FDIs – BOIs & Exchange Crisis 

By Rusiripala Tennakoon –

The phrase BOI came into usage starting 1992, when 31 years ago, the Board of Investment of Sri Lanka was established. The origin of the concept has its roots and extends to 1978 when the JRJ Government following its open economic policy, established the Greater Colombo Economic Commission in Sri Lanka with very wide powers to attract foreign Investment into the country. Board of Investment of Sri Lanka Law No.4 of 1978 was the base document for the 1992 Chapter.

Ever since, BOI has been in existence over a period of 3 decades as the principal investment promotion agency of SRI LANKA. It has during this period survived with many ups and downs undergoing phase changes but always remaining at the center of focus for want of delivery and accomplishment of the   gigantic task of attracting FDIs, much needed for the resolution of our lopsided balance of trade imperfection. Well, it continues to exist while the problems under its purview are gaping amidst much   hope and expectations.

Many countries of the world have similar set ups to carry out the tasks and  objectives in the economic development of the country. During my recent visit accompanying the team that participated in the tour of Sri Lanka Prime Minister to Thailand, I had the fortune of witnessing how the Thailand BOI was operating. I thought it would not be out of place or irrelevant to highlight some of its activities as the government agency  supporting and promoting investment from the private sector. It’s  mission focuses on “promoting valuable investment in both investment into Thailand and Thai overseas investment to enhance Thailand’s competitiveness  to overcome the “Middle Income Trap”, and to achieve sustainable growth in accordance with the sufficiency economy philosophy”

The concern of promoting Sri Lankan investments overseas appears to be a little far-fetched for our situation but there are other interests of a common nature relevant and applicable to us. In this mission  statement. In our own interest the promotion of Thai Investment overseas is of great importance to us. This aspect has to be considered in the context of their emphasis to enhance Thailand’s competitiveness through Thai overseas investment as envisaged. Don’t we have opportunities here to attract this particular interest of Thailand BOI? I think we have a wide array of favorable circumstances that can be pursued to the mutual advantage in this regard. 

Be that as it may, now let us take a look at the operational highlights of the Thai BOI which may be of value to us.

Tax incentives: Thai BOI announces a package of  incentives and facilitations offered to both Thai and Foreign investors interested in investing in Thailand as Tax and non-tax incentives. Among the Tax incentives offered are the Following; 

Exemption of Corporate income tax up to 13 years, 50% reduction of corporate income tax up to 5 years; exemption of import duties on machinery and for raw materials used in production for export and raw or essential materials used for R&D purposes.

The non-tax incentives are, permission to enter the kingdom to study investment opportunities; permission to bring in skilled workers and experts, permission to remit money abroad in foreign currency; permission for promoted projects to own lands. 

The Thai BOI has simplified the procedure and fast tracked its approval process as follows; for projects with a capital investment less than 200 million Thai Baht within 40 days; when the investment capital is less than 2000 million Thai Baht within 60 days and any investment over 2000million Thai baht within a period of 90 days. 

Other significant features in the Thai BOI criteria for approval of projects to be promoted on a priority basis are worthy of consideration. The factors taken into account cover a wide range under the national importance of each project and its contribution to the National Economy.

* All investments should newly invest in machinery required for their proposed production line

* There is a minimum capital investment without the land and working capital estimates

* It is compulsory for the project to utilize modern manufacturing processes

* There is a fixed debt equity ratio for new projects

* The resulting value addition to the products is carefully monitored

* Project qualifies for special consideration on its location and its environmental impact

Further the approval process is subject to the related activities categorized into priority Divisions :

Division 1 includes Agricultural and Food processing; Medical Industry and Biotechnology Industry

Division  2  Covers, Machine Industry and parts; Motor vehicle Industry; Electronic and electrical appliances industry

Division 3 Energy, Public Utility and environmental concerns; Industrial area development; Metal, Mineral and Material Industry

Division 4 Tourism, Digital Smart City development and Service industries

Such categorizations may not suit our situation exactly in the same way. Our priorities depend on the current status of our production lines and national priorities. Nevertheless, identification of priority areas is a must for the investments to deliver timely and meaningful results. For example, we are in need of resolving a critical level of our foreign exchange earnings and hence areas such as Tourism, Renewable Energy and Agriculture, by all means, take an  important place in the list of our priorities.

Our BOI has to devote some time and special consideration to examine our infrastructure and resource bases which we can offer to the Investors. Land is an important component in this equation. We are aware of the large extents of unutilized lands which have been consigned to this state due to total lack of attention and negligence. Just to quote a few examples, a land area exceeding 100 acres which was used for cultivating Cardamoms lying idle and covered with jungle in a part of a State Owned Estate in Yatiyantota area not very far from Colombo  and over 2000 Acres of a land extent that used to be under a carefully managed Rubber Industry remains abandoned for over thirty years in the Wellawaya area with plenty of water supply and with direct  main road accessibility only lying in the inventories of LRC.

These are National Crimes, only to be focused on by the relevant authorities but not done. Development, FDI and Investment are like Mantras chanted by village soothsayers and ‘mantara karayas’ who tie yellow threads on ailing victims. The extents of lands belonging to SPC, LRC, Divisional Secretariats and such state bodies lying idle over several years could be identified and listed by a stroke of pen to be included in a Land Bank data chart. But alas! We have no commitment to do such a thing. We have been talking for decades now but all talks have merely vaporized into thin air.

I saw in the Thai BOI example how they plan out for land utilization in developing their agricultural and food processing Industry. Starting from day to day development under traditional agricultural practices actively promoted under their programs they have a range of identified areas which they focus under their BOI activities. Such as ,Upstream agriculture, processed agriculture , rubber, agricultural waste products, food production, cold storage, trading centers for agricultural products, animal food, smart farms and plant factories with modern applications like tissue culture in their programs.  

Readers, none of these tantamount to any black magic. They are the results of careful and meaningful contributions by national minded persons devoted to their tasks and jobs honestly, diligently and true to their consciences.

Let us prey and Hope that avenues for real development be opened for the attention of such people and not remain confined to a set of nincompoops who only sing praises to the politicos {who thrive only on hopes created with least concern for results} to safeguard their own sustainability and longevity in the places where they are employed.    

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