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Foreign investors seek greater legal certainty before investing in Sri Lanka

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German Industry and Commerce in Sri Lanka Chief Delegate Andreas Hergenrother  (Pic by Nishendra Silva)

German companies in discussion regarding potential upcoming investments here

by Sanath Nanayakkare

Legal certainty was a fundamental principle for foreign investment across the world, important even for potential German investors, Andreas Hergenröther, Chief Delegate of German Industry and Commerce (AHK Sri Lanka) told The Island yesterday:

“The reliability of the legal framework in Sri Lanka is essential for foreign investors. We have seen many changes since the beginning of 2020; so many gazette notifications and operating instructions which appear quite confusing for foreign investors and trading partners,” he said.

Elaborating Andreas said: “Of course, we understand that there is a scarcity of foreign currency in the country. On the other hand, it has to be understood that foreign companies operating in Sri Lanka need a clear framework which they can rely on. We hope that when the Covid-19 situation improves, there will be a coherent, transparent investment and trade policy for foreign investors to continue their businesses without uncertainty. They need an operating framework upon which they can plan on their mid-term and long-term prospects. This is very necessary because investors do not want to invest in a scenario that they do not fully understand”.

“For Foreign direct investors including German investors the reliability and predictability of legal frameworks are of very high importance not only with regard to Sri Lanka but worldwide. We fully understand the current situation in the aftermath of Covid-19 where decision makers need to make quick decisions and sometimes the impact of these decisions may not be foreseeable or predictable, but the continuous changing of the business landscape is a major challenge, because what investors mostly need is legal certainty. This fact was further confirmed at a survey we conducted among 160 CEOs and representatives of German companies and their Sri Lankan partners”.

“Of course, Sri Lanka is a sovereign country. Every country has to find its own way to promote foreign direct investment and even during the pandemic, we received some requests for potential investments in Sri Lanka. These requests were much related to certain product groups that are on very high demand and they are also related to free market access to mainly Pakistan and India. Sri Lanka offering free trade access to these two countries is a clear advantage, but it would give much more advantage if Sri Lanka would have free trade agreements (FTAs) with South East Asia (ASEAN), People’s Republic of China and East Asia. Such broad-based market access would definitely increase the potential of Sri Lanka to promote its foreign direct investments”.

“Currently these potential investors are gathering information about Sri Lanka and how they could run their operations from here. Once the airport reopens these investors will be keen to come to Sri Lanka and hold detailed talks with the decision makers here”.

“With regard to these investors’ wish to invest in Sri Lanka, AHK Sri Lanka has initiated talks with Sri Lankan institutions – mainly the Bureau of Investments (BOI). These companies are currently evaluating the situation and will likely visit here to see the ground realities for themselves before making the decision to invest”.

“These companies are from the medical sector, rubber related sector and another one in the field of logistics; namely a Multi-Country Consolidation service. There is another ongoing project in the field of chemicals. These companies are continuously having discussions with the authorities here. In fact, AHK Sri Lanka initiated talks at the time of the lockdown via video links with Sri Lankan decision makers on particular challenges facing German companies in Sri Lanka as well as upcoming projects”.

When asked to name these companies, Andreas said “it should remain confidential as the talks are still at an initial stage”.

“Once the health crisis improves, the decision makers of these companies will visit Sri Lanka to evaluate the legal framework. AHK Sri Lanka and German investors are very satisfied with the talks they have had with Susantha Ratnayake- the Chairman of BOI. He is doing everything he can to support the investors to come here and we have a very close relationship with the BOI. In fact, German companies have been in close contact with the BOI”.

“A level playing field is something very important to build confidence in foreign investment. In this context, we have supported a lot in the initiative of liberalization in the field of freight forwarding and shipping in Sri Lanka. In this regard, we held many conferences as we strongly believe that once foreign ownership will be possible in the field of freight forwarding and shipping, more foreign direct investments will come to Sri Lanka. And with those freight forwarding and logistics companies, their key customers will also follow suit. This convergence would enable Sri Lanka to transform from a transshipment hub into a ‘true logistics and a trading hub’. And then the ideal would be to have companies here that assemble, manufacture and/or make value addition under the scheme of Multi-Country Consolidation.

“The minimum capital requirement for Multi-Country Consolidation in Sri Lanka is US$ 3 million and US$ 5 million for Entrepot Trade. The potential investors are not ready to put three or five million dollars on the table. When it comes to investing, companies in the freight forwarding sector want to have full ownership and not be a minority shareholder of 40%. Currently the law [in Sri Lanka] allows maximum 40% shareholding for freight forwarding and shipping companies”.

When asked why the foreign companies in the freight forwarding sector wanted full ownership, Andreas said, “These companies have reporting obligations and internal compliance rules which have been made more severe in the past years, therefore, it is important for them to determine the processes and operations inside the companies according to their standards. Furthermore, companies compare different Foreign Direct Investment Destinations in the world. Nowadays most of the ‘hub-countries’ offer full ownership to freight forwarders and encourage investments under the scheme of Multi-Country-Consolidation”.

The Delegation of German Industry and Commerce in Sri Lanka (AHK Sri Lanka) was officially inaugurated on 27th March 2018, with the purpose of enhancing the bilateral economic relationship between Germany and Sri Lanka. AHK Sri Lanka is part of the German Chamber Network supported by the Federal Ministry for Economic Affairs and Energy. With 142 locations in 92 countries around the world, the members of the German Chamber Network (AHKs) offer their experience, connections and services to German and foreign companies. AHKs are located in all countries of particular importance to German companies and are closely connected to the Chambers of Industry and Commerce (IHKs) in Germany. Together they support German companies with building up and extending their business relations to foreign countries, representing in total 3.6 million German companies.

During the past years, AHK Sri Lanka) has been a reliable partner for many Sri Lankan institutions such as BOI and EDB. Committed to investment and export promotion, more than 20 business delegations have been organised in both directions. Further, AHK is planning to take four business delegations to promote exports in the sectors of agriculture/food, PPE, rubber, and energy efficient industrial solutions in the fourth quarter of 2020,

On 21st of August AHK Sri Lanka will organize a joint webinar with Deutsche Bank and Allianz on ‘Planning and Risk Mitigation in Times of Economic Uncertainty’.

 



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Cabraal: Prez appoints members to Port City Economic Commission

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By Shyam Nuwan Ganewatta

The President of the country would always appoint members to the Colombo Port City Economic Commission, entrusted with running of that city under the proposed CPCEC Bill, State Minister of Money & Capital Market and State Enterprise Reforms, Ajith Nivard Cabraal, yesterday, told the media, in Colombo.

State Minister Cabraal said that most critics of the Colombo Port City Economic Commission Bill had not even read it.

“Sri Lankans don’t need to obtain a visa to enter the Port City as some claim. The Port City will be administered by the Colombo Port City Economic Commission and the Bill we have presented details how the area will be governed,” Cabraal said responding to a question posed by a journalist.

The State Minister said that President Gotabaya Rajapaksa had asked him to counter the misinformation and fake news that was being spread about the Bill. Once people have read and understood the Bill, most who criticise it would have to change their tune, the Minister said.

 

Journalists also questioned the State Minister on the allegations levelled by MP Wijeyadasa Rajapakse. The State Minister said that Rajapakse had not even asked a question about the Bill during the Parliamentary Group meetings.

“As I said earlier, the Port City will be administered by Colombo Port City Economic Commission. All members are appointed by the President. The Chairman of the Commission too is appointed by the President. The President can get rid of them anytime he wants,” Cabraal said.

The State Minister added that no one would be allowed to withdraw money or assets from Sri Lanka and invest in the Port City. “This is a special economic zone. We need to attract foreign direct investments. We need to have ease of doing business in this zone and we have to make it an important financial hub in the region.”

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Two hotels to be built obstructing elephant corridor in Sinharaja – MONLAR

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Forest land being cleared for the construction of a hotel

By Rathindra Kuruwita

The Bowitiyatenna elephant corridor, used by elephants in Sinharaja to travel to Dellawa – Walankanda forest had been obstructed by two businessmen by clearing a section of the forest to build hotels, Sajeeewa Chamikara of the Movement for Land and Agricultural Reform (MONLAR) said.

“One hotel is being constructed in the Dolekanda Grama Niladari area after clearing seven acres of forest land. The Kalawana Divisional Secretariat has approved the construction of the hotel ignoring environmental regulations. Right now, forests are being cleared, land is being prepared and buildings are being constructed using heavy equipment.”

Another hotel was being built at the Bowitiyatenna Elephant Corridor, situated in Godakawela Divisional Secretariat area by a businessman from Godakawela. He has cleared around eight acres of forest land, the environmentalist said.

The two hotels were obstructing the elephant corridors used by the remaining two elephants in the Sinharaja Forest Reserve. Now, the the people of Rambuka, Thanawela, Ellagama, Handiyekade, Kajugaswatte, Pothupitiya, Kopikella and Cypresswatte would have the elephans marauding their villages, the environmentalist said, adding that the residents of those villages would lose property and lives due to the hotels being constructed by obstructing the elephant corridors.

“Most of the forest areas surrounding the Sinharaja are to be annexed to the Forest Reserve because they are an important part of the forest network. These unscrupulous businessmen and politicians supporting them are attempting to carve out as much land as possible before these areas receive protected status. They are also doing their best to delay the declaration of these lands as protected areas.”

Chamikara said that the Central Environmental Authority (CEA) had the power to take action against those who carried out such illegal activities.

According to Section 23 (a.) (a.) of the National Environmental Act, when a project is carried out without environmental clearance, the CEA can produce such people before a magistrate’s court. If found guilty, a person can be fined up to Rs. 15,000 or imprisoned up to two years or subjected to both.

Chamikara said: “According to Article 27(14) of Chapter VI of the Sri Lankan constitution the state shall protect, preserve and improve the environment for the benefit of the community.” However, the CEA seems to have no interest in taking action against those who are building these hotels illegally. This is CEA’s attitude to almost all major environmental destruction that seems to be taking place these days.

“The government is silent when the Sinharaja forest is degraded and elephant corridors are closed by businessmen. The right to land seems to be a right reserved only for businessmen. We have the right to oppose these under article 28. (f) of the Constitution which states that we have a fundamental duty ‘to protect nature and conserve its riches.’ Article 28. (e) states that we also have a fundamental duty ‘to respect the rights and freedoms of others.’ Thus, we, the citizens have the right to oppose the illegal use of natural resources by powerful businessmen. If we do not oppose these moves as citizens, powerful businessmen will take over all our natural assets like they are doing at Sinharaja.”

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RDHS predicts Coronavirus spike in Jaffna over the weekend

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By Dinasena Ratugamage

There might be a spike in COVID-19 cases in Jaffna this weekend, A.

Kethiswaran, Regional Director Health Services told the media yesterday. Dr. Kethiswaran made the prediction after 26 new cases were detected in Jaffna.

A large number of COVID-19 cases had been reported from Jaffna in the past few weeks. Thus, the people should adhere to health guidelines. If people did not follow the guidelines, there would be a spike in cases and then some places would have to be locked down, he said.

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