The ongoing tug of war between the Treasury and Board of Investment (BOI) designed to be a ‘one stop shop’ for investors, is hindering Sri Lanka’s efforts to attract US$2 billion in foreign direct investment targeted for this year, official sources said.
Having been absorbed by the Economic Development Ministry, the BOI is still in a transition without a Chief Executive Officer proposed in 2010 and included in November when the 2011 budget was presented, to issue clear direction on investment promotion.They said the BOI top management has failed to perform up to expectations in spite of Treasury instructions towards revitalizing the country’s premier investment agency.
More than 18 months after proposing the post, Treasury Secretary Dr.P.B. Jayasundera against referred to the issue at a media conference last week saying they are searching for a suitable candidate for the post of CEO to turnaround the BOI.
On the other hand, top BOI officials expressed concern over foreign investment deals and canvassing for investments by powerful individuals completely ignoring normal procedures. They said that the role of the BOI has become less important as its functions and responsibilities have been taken over by certain ministries and that, this is one of the reasons for its slow progress in facilitating new investments.
Right now the BOI is simply acting as an agency to get tax relief, not promote investments, they say.
Responding to the Treasury Chief’s observations and criticism, BOI Chairman and Director General, M.M.C Ferdinando told the Business Times that he has taken measures to attract mega investment, as all the other investments had been saturated. He initiated these actions since his appointment as the acting Chairman of the agency in mid July last year. Necessary infrastructure to attract such investments had to be built and he initiated a massive project to set up heavy industrial investment zone in Sampur at an investment of US$4 billion towards this end, he said.
Sri Lanka is targeting most of the US$ 2 billion of foreign direct investment for 2012 to flow into infrastructure with US$ 400 million going into tourism, he said.
Mr Ferdinando said the BOI has been undermined by those implementing ad hoc rules and regulations and the introduction of pieces of legislation. He blamed the Customs, Inland Revenue, Exchange Control Department, Import-Export Control Department and UDA for not being considerate in dealings with the BOI. He also opposed experiments (at the BOI) such as restructuring at the expense of the institution. He added that millions of rupees had been spent for restructuring process of the BOI, but it has failed to bring expected results so far. He noted that he is trying his best to put the house in order.
He disclosed that he proposed the setting up of new investment promotion zones in Trincomalee, Kilinochchi, Maduruoya, Puttalam and Achchuweli areas. Twelve new Investment Promotion Zones (IPZ) will be set up to make Sri Lanka a preferred destination for investment in Asia catering to the needs of local and foreign investors. The BOI will invest Rs. 3 billion to upgrade the 12 BOI zones in the country within the next three years, he disclosed.
Responding to an allegation of BOI’S failure to properly facilitate a team of Korean investors, he said that he also heard about this complaint made to the President during his recent tour of Korea. But no such team approached the BOI and this particular Korean delegation was not an investment mission. They were looking for loan facilities to implement some tourism projects, he revealed.