and grow your business, your brand and your investment, then this is it”.
Reform or perish, it’s not too late
Sri Lankan economy in historic crisis
By K.D.D.B Vimanga and Naqiya Shiraz
The Sri Lankan economy faces a historical crisis. The root causes are the twin deficits. First, the persistent fiscal deficit – the gap between government expenditure and income. Second, the external current account deficit – the gap between total exports and imports. The problems have been festering for too long. Without urgent reforms, the crisis could easily morph into a full-blown debt crisis.
Sovereign debt workouts are extremely painful for citizens. A mangled debt restructuring can perpetuate the sense of crisis for years or even decades. A return to normal economic activity may be delayed, credit market access frozen, trade finance unavailable.
With the global pandemic, these are unusual and difficult times. The next five years are going to be crucial for the country. The problems can no longer be avoided and should be faced squarely. The journey ahead is going to be painful but the longer these are delayed the worse the problem becomes and the magnitude of the damage compounds.
State of the Economy
The new government inherited a fragile economy, battered by the Easter attacks of 2019, the constitutional crisis of October 2018 and the worst drought in 40 years in 2017. With the pandemic in 2020 Sri Lanka’s economy shrank by 3.6% with all sectors of the economy contracting.
Yet, the pandemic is not the sole cause – it only accelerated the decline of Sri Lanka’s economy that was weak to begin with. The country has long been plagued by structural weaknesses, with growth rates in the last few years even below the average growth rate during the war. Mismanaged government expenditure coupled with a long term decline in revenue have characterised Sri Lanka’s fiscal policy. As of 2020 total tax as a percentage of GDP fell to just 8%, while recurrent expenditure increased.
Borrowing to finance the persistent budget deficits is proving to be unsustainable. Total government debt rose to 101% of GDP in 2020 and has grown since. Sovereign downgrades have shut the country from international debt markets. The foreign reserves declined from US$ 7.6 bn in 2019 to US$ 5.7bn at the end of 2020 and to US$ 2.8 bn by July 2021. This level of reserves is equivalent to less than two months of imports. With future debt obligations also in need of financing, the situation is dire.
The import restrictions placed to combat this foreign exchange crisis have failed to achieve their purpose and are doing more harm than good. imports rose 30% in the first half of 2021 compared to 2020 despite stringent restrictions.
The problem lies not in the trade policy but in loose fiscal and monetary policy that has increased demand pressures within the economy, drawing in imports and leading to the balance of payments crisis and consequently the depreciation of the currency.
Measures by the Central Bank to address this by exchange rate controls and moral suasion have caused a shortage of foreign currency leading to a logjam in imports.
Fundamental and long-running macroeconomic problems were intensified by the pandemic.Import restrictions, price and exchange controls do not address the real causes.
Treating symptoms instead of the underlying causes is a recipe for disaster.
The continuation of such policies will lead to the deterioration of the economy, elevate scarcities, disadvantage the poor who are more vulnerable and in the long run lead to even higher prices and lower output due to lack of investment.
Sri Lanka’s GDP growth over the last decade has been alternating between short periods of high growth and prolonged periods of low growth. This is a result of the state-led, inward looking policies of the last decade.
A comprehensive reform agenda must be built around five fundamental pillars:
i) fiscal consolidation – The need to manage government spending within available resources and to reduce debt are paramount. Revenue mobilization must improve but the control of expenditure cannot be ignored. Budgetary institutions must be strengthened and there must be reviews not only of the scale of spending but also the scope of Government.
ii) Much of government expenditure is rigid – the bulk comprises salaries, pensions and interest so reducing these is a long term process. Reforming State Enterprises, especially in the energy sector and Sri Lankan Airlines is less difficult and could yield substantial savings. Continued operation of inefficient and loss-making SOE’s is untenable under such tight fiscal conditions. Financing SOE’s from state bank borrowings and transfers from government reduces the funds available for vital and underfunded sectors such as healthcare and education. Excessive SOE debt also weakens the financial sector and increases the contingent liabilities of the state. Therefore SOE reforms commencing with improving governance, transparency, establishing cost reflective pricing and privatisation are necessary. This can take a significant weight off the public finances and by fostering competition contribute to improvements in overall economic productivity.
iii) Tighten monetary policy and maintain exchange rate flexibility. Immediate structural reforms include, Inflation targeting, ensuring the independence of the central bank by way of legislation and enabling the functioning of a flexible exchange rate regime. Further significant attention has to be placed on the financial sector stability with a cohesive financial sector consolidation plan, with special emphasis on restructuring of SOE debt.
iv) Supporting trade and investment. Sri Lanka cannot achieve economic growth without international trade which means linking to global production sharing networks. Special focus has to be given to reducing Sri Lanka’s high rates of protection which creates a domestic market bias in the economy along with measures to improve trade facilitation and attract new export oriented FDI.
Attempts to build local champions supported by high levels of protection have
(a) diverted resources away from competitive businesses,
(b) created a hostile environment for foreign investment,
(c) been detrimental to consumer welfare,
(d) dragged down growth
v) Structural reforms to increase productivity and attract FDI – Productivity levels in Sri Lanka have not matched pace with the rest of the growing economies. The reforms mentioned above are extensively discussed in Advocata’s latest publication “Framework for Economic Recovery”.
Sri Lanka stumbled into the coronavirus crisis in bad shape,with weak finances; high debt and widening fiscal deficits. It no longer has the luxury to delay painful reforms. Failure to do so will not only jeopardize the economy; it could even spawn social and humanitarian crises.
Naqiya Shiraz is the Research Analyst at the Advocata Institute and can be contacted at firstname.lastname@example.org.K.D.D.B. Vimanga is a Policy Analyst at the Advocata Institute. He can be contacted at email@example.com.
Samsung Galaxy 5G-ready devices now available at Dialog
Dialog Axiata PLC recently announced the pre-order availability for the all new 5G-ready Samsung Galaxy Z Fold3 5G and Z Flip3 5G devices.
The latest foldable smartphone range by Samsung is now available for pre-order via Preorder.dialog.lk until 30th September 2021. Dialog Customers will also receive anytime free Data worth 200 GB (valid for 60 days) with Fold3 purchases or 150 GB (valid for 60 days) with Flip3 purchases made on or before the 30th October 2021. Club Vision members have the added benefit of redeeming their loyalty discounts when purchasing the devices from Dialog. Customers are also provided with the convenient payment method of purchasing the latest Samsung Galaxy Z Flip3 and Fold3 on monthly instalment plans at 0% interest – up to 40 months with leading credit cards. All online purchases will also receive free doorstep delivery.
Opening the next chapter in foldable innovation, both devices are premium foldable smartphones built with the craftsmanship and flagship innovations Samsung users have come to love and expect. The third generation of these category-defining devices incorporates key improvements that Samsung foldable users have asked for—making them highly durable with more optimized foldable experiences than ever before. From iconic design to immersive entertainment, Galaxy Z Flip3 and Z Fold3 offer users unique new ways to work, watch, and play. For those who need the ultimate device for productivity and immersive entertainment, Galaxy Z Fold3 is a true multitasking powerhouse with next-level performance, an undisrupted 7.6-inch Infinity Flex Display, and the first-ever S Pen2 support on a foldable device. For those who want style that comes with function, Galaxy Z Flip3 is the ideal device with its sleek, compact, and pocketable design, enhanced camera features, and a larger Cover Screen built for quick use on the go.
The Samsung Galaxy Z Flip3 is available in the colour Cream with an 8GB RAM + 256 GB internal storage capacity and is priced at Rs. 249,999/-. The Samsung Galaxy Z Fold3 is available in the colours of Phantom Black and Phantom Green with a 12 GB RAM + 256 GB internal storage capacity and is priced at Rs. 399,999/-.
BoardPAC appointed Strategic Partner of Commonwealth’s Business Network – CWEIC
BoardPAC, the Sri Lanka-based multinational Board meeting automation solutions company, has been appointed a Strategic Partner of the Commonwealth Enterprise and Investment Council (CWEIC), the organization officially mandated by the Commonwealth Heads of Government to promote trade and investment between the 54 Commonwealth member countries, a company news release said last week.
“This prestigious appointment will see CWEIC relying on BoardPAC’s award-winning solutions to conduct board and committee meetings with members and maintain relationships across the Commonwealth network at a time when the global pandemic’s complete disruption of business activity has resulted in a surge in the demand for efficient board meeting automation,” it said.
The Company said the partnership will also effectively promote the BoardPAC platform to new users and facilitate its expansion into new territories and focus markets. BoardPAC already has a global user base in excess of 50,000 and a presence in more than 40 countries.
Noting that BoardPAC’s latest partnership serves as yet another testament to the quality of its solutions, BoardPAC Co-Founder/CEO, Lakmini Wijesundera stated: “Our growth plan includes expanding our worldwide network, and our strategic alliance with CWEIC will strongly help us extend our presence into Commonwealth territories. The strategic cooperation between CWEIC and BoardPAC is especially relevant in light of the worldwide pandemic, and the emerging need for secure remote working and filling the void in virtual board meetings.”
CWEIC Chairman, Rt. Hon. Lord Jonathan Marland said: “We are looking forward to work closely with BoardPAC. The alliance will not only help CWEIC to conduct virtual board meetings securely and safely, but also align ourselves with all governance, risk and compliance as well as environmental, social, and governance frameworks.” Echoing this sentiment, CWEIC Deputy Chair, Sir Hugo Swire stated: “We are excited to partner with BoardPAC and extend modern digital governance and compliance solutions to organisations operating in the Commonwealth.”
A commercial, not-for-profit membership organisation, the Commonwealth Enterprise and Investment Council’s network includes around 100 business and government Strategic Partners (members) including Standard Chartered, Zenith Bank, Trade & Investment Queensland and the Government of the Maldives from 30 countries and territories. Every two years, CWEIC hosts the Commonwealth Business Forum in association with the host country of The Commonwealth Heads of Government Meeting (CHOGM).
BoardPAC is an award winning, multinational, paperless board meeting automation solutions provider, recognized for driving simple, secure, sustainable and experiential communications for Board and Executive members. Leading corporates such as Petronas, Deloitte, EY, Mercedes Benz, Prudential, Hong Leong Group, Stock Exchange of Malaysia, Central Bank of Sri Lanka, Bombay Stock Exchange, Bank Negara, Maybank, Power Grid Corporation of India, Colombo Stock Exchange, and Sri Lankan Airlines are just some of BoardPAC’s success stories, and the Company said the partnership with the CWEIC will pave the way to several more high-profile additions to this list.
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