LKR 500 Billion investment in the next five years to achieve Export targets

Prime Minister Ranil Wickremesinghe says it is necessary to take a massive leap forward based on successful reforms to embark on a rapid development trajectory through a digital economy geared towards exports.

The Premier held a particular discussion at Temple Trees with the representatives of the Sri Lankan Chamber of Commerce on the Chamber's series of proposals to develop the local economy. Prime Minister Wickremesinghe pointed out that in 2015 the government had to take on an unsustainable debt burden but it has now resolved the challenge of moving the country towards a road to reform the economy while relieving the debt burden.

The Prime Minister further claimed that by easing its debts, the government accepted the challenge to bring the country to a high economic level. He pointed out that the state can escape the debt burden by 2030 by quick forward action and generate jobs and new income streams.

Everyone at the meeting accepted that an export-oriented economy could achieve these new employment and income avenues. Often discussed were the practical problems and difficulties faced by businesses from a small business to a large-scale business venture. Representatives of the Chamber of Commerce found out that there was an urgent need for a framework to provide all services efficiently through one platform.

At the conference, proposals on several issues were thoroughly shared, including the transformation of agriculture, the financial sector, small and medium-sized enterprises, transportation and transportation services, administrative problems, regulations and rules, private health services and education.

The importance of finding a collective agreement on the changes to be carried out in conjunction with other boards and organisations was also stressed. Also, Prime Minister Wickremesinghe briefed the gathering on the trade and commercial space around the Kandy-Colombo-Hambantota Expressway and the North and East Economic Development Program.

OSL Take: The Prime Minister’s statement on promoting the diversification of exports will result in the expansion of investment opportunities in Sri Lanka for foreign businesses/investors. Interested investors could look at forming partnerships with local companies and engage in the export sector using the benefits of the many trade agreements and trade concessions enjoyed by Sri Lanka.

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FDI worth $20 bn projects approved this year

International Trade Minister Malik Samarawickrama disclosed last week that the Investment Board (BoI) had accepted over $20 billion in foreign direct investment (FDI) projects for this year. 

There is one project that the Cabinet has just passed, worth $15 billion.

Recognising that it will take at least three to four years for many of these projects to be fully functional with all the correct environmental clearances, the Minister said the reality is that they are all in the pipeline and these investments are currently being undertaken by the necessary authorities. He also said these projects would provide direct employment for more than 25,000 individuals.

Noting that Sri Lanka can be proud of its FDI accomplishments that are now catching up, he said the FDI inflows to Sri Lanka between 1978 and 2018 were $17.3 billion, while FDI inflows were $5.8 billion from 2015 to mid-2019. One-third of the complete FDI since our economy's liberalisation has been coming in within the last four years. Hence, this is a clear sign of investors' confidence in Sri Lanka and the opportunities for investment in our nation.

The Minister also observed that over the previous three years, the government has embarked on a series of policy reforms to promote the economic transition toward more trade, exports, and FDIs. He called on ministries of government, organisations, and government leaders’ dedication to expand exports and boost export-oriented FDIs.

The Minister also observed further legislative modifications to attract more investment by enhancing the efficiency of Sri Lanka in the World Bank's Ease of Doing Business rankings.

OSL Take: The statement made by Sri Lanka’s Minister for International Trade and Development Strategies on the FDIs that have reached the country is indicative of the business/investment potential in Sri Lanka. The country is engaged in an aggressive development program that covers all vital economic sectors islandwide.

Also, the country’s geographical positioning in the Indian Ocean, the ‘ease of doing business’ environment and the many trade agreements as well as trade concessions enjoyed by Sri Lanka have made the island nation the most suitable business destination in all of South Asia. All these have also increased the business/investment opportunities in Sri Lanka.

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Economic Analysis of Sri Lanka (Part 2)

The structure of the economy in terms of GDP spending, the information shows that in 2018, personal service spending made up 70% of the Sri Lankan economy, making it the most significant share of the economy. The second most prominent element of the expenditure in 2018 is expenditure on investments with a 29% share. Government spending represents 9% of the Sri Lankan economy.

Net Balance of Trade, which is exports minus imports, remained an adverse contributor, and their share of the economy in 2018 was about -7%. It is quite apparent that in the last five years, the structure of the economy has not altered much in terms of expenditure either. As for nominal development in expenditure elements, during 2014-2018 consumption and public spending grew at an average pace of 8% and 11.9% respectively.

They were somewhat volatile, especially as the growth in 2016 was minimal. Investment growth ranged from 7 per cent in 2015 to 22 per cent in 2017, which was the most volatile over time. The increase in net exports was negative, except for 2015, and the magnitude of adverse development continued to rise, reflecting poor trade performance. Net exports have grown by 5.2 per cent on average.

Sri Lanka's biggest challenge is to stem the country's declining development in latest years and reinvigorate the economy with a concerted attempt to achieve the next decade's higher single growth. This needs a more in-depth assessment of the Sri Lankan economy's growth dynamics, taking into account experiences in other markets with lower-middle revenue and upper-middle earnings.

While in the five years from 2013 to 2017, Sri Lanka averaged an increase of 4.2 per cent, each other nation in the South Asian region reported more significant average growth development than Sri Lanka. The greatest highlights were India with an average growth rate of 7.4%, Bangladesh with 6.6% and Maldives with 6.3%. East Asia's average growth was 6.5 per cent, with development in China, Cambodia, Laos, and Myanmar exceeding 7 per cent.

OSL Take: While the growth routes of these high-growth Asian economies may not replicate, their growth experiences involve lessons and plans from which Sri Lanka can learn. Economic reforms are vital if Sri Lanka is to unleash its true potential for development.

The key to enormous economic growth is export-oriented industrial development funded by private capital, especially foreign direct investment. Hence, Sri Lanka requires a solid export development policy and a regionally competitive incentive framework to attract large-scale foreign direct investment in this context.

To improve productivity and the contribution to development, significant reforms are required to modernise and diversify the agricultural sector. Private Equity capital must leverage as a growth driver for infrastructure development. High-level human development and extremely trained workers in the country could be harnessed to expand current service industries and generate new ones that can add to growth.

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Economic Analysis of Sri Lanka

The latest financial and economic performance of Sri Lanka is mixed. The island-nation is currently facing a development problem. While the economy has continued to grow, growth in latest years has been small and declining. The nation requires critical structural and other policy reforms to unleash its actual development peripherals. To minimise the current budget deficit, Sri Lanka would require more significant development. In the current development setting, the amount of public debt is substantial and unsustainable.

Further deterioration of the fiscal balance could result in more government borrowing and more debt piling up. Improving the balance of trade and the deficit in the balance of payments also requires increased development. Sri Lanka recently reached the upper-middle-income stage. Higher and sustained development will be needed to maintain this high-income status. With viable assumptions concerning the development growth, Sri Lanka will need about 20 years of annual growth at 5% and around 15 years of development and economic growth of 6% to be classified as a high-income economy.

In terms of general financial development, Sri Lanka has reported average annual growth of 5.4% in actual terms over the previous ten years (2009-2018). This period consisted of two distinct development phases: the economy rose at an annual average rate of 6.5 per cent in the five years 2009-2013, which was the period instantly following the end of a 20-year civil war in May 2009. In the three years following the end of the war, where growth was 8.0 per cent in 2010, 8.4 per cent in 2011, and 9.1 per cent in 2012, the more significant development was particularly spectacular, showing continuing growth momentum.

However, this momentum broke with development dropping significantly to 3.4 per cent in 2013, and the average annual growth dropped to 4.2 per cent in the last five-year period of 2014-2018, which is more than a two percentage point fall compared to the past five-year era.

Besides, growth has shown steady decreases since 2015, with a growth rate of 3.2 per cent in 2018 is the highest in 16 years. Concerning the sectoral structure of the economy, the services sector is the most crucial sector of the economy, contributing 57% of the actual gross national product in 2018, followed by industry (27%) and agriculture (8%). Hence, it is proven that the sectoral composition of the economy has barely changed over the previous five years.

Concerning sectoral development, over the previous five years, the agricultural industry has risen at an average pace of 2.1%. With the exclusion of adverse event in 2016 and 2017, this industry showed at most an increase of around 5 per cent. With a significant variation from 0.9 per cent in 2018 to 5.8 per cent in 2016, the industry sector reported an average development of 3.3 per cent. The services industry showed constant growth of around 5 per cent on average.

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To be continue...

Investment Opportunities in the Tourism sector

Tourism is the country's third-biggest foreign currency earner. With over 2.3 million visitors coming into the nation, Sri Lanka reported its largest-ever amount of arrivals in 2018. In 2018, the industry is projected to have earned around $4.3 billion, 11 percent higher than last year. Sri Lanka provides a combination of beaches, wildlife parks, rain forests, tea plantations, ancient ruins, Buddhist cultural sites, and festivals.

Sri Lanka ranks 64th out of 141 nations in the World Economic Forum's 2017 Travel & Tourism Competitiveness Report. The government is aiming to boost tourist arrivals in 2019 to 3 million, although the terrorist attacks of April 21 have dampened opportunities for 2019 and 2010. India and China, followed by the UK, Germany, and France, contributed the most significant amount of tourist arrivals. Tourism sector investment remains with projects valued at around $223 million authorized in 2018. Sri Lanka is aimed at attracting worldwide names.

Several global and regional hotel chains, including the Marriott, Shangri-La, Six Senses, and Movenpick, have recently started building or running hotels in Sri Lanka. Shangri-La and Movenpick began activities in 2017, while others like Sheraton and ITC are anticipated to complete activities in 2019/20. Some local conglomerates control most of Sri Lanka's luxury resort hotels. Moreover, the idea of the boutique hotel is catching on quickly. International hotel businesses were absent from Sri Lanka during the conflict (which finished in 2009). Hilton was Sri Lanka's only global player to manage a luxury hotel (owned by the state) and an apartment complex for many years in Colombo.

Eastern Sri Lanka is an area with remarkable potential as it is famous for world-class beaches in this region. Locations like Pasekudah and Arugam Bay, particularly for surf lovers, are top destinations. The nation has several parks and forests home to a variety of wildlife and distinctive species of fauna and flora, and several global environmental organizations consider it a biodiversity hotspot. The latest ban on land sales to foreigners can make the construction of new properties more complicated. Eco-friendly resorts are also becoming popular with many developers opting to set up "green" hotels to attract an increasing section of the market.

Increasing tourism is driving the restaurant industry's significant development. An evolving tourism trend has brought a big influx of visitors looking for a more genuine experience, according to industry specialists. These visitors, mostly younger, are looking for cheaper lodging units and homestays, and are using navigation internet apps. The tourism industry should constitute significant possibilities for U.S. providers in a range of fields such as facilities, technology and consultancy services, hotel equipment, furniture, water purification systems, electrical systems, energy-efficient equipment, food, and beverage equipment, bathroom accessories, spa and fitness equipment, and water sports equipment.

Sri Lanka also plans to implement aviation services to promote its tourism drive, including air taxis and helicopter facilities. The enhanced development of the hotel industry, the upgrading of existing properties and the development of global hotel chains requiring high-end inputs and technology offer essential opportunities for U.S. businesses.

OSL Take: Tourism provides possibilities for both investment and trade. The state offers beach land and islets for the growth of tourism. Several policy initiatives and actions to harness the sector's potential were introduced in 2017. The new strategic tourism plan implemented in 2017 is aimed at raising income by 2020 to $7 billion and creating 600,000 employees in support sectors.

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Investment Opportunities in the Pharmaceutical sector

The pharmaceutical industry in Sri Lanka is estimated at USD 400 million annually. Regulating these medicines pricing has a significant effect on the population's health. The revised drug price formula implemented in 2016 guarantees that essential drugs should always be sold below the maximum recommended retail price.

Due to a very aging population, the demand for healthcare facilities is increasing in Sri Lanka. At the end of 2017, nearly 10% of the population was 65 years, and this figure is expected to double by 2030. The government remains its policy of offering public hospitals with free health care. In 2018, government spending on the health industry amounted to about $1.3 billion. Increasing access to private health services is also a government focus, as meeting the demand for healthcare services is hard for the public sector alone.

The private sector has made significant investments in health care, particularly in Colombo and some of the main towns, which has eased some of the state's burden. With higher revenue rates and shifting preferences, demand for healthcare in the private sector has risen. Health insurance provision has also backed development in the private healthcare industry.

There are 612 public hospitals in Sri Lanka, approximately 200 variable size private hospitals, 5,000 private pharmacies, and 1,000 laboratories. The healthcare industry offers U.S. medical equipment suppliers and pharmaceutical companies with excellent possibilities. The local pharmaceutical industry has risen at a pace of about 15 percent over the previous five years, according to specialists in the pharmaceutical industry, and the sector has excellent opportunities for future high-volume development.

The government is promoting investment to produce drugs locally in the pharmaceutical industry. In 2019, the government released laws establishing maximum retail rates for 60 formulations of medicinal products. The Regulatory Authority for Cosmetic Drugs and Devices regulates the pharmaceutical industry to guarantee drug and medical equipment quality, security and effectiveness. Although many pharmaceutical imports come from regional sources, medical practitioners and customers commonly recognize the greater variety and efficacy of Western produced drugs.

Drug registration can be time-consuming with the authorities requiring comprehensive information. It is also complicated to dismiss local officers based on universal values, as the officer must provide the authorities with a no objection letter to appoint a fresh officer. Private hospitals in Colombo are fitted with state-of-the-art machinery, providing excellent possibilities for U.S. providers.

OSL Take: U.S. exports of medical and pharmaceutical machinery to Sri Lanka were estimated at $25 million in 2018. Other possibilities for U.S. businesses in health care are government tenders for machinery, pharmaceutical products, and initiatives. Medical equipment manufacturers need to succeed to engage local officials with medical industry experience and to maintain active contacts with both government and private sector health providers. Well-known brands around the world order a premium. Diagnostic equipment, operational theater equipment, intensive care equipment, clinical analyzers, and hematology equipment continue to give U.S. companies the most significant sales opportunities.
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Investment Opportunities in the Energy sector

The government of Sri Lanka aims for a country that is self-sufficient in energy by 2030. The goal is to raise the country's power generation ability from the current 4,043 MW to 6,900 MW by 2025 with a substantial renewable energy increase. Sri Lanka has already accomplished a 98 percent grid connectivity, which is comparatively high according to South Asian norms. There are three primary sources of electricity produced in Sri Lanka: heat power (including coal and fuel oil), hydropower, and other non-conventional renewable energy (solar power and windpower).

Sri Lanka intends to add 842 MW of Major Hydro, 215 MW of Mini Hydro, 1,389 MW of solar, 1,205 MW of wind, 85 MW of biomass, 425 MW of oil power, 1,500 MW of natural gas and 2,700 MW of coal power to the electricity generation scheme from 2018-2037. The total annual demand for electricity is approximately 14,150 GWh. It is projected that the yearly demand for electricity will rise by 6 to 8 percent, a number limited by high prices.

Despite long-term power generation plans in place, in the past two years Sri Lanka encountered several energy outages as hydropower energy generated started declining owing to less predictable weather patterns. As a result of this, in the next ten years, Sri Lanka plans to add new power plants for coal, renewable and liquefied natural gas (LNG). There are several active suggestions from the government to establish LNG import facilities and associated power plants and a new oil refinery.

The existing oil refinery is over 45 years old and requires urgent modernization to satisfy the petroleum industry requirement. All forms of renewable energy are actively promoted by the Sri Lankan Sustainable Energy Authority (SLSEA).

OSL Take: Sri Lanka requires to add substantial ability to satisfy present and future energy requirements expected to expand at around eight percent per year. Sri Lanka has a total energy-generating capacity of 40 GWH as it depends primarily on heat energy, including a coal-fired Chinese energy plant, which accounts for 45% of its production. Insufficient rainfall has restricted ability to generate hydropower, and the government was compelled to impose power cuts in early 2019 owing to an absence of ability to produce. To satisfy electricity shortages, the government has resorted to buying costly emergency power.

Opportunities in the power industry include wind and solar power plants, LNG power plants, auto-diesel power plants to dual fuel (liquid natural gas) plants, mini-hydro power plants, domestic solar systems, wind power, electrical meters and switches, power transmission and control systems, and power wires. SLSEA actively promotes alternatives for renewable energy and statistics show a steadily growing contribution to renewable energy. Because of its unique location, Sri Lanka has vast wind energy resources. There are presently 11 wind power plants linked to the national grid. USAID has evaluated Sri Lanka's wind and solar potential.
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Investment Opportunities in the ICT sector of Sri Lanka (part 2)

In latest years, the telecommunications industry in Sri Lanka has been liable for significant foreign direct investment (FDI). The use of telecommunications has risen, and the overall fixed-line and mobile phone density have been increased to 161 per 100 people, driven by a rise in mobile users.

There seems to be a saturation point in the demand for essential speech services. Mobile telephone operators dominate the industry. Continued infrastructure development has allowed a sophisticated telecommunications service level across the nation.

 There is substantial competition among existing operators, consisting of three fixed-line operators, five mobile operators, and eleven Internet service providers. In 2017, the U.S. exported to Sri Lanka about $2 million in telecommunications equipment.

Sri Lanka is connected to the South East Asia-Middle East-West Europe 4 project (SEA-ME-WE IV), the submarine cable system that connects South East Asia to Europe via the Indian Sub-Continent and Middle East.

The project aims to bring these regions to the forefront of global communication by significantly increasing users ' bandwidth and global connectivity along its Singapore-France route. SEA-ME-WE 4 fiber optics cables provide a bandwidth capacity of 1.28 terabits per second, ensuring the technology's lifespan of 25 years. This submarine cable system offers a vast bandwidth advantage to Sri Lanka and paves the way for Sri Lanka to become a globally competitive business hub.

OSL Take: The Telecommunications Ministry is finalizing a digital identification card international tender. Over $55 million total cost will cover nearly the entire population. Another business/investment opportunity for foreign businesses/investors looking to enter the Sri Lankan economy is the Lotus Tower project of Sri Lanka.

The emphasis on developing Sri Lanka's digital infrastructure and enhancing its ICT sector will not only enable the country to become a digitized economy but will also provide enterprising individuals with ample opportunities to invest, innovate and introduce new techniques into this sector. Furthermore, Sri Lanka Telecom's launch of the ' National Digital Roadmap ' would pave the way for the digital journey of Sri Lanka would also open up a host of business/investment opportunities in the digital infrastructure sector of the country.

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 For the previous article :Investment Opportunities in the ICT sector of Sri Lanka

Investment Opportunities in the Construction sector

The construction industry adds almost 9 percent of the GDP of Sri Lanka, employing some 600,000 employees. Over the previous nine years, the building industry has risen quickly in high-end residential, commercial, hotel and resort building and infrastructure growth, with the sectors contributing to GDP estimated at around 7.5 percent in 2018. Building sector annual value is at $3 billion. Many building businesses locally and internationally, are involved in the sector.

Several major infrastructure projects are under construction, including a new Port City within Colombo's town boundaries on newly reclaimed land. The terrorist attacks in April 2019 probably dented some optimism in the real estate and construction industry, but analysts are expecting demand to catch up with the financial recovery and low prices may give developers chances.

Companies in the U.S. have essential opportunities to sell a variety of equipment and technology, from machinery and heavy equipment to building appliances to heating, ventilation, and air conditioning (HVAC) systems. Buyers are often price-sensitive, but high-end innovations have more room to buy goods and services of high quality. Sri Lankan developers are also often associated with U.S. engineering and design companies, particularly for high-end office buildings, luxury flats, or resorts.

The government recently announced that the Megapolis Project, which hopes to radically modernize urban infrastructure in and around Colombo using innovative technology (e.g., innovations in smart cities) to propel it to the status of ' high-income developed country ' by 2030. After the 3-decade-long conflict, the industry was motivated mainly by the reconstruction of infrastructure and also in line with attempts to modernize the Sri Lankan economy.

The publicly led construction projects have created the bulk of the contribution to massive growth within the construction industry itself, particularly in projects such as highway construction, port and airport development, and numerous housing projects

OSL Take: Sri Lanka is presently undergoing an aggressive program of growth covering all main areas of the economy on the island.  The Port City project is one of the country's major continuing mega-projects to match Sri Lanka with many financial hubs in South East Asia. Given the geographical location of Sri Lanka in the Indian Ocean, the country's relaxed corporate climate and numerous trade arrangements, as well as the island's trade concessions, have created Sri Lanka the perfect company destination in the South Asian area. Foreign businesses/investors could, therefore, investigate possibilities for business/investment in the Port City project in Sri Lanka.
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Investment Opportunities in the ICT sector of Sri Lanka

Telecommunications, computer, and data services are the primary element of development within the services industry, delivering constant development in 2018. In 2018, total ICT revenues amounted to $995 million, roughly an 8.9% increase over the past year. The country launched the adoption process of fifth-generation (5 G) technology in 2018. Software suppliers in the United States have been effective in selling alternatives to private clients and some organizations in the public sector.

The country launched the adoption process of fifth-generation (5 G) technology in 2018. Software suppliers in the United States have been effective in selling alternatives to private clients and some organizations in the public sector.

The IT and company outsourcing industry in Sri Lanka tripled exports and doubled the workforce in just over five years. The sector has shown immense growth with over 120% recorded in the last five years, making it one of Sri Lanka’s highest growth fields and the fifth-biggest export segment. The IT/business process management industry in Sri Lanka envisages income of $5 billion, 200,000 immediate employment, and 1,000 start-ups by 2022.

The state-owned Agency for Information and Communication Technology (ICTA) is at the forefront of driving IT and implementing programs to guarantee IT development in both towns and villages. ICTA is engaged in an e-Sri Lanka initiative's five-pronged approach that includes building information infrastructure and enabling environment, developing ICT human resources, modernizing government and providing citizens ' services, leveraging ICT for economic and social development, and supporting Sri Lanka as an ICT destination.

In many relevant fields, Sri Lanka is also emerging as a preferred global IT Business Process Outsourcing (BPO) destination. In 2017, AT Kearney ranked Sri Lanka 11th among the world's top 50 outsourcing locations, moving up three slots from 2016.

The software industry in Sri Lanka generates world-class products and has grown substantially over the previous decade.  Many tiny and medium-sized U.S. businesses are developing software in Sri Lanka. The government is seeking to further create Sri Lanka as a base for IT, call centers, and outsourcing.

Sri Lanka's telecom industry is one of the most vibrant sectors in the country, contributing considerably to investment, jobs, productivity, innovation, and overall economic growth, both directly and indirectly. The telecommunications industry in Sri Lanka is overcrowded, with a population of 21 million serving five mobile operators. With the latest significant taxes on telecommunications businesses, the smaller companies are anticipated to exit or merge with the more significant firms.

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To be continued..

Exploring Opportunities in the oil and gas sector (Part 2)

Sapugaskanda oil refinery renovation is a high priority for the Sri Lankan government. The output from the Sapugaskanda petroleum refinery meets 40% of Sri Lanka's demand for refined fuels and the government imports 60% of the refined fuels consumed domestically.

It is anticipated that the Ministry of Petroleum will draft a tender to expand the Sapugaskanda refinery and have indicated that they intend to keep ownership, take on debt to finance the renovation and undertake a public and transparent tendering process.

The state is also interested in building a refinery owned by the private sector that could serve both the national and export markets. These proposals will be considered periodically by the Ministry of Petroleum (no tender needed) and will seek permission from the cabinet on vetted feasible projects. To be a severe contender, companies must secure the necessary funding.

There will be possibilities to supply oil and gas exploration projects with the required facilities and services. The government is providing a global licensing round in the Mannar Basin block M2 for the assessment and growth of natural gas findings.

According to reports, the Sri Lankan Petroleum Development Secretariat has obtained offers from a consortium of medium-sized oil companies in the United Kingdom, the United Arab Emirates (UAE) and South East Asia to create an offshore block where gas deposits have already been discovered.

Media reports say that an India firm found gas deposits in the M2 block off Sri Lanka's northwest coast, but the wells had not been established as gas prices had dropped.

OSL Take: 

The geographic placement of Sri Lanka in the Indian Ocean has made it a leading player on the main maritime path, creating many possibilities for business/investment. The oil and gas exploration industry in Sri Lanka is rapidly emerging as a high-standard business/investment chance. Foreign oil companies could explore possibilities for business/investment in the oil and gas exploration industry in Sri Lanka.

 For the previous article:Exploring Opportunities in the oil and gas sector (Part 1)

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Exploring Opportunities in the oil and gas sector (Part 1)

In two blocks in the Eastern Province of Sri Lanka, the Mannar and Cauvery Basins, Sri Lanka has opened a global bid round to explore and generate oil and natural gas. The offers for the M1 block of the Mannar Basin and its northern neighbor, the C1 block of the Cauvery Basin, will be closed on July 15, 2019, according to the Petroleum Resources Development Secretariat.

The blocks of M1 and C1 cover 2,779 km2 and 2,246 km2 respectively. Based on information from seismic studies, the government estimates that in northern waters there are more than one million barrels of oil resources in a region of 30,000 square kilometers. An Australian subsidiary of the Norwegian company TGS-NOPEC performed the seismic surveys in 2003 and 2005.

Several blocks have been marked for offshore oil exploration in the Mannar Basin and Cauvery Basin by the Sri Lankan Petroleum Resources Development Secretariat (PRDS). Based on the initial studies conducted in the oil basin, the PRDS estimates that the Mannar basin alone could potentially generate five billion barrels of oil and nine trillion cubic feet of natural gas, which would be sufficient for the energy needs of Sri Lanka for the next 60 years.

The first Mannar Basin exploration permit was awarded in July 2008 to an Indian oil exploration company. The test wells generated natural gas, but in 2015, owing to low prices of crude oil and natural gas, the firm decided to leave oil and gas exploration operations in Sri Lanka.

Earlier this year, the Government of Sri Lanka signed an agreement with Eastern Echo DMCC, a subsidiary of a significant oilfield services business, Schlumberger, to collect, market and license "multi-client" oil information, allowing multiple data acquisition projects, including 2D and 3D seismic, to be carried out in chosen offshore fields around Sri Lanka at no expense to the government.

The primary goal of this contract is to obtain more petroleum information using contemporary acquisition and handling methods, thereby reducing the technical and financial risk of potential investors in profound water exploration in Sri Lanka and encouraging enhanced investor involvement in oil and gas exploration operations.

Currently, there is an urgent requirement to upgrade and expand the only oil refinery in Sri Lanka and the primary port-to-refinery pipeline. The state-owned Ceylon Petroleum Corporation (CPC), which operates the Sapugaskanda refinery, has indicated that it will invite offers to upgrade the current refinery and construct a new refinery.

Although numerous announcements have been made by the government to build a new refinery, a project has not yet been enacted. The CPC expects from the present 50,000 barrels per day to 100,000 barrels per day to raise the refining ability. The primary 5.8-kilometer oil pipeline in Sri Lanka also requires immediate replacement, and the CPC is assessing offers for a new oil pipeline including a U.S. business offer.

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Analysis of Foreign Direct Investment in Sri Lanka (Part 2)

Another way to compete is through trade processing speed and price. While national logistics is inefficient, Sri Lanka is doing better globally. It currently ranks 57.7 out of 100 on the BMI Logistics Risk Index and ranks fifteenth on the UNCTAD Liner Shipping Connectivity Index, which ranks nations by their level of connectivity to global maritime networks. The per-container cost of exporting and importing to and from Sri Lanka is much lower than the average of South Asia but not at world-class level (US$ 560 and US$ 690 respectively – South Asian average is US$ 1,923 and US$ 2,118, 2015).

1.         Promoting investment and laws while avoiding policy uncertainty - The island ranked 111th out of 190 countries in Ease of Doing Business index 2018, showing opportunities for enhancement. Since 2016, the government has carried out some targeted reforms to enhance the investment climate, and improvements are emerging with the anticipated lag. Changes are required in fields such as land ownership to tackle critical problems. At present, land in Sri Lanka is mainly state-owned, and land administration is weak and complicated. Anecdotal proof indicates that FDI projects are discouraged owing to land problems. 
   In addition, the BOI (the primary facilitating body for FDI in Sri Lanka) is transitioning to contemporary investment promotion. The Internal Revenue Act streamlined and enhanced the effectiveness and transparency of foreign investment incentives in Sri Lanka. The state also liberalizes controls over foreign exchange. Long-term policy approaches in support of the GOSL vision can serve as path-setters and expressed dedication to policy continuity.
2.  Strengthening innovation through competitive product and financial markets - Over the past 20 years, Sri Lanka has seen little change in what it has been exporting. There has been restricted innovation and diversification into "near-by-product" space (fresh products strongly associated to current ones) which is a more straightforward step with the investment that occurs organically. This challenge of moving into new space also left the nation out of touch with regional and international networks of manufacturing. Where there is innovation, it is restricted to a few sectors. A national plan for innovation aims at tackling gaps and supporting start-ups and SMEs.
3.  Providing the right environment for logistics and infrastructure - Nationally, Sri Lanka requires to tackle transportation deficiencies that have seen unfair development with some areas disconnected from growth, rising congestion problems, and insufficient women's safety. Different regions face different transport gaps in roads, air travel, and shipping infrastructure, while rail infrastructure is outdated and limited, particularly for goods transport.

OSL Take: Sri Lanka's International Trade and Development Strategies Minister Malik Samarawickrama informed the Parliament last week that the government has approved US$ 4.6 billion worth of Foreign Direct Investment (FDI) projects in the first seven months of 2019. The statement on the FDIs that have reached the country by Sri Lanka's Minister for International Trade and Development Strategies is indicative of Sri Lanka's business/investment potential.

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Analysis of Foreign Direct Investment in Sri Lanka (Part 1)

Sri Lanka and foreign direct investments read a bit like a hit and miss story. But it was not always the case. Before 1983, businesses such as Motorola and Harris Corporation planned to set up plants in the export processing areas of Sri Lanka. Others including Marubeni, Sony, Sanyo, Tokyo Bank, and Chase Manhattan Bank had early 1980s pipeline investments in Sri Lanka. Before 1983, businesses such as Motorola and Harris Corporation planned to set up plants in the export processing areas of Sri Lanka. Others including Marubeni, Sony, Sanyo, Tokyo Bank, and Chase Manhattan Bank had early 1980s pipeline investments in SriLanka.

All this altered when the nation was convulsed by the war and its development derailed. Companies left and took with them their foreign direct investment (FDI). Sri Lanka is now in a very distinct location almost a century after the civil conflict finished in 2009. In 2017, Sri Lanka's Foreign Direct Investment (FDI) rose to more than $1,710 billion, including foreign loans obtained from businesses registered with the BOI, more than doubling the past year's $801 million.

But there are still methods in Sri Lanka to attract more FDI. FDI presently stands at just 2 percent as a proportion of GDP and lags 3-4 percent behind Malaysia and 5-6 percent behind Vietnam. More importantly, Sri Lanka's FDI has been skewed away from worldwide manufacturing networks with high value-added. And the more significant proportion of FDI inflows has concentrated on infrastructure at the moment. While these investments may momentarily increase employment and development during the building era, they have little long-term effect.

Compare this to a plant or a new IT service company that would hire individuals as long as they make a profit and export, pay taxes and add to Sri Lanka's decades-long development. Also, elevated FDI infrastructure depends on few and big deals on infrastructure that are unlikely to be replicated and maintained over time. On the other side, production and services hold a stronger long-term promise, but even there, a substantial proportion of FDI is linked to traditional industries and low-value-added local market-oriented operations where productivity gains are low.

Sri Lanka will need to create concerted and ambitious attempts to tackle gaps and play its strengths to maintain and boost FDI flows. Simply put, by establishing a more hospitable investment climate, Sri Lanka can enhance FDI. It is also crucial for national investment to take measures in this direction, not just FDI. And while the government has already started to target issue regions, it needs a lot more. There are six ways in which Sri Lanka can enhance FDI for this purpose:

•     Trade policy reworking - More trade will assist in diversify the economy and exports and lift the burden of driving development from the government-industry. It can also actively encourage technology absorption, skill upgrading, and enhanced competitiveness, resulting in benefits for employees, customers, manufacturers, and the government in the long run.
•      Improve logistics and facilitate trade - Sri Lanka can take advantage of its distinctive location and trade contracts to overcome its small-scale dis-economies. The port of Colombo, which already sees 80% of its volume coming from trans-shipment cargo, is about to develop. However, with high growth in other ports in Pakistan and India, Sri Lanka can not take its place for granted.

Real Estate Investment Opportunities in Sri Lanka (Part 2)

After a constant era of remarkable economic growth over the previous decade, Sri Lanka's ' Pearl of the Indian Ocean ' is experiencing a rise in real estate investment.

Why should youinvest in Sri Lanka?

•        A vibrant democracy & political stability, and a transparent and robust legal system based on the canons of England's laws.
•      Freedom of investment policy for foreigners and an open legislative system for free movement of assets.
•      A comparatively good tax environment
•      Peaceful South Asian region and a steady growth economy combine to highlight this island as one of the top real estate investment opportunities in developing Asian economies.

According to World Bank estimates, extensive government investment and private consumption have helped produce an impressive 4.5 percent GDP development. The capital city of, Colombo, is one of the fastest-growing business hubs in the region.

Located at the center of significant shipping routes linking South Asia and the Far East with Europe, Africa, and America, it enjoys enormous strategic significance, and today the town is a base for countless companies and institutions of government.

Also, robust air connectivity and tourist popularity supplied a solid basis for the transformation of the country.  Sri Lanka's high tourism potential – and particularly luxury tourism – has led some significant infrastructure initiatives such as the Port City reclamation Colombo International Financial Center, Megapolis and Beira Lake, as well as improvements in transportation including new highways, a new Colombo Light Railway (CLR) and extension of airports.

Real estate, however, is the significant success story that underpins the development of Sri Lanka. As the nation seeks to gain prominence in South Asian economies, GDP development will coincide with rising wages, resulting in increased demand for high-quality accommodation.

Also, increasing demand from local and international companies for quality office and business space is spurring private-sector investment. Alone at the Port City, the suggested International Financial Center will add 5.65 million square meters of new mixed-use property.

Attracted by the robust economic growth, developers from far away are increasingly focusing on Sri Lanka, particularly Colombo; concerning significant current Chinese investment in Colombo, the Japanese company Belluna Co. has lately announced plans to invest US$ 500 million in real estate projects here.

OSL Take: Sri Lanka's government's aggressive development program has further risen property prices making properties on the island an accessible investment opportunity with short-term advantages. The proposed project of Colombo Port City will also improve land value. Foreign businesses/investors could, therefore, explore possibilities for business/investment in the real estate industry in Sri Lanka.

⇐ Real Estate Investment Opportunities in Sri Lanka

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Real Estate Investment Opportunities in Sri Lanka

After a constant era of remarkable economic growth over the previous decade, Sri Lanka is witnessing an increase in real estate investment. As the nation seeks to gain prominence among South Asian economies, GDP development will coincide with rising wages, resulting in increased demand for higher-quality housing.

Also, increasing demand from local and international companies for quality office and business space is spurring private-sector investment. At Port City alone, the suggested International Financial Center will add 5.65mn square meters of new mixed-use property.

Sri Lanka's economic growth is driven by prominent real estate projects in Colombo from various investors including the US$ 15 billion reclamation project, with an anticipated additional investment of US$ 25 billion in reclamation projects that are all about to reposition Colombo's and indeed Sri Lanka's significance as a leading regional business and financial hub. As the market is at the start of its growth curve, this makes Sri Lankan real estate a fantastic opportunity.

High-quality assets in Sri Lanka give excellent opportunities for long-term returns, particularly in the present situation where asset prices are comparatively smaller than other regional businesses and political centers. Indeed, Sri Lanka is becoming progressively appealing to worldwide real estate investors as a quickly developing emerging market. A recent study by KPMG revealed that the real estate investors in Sri Lanka are being rewarded with ROIs averaging 17% per annum and rental yields of up to 9%.

Sri Lanka has provided a series of increasingly luxurious premium housing developments since the end of the civil conflict in 2009.

• By 2020, more than 6,000 new apartment units will be constructed
• Extensive government investment and private consumption contributed to an impressive 4.5 percent GDP development, according to World Bank estimates
• The luxury market is motivated mainly by local investors from Sri Lanka (61%) as well as expats from Sri Lanka (18%) who are eager to invest in their nation of origin. The rest of the industry includes owners (17%) and institutional investors (4%)
• High-end new-build properties in Sri Lanka achieve an average ROI of 10 percent per annum from drawing board to completion.
• On average, investors entering the secondary market obtained an annual ROI of 15 percent. Historically, prices have increased by 40-45% in the first year to the third year following completion
• Rental returns are a generous 9% per annum, while secondary sector investors average 5-7% per annum.
• Foreign investors are the luxury market's most prominent tenant (67%), followed by local end customers (19%), residents (13%) and foreign visitors (1%)

Regional Sri Lanka, when considering real estate ROI, continues to be appealing as an emerging market. The global economy's favorable perspective is an encouraging indication that the benefits will continue for some time to come.

Recently, developers have brought the real luxury estate into line with top worldwide metropolitan locations, and several new luxuries and branded housing developments – including Cinnamon Life, Altair, Shangri-La at One Galle Face and Ritz-Carlton at The One – have sprung up across the town, with more in the pipeline.
reade more: Real Estate Investment Opportunities part 2
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