Launch of investor platform part of Sri Lanka’s push for more FDI
View(s):Sri Lanka has moved to increase foreign direct investment (FDI) flows following the launch of a new programme aimed at streamlining Customs procedures to boost trade.
In late May the Board of Investment signed a memorandum of understanding with six government agencies to develop the National Single Window (NSW), an online one stop shop for investor applications and certification processes.
The signatories were the Department of Registrar of Companies, the Department of Inland Revenue, the Central Environment Authority, the Colombo Municipal Council, the Urban Development Authority and Sri Lanka Customs, according to the Sri Lanka economic update issued by Oxford Business Group (OBG) to the local media.
The six agencies comprise the first phase of the Single Window Investment Facilitation Taskforce (SWIFT), a specialist body established by the Development Strategies and International Trade Ministry to expedite investment approvals. In its second phase, due to roll out next year, SWIFT will implement the NSW and incorporate 19 more state agencies into the system.
The creation of the NSW is expected to substantially simplify the foreign investment process, which formerly required investors to obtain in-person approval for projects from all relevant agencies, involving up to 14 permits in some cases, OBG said.
The NSW will also be boosted by companion platform the Trade Information Portal (TIP), expected to be launched in the second half of the year. With instant access to close to 800 regulatory documents, including laws, prohibitions, standards and procedures, the TIP should improve transparency and reduce errors, allowing traders to find all relevant regulatory information on a single digital platform.
The digital integration of ministries and relevant bodies is expected to greatly streamline existing bureaucratic procedures for exports and imports, often cited as a key factor restricting FDI.
While Sri Lanka recorded US$1.6 billion in FDI last year, its highest-ever annual intake and double that of 2015, it represented just 1.6 per cent of GDP, significantly lower than levels in Malaysia and Vietnam, where rates stand at around 3-4 per cent and 5-6 per cent, respectively.
For the past decade FDI has been largely concentrated in infrastructure and construction projects, evidenced by the June release of the final tranche of China Merchant Port Holdings’ $976 million investment – the country’s largest-ever single FDI – for the 99-year lease of the Hambantota Port.
OBG said that while efforts are under way to improve the investment climate, some factors could hinder foreign capital inflows.
Chief among these is the value of the rupee, which has depreciated almost 5 per cent against the dollar since 2016, and has been susceptible to sharp drops in value, as experienced in 2011 and 2015. However, the passing of the Active Liability Management Act – aimed at improving public debt management – in May has seen the rupee stabilise.
Additionally, existing visa, immigration and naturalisation policies have been cited as factors limiting critical knowledge transfer to the country, and the subsequent development of expertise in new technologies.
“At present, immigration law offers no path to permanent citizenship, and places restrictions on both foreign workers and their family members.” OBG said.