“How can we promote other investments if the BOI ‘cares a damn’ about existing investors?” – Local investors

Investors at Seethawaka Zone cry foul

All investors at the Seethawaka Industrial Park at Avissawella have jointly accused the Board of Investment (BOI) of being unfair in the charges for services and phenomenally upping of land rents. On their behalf, the Seethawaka Industrial Park Manufacturers’ Association (SIPMA) recently took up cudgels with the BOI over the issue but failed with investors forced to pay increased rates or be threatened with cutting off water and power services.

“All 33 companies decided they would not pay such high rates when we have been going through a hard time. We were forced to pay or find services cut off. How can we promote the zone to other potential investors when the BOI treats us like this,” said Ananda S. Wijesuriya, the Association’s former chairman.

He said all BOI officials present and past have ignored the needs and concerns of investors in deciding on new rates. “We had a spate of strikes and were recovering when these new rates were slapped. BOI officials just don’t understand that we need to do well to pay any increased rates.

There is just no understanding of these issues,” Wijesuriya said.
He said the association is yet to receive a response to a March 21 letter sent to Minister of Enterprise Development and Investment Promotion Dr. Sarath Amunugama raising these issues. “We have no acknowledgement nor any response,” he said.

Here are extracts of the letter:
“Our members are subjected to hardships through the executive actions of the BOI officials, notwithstanding the fact that our Association has made representations over the period of time including the latest done to the Chairman/Director General on December 23, 2006 and February 16, 2007, we are reluctantly compelled to seek your intervention on two issues as described below;
The action taken by the BOI officials in suspending services to our members whilst pending a reply/acknowledgement to an appeal made to the Chairman/Director General of the BOI is disrespectful towards our members who have invested over Rs. 10 billion collectively, providing employment to nearly 15,000 people.

1.Ground Rent:
In order to explain this issue, it is necessary to state that a majority of members are those who sited themselves at SIP as per the contracts entered into with the Ministry of Industries back in 1999. Subsequently this Park was vested with the BOI and there were protracted negotiations that lasted almost four years before a consensus was agreed upon at which time agreements were entered into with the BOI stipulating the conditions governing the lease of the land/factory buildings, where applicable. The main issue that was the bone of contention was the arbitrary decision taken by the BOI at that time, to increase the ground rent to US$ 3,500 per acre notwithstanding the contents of the original agreement with the Ministry of Industries where the rate was stipulated as US$ 1,000 per acre.

It must be mentioned that the consensus agreed to, interalia, at that time as minuted by the BOI themselves was ‘the rates would be revised at the end of three years subject to a maximum of 15% and revise annually from the 5th year onwards subject to maximum limit of 10% per annum.’

Industrialists who have established themselves at the inception with high investments were incurring increased costs due to inadequacies in the infrastructure available.

Additionally our members were undergoing numerous problems; unable to use their property as collateral for bank funding for working capital due to absence of a written agreement; especially those with foreign collaborations where the principals were questioning the security of their investment. Hence, our Association agreed to the above conditions that was not in their best interest as a compromise to expedite the signing of the lease agreements.

The current issue is that with the latest revisions the lease rates has been increased to US$ 1,450 per acre, an increase of 45%.
We would like to point out that when one takes into consideration the exchange rate of the US Dollar which was approximately Rs. 71.30 at the outset that now stands at Rs. 108, the total increase in rupee terms in which currency we pay our lease rent to the BOI is 196%.

Thus our members have to incur twice the cost of the lease rent compared to what they initially contracted with the Ministry of Industries within a relatively short period of time. Our members collectively and almost all exporters in general had to incur large amounts of expenditure in August last year due to the work stoppage at the Colombo port requiring to airfreight raw material as well as finished goods.

Additionally we also are having to bear inflation related high cost of transport, salaries, etc., and therefore, what we kindly requested to the Chairman/Director General, BOI was to differ such ground rent increases, which in any event were far beyond what has been agreed at meetings and as stipulated in signed contract between BOI and our members. The BOI in its own wisdom and using our hapless situation as captive investors have taken action which we believe is not in the best interest of anybody.

Our Association has repeatedly pointed out that viability of the investors operating in Sri Lanka would be the best form of advertisement for the BOI to attract new investors. It is on record that at SIP during this short period nearly seven investors have closed down or could not go beyond the building stage for number of reasons including the inability to raise the working capital owing to delays in finalizing documentation referred to above.

It is also a fact that almost 45% of the space available for industrialists at SIP remains unoccupied and BOI has not initiated action on matters of importance that we have been constantly highlighted, although they do not relent on our request for small measure of relief.

2. Increase of Water Tariffs:
BOI has sent a letter dated March 16, 2005 to the members announcing the increase of water rate to be Rs. 52 per 1000 litres from the prevailing rate of Rs. 37 per 1000 litres, the revision explained as based on the gazette notification of National Water Supply and Drainage Board (NWS&DB). Since the said gazette notification spells out “Tariff 4 (v) for Bulk supplies of water to the Export Processing Zones of Board of Investment of Sri Lanka shall be Rs. 42.00 per 1000 litres”, we have questioned the validity of the additional Rs. 10 levied by BOI.

It is ironical that the Chairman/Director General of BOI who appreciates the efforts of our Association in writing (quote “Let me thank you and the members of the Association for your contribution to the development of the Seethawaka Zone and look forward to continuing the close association to further develop this zone” – unquote), has been unable to extend any sympathy to our plight.
We reiterate, we have asked only relief to conduct our business without having to incur arbitrary, increased unreasonable costs, and we believe we have the right to be heard than forced to accept conditions under duress.
Through their actions the BOI officials have shown that they are interested only in their pound of flesh and in the process ensuring that we bleed to death.
If justice doesn’t prevails we would be forced to join the ranks of those who have gone bankrupt.”