Old Regulations and Bureaucratic Barriers are Killing the Nation – Niranjan Deva Aditya
By Ishara Gamage
To attract foreign investors to Sri Lanka, the first thing is to offer a panel of key business people in this country, who can partner international business, a former Member of the European Parliament and member of the Board of Directors of several leading listed companies in Sri Lanka Niranjan Joseph De Silva Deva Aditya, told Ceylon FT.
Joining an exclusive interview with Ceylon FT he said, that, Sri Lanka will only develop through Foreign Direct Investment (FDI).Therefore, in the past few years he brought George Soros, Richard Branson and many wealthy people here. Most recently a member of a Europe-based investment banking family, Nathaniel Rothschild and prominent Russian business tycoon Andrey Melnichenko also visited the country at his behest.
He said, the failure to find real business partners in the country and the bureaucracy as well as outdated investment rules had turned away these wealthy investors.
This is the interview we had with him:
What is your overall assessment on the investment climate in Sri Lanka?
A: Sri Lanka has to develop through FDI. We all know that Sri Lanka’s borrowing capacity has certain limitations; we are not able to borrow any more. Our credit ratings have not been very good. Though, we have never as a country, defaulted on any loan, it’s been impeccably correct in saying, what is due on the correct date, but yet in spite of all that. The International rating agencies have dropped our rating to below the best, which means that, it will be far more difficult and more and more expensive to borrow money from the international markets. When you borrow money you have to pay higher interest rates. And as the interest rates/ charges go up, more of our exports earnings are used to pay interest and loan settlements. So the earnings that we made from our exports cannot be used for development activities. Therefore we are in a vicious cycle. Since our independence, we have witnessed very few groundbreaking development projects.
Are you trying to say that the post-independence socio -economic setbacks that we have experienced have caused foreign investors to leave Sri Lanka?
A: You go to other foreign countries now, in Bangladesh, Thailand and so on, and you see a significant improvement in their infrastructure in the standard of living and so on. Well, when you come to Sri Lanka you’re disappointed that a country which was once the second richest in Asia, in 1950, is now not so rich in terms of its economic balance and is living on borrowed money. So, we have to change. That means we have to attract FDI. That means that we need to change our culture, our attitudes, our hostility to foreigners investing here. Do you know that there are 8,000 expatriates who have invested in this country have put over a million dollars, and have lived here for more than 20 years creating jobs creating businesses around them and creating jobs for local people, and they have to annually, go to BoI office and get their visa renewed.
Now, who in their right minds will bring money with that uncertainty, hanging over your head? Who thinks of these nonsensical things that you will ask an investor to come? And then the investor has to go every year, and plead with some official to extend his visa. Now in Britain, where I come from, where I’m a politician and a legislator. If you put 5 million pounds into the British economy, you get a British passport in two years. And, if you put in $3 million, you get permanent residency, immediately, and you come and put money in Sri Lanka, each year you have to go begging to have your visa extended. Who is going to put in money in this country? And there are 8,000 of these people who we are harassing like this, because of our stupid mindset that people have to beg to stay.
It’s not about that. It’s about corruption. Every time they have to go and get their visa extended obviously someone is trying to get a bribe and this must stop. That’s a small example, but you think these 8,000 people who are being harassed like this here in Sri Lanka, don’t have a voice, they don’t talk to other people abroad, don’t they tell their friends, who ring to say, ”How’s it going, Bob. They will say no no, don’t come here.” It’s terrible. But, they are good ambassadors, we have to turn all these people, to being good ambassadors for Sri Lankan investment, not harass them so that they get annoyed with us. And then don’t encourage other people to come in, simple. This does not require rocket science, or a PhD to work it out, right, here at the simplest level, we find the problem of FDI.
A few weeks ago, you brought two powerful foreign investors to Sri Lanka to invest in the Port City project. Even before that you had invited many of the world’s leading investors for investment opportunities in Sri Lanka. Why do you not see clear success with them so far?
A: In the past few years I have brought George Soros here to Sri Lanka, Richard Branson and several other world’s top billionaires here, including more recently a member of a Europe-based investment banking family, Nathaniel Rothschild and this prominent Russian business tycoon Andrey Melnichenko. Now, when persons like this come to invest what are they looking for? Let’s think about this. They’re looking for projects. There are millions of projects in the world. They’re looking for sunshine. There have been many places to go off to, to find sunshine. They’re looking for beautiful beaches, there are many places with beautiful beaches, and further what are they looking for? They are looking for a partner, a partner who understands them. Who speaks their language, who is a part of the international global financial world, a partner who understand their language, when they go back to London or Moscow or wherever they can make a telephone call and they know the exact terminology, language, all the technology that international billionaires, talk to each other about.
They need a partner here, who is at the same background, education, culture and knowledge. When people come to invest in a country they’re not looking for projects. There are hundreds of projects, they’re not looking for blue seas, they’re looking to put their money with someone they can trust and go home. And know that the person they have chosen to put their money with, and the partnership is of value of probity of honesty of transparency and that all the processes and procedures, then the money they put in with that person will follow international standards of reporting, accounting, environmental, social responsibility this sort of thing.
So, they need somebody who they can dance with. If they find that person they put the money. So, the first thing to do is to offer a panel of key business people in this country who can partner international business, but if we don’t have those people in this country, for whatever reason, If we don’t have or we only have a few, maybe two or three. And that is not enough to get 40 or 50, billionaires coming here, and investing with two or three local tycoons, and then what do we have to do? We have to bring those people here who can do this? Right now in the United Kingdom, we are offering a million, blue passport to people in Hong Kong to come; in Vancouver a major city in Western Canada, they’re begging the people in Hong Kong to come and set up businesses. There are groups of people who come, who can partner anybody around the world. That’s just an idea.
Then there are other reasons, people around the world in China and Japan, who may be able to come here and make this their home. These guys are billionaires and I’m talking about who don’t want to come and live here, they come and put their 500 million and go with somebody who they can partner somebody who they can trust somebody who understand their language, somebody who speaks the way they do, someone who understands the terminology and the lexicon of global finance, that’s what they’re looking for. So if you don’t have that. How can we bring people in? And if we don’t have that, we have to create it. That’s the conundrum we are in.
To what extent does the existing bureaucracy in State institutions in Sri Lanka affect the attraction of foreign investment in the country?
A: The attitude of our officials is a major problem to attract FDIs to Sri Lanka. I have brought people here who want to invest and have taken them to Ministries and the first question some senior civil servant whose name I forget, said to my friend. “Oh, so you want to come here and make a profit. What an attitude”. My friend got up and left. And in the car, he said, I’m disappointed, what is that man thinking, am I going to come here and make a loss. Why should I come here, and invest when I can go anywhere in the world and be welcome.
Why are they saying, ha, so you want to come here and make a profit? What is this attitude? Of course, we come to put in our money where there’s a profit. We’re not going to call it put money to make losses. What a silly question was it that the official asked? I’m never going to come back here again. Thank you very much anyway. So with that sort of resentment that our officials have will foreigners want to come here and make a profit. Well, if you have that type of attitude nobody will be willing to invest here in Sri Lanka. So our officials have to understand that businesses are going to come to make a profit, they also can go somewhere else to make a profit, and they have to be welcome to profit if they can. Everybody benefits and they are going to take the profit out, but they’re going to reinvest, and then jobs are created.
But staying with attitudes oh, you want to come here and take away minerals, and our oil, you want to come here and take out whatever is there, of course, that is what a joint venture partnership is. If you leave it on the ground, don’t do mining, don’t do explorations for oil. And Sri Lanka is surrounded by oil and gas. Nobody’s coming.
Everybody knows that. But anyone saying huh, you want to come and take oil away and make a profit, what the hell, they will go to Africa where they’re calling you to come and make profit. We got to change that mindset. If we don’t, we are going to sink into a big hole. So these are not things that I can change. These are things that people have to learn to change. And if you don’t change we are going to be in deep trouble. And our people are going to suffer.
In such a negative context, can you classify Sri Lanka as an easy country to do business in?
A: There are many people who are trying to help to make it easier. Now when I was in the British Government and in the British Parliament, I worked with Margaret Thatcher, and we had a bonfire of regulations. We destroyed 27,000 regulations that stopped businesses working fast. So we created a climate where an investment can be utilised and brought it into place, extremely quickly.
In general, it is easier to do business according to the rules introduced by Thatcher. Accordingly, if there is no response from a local Government body within 28 days, the project is considered approved.
From that I learnt these regulations are killing Sri Lanka. These regulations were not in place in 1948, to develop Sri Lanka; they were in place to control Sri Lanka from London. And after independence, those regulations are still kept in place. With imperial regulations to control the Sri Lankan economy from London, how can Sri Lanka develop? Even in Britain we got rid of it all, the regulations.
Therefore, the government should immediately remove the centuries-old regulations and create an investment -friendly environment.