Daily News Editorial

Boost for foreign investment

14 January 2017

The Government has placed emphasis on trade and foreign investment to boost the economy, instead of relying on loans and grants. The latter are anyway in short supply as Sri Lanka is now in the Middle Income category. It is always better to rely in trade and investment – reckless borrowing at commercial rates by the previous Government has placed Sri Lanka in a massive debt trap. It will take decades to repay these loans, some of which have been taken for useless vanity projects that just perpetuate the Rajapaksa name.

Foreign Direct Investment (FDI) is often the best way to stimulate an economy. Just a couple of days ago, Swiss food giant Nestle started work on a Rs.5 billion manufacturing plant in Pannala, their long-time local base. Several such mega projects are now underway in various parts of the country, under the Government’s new three-year plan for a sustainable economy.

But we often tend to overlook one important category – the individual foreign investor. They are usually high networth individuals who have investments in various countries. The Government has expressed its keenness to attract this type of investor as well and revealed a sound proposal. Resident visas from two to five years would be granted to foreigners who make a minimum investment of US$ 300,000 in Sri Lanka, Finance Minister Ravi Karunananyake has said.

The Finance Minister says the Government will also grant tax concessions and extension of visas to foreign investors who invest over US$ 1.5 million. It is a commendable move, given that investors would like to have unhindered access to their investments here without undergoing separate immigration procedures every time they arrive in the country.

We are somewhat late to this party, with several countries in region including Malaysia offering similar programmes. Malaysia’s “My Second Home” programme, renowned throughout the world, offers long-term visas to foreigners who invest in their country. Many Sri Lankans too have obtained this facility from Malaysia. In some countries, the investor can directly apply for citizenship (not just a resident visa) under a “Citizenship by Investment” programme. Among the countries that offer this facility are Portugal, Greece, Spain, Cyprus, Hungary, Dominica and Malta. In some countries, an investment of just US$ 100,000 in funds or real estate is adequate to gain a resident visa or citizenship (passport) in just three months. Portugal alone has issued over 2,000 residency visas in just two years.

The Government should advertise this programme through the proper channels and websites dedicated to such “Golden Visas”. There is enough demand for this type of investment, but the authorities should ensure that no attempt is made to launder money by any individual. Last year’s Panama papers scandal revealed how the super-rich and corrupt politicians park their money in other countries through shell companies. There shall necessarily be a selection process which will help identify any such attempts.

The government has also promised to relax exchange control regulations though a regulatory mechanism will be in place when foreign exchange is taken out of the country in bulk form. This is the norm even in developed countries – individual travellers have to declare sums over US$ 10,000 if brought in or taken out. Apart from that regulation, the overall forex regulations could be eased to a great extent. This is a move in the right direction, because some of the forex regulations are archaic and serve no useful function in a modern economy. More investors are likely to come to Sri Lanka if the forex regulations are eased.

Injecting cash through commercial banks is just one form of investment. Among the other options are the Colombo Stock Exchange (CSE) and Government’s Treasury Bills and Treasury Bonds. Foreigners are highly active at the CSE, which shows its value as an investment option. These options give more flexibility and choice to would-be investors who are wary of putting all their eggs into one basket and will also help Sri Lanka gain a reputation as a multi-track investment destination. These measures will help reduce debts and increase investments and thereby help market Sri Lanka as an ‘Investment Destination’. This is also a golden opportunity for Sri Lankans domiciled abroad to contribute to their Motherland’s socio-economic development. The Lankan Diaspora in most countries includes influential and affluent individuals who would like to contribute in some way towards the country’s development. Unlike other foreigners they can apply for dual citizenship, but even if they do not want to do so, they can still gain a better opportunity to serve the Motherland under the new foreign investment programmes. They will then feel very much at home.

The authorities should evolve innovative approaches to seeking FDI, holding more roadshows in prominent capitals. Red tape, lethargy and corruption must disappear completely, lest the investors turn back in disgust. There is fierce competition out there in our region and beyond for investor dollars and we should not let this opportunity slip by.