ECONOMYNEXT – Sri Lanka’s practice of giving 12-month mining permits compared to 10 to 15 years like in Australia would make investors “run away”, and was a regulatory hurdle that had to be rectified fast, an industry official said.
“Our permits generally are generally valid for one year,” F A Farook, Vice Chairman of Sri Lanka’s newly set up Chamber of Mineral Exporters told reporters.
“We’ve all been in this sector for the last twenty plus years, so we have some experience on how to get things done, so we will stay.
“But if you are to attract somebody else to come from outside, they will not come.”
“As soon as they hear that the mining or environmental license lasts only for one year, and that there is a requirement to renew them each year, they will run away, because that is too much of a risk for someone to come and invest.”
“There is no country in the world with permit of one year validity. Usually, it is valid for 10 to 15 years. That is something that has to be rectified very soon.”
The Australian High Commissioner had recently mentioned that there were companies that were willing to invest but that the investment environment was not conducive, he said.
Mineral firms had to deal with eight separate state agencies to function on a day-to-day basis,
For 15 years Sri Lanka had been talking about a “one stop shop” for approvals, but it has not yet happened, Farook said.
There has to be transparency and clarity and transparency in how decisions are made, since there are a large number of government agencies involved.
There should be a level playing field for all, and processes should not be made “easy for one or two people”, Farook said.
It was not the “availability of raw materials but the accessibility of raw materials” that was the key constraint.
The industry was willing comply with environmental regulations. Foreign buyers also required that mineral extraction had to be sustainable. In some cases land had to be restored to the original condition, or if areas were deforested, other areas had to be forested.
Mining also affected communities and firms also had it was a sensitive subject. There were resources in land owned by state agencies for which mineral rights had to be streamlined.
In some instances companies had started mines in unpopulated areas, but people had settled near them later, the Chamber said.
Sri Lanka now exports around 65 million US dollars of permitted minerals including graphite, quartz, mica and mineral sands.
In addition to issuing what was probably the shortest duration mining permit in world, Sri Lanka was probably charging the highest royalty, which was levied as a value added tax at the point of export instead of being imposed on the pit head cost, the Chamber said.
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Exports were taxed 9 percent with exporters being charged more taxes per tonne, higher the value that was added.
Sri Lanka’s inconsistent policies meant that investors who produced final goods from minerals would also be discouraged, with no assurance of a steady supply of raw materials.
Some ideas about ‘value addition’ was also impractical, the Mineral Export Chamber officials said.
One idea was that quartz should be used for computer chips instead of exporting granules. But computer chips and mining and processing were completely different industries.
Businesses higher up the value chain, required many other raw materials to be imported and also a lot of energy and industrial processes, which also involved more pollution.
Sri Lanka did not have an accredited lab to test minerals. The chamber called for a national survey of mineral resources by an agency like the Geological Survey and Mines Bureau.
Though some private companies had done surveys they were not available publicly for potential investors. (Colombo/Aug03/2023)