U.S. companies painting 'sombre picture' of business conditions in Sri Lanka: study


AmCham (American Chamber of Commerce) and STAX officials present a copy of a collaborative study conducted on 'FDI Landscape and Investor Sentiment in Sri Lanka', to Development Strategies and International Trade Minister Malik Samarawickrama, in Colombo yesterday. At right is BOI Director General Duminda Ariyasinghe. - Pic: Saman Abeysiriwardena

by Sanath Nanayakkare

U.S. companies surveyed for a report on 'FDI Landscape and Investor Sentiment in Sri Lanka', have painted a sombre picture of business conditions within the country with policy instability being the primary issue cited, followed by a shortage of labour, among other concerns.

From a U.S. perspective, conditions for attracting FDI into Sri Lanka are not optimal and the current quantity of U.S. FDI flowing into Sri Lanka is not significant. As a result, the country's regulators value the impact made by U.S. investors in Sri Lanka less than that of Asian players such as China, the report stated.

Another primary barrier that needs to be broken down is the difference in Sri Lanka's standards for transparency and corporate governance in order to attract U.S. investors to invest in Sri Lanka, it said.

Adding to the 'to do' list, the report points out the need to improve sets of of data on FDI, which could otherwise confuse potential investors.

"In recent times there has been some discrepancy in FDI figures reported by the media and various other sources. For example, recent news reports highlighted a significant drop in FDI over the 2015-2016 period although the Central Bank's statistics painted a far more conservative trend. In this context, it is Important to have clarity around the data reported by various sources," it said.

Dealing with these concerns will be important if U.S. FDI into Sri Lanka is to be improved, the report suggested.

These finding were revealed to the media and a number of relevant stakeholders in Colombo yesterday by AmCham (American Chamber of Commerce) through a study commissioned by it, which was conducted by STAX on a pro-bono basis; meaning 'for the public good'.

On a positive note the report stated that while issues such as these need to be rectified if Sri Lanka is to compete as an attractive FDI destination , there are many positives to look forward to over the coming years. New tax incentives have been introduced with an emphasis on capital formation. Reform procedures are also being implemented to improve investment promotion and business conditions within the country , while negotiations are underway to improve Sri Lanka's trade relations. Key investment projects including the Hambantota Port and the Colombo International Financial City are likely to provide a much-needed boost to FDI inflows, which are expected to trend positively over the next five years.

As a key proponent of policy dialogues between U.S. affiliated businesses and regulators, AmCham is especially keen on facilitating avenues for the private sector to voice their concerns. AmCham's goal is to bring various aspects of FDI together - as one complete story - that helps facilitate discussion and development in key investment areas.

The United States holds great importance to Sri Lanka as an economic partner as it is the country's largest single nation export destination accounting for 26.6% of exports in 2016. By contrast, the EU as a whole accounts for 29.7%. In 2017, Sri Lanka was the United States' 70th largest trading partner, with exports from Sri Lanka valued at $2.9 billion while imports were a modest $ 336 million. Apparel was the primary export good accounting for over 70% of exports in 2016. In 2016, U.S. FDI stock in Sri Lanka was $117 million, while Sri Lanka was reported to have a stock position of $70 million in the U.S., according the Bureau of Economic Analysis.

animated gif
Processing Request
Please Wait...