ISSN: 1391 - 0531
Sunday, June 03, 2007
Vol. 42 - No 01
Financial Times  

CNCI says local investors must get same ‘treatment as foreigners’

The Ceylon National Chamber of Industries (CNCI) has said that whatever facilities that are afforded to foreign enterprises to operate in Sri Lanka must be extended to local enterprises irrespective of whether they are BOI or not.

It said under the CEPA agreement that is under negotiation it is proposed to permit up to 100% investment for Indian entrepreneurs to invest in a variety of product areas as permitted for foreign investment by the BOI on a case by case basis. Similarly India too has reciprocated with a larger list of product areas to be opened up for 100% Sri Lankan investment in India.
The CNCI said currently most of the product areas are available for investment only on a case-by-case basis approved by the BOI. However, what is proposed under the CEPA is for the Indian investments to be allowed without any restriction whatsoever by the BOI.

“It is our view that Indian investment could certainly be invited to Sri Lanka but should be under the existing rules of the BOI in order to safeguard the local industry whilst expanding the BOI investments. It is noted that although India has opened up a series of product areas for Sri Lankan investment we observe that this offer is qualified by the necessity to obtain approval from various Indian agencies and authorities.

Accordingly Sri Lanka too should qualify its offer by requiring the Indian investment in Sri Lanka too to be subjected to approval by BOI,” CNCI said.

The fears expressed by industry are since the Indian investments will be BOI concerns they will be entitled to import raw material and machinery (both new and old) duty free and VAT waived or deferred. With such advantages they also become entitled to sell 20% of their output to the local market.

“As BOI concerns are exempted from some such as labour laws that are applicable to non BOI companies the Indian Investor would enjoy further advantages not available to local non BOI industrial sector. Being BOI concerns they will have the added advantage of accessing low cost capital by borrowing in US$ whereas the local companies have to borrow in Sri Lankan rupees at higher cost. Contrary to what is proposed under CEPA we do hope that expatriate staffing will be restricted to senior managers and technical positions for which expertise is not found in Sri Lanka. The BOI must also ensure that the Indian companies operating under the BOI umbrella should continue the value addition as stipulated during the entire life time of the venture without converting themselves to trading ventures as time goes by,” it said.

Even if India does open its product areas for 100% Sri Lankan investment, given the current exchange disparity of both countries, it is unlikely that tangible investments could be made by Sri Lankan entrepreneurs in India.

“This is all the more reason that if Sri Lanka is to benefit there must be fair competition for the local enterprises to operate in their own country,” CNCI chairman A.K. Ratnarajah said.


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