Justice Minister Dr. Wijeyadasa Rajapakshe very boldly stated at the Sri Lanka Economic Summit on Wednesday that the Board of Investment should be shut down. The BOI is the PM’s brainchild and an offshoot of the GCEC.
Wijeyadasa went on to say the one-stop-shop has now become a ‘one more stop’ and is destroying the economy. It may sound very harsh, but that is very much the reality. It has outlived its true purpose and no longer connects with our economic needs of our country, other than putting more barriers for FDI and costing the taxpayer more and more money.
The proposed Agency for Development once enacted should hopefully pave the way to radicalise the way we attract FDI into the country and hopefully pave the way for the BOI to be absorbed into the agency.
Sri Lanka no longer looks more attractive than some of the other FDI destinations in the region because they have now all caught up with Sri Lanka. The Board of Investment of Sri Lanka was set up in 1992 to showcase our comparative advantages over the other countries and to attract significant amounts of FDI, increase employment opportunity for our youth and to drive up our exports.
Today to successfully promote our skill sets and national resources in exchange for FDI, requires significant investment from Government in knowledge management, building skills and also leadership to develop new industries and exploit our current or potential comparative advantages. We have so far hardly addressed any of these issues other than at talk shows or on paper.
The BOI to be effective needs to have well-established links to education and industry skills, policymaking and technology development to make a meaningful contribution to the progress of the country. The lack of genuine measurable success is highlighted by the limited amount of real growth in FDI in the last three years.
For a cash-strapped economy like Sri Lanka, foreign investment is a significant driver of economic development. FDI fills the savings-investment gap and enhances investment and economic growth. FDI contributes to improving work ethics, discipline, skills and knowledge of workers.
Private sector development
Despite the policy reforms introduced to facilitate private sector development, the private sector investment is constrained by several factors, which need urgent corrective action, especially the institutional set up.
If Sri Lanka is to achieve 6% +growth, foreign investment has to increase to around 20% of GDP. In Sri Lanka, during periods of relative economic and political stability, foreign direct investment inflows have responded positively.
Sri Lanka expects Foreign Direct Investment to quadruple to $4 billion by 2020. To achieve this we need new thinking, a new institution which has no baggage of the past and new leadership to position Sri Lanka for the future.
Sri Lanka is strategically placed to benefit from a fast changing global marketplace and trade routes. We are between Europe and Far East on the major East-West shipping lanes. We have easy access to lucrative Middle Eastern markets and rising African markets, while the growth engine that is India lies just 20 miles away.
However, if Sri Lanka is to attract any significant FDI, the investment promotion policies need to be complemented by appropriate policy changes with respect to education and skills development, R&D, regulation and leadership.
(The writer is a thought leader.)