Sri Lanka has taken more than 60 years to transit from a low income to a lower middle income economy. The country faces strategic and structural development challenges especially in fostering private sector development and private investment including foreign direct investment (FDI) in its transition to an upper middle-income country. FDI is important to bring [...]

The Sunday Times Sri Lanka

BOI – Taste of the pudding is in the eating


Sri Lanka has taken more than 60 years to transit from a low income to a lower middle income economy. The country faces strategic and structural development challenges especially in fostering private sector development and private investment including foreign direct investment (FDI) in its transition to an upper middle-income country. FDI is important to bring in innovation and supplement the country’s limited domestic savings. Streamlining procedures and reducing administrative barriers to FDI will be important in this regard. Sri Lanka will also need to demonstrate sustained commitment to ensuring an attractive investment climate with clear rules of the game applied equally. Thus the role of Board of Investment (BOI) is crucial.

The BOI was established as Greater Colombo Export Commission by a special Act in 1978 and was later expanded to cover the entire island. The BOI is expected to attract foreign investment into the country with a view to contributing to the national product and employment by way of receiving improved modern and advanced technology, poverty reduction and regional growth. This is the 37th year of existence of BOI. It is worth examining whether it has lived up to its expectations.

The world economic order is changing daily with globalization and the awakening of new regions. China has beaten Japan to become the second largest economy. Demand and the competition for FDI among developing nations is on the rise. In order to increase the share of FDI, the country needs to improve its business environment and to ease administrative procedures. Economies are ranked on their ease of doing business, from 1–189. A high ease of doing business ranking means the regulatory environment is more conducive to investors. The rank of Sri Lanka for 2014 was 105 out of 189 countries. Apparently 37 years of BOI existence has not helped much in easing doing business. The BOI has to be more vigilant, attentive and aggressive. It has to address the concerns, issues and expectations of investors and investor countries.

Not many years ago the Secretary to the Treasury publicly criticised the role of the BOI. He stated that the BOI suffers from inadequate professionalism and inadequate performance.

Former Chairman, Sri Lanka Tourism Authority in a statement to the media stated that the ‘One- Stop-Shop’ at Sri Lanka Tourism overrides the BOI taking charge of BOI functions as well. He pointed out, that over the years other ministries passed legislation diluting the powers vested within the BOI. In this respect, approvals for projects left the investors with little choice but to approach the respective ministries and line agencies.

The former Minister of Economic Development has directed that no investor who has once approached the BOI should be sent from pillar to post and relevant officials in the organisation should work with government agencies on all multifaceted needs of investors. Many investors have brought to the notice of the Ministry that the performance of the “One-stop-Shop” concept in BOI is still far below their expectation. The Ministry believes that the BOI needs significant reforms in terms of attitudes, decision-making and follow up by its senior officials.

It appears that the BOI has failed to establish an effective “one-stop-shop” for 37 years. A one-stop-shop is a single location where all of the needed services for a particular activity are provided. It saves clients’ time, cost and effort. Commonly identified constraints such as land alienation, local authority clearance, environmental and regulatory arrangements, tax matters, etc require a coordinated effort by the BOI to resolve the investor approval process. The BOI “one-stop- shop” has a long interesting episode.

The late President Ranasinghe Premadasa once informed the then Director General that he would pay a visit to the BOI office. That was more than 25 years ago. The visit was arranged and the President received a warm red carpet welcome; the place was well kept; spotlessly cleaned; staff was punctual, attentive and customer-friendly; flower pots and floral arrangements complimented smiling faces. The President addressed the BOI staff and thanked them for the welcome as well as the efficiency. He suggested that BOI should set up a “One-Stop-Shop”. The BOI staff from DG downwards looked at each other’s face. They had no idea of this one-stop-shop concept. But they all nodded their heads in agreement. A few days later the President made a surprise, unannounced visit to BOI. Most of the tables were empty; even the occupied ones were busy with chatting and smiling officials. Flower pots, floral arrangements were all gone. Potential investors were running from place to place. There were no signs of a one-stop-shop. He returned to his office and telephoned the DG and requested him to tender his resignation.

The BOI promotes the following sectors as priority sectors for FDI: Tourism and leisure; infrastructure; knowledge services; utilities; apparel; export manufacturing; export services; agriculture; and education. The BOI documents, publications and the website contain information on facilities and services provided to investors. But there is no information available on the potential projects and locations in identified sectors for investor consideration. Investors expect guidance, indication and direction on potential projects, locations and prospects. The BOI needs to work out a wide range of investment proposals that can be presented to investors. The BOI being a promotional agency should coordinate with other agencies and be equipped with such information. A coherent well coordinated promotional strategy is necessary for an effective promotional campaign. Promotional programmes should be carried out by a collective arrangement with agencies such as Sri Lanka Tourism, Export Development Board, Department of Commerce, Sri Lanka Tea Board, SriLankan Airlines.

The BOI manages a number of export processing zones that feature business-friendly regulations and improved infrastructure for foreign investors. The BOI aims to provide services such as approving projects, granting incentives, and arranging services such as water, power, waste treatment, and telecommunications. It also assists in obtaining resident visas for expatriate personnel, and facilitates import and export clearances. Although the BOI is relatively effective in assisting investors who want to establishoperations within its export processing zones, it is less effective in facilitating and servicing investments outside these zones.

The Government anticipates inflows of over US$2 billion foreign investment to realise this year. The BOI should prepare an action plan to ensure close monitoring and supervision. I am not familiar with a monitoring process adopted by the BOI. It must monitor, supervise and follow up the investment projects located within and outside Export Processing Zones. Sometime back the media reported that a few BOI companies have closed their operations and left the country without settling their bank loans. Some companies have neglected their obligations to their employees. Such things can only happen sans the awareness of the BOI as it does not adopt a close monitoring process. Monitoring is important to track down the performance and progress; it is important to check whether the promised and expected investment has been realised; it is important to check whether projected export volumes, income and employment has realised. It is important to review and revise and take timely remedial actions.

The BOI in promoting investment has to be concerned about the impact of FDI on employment, production, exports, poverty reduction, regional development and forward and backward linkages. On the one hand these parameters indicate the socio economic benefits accrued by FDI. On the other hand FDI should create dynamic forces to push the economy upwards. In the past the Government and the BOI have placed more or only emphasis upon the enabling environment and few financial concessions such as tax benefits. But the low inflows of FDIs in Sri Lanka are mainly due to administrative and procedural delays and difficulties at implementation level. It is time to address them if the country to be benefitted by attracting FDIs.

(The writer can be reached on

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