It is a great honour for me to address the delegates and participants at the Opening Ceremony and Plenary Forum of the China Overseas Investment Fair. This event is very important in the current context, as China has emerged over the last decade as a global economic power and a beacon for world peace.

I am equally pleased to address this distinguished gathering from China and other nations in view of the longstanding friendly relations that have existed since time immemorial between Sri Lanka and China.

The strength of these relations has been characterized by trust and friendship, strong pillars upon which our two nations can mould their future exchanges.

As Minister of Enterprise Development and Investment Promotion of Sri Lanka, my interest is specifically on the area of outward investment from China, which has grown over the years.

I remember reading about two years ago the World Investment report issued by UNCTAD, where it was stated that one of the salient features of the global economy in the first decades of the 21st century will be investment overseas by nations such as China and India that underwent rapid development and economic transformation barely a few decades ago.

China has attracted US$ 92 billion in Foreign Direct Investment in 2008, which was about a 25% increase from the previous year. But much more significant in my view is the nearly 64% increase of outbound investment from Chinese enterprises, which totaled $41 billion.

I consider this development of the highest significance as FDI as one of the most influential forces for economic transformation. In the years to come this economic landscape of Asia will be radically transformed by the inflows of FDI and the sharing of technology between Asian countries.

There are some voices in some parts of the world that fear the "Pacific Century" which as you all know amounts to a world economy centered around the Pacific Rim where the economies of that region will be the engines of growth for the world. In that scenario China would be one of the leading nations to drive this development.

In my view these fears are unfounded and the emergence of China as a global player will indeed be a win-win situation for all nations, not just centered around the pacific Rim, but also beyond. The impact will of course be felt in South Asia, our own region.

Naturally, a country such as Sri Lanka is very keen to attract a quantum of this Chinese investment and it would be fair for to add that I will use this opportunity for making a strong case for Chinese enterprises to opt to invest in my own country.

When I make a case for Chinese investment into Sri Lanka, I will first mention that there is a strong history of Sino-Sri Lankan economic exchanges that go back to the earliest times.

Our Chinese friends all know of Admiral Cheng Ho’s visit to Sri Lanka and of the description of the island by the Chinese Buddhist Monk Fa Hsien.

It is equally important to recall how in more recent years, Sri Lanka was also one of the first countries to recognize the fledgling People’s Republic of China, established in 1949 by the late President Mao Zedong.

Here again Sri Lanka took a realistic position with regards to the One China Policy at that time many countries expressed hostility towards the People’s Republic of China and continued to recognize the earlier government of China. Our traditional ties guided us to the great Chinese nation and also by our interest as a non-aligned power.

Over the years relations have flourished. I wish to recall the 1952 Rice-Rubber Pact that was a mutually beneficial agreement between our two developing nations.

I also want to add that China has an important presence in Sri Lanka. Most important events held in Colombo are hosted in the Bandaranaike International Conference Hall (BMICH) which was built in the 1970s to host the Non Aligned Nations Summit of 1976. Another important Chinese built structure is the Superior Courts complex.

Currently work is underway for the construction of a National Performing Arts Theatre in Colombo that will seat 1,250 spectators.

But while in the past relations between Sri Lanka and China were political and cultural, the current focus is economic. Hence many of the major infrastructure projects that are taking place in Sri Lanka are undertaken by Chinese enterprises

One example of such projects undertaken by Chinese industry that comes to my mind is the Norochchollai Power Plant that will address many of the Sri Lanka’s energy needs when it is completed in 2010.

I also want to mention the Chinese role in the development of the Hambantota Port. The construction of this new port will play an important part towards the creation of a new economic hub in the southern tip of the island, as it is at the crossroads of the major shipping lines of the Indian Ocean.

I also want to add since it will interest our Chinese friends, that China will have an important economic presence in Sri Lanka in the next few years. This is the result of the agreement that was signed between the Board of Investment of Sri Lanka and a Chinese company to establish a dedicated Chinese Special Economic Zone (SEZ).

Once the SEZ is completed, there will be a Chinese economic enclave in Sri Lanka, which will operate as a fully-fledged Chinese industrial city. The Chinese company will build, manage and source investors for this zone.

We are also optimistic that your enterprises will be interested in offshore oil exploration. Sri Lanka has awarded one block to China to begin prospecting for oil off our coast.

The question we now need to ask is, "what is the best strategy to adopt to develop further economic relations between Sri Lanka and China and more specifically Investment?"

At the highest level, we have used the opportunity to actively promote Sri Lanka during His Excellency President Mahinda Rajapaksa’s State Visit to China in 2007, in honour of the 50 years of diplomatic relations between our two great countries.

At this event The Board of Investment organized in Beijing, Shanghai and Guangzhou, investment fora, highlighting the potential of our country. At such meetings many Sri Lankan entrepreneurs from leading companies met their counterparts from the Chinese Private sector and discussed trade and joint ventures.

Similarly, Sri Lanka has hosted a number of Chinese Government and Business delegations that have visited the country on fact-finding missions. In addition to your own delegation, there have been a number of other distinguished industrialists from China who have visited our offices and met our officials. Those that come to my mind include delegations from the CCPIT, Shanghai’s leading chamber of Commerce, from East China. The last one we hosted was from Fujian Province.

The Board of Investment has also participated in a number of trade fairs in China such as the current China Overseas Investment Fair. But in the past Sri Lanka participated at the International Trade Fair in Xiamen where the BOI hosted a pavilion to promote investment.

In the same light was our decision to provide Sri Lanka with some kind of window in China at a central location that would showcase her products and highlight her true potential. This was the rationale behind the opening of the Sri Lanka Centre in Shanghai. This office, which recently won an award for its innovative design, fulfills this important role in Shanghai, China’s commercial hub.

An important question that needs to be addressed is the need for enhanced Chinese investment into Sri Lanka. I am concerned that at the end of June 2009, only US$ 64 million worth of Chinese FDI flowed into the country, even though China is the leading investment generating nation.

This is indeed a very small quantum, considering the excellent relations our two countries enjoy. There is definitely a lot more that can be done to ensure that we move beyond the existing status quo where a total Chinese FDI in Sri Lanka is only US$ 109.7 million.

A point that needs to be made is that Chinese investment in Sri Lanka needs to be of a technologically advanced nature. Current Chinese investments in our country include enterprises in sectors such as apparel, manufacturing, deep-sea fishing, trading houses, restaurants and medical centers.

The central question on the mind of all investors from China will be: "what can Sri Lanka offer to Chinese investors?"

I will begin by saying that Sri Lanka is a perfectly safe environment to invest since the end of the conflict and that Chinese investors will be operating in an vibrant economic climate.

Production is about people and Sri Lanka strength lay in an excellent workforce that is skilled and capable of undertaking any task. This is because Sri Lankan governments, like that of China, invested in education and also ensured that high standards of labour relations were maintained.

The next is of course our country’s position that is strategically placed at the crossroads of the major economic regions of the world such India, the Middle East, South East Asia and even Europe. Sri Lanka has excellent connections by and by sea and sits at the center of the major shipping routes.

I also want to stress that Sri Lanka enjoys a number of important facilities with foreign countries that Chinese investors can utilize if they do decide to start projects in our country.

If Chinese investors manufacture products in Sri Lanka they will be permitted to sell a wide range of products duty free in India. This is permitted under the Indo-Sri Lanka free trade agreement. This is of great value in view of India’s emergence as a major market for goods and services.

A similar arrangement exists for Pakistan, which is also emerging as an important market in our region.

More significant in my view is the European Union GSP+. This is significant as almost all products made in Sri Lanka enjoy duty free access to the European Union, the World’s largest trading area. This is something which Chinese entrepreneurs need to consider seriously.

I hope that my address will create a better understanding of Sri Lanka’s investment climate and true potential as an investment destination for Chinese enterprises. It is essential to ensure that economic relations between our two countries will move several steps further.

An excellent catalyst for investment is without doubt travel and tourism and the rise of Chinese tourist arrivals to this Sri Lanka and the growing trade between our two nations, will I hope lead to a corresponding increase of FDI from China.