Sri Lanka’s Foreign Direct Investment (FDI ) has been falling down under the present economic set back, policy uncertainty and political instability along with the removal of tax concessions including tax holidays, ministerial consultative committee report revealed.
The Board of Investment (BOI) now acting as an intermediary rather than facilitator has been directed to provide actual FDI data to the Central Bank and the Treasury as it should be armed with clear record on foreign investment projects and the actual value of investments, the committee advised.
It observed that there were no investments coming under the new enhance capital- based package and BOI data on FDI should be clearly communicated to the Central Bank and the Treasury enabling them carry out negotiations with the International Monetary Fund (IMF).
The Ministerial Consultative Committee on investment Promotion instructed the BOI to clearly communicate to the Central Bank (CB) and the Treasury on foreign investment information with relevant documents on FDI inflows in the past five years.
It has been observed that the granting of tax exemptions was one of the BOI’s main roles until the responsibility moved to the ministry of finance (MOF) in 2011.
However the lack of clarity in BOI records of FDI inflows, number of project proposals received and number of projects approved or registered has jumbled actual data.
The removal of tax concessions including tax holidays for investors has triggered the slowdown of e FDI inflow, several BOI officials claimed, consultative committee minutes indicated.
With no plans and strategies properly being implemented, the BOI has become a burden for the state as a dormant institution after four decades of poor performance in its role of investment facilitator, foreign investment report of finance ministry revealed.
Since the establishment of this export promotion entity approximately 40 years ago, the institution has managed to attract only US $ 20 billion in Foreign Direct Investment (FDI), it added.
It has been observed that the average annual FDI inflow has merely been $ 500 million
Another main accounting practice of the BOI was the inclusion of foreign loans to Direct Investment Enterprises in annual FDI while publicizing dollar earnings of existing free trade zone enterprises
The BOI has attracted foreign direct investment (FDI) inflows amounting to $ 713 million in the first nine months of 2022, which is 71 percent of the 2022 full-year target of $ 1 billion, State Minister of Investment Promotion Dilum Amunugama said recently.
BOI has inked a total of 123 agreements to the value of $ 1.9 billion, which consists of US$ 1.5 billion in new projects and US$ 400 million in expansions as of the first eleven months, he added.
However according to finance ministry estimates computed by using mathematical models, the FDI in 2022 will be in the region of $ 476 million excluding foreign loans obtained for ongoing projects.
FDIs, excluding foreign loans to Direct Investment Enterprises, amounted to $598 million in 2021, in comparison to $548 million in 2020, $793 million in 2019 and $1.6 billion in 2018.
The main BOI function during previous regimes was to hand over concessional Government lands on lease for mixed development projects offering tax holidays as incentives for Investments, finance ministry investment assessment report divulged.
