FDI lowest in 10 years

Political stability and policy consistency were imperative to attract foreign investments, an economist said.
Professor Prema-Chandra Athukorala, Professor of Economics, Australian National University, speaking at a function in Colombo Thursday said Sri Lanka foreign direct investments (FDI)inflows to Sri Lanka were the lowest on record last year .
Total FDI receipts last year, excluding foreign loans, amounted to US$ 681 million, down from the previous year’s (2014) figure of $ 894 million (excluding foreign loans). Last year Sri Lanka held two major elections, the Presidential Election on 8 January, 2015 and the Parliamentary Election of 17 August, 2015.

Central Bank of Sri Lanka (CBSL) Governor Dr. Indrajit Coomaraswamy said earlier that FDI in the first half (1H) of the year was poor, but was looking up in the 2H of the year. According to CBSL, FDI in the first five months of the year, including foreign loans, amounted to a mere $ 164.5 million, down 52.5% year-on-year compared to last year’s commensurate figure of $ 346.4 million.
The Sri Lanka’s Board of Investment signed agreements for foreign direct investments worth an estimated 1.6 billion US dollars in 2015, up slightly from last year, according to the island’s investment promotion agency.
When this reporter asked Athukorala whether it’s possible to have policy consistency in a democracy like Sri Lanka, where the island has to go to the polls once in five years, Athukorala said that it was possible, and gave as examples the island’s free trade zones (FTZs) established after 1977, as an example of bipartisanship, where no steps have been taken to dismantle FTZs despite 40 years after their establishment, by successive governments.

FTZs, with the concessions offered to investors, are conduits to attract foreign investments.
Athukorala further said that studies have shown that FTZs, and not free trade agreements (FTAs), boost exports. The ‘Achilles’ Heel’ in FTAs is their subtle rules of origin (ROO), he said. Athukorala said that he spoke to a joss sticks manufacturer at Mawanella the other day.
This manufacturer said that he cannot export joss sticks to India by trying to avail himself of the concessions to which exporters are reportedly entitled to exporters under the existing Indo-Lanka Free Trade Agreement (ILFTA) because of India’s stringent ROO. A key component in the manufacture of joss sticks disqualifies this manufacturer from exporting to India under the ILFTA duty concessionary umbrella.

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