FDI up 13.4% in H1
By Mario Andree
Foreign Direct Investments (FDI) into the country after a considerable time frame has shown some improvement following promotional activities by the Government, as evident by an increase of 13.4 per cent in inflows during the first six months of this year. According to data released by the Central Bank of Sri Lanka, during the first six months (H1) the country received only USD 398 million as FDI, up 13.4 per cent compared to USD 351 million received during the corresponding period a year earlier. Last year, Sri Lanka’s total FDI inflows, including foreign loans received by Board of Investment (BOI) companies, amounted to USD 690 million, down 43.6 per cent compared to USD 1,189 million received in 2019.
The Government received USD 1.46 billion during 2018 and 2019 for the lease agreement of the Hambantota Port. The Central Bank attributed the decline in FDI over 2019 to the wakened investor sentiments with increased uncertainties in the aftermath of the Easter Sunday attacks and political developments, while the further deterioration during 2020 was due to the COVID-19 pandemic related uncertainties in global financial markets.
Despite the slowdown during the short-term, the Government hopes that the Hambantota Industrial Zone, the Colombo Port City, the hotel sector and mixed development sector will attract significant inflows in the coming years. The Chairman of the selfproclaimed one-stop-shop, BOI, Sanjaya Mohottala recently said that the agency was working to introduce policy reform on top of tax incentives given to strategic investors.
During the second term of Mahinda Rajapaksa’s presidency, the Government offered major tax incentives to attract global investments such as the Colombo Port City and Shangri-La. These projects which were classified as Strategic Development Projects were given steep tax breaks spanning up to 25 years and encouraged more investors to seek opportunities in the country. Recently, the Cabinet approved a proposal by Prime Minister Mahinda Rajapaksa to identify India’s HCL investment at a Strategic Development Project which would allow the Company to enjoy steep tax breaks.