The sudden resignation of the Board of Directors of the Board of Investment (BOI) this week was not so sudden in a sense; it was a long time coming. Friction within the country’s ‘One stop shop’ for Foreign Direct Investments (FDIs) and the Minister in charge had dogged the Government’s desperate search for foreign investors. [...]


Changing pillows for FDI headache won’t do


The sudden resignation of the Board of Directors of the Board of Investment (BOI) this week was not so sudden in a sense; it was a long time coming. Friction within the country’s ‘One stop shop’ for Foreign Direct Investments (FDIs) and the Minister in charge had dogged the Government’s desperate search for foreign investors.

The anticipated dollars, sterling and euros were not flowing in as the new Government of 2015 anticipated, forcing it to rely on state-backed investments from China and India.When President J.R. Jayewardene initiated the Free Trade Zone in 1977, he famously proclaimed “let the Robber Barons” come. He took a practical view of the commercial world and the flow of capital, that many ‘developed countries’ opened their doors to – money, black or white.

At the time, Sri Lanka was a pioneer in inviting FDIs, and the pro-West Government was an attractive proposition for investors looking for markets in the region. However, the JVP insurgency of the 1980s sent jitters down the initial investors, the Koreans mainly, and they all started pulling out.
In the intervening years since, other countries in the region began liberalising their economies and turning from socialism to market economies – Cambodia, Myanmar, Bangladesh, Vietnam and even India. Sri Lanka is no longer the ‘only girl on the beach’ and today, is trying to play catch up as others forge ahead.

The ‘Robber Barons’ looking at Sri Lanka today are unfortunately those of Sri Lankan origin themselves. They had parked their monies elsewhere and want to bring it in as clean money. The name of the game is for slush money in the Asian region to be laundered and ‘invested’ elsewhere, but close-by. Recently, the Government has had to come to terms with several questionable projects where Government VIPs have been associated with ‘sweetheart’ deals.

While it is not the BOI’s role to check the credentials of prospective investors — a responsibility which lies with the Central Bank and the commercial banks in view of international money laundering laws in force — due diligence of a potential investor is a sine quo non. And yet, those laws are mainly aimed at the narco trade and terrorist activity, not so much the monies siphoned away by corrupt political leaders. See what happened to Sri Lanka’s efforts to recover money from Sri Lanka in Dubai – it fell on deaf ears.

In this climate, ask potential investors why Sri Lanka is not an attractive country for FDIs anymore and they will give you five major reasons viz., 1) the high cost of labour, 2) kickbacks demanded by VIPs, 3) bureaucratic red tape, 4) lack of tax incentives forced by the IMF and 5) political policy inconsistencies – not necessarily in that order.

On April 27, 2016, the Cabinet of Ministers decided not to extend tax holidays and other incentives offered since 2006. Applications for BOI approval dropped from 20 a month to six. An ill-fated Agency for Development Bill was mooted to neutralise the BOI amidst the tug-of-war between the BOI and the Line Ministry by taking away BOI’s powers to enter into agreements. The new IMF proposed Tax Bill further emasculated the BOI curtailing the powers left to it to grant whatever tax holidays that were available and raising certain thresholds in core areas of investment, such as in IT. Changing pillows at the BOI directorate will not be enough to cure Sri Lanka’s FDI headache.

Net the local bottom trawlers also
If the wheels of Government are not moving as fast as one expects, the fact that it was able to enact legislation to ban bottom trawling in fishing shows that those wheels are moving at least slowly in some quarters.

But that, that too, had to be churned out by way of a Private Member’s Bill from an Opposition TNA MP who faced some resistance from his own party tells how difficult it is to break through the institutionalised corruption in this country.

This law was still long overdue and after the issue of illegal fishing practices was long spotlighted in the media, not least by this newspaper. There was a total ban of exports imposed by the European Union and mobilised protests by northern fishermen who faced the brunt of this illegality with more than 1,400 boats coming thrice a week, every week from southern India and engaging in such bottom trawling in the waters of the Gulf of Mannar and the Palk Bay.

Not only was the livelihood of these northern fishermen being robbed, so too was the marine life of Sri Lanka’s northern waters raped, and the economy of Sri Lanka made to face huge losses. All Sri Lanka could do in the face of these armadas of poachers was to arrest the men and their made of steel boats and then release them after a telephone call came from across the Palk Strait to do so.

This was causing inevitable tension between the fisher communities of the two countries and while many nations took tougher stands on such issues, successive Governments in Colombo opted for the coercion course, and to the credit of the incumbent Government in New Delhi at least some remedial measures have been taken to end this irritant between the two neighbours.

Bottom trawling or sweeping the ocean floor with nets as it were, is an illegal fishing practice, internationally frowned upon. The wanton damage it caused was something that has to be seen to be believed and this newspaper ran series upon series of reports on this issue. India too, has at least partially banned this practice, but for a long time turned a Nelsonian eye allowing its fishermen to do just that in Sri Lankan waters because its resources were already depleted by this fishing practice.

Sri Lanka’s new law sends a clear signal to the state of Tamil Nadu that patience is running thin on this side of the International Maritime Boundary Line (IMBL). However, while these laws have been enacted and the Sri Lanka Navy has successfully pushed the Indian fishermen deeper and closer to the IMBL, big time local (Sri Lankan) boat owners are seemingly smacking their chops trying to move into the vacuum created.

Studies now show that at least two hundred plus 3 ½ tonne one-day boats owned by businessmen not just in Gurunagar (Jaffna) and Pesalai (Mannar), but also in Negombo and Chilaw are sending fishermen to engage in this very same bottom trawling expeditions. They are seen right now plying up and down Pooneryn and Kilinochchi and down to Talaimannar.

For the small time fishermen in the north, it will be a case of the ‘same difference’ and something that could well trigger a future communal flare-up unlike in the case of the Indian fishermen. And unlike when the SL Navy was responsible for protecting the territorial waters of Sri Lanka and apprehending the foreign fishermen, it will have no powers with local violators of the new law. This will be now the responsibility of the Department of Fisheries.

It will merely be a case of the Sri Lankan fish mudalalis taking over from where the Indian fish mudalalis left.

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