1. Attracting Regional FDIs
Building a Conducive Climate for Entrepreneurship to Thrive
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2. Table of Contents What do Entrepreneurs look for ?
FDI Country Comparison
FDI Trends in Sri Lanka to 2017
Why have we lagged behind? Where did we go wrong? Have we missed the bus?
Regional Comparison of Investment incentives
Sri Lanka’s World ranking in access to Finance
Factors that need to be considered to improve FDIs In Sri Lanka
How do you create an eco system to attract FDIs and promote entrepreneurship?
Key learnings in setting up of SEZs
How can Port City help to attract FDIs and promote entrepreneurship?

3. FDI: What do Entrepreneurs look for?
Hardware
Software
Political stability
Airports
Access to Finance
Roads
Connectivity
R&D
Human Capital
Water
Internet
Utilities
Simple taxes
Flexible Labour laws
Location
Electricity
Work permits
Ports
Cross boarder Investment Perspective: Need to have a reasonable amount of hardware
Getting hardware sorted is a very costly exercise, hence it is important to target investments in areas it would generate returns.
A more weightage is really given to Software; Fixing these would not require a whole heap of funds but a Political Will is essential
Why do I say that?
We cannot be a regional hub for excellence and have restrictive policies on allowing foreigners to work here..
Relaxed exchange control
Telecommunication
Stable Legal framework
Railways
Access to markets
Favourable Policies

4. FDI : Country Comparison
Why is HKG, SGP ranked on the TOP? Ease of Doing Business rankings… Why is Cambodia ranked high? Ease of Doing Business ranking is 138. They have 36 Registered SEZs
Cambodia rank very high on Access to Finance and they have much better tax incentives to attract Investment. They’re connected to the World’s Supply Chain
Source: World Bank, data base

5. FDI Trends in Sri Lanka – 1978 to 2017 (Annual)
In 2016; FDIs from new Projects < 5%
In 2017; FDIs from new Projects < 35%
USD $
Need to dissect FDIs to really understand what it consist of?

6. Why have we lagged behind. Where did we go wrong
Why have we lagged behind? Where did we go wrong? Have we missed the bus?
We failed to evolve beyond the 1978 Greater Colombo Economic Commission Law
Lack of export diversification
High Income taxes and other Indirect taxes
Stringent labour regulations
Exchange Control regulations
Archaic laws
Border Controls
Ease of Doing Business ranking is 100
Low investment in R&D
Poor intellectual property rights regulations
Lack of access to Finance – high interest rates, traditional asset backed funding, infant capital market
1. SL adopted open market economy and transitioning from a Agricultural based to an Industrial based economy
40 years ago; world has changed, Apparel Industry thrived as a result…
– SL has added only 7 new products >$100Mn Whilst China, Thailand, Vietnam added new products with Billions of export revenue
3. SL in a small market, entrepreneurs look for sizeable markets.. export oriented …Trade agreements
4. We rank 164 on enforcement of contracts.

7. Comparison of Investment Incentives

8. Sri Lanka ‘s World Ranking in Access to Finance - Low
Sri Lanka’s ranking (124) on access to credit is low compared to other Southeast Asian Countries .
Sri Lanka is ranked overall 100th out of the 190 countries
An Ease of Doing Business Environment is essential for Entrepreneurs to thrive .
>80% of SMEs in SL unserved or underserved..
Lending based on immovable property…asset light business would struggle…
Cambodia: higher credit bureau coverage (% of adult population), more relaxed collateral based lending
Enterprise SL

9. Factors that need to be considered to improve FDIs In Sri Lanka
Economic Potential
Business friendliness
Human capital and
lifestyle
Cost effectiveness
Connectivity
Perth; Internationally recognized Energy City and wants to promote it as a global resources hub
They also rank high on the quality of living index
Most Livable City in South Asia by Merser
Source: fDi Asia Pacific cities of the future 2017/2018 :

10. How do you create an eco system to attract FDIs and promote entrepreneurship ?
Set up Special Economic Zones; SEZs are innovative testing grounds to rollout new policy initiative to overcome old regulation barriers
SEZs provide greater economic freedom from both administrative and legal aspect from Central Government
SEZs would introduce a culture with technology, new learning, innovation, higher productivity thus promoting entrepreneurship
South Korea has 7 types of SEZs such as : IT zones, Export Processing Zones , R& D Zones ,Enterprise zones and Free Economic Zones.
Dubai has 20 free zones in a clustered eco-system based on specialized areas: Dubai Internet city, Dubai Financial Center , Dubai Media City and Heath care city, etc
GIFT: Why India had failed
Know-how through FDIs

11. How do you create an eco system to attract FDIs and promote entrepreneurship ?
In China; > 20% of GDP, ~50% of FDIs, >50% of exports and > 30Mn jobs; 30yrs ago Huawei was set up in Zengen SEZ with a Seed Capital of USD 3000.
China SEZs have evolved; 1st Generation SEZs were more focused on tax Incentives, 2nd Generation SEZs on Ease of doing business and more recently they seem to combine the two
Classical Labour Intensive SEZs are transforming to more Knowledge, Innovation and Technology driven SEZs
SL does not have the demographic dividend like Bangladesh, Cambodia, etc … labour is scares and expensive….

12. Key learnings in setting up SEZs: China, South East Asia and Africa Experience
SEZs based on Political interest rather than Economic Goals are doomed to fail
Quality infrastructure and high set up costs
SEZs have to integrate with the local economy
SEZs should be targeted specific sectors rather than very generic
Should ensure that the FDI benefits should not be outweighed the tax benefits
Trade Treaties should be carefully considered when establishing SEZs because they may violate treaty agreements
Intentional Arbitration is the key for Investment Protection
WTO - SCM Agreement (Article 1 on Subsidy) - Prohibitive Subsidies and Actionable Subsidies
Africa; Power outage is xxxx and customs clearance
Connecting to the global supply chain

13. How can Port City help to attract FDIs and promote entrepreneurship
Port city will be the 1st special economic zone for Services
It is a PPP; Private sector invests in the hardware and the GOSL to augment it by implementing the required software
> $1.5 Bn Investment to create the infrastructure and a further $13.5Bn for vertical development
It will serve as a pilot bed to test new policy measures and help the government to identify and implement successful programs in the hinterland. i.e BOI Industrial Zones
Featured by a transparent Governance structure with best in class regulations, stable and consistent policy environment and an efficient public service, acting as a “one – stop services”
The objective of implementing the SEZ law is to do away with the existing bureaucracy and find solutions to provide a speedy service
Arrest brain drain: 29. Emigration - in 2017 Data shows that nearly 6,371 left under the professional category. 68,993 went abroad under the skilled labour category

14. THANK YOU