More transparency, efficiency for a start
Sri Lanka’s international trade minister called it “extremely low by any standard.”
Foreign direct investment (FDI) into the country nose-dove 54 percent last year to USD450 million, compared with USD970 million in 2015. The government has since latched onto a more aggressive tack, setting the FDI target for this year at USD3 billion.
“The policy framework to attract FDI is much clearer than before, especially for the real estate and construction sectors,” said Arumugham Shankar, head of operations for strategic consulting in Jones Lang LaSalle (JLL) India and Sri Lanka in a statement.
However, such ambitious targets will be predicated on Sri Lanka’s ability to streamline bureaucratic processes. “It is evident more needs to be done to smoothen the investment process and improve transparency in Sri Lanka,” said Shankar. “But since the government started taking steps to address these structural issues, improvements can be seen. Sri Lanka is gradually moving in the right direction.”
An inefficient judiciary, coupled with a dearth of electricity approvals, has beleaguered Sri Lanka and tainted its standing in the international investor community, said Upul Jayasuriya, the country’s Head of the Board of Investment (BOI). “Sometimes judgements are delayed, sometimes not delivered, sometimes implementation of a judgment does not take effect. It doesn’t happen in other countries.”
Sri Lanka nonetheless entered JLL’s Global Real Estate Transparency Index for the first time last year. “The luxury residential sector has reasonably good supply considering the growing average absorption, while middle income housing is also performing well,” said Steven Mayes, managing director of JLL Sri Lanka.
Some forms of investment are less welcome than others though. The Sri Lankan government, at the urging of Ports Minister Arjuna Ranatunga, is calling for the cutting of China’s stake in the Hambantota port to 60 percent.
The controversial Framework Agreement had earlier given the state-run China Merchants Holding Company an 80 percent stake and a 99-year lease in the deep-water harbour for USD 1.1 billion.
Part of China’s One Road, One Belt (OBOR) spending spree, Hambantota is widely seen as a strategic point in an expansionist infrastructure program by the Chinese military in the Indian Ocean.