Sri Lankaâ€™s BOI says still seeking funding sources of high speed rail proposal
ECONOMYNEXT – Sri Lanka’s investment promotion agency said it has deferred approval of a high speed railway manufacturing project proposal owing to delays in getting a detailed business plan and how it will be funded.
“If a project is deferred it does not mean it is abandoned,” said Mangala Yapa, acting chairman of the Board of Investment (BOI), which gives investors incentives like tax breaks.
The project proposal by Ceylon High Speed Railways Ltd. was very complex, of high value and comprehensive, requiring more scrutiny than for a simpler one like setting up an apparel manufacturing plant, he told a news conference.
Ceylon High Speed Railways Ltd., in Nugape, Pamunugama, has proposed setting up a high speed train manufacturing plant including seven final assembly plants and 34 factories to make sub-systems for the final assembly lines.
It also wants to set up a private bank, university and television and radio stations.
The company was incorporated in April 2014 with two Sri Lankan directors, V. Don Anushka Renu and Mahathelge Margaret Dias.
They have indicated German and Italian parties were supporting the project through technology partnerships in certification, and high speed drive mechanisms and dampers or shock absorbers.
They propose investing 488 million euro as initial investment on capital goods over eight years and indicated working capital is to be invested by a European company or individual with the whole investment being 2.2 billion euro on completion.
The project to export high speed trains will employ 24,860 people including 2,400 foreigners and generate export revenue of 5-7 billion euros in seven years, which is about 30 percent of Sri Lanka’s current exports, the BOI said in a statement.
Yapa said the government’s Single Window Investment Appraisal Committee (SWIAC), chaired by the secretary to the finance ministry, had evaluated the proposal and held two meetings with the local directors.
The two directors had been asked to submit additional details, including a detailed business plan, in December 2017 which was yet to be received despite an assurance it would be given in 2-3 weeks.
Yapa said SWIAC had deferred five projects including the rail one of which three were being considered again with the submission of more information.
“It goes through a due process unlike in the past. It does not go through any non-routine channels.
“This is a very complex project to manufacture and assemble high speed railways, which is not done in Sri Lanka.
Duminda Ariyasinghe, BOI director general, said only very few companies had high speed train technology. These include firms in Japan, Germany, France and China.
Yapa said the BOI "is more than happy to process the project appplication further but the investors have to submit more information. We need to find out if this project is feasible.
Yapa said the local company has no track record and could not be taken ‘prima facie’ or at first sight, hence the need for closer inspection of the proposal.
But he noted: “We don’t reject a proposal just because the local firm has no track record. Manufacturing and assembling a train is no joke. This is a good opportunity for Sri Lanka to get into train manufacturing or even components.
“If Italian and German companies are involved they must make a substantial commitment. They (local directors) have not been able to establish sufficient commitment from the foreign partners.
“We are seriously concerned. Unless full details are submitted and the criteria is met, this project cannot be approved.”
Ariyasinghe said they were keen on promoting export manufacturing.
“Export manufacturing is a most important industry for us. If its export manufacturing, there’s no way we will reject it, if the criteria is met.”
(COLOMBO, 05 October 2018)