Can you give our readers some information regarding the historical background, the main activities and the structure of the BOI?
The BOI had been in existence since 1978, and it was established as the Greater Colombo Economic Commission, (GCEC.). After 14 years of existence, in 1992, the commission was reconstituted as the BOI. Its principal activity is to function as a central factitious point for investors. The objective is to enable foreign investors who are interested in doing business in Sri Lanka, to facilitate them in every way in establishing an investment. It is to act as a one-stop shop most of the time. Basically foreign investors could come here, find out every thing about the opportunities for investment, and more importantly, the facilities and incentives for the foreign investment. We would provide all the relevant material and be able to tell them very clearly that if they meet the requirements, they would get BOI approval. The most significant part of the BOI approval, are the tax and physical incentives that are relevant. This is the most important benefit that we can offer.
We also operate a number of industrial parks. The advantage of an industrial park is that it is a zone where the infrastructure is already present. There are allotments of land that can be provided and someone can go there and set up his structure. Therefore he eliminates the need to try and find land and worry about neither the infrastructure nor the security, since the sites are provided with security. Our aim is to enable the investor to get his operation off the ground smoothly.
We also help people in their imports and their exports because incentives relate to the two. There are spreads of incentives and one is that investors will be allowed to bring materials, free of duty.
In terms of promotions of investment opportunities, what do you see as the focus for this year and what are the sectors you are trying to attract investors in ?
I think one of the most interesting opportunities, which are arousing a lot of interest, is the relationship between India and Sri Lanka. In terms of geography, we are very close to India and therefore in terms of locating industry, Sri Lanka is as good as locating business in any other part on India, if you are in the South of India and you are servicing the country miles away from the North or if you are miles away from the South. The same applies if you are in the East or the West. We are in such close proximity, just separated by a thin ribbon of water between the two. One could peruse this, like setting up an operation in the Southern part of India.
With the free trade agreement with India, Sri Lanka has much-preferred rates of duty into India when applicable than if you are coming in to India from anywhere else. The reverse applies as well and this is a result of the free trade agreement within the two countries. Therefore if somebody is exporting things into India, on higher tariff barriers, by setting up an operation in Sri Lanka, they could get to India on low tariff rates.
India of course is a huge market and along with China, they are considered as the two new emerging giants in the world scene. Perhaps by 2010, if one looks at all the economic indicators and forecasts, there will be economic pallas and therefore creating a huge market, which will attract any person who is going to wants to make any kind of significant business.
This is the same kind of excitement that China provides, because a lot of people are investing there since in the long haul it will become one of the big markets. One day it is going to be a very profitable market.
Most companies in the West are looking for growth opportunities. There is saturation in the US and Western Europe, any fast moving consumer goods or consumer durable company will find it very difficult to get volume growth with saturation consumption. Population is not growing in great volumes. These companies will have to look for expansion and they will go in to the emerging world in search of new markets. There is a great interest in Brazil and China and of course India. Very often the question is how do you go into those markets. It is often complexed going to those markets.
But, if you were to come to Sri Lanka you are free of all those complications. In a very simple straightforward style, one could set up operations here very quickly. Unlike India, we have one central government, where it is not very complex to operate, since ours is a regional federal structure and one does not have to thread their way.
I suppose Sri Lanka wants to do what Singapore did. Singapore, like Sri Lanka, is a very small and compact uncomplicated country. If you wanted to do business in the Far East, 20 years ago, people found it very convenient to go to Singapore, because you could set up business easily and it was a base to work for in the ASIAN countries. It was a very well equipped place to run regional officers from.
Similarly you could set up an office in Colombo, and if you want to run operations in India, you can fly to New Delhi in three hours time. It is just like taking a plane to come to Madras (Chennei) in three hours. Therefore flying out from Colombo, to either Bombay or New Delhi is similar to flying from Madras to Bombay or Madras to New Delhi. Therefore the time it takes to fly from east to west or west to east within India is equal to the time it takes to fly from Colombo to New Delhi or Bombay. This is why Sri Lanka is the ideal place to set up regional business officers. We therefore see India offering a greater market for Sri Lanka, which is an exciting scenario.
The other basic advantage is that Sri Lanka has an educated population who is experienced, quick to learn and has very good hand skills. Our garment factories work very well because people come with a combination of good hand skills and education. Traditional historic arts, crafts and practices too produce good hand skills. It is not only the traditional hand skills we're blessed with, but also education to go with it, and a track record to prove it works. One could see this component in playing a vital role, in large number of factories.
The other advantage is that we are very favorable in terms of foreign investment. Lots of countries had very complex rules. We are very uncomplicated and one can have a 100% owned foreign company. One does not have to have a joint venture partner, which is an advantage. It is very difficult to have a 100% owned foreign company in the South Asian region or anywhere else. There are certain conditions in which one can have 100% own companies. But you couldn't in many sectors as yet.
But in Sri Lanka you could have your own company. Then under the free trade area, export to India. This is a new focus because of two factors: A growing interest in finding new emerging markets, and India coming in to the fore. The Chinese experience has been difficult, as it has not proved easy for many western countries to get off the ground quickly in China.
I was involved in a multi national for 40 years where I too had my personal experience when we tried to go in to China. The difficulty with China is that China itself was in a state of transition from a highly controlled communist regime to a more free market regime. The free market structure did not exist and that was complicated. There were problems in buying land; ownership and titles of land were very different in the Communist regime than in the free market world. But despite these problems people were persevering in going to China, because it is a large market.
India on the other hand has a very westernized kind of infrastructure. They have a well-established legal system, which is very intelligible and similar to legal systems that people would understand in the West. Very high percentages of Indian people speak English. Since people are beginning to see the problems involved in operating in China, many will see increasing importance and interest to India.
That is what a person says might be new. Over and above what Sri Lanka offers its traditional benefits of relatively inexpensive labor, you also find labor, which you cannot find in other parts of the world. In the advanced Western countries one cannot find people dedicated to work in Labor-intensive operations. This is a kind of skill that has evaporated.
Therefore, I think that to any industry that needs a high component of manual labor, Sri Lanka is a very attractive place to set up business. This is why we have such large number of export industries operating out of Sri Lanka. People in the world have to manufacture somewhere and the question is where? Sri Lanka has proved to be a good place to manufacture and export from. As long as one is talking about products that are not particularly heavy and bulky, and can move around the globe, Sri Lanka is a good location. | Working in a multi national environment, there is some other key factors that would have to be considered in order operate from a country like this. It is not purely the labor factor that counts, but the management component. If you are injecting foreign investment into SL for example, very often it's quite a necessity that the foreign investor will want to send his people to manage operations, since the foundation of a company is its people. The difficulty in the Western world now is that people are not ready to go to inhospitable places and they can't be forced to go to these places as it was done 20 or 30 years ago.
This is where Sri Lanka scores. Every body looks on Sri Lanka as a pleasant place to work and every body gets what they want. If you are married, you have good international schools, which is a major plus if thinking in residing in the country of operations. From a management point of view it is a good place to put management in, because the management is prepared to come here, as in the case of Singapore. The other advantage is the language. One could come here as a foreigner and you are not at a disadvantage if you can speak English and you can't do that in many other parts of the world.
What do you think of the presumption that Sri Lanka is a dangerous place, a war country?
Yes we cannot ignore the fact that there is a war up in the North and that has to be considered as a negative factor. One has to use sun, sand, and sea to counteract it. There is a lot of war, uprisings and tension all over the world and we are not unique about it.
Fortunately this war is confined to a particular part of the country. There have been incidents that have taken place else were in the country. Therefore the war has not impinged on the people living in the other parts of the country where you have to be ducking shells or running in to air raid shelters. Those who have been here and worked here are comfortable and know that the war does not affect or concern them.
What is the amount of foreign investment that you foresee for this year?
My first thoughts on this are that we would try to use a focused approach on foreign investment to the country. We will be looking at attracting small export oriented companies and targeting larger pieces of investment. It is not only the big multi national companies that we are trying to target. But also information technology and data transmission ventures where new technology is involved. The 'E commerce' is developing rapidly, therefore some part of commerce can be done from all over the world. One could have an airline agency in a tiny little island that can handle airline bookings anywhere in the world.
Theoretically a lot of things in the world of commerce could be operated from anywhere in the world. This is a new area of activity and there are a lot of firms emerging out of this concept. That is a whole kind of exciting area. We have a lot of sun and sand and locality. Just as much as the Maldives grew up, we have the basic kind of facilities that could develop in to huge resorts. It is therefore a question of looking at larger scale operations. That is the sort of thing that we will look long and hard at. Two of them are worth as much as 50 small ones in terms of investment.
Our location is good, since it is between the south and the west the tip of south Asia and not really that far away from East Asia, plus there is good communications to Europe. We are really far away from the US and Latin America, but if one looks at Europe and East Asia we are within the reach of a large part of the world. This is a very interesting thing as far as moving people around the world.
Are you hoping to focus on geographical markets in promotion of foreign investment or are you going in for new markets?
We have certain number of countries that have been traditionally coming to Sri Lanka. The advantage in those countries or companies is that they can always go and ask somebody else what is like doing business in Sri Lanka. I one goes to a country that's never done business in Sri Lanka, then it is going to be pretty difficult. Therefore we have decided to target companies of those countries that have invested in Sri Lanka in the past.
How does the BOI raise funds for the promotion of investment?
We do not have huge numbers, because we are a facilitating agency and we provide facilitation at each of the industrial Zones we have. Each zone may have 25 000 people working there. They are not employed by us or are in the pay role of the BOI. We have about 250 officials working in the infrastructure on the zone.
In terms of funding for BOI, it's funding requirements just in terms of generating foreign investment is relatively small, because we are running an investment agency, which is not a huge cost. The cost comes in things like creating industrial zones, and that money has to come from the government, since there is no other way. When creating infrastructure too it has to come from the government. Talking about E commerce related activities, if we are going to create some major E commerce related facility, the money too has to come from the government.
Regarding your future outlooks where do you see Sri Lankan economy in two years time and the role of the BOI?
I think that the BOI has two parts to it. One is to bring in foreign investment and another is to play a role as a catalyst for major investment. It has to play the role of a facilitation agency. Therefore the BOI brings in foreign investment to the country and on the other hand acts as a catalyst in trying to put projects together as an investment agency would. Some of these may be aid-related projects where there may be funding from major international agencies like Japan. Therefore one can say that there is a source of funding and here in a major infrastructure need and the BII, part of the BOI, could then be the catalyst trying to generate or develop a project which would link up with different government or private agencies together. This is a part of the BII and therefore that is another vital part of the role we play.
In five years time, what we hope to see is a larger number of ventures operating from here, primarily serving export markets. We would hope to see some bigger ventures using Sri Lanka as a base. This is to serve both Sri Lanka and south Asia and maybe many other parts of south Asia.
At present we are having small industry and hopefully people will say that Sri Lanka is a good country to operate big international business. Our aim is to be a catalyst, not an owner; we hope to stimulate the infrastructure development as well, which will help the country as a whole.
There are so many interesting things one can bring in as a catalyst and one area is the medical side. There are opportunities in this part of the world, where we could provide absolutely world-class medical facilities. This area has not been looked in to so far and we should market medical packages very soon. We could say, come to Sri Lanka or Maldives on a package, seven days full board, free liquor, get your hernia operation or cartilage in your knee repaired, for 400 pounds. You do not have to wait in the queue for this and the whole package will be very much cheaper than the one paid for their medical insurance.
What is your final message for our readers who are potential investors in Sri Lanka?
People who have lived and worked here are very happy, as we do not have restrictions like in Saudi Arabia, where you can't even get a Beer. We have only very few negatives issues. What I have to say is that Sri Lanka has a wonderful location and has an environment to do business in; and that it is an excellent place for locating activities.
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