Sri Lanka to relax controls on foreign investment: Finance Minister

ECONOMYNEXT – Sri Lanka will relax existing foreign controls on some sectors, while encouraging domestic investors, and also the financial sector to broaden activities, Finance Minister Ravi Karunanayake said.

"Even what is restricted would now be open," Karunanayake told a business forum in Colombo, when asked whether priority to domestic investors would mean restrictions for foreign investors.

He said more financial sector liberalization was on the cards, without elaborating.

A budget for 2016 is expected to be presented on November 20. Before that Prime Minister Ranil Wickremesinghe is expected to make a policy statement on November 04 or 05.

In a reference to logistics, he said only one firm had been allowed to bring in majority foreign ownership in the past.

A brief ‘window’ was given for a Japanese firm to invest in a Sri Lankan freight business but especially in logistics, a negative list holds back foreign investment.

Sri Lanka shipping and many other sectors are part of a ‘negative list’ for foreign investors, with some having ceilings, a remnant from post-independent economic nationalism.

Sri Lanka wants to be a shipping and logistics hub.

Karunanayake said he also expected the financial sector to be ready for more open.

Karunanayke said foreign investments in land will also be relaxed and possibility of giving greater freedom to the tea value adding sector will also be considered.

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At a business forum at the Finance Ministry, the owner of a security firm said investment restrictions prevented him from getting an international equity partner who will help his firm provide specialized industrial security.

Karunanayake said Sri Lanka needed foreign investment to bridge domestic savings gap.

Sri Lanka’s has a high private savings rate and but domestic savings are low because the government is a net-saver running deficit in the current account of the budget, where total revenues are not enough to cover the recurrent spending.

So-called ‘private savings’ are also undermined because state enterprises, many of which make losses are classed as ‘private’ in economic accounting.

Many countries in East Asia have high domestic savings rates because national governments, and sub-national administrations, and also state enterprises run operating surpluses. (Colombo/Oct20/2015)
 

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