FDIs With Multiplier Effect Vital – BOI Chief
By Rajiesh Seetharam
Foreign Direct Investment (FDI) with multiplier effect is important compared to the FDI number, stated BOI chairman, Sanjaya Mohottala. Speaking to Ceylon FT, on the sidelines of a forum organised by Friedrich Naumann Foundation he said that not all FDI are the same. Sometimes an FDI with a huge number can have a big outflow, while an FDI with smaller capital can have a bigger multiplier effect, Mohottala said.
“As we become wealthier, and we get urbanised, we need apartments. Money does come in from real estate projects, but to get raw materials, fittings; there is an outflow of money as well. Now consider an FDI for a rubber exporting factory. The dollars coming in will go into the hands of small scale rubber producers to the transport industry, creating a multiplier effect. A factory of such nature will also lead to encouraging rubber producers to find ways to increase yields.
Sri Lanka is also in the stage of transforming from a factory-driven economy to a knowledge driven economy. Last year, ‘HCL’ an Indian based Software IT company started operations in Sri Lanka. The capital formation was only USD ten million. However, the staff working in it are paid higher salaries compared to an average factory job. HCL has recruited one thousand IT staff so far, with a plan to recruit another 4,000 – 6,000 more.
After ten years of experience, a Software coder would be in demand worldwide, and the chance of his/her salary multiplying several folds is very high. Thus an FDI from an IT company would create a far better multiplier effect compared to a manufacturing plant or a real estate project. Thus when looking at FDI, it is more than numbers. FDI’s with a multiplier effect creating an ecosystem for further investments would be very significant compared to the numbers.”
Speaking on the upcoming budget, BOI chairman stated that the budget should be in line with keeping consistency in policy. “From 2014 onwards, we have been around USD 79 billion economy and a USD 4000 GDP per capita or slightly below. We need to double our GDP in ten years. Budget should have a strategy for that”, he said.
Mohottala further noted that digitalisation of the legal system is vital. “BOI is working with the justice ministry to have a system where cases are fast tracked without dragging. Colombo Port City is working to get an arbitration centre. “ He added “When transforming from a factory- driven economy to a service-driven economy, a mechanism like Colombo Port City is an absolutely must.”