Indian companies head for Sri Lanka
By Shilpa Puri
Sri Lanka is placed 28th, up 13 positions since last year, in the 2001 global rankings of "economic freedom" compiled by the Heritage Foundation and the Wall Street Journal.
Regionally, the island nation is the only South Asian country to be featured within the top 100 in this category.
Interaction between India and its southern neighbour have been on the rise since the signing of the Free Trade Agreement by both the governments in late 1998. India's exports to Sri Lanka in the year 2000 increased by about 28 per cent to $404 million. This has increased Lanka's share in our total exports to 1.42 per cent from 1.32 per cent in the previous year. On the other hand, imports from our neighbour declined by 11 per cent in April-November 2000 to $28.3 million as against $31.8 million in the corresponding period of 1999.
Sri Lanka has been a priority destination for direct investment by Indian businesses within the SAARC region. Over 50 per cent of Indian joint ventures and wholly-owned subsidiaries in the region are located in Lanka. Of the total equity invested by Indian companies in regional joint ventures, 54 per cent are in Lanka. The inflow of direct investment into the island nation has been gradually increasing; the number of approved Indian projects has risen from 23 projects worth SLRs 740 million in 1991 to 150 projects at an estimated investment of SLRs 12.5 billion in 2000.
The main sector attracting investment into Lanka are steel, cement, rubber products, tourism, computer software, IT training and other professional services. Leading Indian companies such as Gujarat Ambuja, Asian Paints, Larsen & Toubro, Tata Infotech, Aptech Ltd, Bengal Waterproof Ltd, Calcutta, Shri Ishar Group, Indore, Nilkamal Plastics, Mumbai, Gujarat Glass Ltd, a subsidiary of the Piramal Group, NIIT, Apollo Hospital, Ansal Housing Construction Ltd and Mahindra British Telecom have recently invested in that country. CEAT and Taj Hotels are expanding their existing operations in Lanka.
This month, Kedar Metals, a Mumbai-based company with a chemical plant in Daman, got the approval to set up a chemical plant in Sri Lanka. It plans to invest Rs 16 crore in 2001-02 and an additional Rs 63 crore in 2003.
Another major project currently under inception is the Rs 120-crore textile plant of Chanthara Textiles Ltd, Mumbai. "We have had over the past year very good experience with the Board of Investment, Sri Lanka. Once our plans are finalised in the next three months we do not see any problem from their side; they are prompt at granting," Promod Kapani, director of the company, says. The company is seeking funds from a Sri Lankan bank.
Wooing with incentives
Sri Lanka is one of the most attractive investment destinations in the SAARC region. Successive governments have encouraged private sector participation in most sectors since economic liberalisation over the past two decades. The thrust areas have been electronics and components for electronic assembly, ceramic, glassware and mineral based products, rubber based industries, light and heavy engineering manufacturing, service industry, software, housing, infrastructure development and training facilities.
The country provides a range of incentives to attract investment. Some of the major incentives are:
· A constitutional guarantee on the safety of FDI providing protection against nationalisation, adequate compensation if required, settlement of disputes under the International Convention for the Settlement of Investment Disputes
· Total foreign ownership across almost all areas. Foreign equity is permitted up to 49 per cent in areas like timber based industries, fishing, supply of water, mass transportation, telecom, professional services, freight forwarding, shipping and travel agencies. Some regulated areas are banking, insurance and trading services on the Colombo Stock Exchange. Areas totally reserved for Sri Lankans are retail trade, coastal fishing, personal services and money lending
· Fiscal incentives and concessions including tax holidays from 5-20 years, concessionary tax at 15 per cent after expiry of tax holiday, import duty exemption from capital goods, import duty exemption on raw materials if utilised for export, exemption from exchange controls, free transferability of shares and concessionary taxation on expatriates income
· Open economic system permitting free transfer of fees, profits, capital earnings and forex transactions on current account payments
· Double Taxation Relief Agreement and Investment Protection Agreement with India, providing reduced tax rates on dividends, interest and royalties.
The Board of Investment, an autonomous body, facilitates FDI into Sri Lanka. Export oriented industries meeting the investment policy of introducing modern technology and generating employment fall under its mandate. According to M. Balachandran, Officer, Consulate General of Sri Lanka, "The maximum time taken by BoI to approve an investment plan is two weeks. Things move fast in the country".
Board of Investment of Sri Lanka,
World Trade Centre,
16th Floor, West Tower,
Tel: 94 1 434403, 435027
Fax: 94 1 447994
Highway to Colombo
By A Special Correspondent
Roadways construction seems to be the flavour of the year in the island nation. Sri Lanka like India is concentrating on connecting the country with quality roads as part of its efforts to improve infrastructure. The Ministry of Highways is undertaking construction of four new highways, connecting Colombo to other major towns, and eight flyovers in Colombo. The road construction is expected to be completed by 2005.
The 128-km southern highway linking the capital city to the southern city of Matara, to be built at a cost of SLRs 34 billion, would be the longest. It will be constructed in two stages: the first 54-km stretch would cost SLRs 20 million. The Japan International Co-operation Agency (JICA) is funding the project.
Colombo's baseline road, which runs across the city from north to south, is also being converted into a highway. It will then become a major access road to the international airport and the Free Trade Zone in Katunayake. This ongoing project is to be completed by 2003.
Plans for a highway between Colombo and Kandy are also afloat with the government of Sweden funding a major portion of the construction.
S. L. Seneviratne,
Secretary, Ministry of Highways,
9th Floor, "Sethsiripaya",
The Ceylon Chamber of Commerce
50 Navam Mawatha,
Colombo 2, Sri Lanka
Tel: (94-1) - 421745-7, (94-1) - 423475-6
Fax: 437477; Fax/IDD (94-1) - 449352
High Commission of India
Fax: 446403, 448166
National Development Bank
40, Navam Mawatha,
Colombo 2, Sri Lanka
International Chamber of Commerce of Sri Lanka
CNAPT Bldg, 1 Floor
51, Sri Marcus Fernando Mawatha,
Tel: +94 1 691290, 075-333392
Fax: +94 1 699290
Full name: Democratic Socialist Republic of Sri Lanka
President: Chandrika Bandaranaike Kumaratunga
Prime Minister: Ratnasiri Wickremanayake
Population growth rate (2000): 0.89 per cent
Literacy: 90.2 per cent
Official language: Sinhala
Area: 65,610 sq km
Coastline: 1,340 km
Currency: Sri Lankan rupee
GDP growth: 3.7 per cent
Major trading partners: US, UK, Germany, Japan, Singapore, India, Iran, Taiwan, Belgium, Hong Kong, China and South Korea
Major exports: Textiles and apparel, tea, diamonds, coconut products, petroleum products
Major imports: Machinery and equipment, textiles, petroleum, foodstuffs