Sri Lanka – the Ideal Investment Destination-by Ranjiv Goonawardena
Sri Lanka has the potential to be the Paradise on Earth. You might be surprised to find out that many of the wealthiest nations are also the smallest countries in the world.
If you ask the average person to identify which are the richest countries in the world, they might consider only certain large economies. Generally, the large economies that might be considered are predominantly those in the Western Hemisphere. However, that’s not the case according to the International Monetary Fund Report on future projections of 2021 compiled in October 2020.
The IMF Report
The report analyzes 12 countries from the Western Hemisphere, two from the Middle East, and five from Southeast Asia. Asia is coming up in the rankings and this number will increase in the next 20 years. Can Sri Lanka join the ranking list? The answer to that fundamental question depends upon the policies which are deployed now so that Sri Lanka could achieve exponential growth in 20 years. Sri Lanka could learn from other countries, like Luxembourg (the wealthiest nation in the world) how they achieved success.
Precisely what does it mean when we say a country is ‘wealthy’, especially in an era of growing income inequality between the rich and the poor, in modern society? While Gross Domestic Product (GDP) measures the value of all goods and services produced by a nation, dividing this total output by the population number would be deemed to reflect the true value rather than a fiscal number. A better way of determining how rich or poor a country is would be by looking at how the population is, relative to another and distribution per individual, per population.
The rationale is all to do with the fact that certain countries which are small have an abundance of either highly skilled human capital or natural resources and their populations are relatively small; when you use the above formula to do the calculation, which takes into account inflation rates and the cost of local goods and services you get a more accurate analysis of a nation’s average standard of living. The resulting figure is what is called Purchasing Power Parity (PPP), which is often expressed in US dollars to allow comparisons between different countries.
Luxembourg success story
With a population of 613,894, ranked number one for a consecutive number of years Luxembourg has been the wealthiest country in the world, per capita, with a highly-skilled population, enjoying a high standard of living. Through investing in its population, Luxembourg made the transition from a resource-based economy into a sophisticated human capital investment economy. Therefore, becoming a major Financial Centre for large private banking, its finance sector is the biggest contributor to its economy. Historically the economy relied predominantly on the resource-based type of economy which focused on coal exports and iron ore.
The discovery of significant reserves of iron ore in the mid-19th century changed Luxembourg’s fortunes almost overnight. Mines and factories sprung up, and the country’s lucrative steel industry was born. By the end of the 19th century, Luxembourg had become one of Europe’s leading steel producers.
Sri Lanka has the potential
This is where Sri Lanka could come in with a high level of literacy and educational attainment levels which have risen steadily after independence in 1948. Today the youth literacy rate stands at 97 percent. The government has given high priority to improving the national education system and access to education.
The biggest resource a country could have is its population, human capital, and if you could develop that, then you can definitely become a major player like the rest of the small nations.
With the development of human capital, most developed countries have exceeded expectations; even the fact that a large number of these countries lack natural resources be that mining or oil and gas, it hasn’t limited them from achieving high levels of productivity and human development capital. Having a sophisticated workforce gives you several options from creating a financial centre of excellence to establishing artificial intelligence and development of technology, which are crucial for an economy to succeed.
Undoubtedly the current circumstances with the Coronavirus are affecting every economy. As governments across the world have placed their citizens on lockdown, downloads of conferencing call apps have taken off to record highs, and the companies behind them have seen their share prices rise. The rest of the global stock market is financially haemorrhaging. With the Corona crisis affecting the whole world, all the economies are affected and the consequences are severe. This has transformed how most employees work, rather than in the normal manner of previously working from one’s office. Due to the Coronavirus, it’s become a trend now to work from one’s residence. The fact is that the majority of the people have access to internet facilities where they can carry on their normal business using the Internet connectivity, as they did when they were working from the office complex.
In view of the fact that there is high-speed Internet connectivity, now, more than ever, people are trying to engage in and conduct business as normal with the use of social media platforms and conferencing platforms. These and other activities are achieved, which they normally would have not considered as a norm. Presently, people are using Zoom and alternative platforms on a regular basis.
The global conference call apps market is expected to substantially increase from US$ 7.87 billion in 2020 to US$ 16.03 billion in 2021. The change in growth trend is mainly due to the company’s demand that grew exponentially during the COVID-19 pandemic in 2020. The market is expected to grow substantially.
The conference call market consists of video conferencing software and its related services by entities (organizations, sole traders, and partnerships) that enable users in different locations to conduct face-to-face meetings without the necessity to move from one place to another. Video conferencing could increase performance, save time, minimise travel costs, and facilitate collaboration. The service-based video conferencing system is not limited to deployment into the Cloud, on-premises; by enterprise size into small and medium enterprises, large enterprises; by end-use into corporate, education, media and entertainment, government and defence, and others.
Thinking outside the box
Countries and economies have to start thinking outside the box to be successful, one cannot rely on the old way of doing business as being the only norm. What has become the norm is that which was unusual or unconventional, but now innovative, and we must become acclimatised to our new environment of the ‘New Normal’. We will not be successful unless we constantly innovate, evolve our technological knowhow and our manpower in that manner.
We have to be the pioneers moving forward in this unprecedented period of time and currently, Sri Lanka is at the helm of such transformation with the current government in place with a large majority in Parliament. The government has come up with an innovative idea to restart the economy by organising a major global webinar to showcase the best of the best that Sri Lanka can present to international investors.
Prior to the Coronavirus pandemic, governments and corporations would participate in major conferences, costing them a fortune. Hosted in different parts of the world, like for instance, the World Economic Forum in Davos and that type of activity has come to a halt.
Port City Colombo Project
The whole idea is to compete with the best of the best in the world and due to Sri Lanka’s geographic location which makes it an ideal climate to have such a financial hub because when you compare the recent developments in the Middle East, people’s most common grievance is that it is fairly cultureless, with a multitude of shopping aisles, lack of green habitats and nothing else, surrounded by hostile landscape, and unbearably hot in the summer months.
In comparison to Hong Kong, recent changes in legislation and social unrest have made major investors think again of operating from Hong Kong. Due to this situation, a lot of the main institutions are looking at alternative destinations to conduct their business.
Sri Lankan legal structure is very similar to English law and it makes it easy for international investors to engage and do business without too much difficulty, unlike certain parts of the world like the Middle East or the Far East where things can be extremely challenging.
In another few years, Sri Lanka should be on the rankings list especially with the brand-new infrastructure development, the Colombo International Financial City which is a special economic zone and International Financial Centre. It is currently under construction on reclaimed land adjacent to the most iconic and most prestigious real estate in the island, the Galle Face Green. The land reclamation work had been completed as of January 2018.
Comprising 269 hectares, Port City Colombo is a new city development built as an extension of the existing Colombo Central Business District. The new city will comprise five main urban precincts or districts, namely International Island, Island Living, Central Park Living, Financial District, and The Marina.
International Island will be a commercial and leisure destination featuring a resort and theme park, convention and exhibition centre, healthcare and education facilities, as well as a waterway park.
The Island Living district will feature villa-style residences and public parks, including the Malwathu Park. A city beach will run along the southern edge of the district. The Central Park Living district will include open blocks, public parks, and pavilions.
The Financial District will offer Grade A office space and serve as a retail destination. The Marina provides access to the sea and includes public parks and water features.
Canal quays and boulevards across all districts will serve as meeting points and viewpoints. The development is protected from rising sea levels and high waves by a 3km-long offshore breakwater.
Sri Lanka is one of the first countries in the world to take advantage of technology in a conference video facility to hold a global webinar Investment Conference attracting global investor audiences, using the above technology which has made its reality for the audience to participate without moving from their current location.
According to social media, the event has gone viral and there has been an oversubscription of investor participants from around the world, who have shown a great interest in investing and looking at Sri Lanka as a potential destination for investment. Interest has been derived from Europe, America, Asia and the Middle East.
The link to join the Investment Forum is HTTPS://INVEST-SRILANKA.LK.
The format is very much in line with the World Economic Forum in Davos. Webinar Investment Forum 2021 will be hosted from June 7 to June 9. This will be a three-day virtual event, jointly organized by the Board of Investment (investment promotion organisation of Sri Lanka) Chairman Sanjaya Mohottala, in collaboration with The Ceylon Chamber of Commerce (Premier Business Chamber in Sri Lanka) Chairman Dr. Hans Wijayasuriya, and the Colombo Stock Exchange Chairman Dumith Fernando.
Sri Lanka the rising star
Sri Lanka is a growing economy and is among the emerging markets of Asia, making it an attractive investment destination. Sri Lanka’s GDP per capita, currently 2-3x of South Asia’s average, is expected to double over the next 10 years. Sri Lanka is set to become a knowledge-driven economy with three times the growth expected in the number of graduates by 2025.
The Colombo Stock Exchange is the fastest-growing stock market in the region. It experienced a 70 percent increase in new investor registrations in 2020, along with zero capital gains and zero dividend withholding tax for foreign investors.
The Sri Lanka Investment Forum 2021 will showcase to the world, Sri Lanka’s attractiveness as an investment destination. The key priority sectors presented in the forum will include Manufacturing with value addition for exports, Information and Communication Technology, Hospitality and Tourism, Agriculture and Food Processing, Construction Infrastructure and Logistics, and Capital Markets. It will also focus on the Colombo Port City, an international business and service hub with attractive fiscal incentives to make it comparable to the likes of Dubai, Hong Kong, and Singapore.
The event featuring sessions and presentations by senior government leaders, top leaders of public and private companies, global experts, investment bankers, and advisory firms, aims to attract multinational corporations, high net worth individuals, direct and portfolio investors including sovereign wealth funds, private equity funds, development finance institutions.
Prospective investors will have the opportunity to access information on FDI projects, listed companies, and private equity placements, acquire first-hand knowledge about the policy framework and legislative landscape for investing in Sri Lanka and to interact with government agencies, state-owned enterprises, industry leaders, global investors, and peers.
(The writer is Chairman of International Consultants, London, New York and Tokyo)