With three decades of war with the Liberation Tigers of Tamil Eelam (LTTE) behind it, Sri Lanka is now in a new phase and has joined the ranks of middle-income countries in the IMF list. Sri Lanka's minister for Industry and Commerce Rishad Bathiudeen spoke to T E Narasimhan in Chennai on the government's proposed measures to attract investments into the country. Edited excerpts:
Is it appropriate to say Sri Lanka has now got a new face, after bringing down the LTTE?
Yes, it is true. After 30 years of internal war, Sri Lanka has now got a new face. The quantum of human and material losses suffered during this period is truly immeasurable. However, all that have now become a thing of the past.
Our economy during the second quarter of this year grew 8.5 per cent, which was on an average rate of 6 per cent between 2004 and 2009, despite the adverse effects of terrorism, tsunami disaster and the recent global economic slowdown.
This growth has resulted in nearly doubling the GDP per capita income to $2,053 in 2009 from $ 1,062 in 2004. Now, with much economic activity going on, we are hoping to double the per capita income to $4,000 by 2015. Having observed our improving economic fundamentals, the IMF recently ranked Sri Lanka to a middle income country.
Which are the sectors that contributed to this growth momentum?
Sri Lanka is rich in natural resources including water and soil. Our focus has been mainly on agriculture, livestock, fishing, commodities and especially tourism. The number of tourist arrivals has almost doubled this year. We look forward to 2.5 million tourists in 2016.
Does the country have adequate infrastructure to meet the future growth?
In hospitality, the number of rooms are not adequate now. The government has decided to give incentives to encourage investments into the sector. The government is also developing projects such as the port of Hambantota, Colombo south harbour, the second international airport at Matara, highway network etc., which will soon change the economic landscape of Sri Lanka, and generate a wide range of opportunities for private sector.
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It was always felt that growth and economic activities are largely happening in and around Colombo, the country's capital. Any plans to promote other parts of the country?
Those who have visited Jaffna recently will have a better idea of the potential the northern Sri Lanka offers to the business community. It may be noted that the North is the worst affected region during the prolonged conflict which came to an end in May 2009.
India has agreed to lend $1 billion to fund Sri Lanka's infrastructure projects, mainly in the former war zones in the country's North and East. India assured us $800 million for the reconstruction of railway and a further $200 million for a power plant.
Which sectors offers potential in Sri Lanka?
Infrastructure, telecom, IT & BPO industry, hospitality, healthcare, education and a large number of agro-based and manufacturing industries. Some of the Indian corporate houses including Bharti Airtel, Ceat Tyre, Taj Hotels, Indian Oil Corporation, Birla, Mphasis, Marg and others have recently entered into Sri Lanka.
Value-added teas, spices, rubber and coconut products, cut flowers & foliaged plants, seafood, electrical & electronic appliances and components, gems and jewellery, ceramic and porcelain are some of the product sectors where Sri Lanka offers a great deal of comparative advantages.
The government is also going to revive paper mills, sugar complex, cement and chemical manufacturing units through public-private partnership (PPP) model.
Any incentives and tax measures proposed to attract investments, especially to Indian companies?
The upcoming budget will be one-of-its-kind in the history of Sri Lanka, offering major tax reforms and changes in policy works. We are also planning to introduce single window clearance to attract investments. The Singapore model will be an effective model, where a proposal is cleared in two hours. The government also offers 100 per cent foreign ownership in almost all these industrial sectors.
Further, the bilateral free trade agreements we have signed with fast-growing economic powers such as India as well as several regional agreements provide duty-free and highly preferential market access for a large number of products manufactured in Sri Lanka.
I personally believe we have not used these agreements properly and this will be the focus now. Indian investors will be treated as equals to domestic investors.
How is the trade and investment flow between India and Sri Lanka?
In the last nine months, exports from India to Sri Lanka touched $2.1 billion in 2009. Exports from Sri Lanka, till August 2010, to India was $293 million and this will be increased to $1 billion by 2015.
What has been the FDI flow into Sri Lanka?
FDI flows have been in the order of around $200-500 million a year, with the exception of 2008, where inflows peaked at around $772 million. The stock of FDI in Board of Investment enterprises has increased from $2.1 billion in 2004 to $4.3 billion in 2009 or 10.2 per cent of GDP.
Investment flow from India?
Value of total Indian investment in Sri Lanka is $500 million. India has been one of the leading investors in Sri Lanka. In 2008, it was $126 million out of the total $889 million. Between 2002 and 2003, India was the largest investor in Sri Lanka.
However, investments slowed down subsequently, due to which India went to fourth position in 2004, fifth in 2005 and ninth in 2006. In 2007, again investments from India rebounded and India was placed at fourth position. In 2008 and 2009, India was ranked second among major investors in Sri Lanka.