View from Colombo: Board of Investment in upbeat mood

In the midst of media reports of corruption and poor performance, the Board of Investment (BOI), set up 25 years ago to attract foreign investment to the country, is planning to undertake a major restructuring and promotional campaign to achieve a billion dollar target a year foreign investment by the year 2006.

Top BOI officials are confident that this target can be achieved. Last year the country attracted $240 million compared with $83 million in 2001 and this year's earmarked target is $500 million. The achievement so far is not something to be proud of and many attribute this to the ethnic crisis and the related negative publicity discouraging foreign investors.

Meanwhile, BOI plans to restructure its operations on the successfully tried Singapore and Ireland models which concentrate a great deal on promotion and emphasise project facilitation rather than incentives.

Under the new scheme more funds will be allocated to promotional activities rather than regulatory functions. Right now the BOI spends only about 10 per cent of its total expenditure on promotions while the remaining 90 per cent is spent on regulatory functions. But under the envisaged plan, the investment on promotions will be initially increased from the current 10 per cent to between 20 and 30 per cent until this figure reaches 50 per cent.

At present the BOI has four departments covering functions such as promotion, appraisals, research and media. These four departments will be restructured to create five different departments covering areas such as leisure, infrastructure, vertical integration of textiles, electronics and agro-industries.

As part of this overall programme, the BOI also plans to undertake a major human resources development programme to upgrade the skills of its workforce to meet the needs of the time. Once trained, these specialists in fields such as tourism, textiles, IT, shipping, logistics and infrastructure will be sent abroad to meet investors in the BOI's campaign to attract more and more investors. The envisaged changes will be based on the recently released Investment Policy Review of Sri Lanka which is expected to reduce the five-year tax holiday to three years besides involving other relevant ministries and state institutions involved in reviewing project proposals based on their merits.

The BOI officials feel that in judging projects' approval based on their merits officials could have more discretion compared to the present system of following a rule book on investment limits. They also feel that there is little risk of corruption if necessary safeguards are in place.

Under the existing requirement the BOI sets minimum investment limits which may be unfavourable to attract smaller investments in certain priority areas. For example, a minimum investment of $150,000 required for export ventures and $5 million in the case of other ventures.

The island with one of the most liberal economic regimes in Asia established a free zone, Greater Colombo Economic Commission, in 1978 which was later reconstituted in 1992 as BOI, to attract foreign investment.

Today there are eight free zones covering all parts of the country and over the years they, together with three major industrial parks, have become the lynchpin of economic development and inflow of FDI.

All foreign investments were guaranteed by the constitution besides offering other incentives such as total foreign ownership and repatriation of foreign exchange without any restrictions.

The BOI companies account for 60 per cent of all Sri Lankan exports and 80 per cent of the country's industrial exports. Last year, BOI approved 499 projects compared with 385 the previous year.

The writer is a Sri Lankan journalist