Discovery of oil will boost Lanka’s growth ambitions

BLACK GOLD: Sri Lanka will add a ‘missing link’ to its growth trajectory with the discovery of oil and gas, Enterprise Development and Investment Promotion Minister Sarath Amunugama said in London.

He was speaking at the Mannar Basin Oil Exploration Road Show.

The Minister’s speech: “It is very appropriate that we begin with the promotion for the Mannar Basin development in the United Kingdom. Sri Lanka and UK had been friends for several centuries.

In the 1815 the King of Kandy entered into a treaty with the King of England. In 1948 we received our independence. First as a colony, then as a dominion and finally as free and independent country. Sri Lanka has had the best of relations with the United Kingdom.

New milestone

So we look forward to very close cooperation between our country and the British Government as well as British companies. We are about to launch a new milestone in the history of Sri Lanka.

Just as much the Treaty was important, just as much to the dominion status is important, just as much our

 independence was important, that why we thought to launch that is the exploration in the Mannar region will be very significant milestone in our history.

Sri Lanka is a very attractive investment destination. We are a country which is located in the mid point between the Middle East and the Far East. Any ship that goes from the West or from the Middle East to the very important destinations of China, Japan or Korea, have to go pass the Southern part of Sri Lanka, go pass the New Port of Hambantota that we are bound to develop.

It is this location between the West, the Middle East and the Far East that makes Sri Lanka a natural hub. The fact that all those countries in the Far East are oil deficit countries.

Take Japan, China and Korea, add Vietnam to it , which are power houses in growth, they are all looking for oil and Sri Lanka when the oil. Gas is discovered will be one of the nearest transportation points.

Billion dollar refinery

Next year we will begin our refinery with a Middle Eastern country, a billion dollar refinery which will be started in Hambantota. Even before the discovery of oil and gas because they know when they store oil in Sri Lanka, it will considerably reduce charges of transshipment to the Far East. So we are well located on this path.

But location not only from the West to East but also North to South. Just 25 miles from the North of Sri Lanka we have this huge and growing market and wonderful country of India, which is also an oil deficit country.

Sri Lanka has had excellent relations with India, and India herself will be joining in this oil exploration, and just across our blocks which we will be discussing, are the blocks which are being exploited by the Government of India.

So both North and East, South and West, Sri Lanka is a hub which has tremendous potential. Notwithstanding oil shock, not withstanding with other problems Sri Lanka has had a growth rate of 7%, which would have sustained over a four year period and we are projecting a 8% growth in the next couple of years.

So while there are drawbacks, particularly, in the terms of oil shock we are very confident that our economy will grow and will participate in the growth of the economies of Asia. Today we know that global growth is being pulled, is being pushed by the economies of China, Japan and India.

Best of relations

And we are countries, these are countries which have the best of relations with Sri Lanka and the closest of geographical and political contiguity. So we are a growing country, we have the best possible location and we are poised to play that hub role.

This we do by increasingly investing in infrastructure. Our Port of Colombo has shown tremendous growth I have the figures with me, which we can discuss when we have one to one talks.

There has been a 20% growth in the last year, in the business in the Colombo Port which is now basically privatized, it is managed by P & O and Nedloyd and it is one of the best functioning ports in Asia. We are also developing the Hambantota Port because that is the closest point on the sea routes between West and East.

In fact Petroleum Resources Minister A.H.M. Fowzie told when we go for meetings, when we go for vacation to Hambantota we can see the big liners, the big ships going pass the shores of Hambantota.

So Hambantota will be also developed as a port. Our airports also has been developed during the last two years largely with Japanese assistance many of you come and go through that port, and the airport so I need not elaborate on that, we have invested a large amount of money on our Katunayake airport and next year we will be investing on a four lane high way which will connect Katunayake with the Colombo city.

Just now we are rather disappointed with the Katunayake Colombo highway. Minister Fowzie when he was in charge of transport tried his level best to improve that road, I am glad Mr. Fowzie that next year your dream will become a reality. So from the point of view of infrastructure I think we have improved by leaps and bounds.

The Southern highway is already a reality. From Colombo a four track highway to Galle and subsequently it will go all the way to Matara Hambantota. But at least by 2008 we should have a four track highway to Galle. So these are indications of our determination to invest in infrastructure.

We also have I must say some characteristics which should be very appealing to you. We are a democratic country, since independence our people had elected governments, thrown out governments, re-elected governments and India and Sri Lanka with all its political ups and downs still remain very committed and good members of the democratic camp.

Good workforce

If you look at the television today you will find that many countries which have growth suddenly going to turmoil because of the problems of democracy. Sri Lanka does not have. We have small problems, party problems and so on but not big problems because all the parties in Sri Lanka are committed to democratic system of Government.

Our people are very happy to elect Governments and to reject Governments. So that is one aspect. But one good aspect of this commitment to democracy has been the investment in education, the investment in social welfare, the investment in health.

My good friend Minister Fowzie was for a long time Minister of Health, he completely revolutionized and reorganised the health system in Sri Lanka.

We have a very good public health system , we have good universities, education free from cradle to, I wont say cradle to grave, but at least from cradle to university degree, so that there is a very strong investment in social welfare which you in Britain will understand.

At least at this stage dividends in terms of near universal literacy a very good scientific core of people and dedicated workers who have been recognized by the EU as a model country, when it comes to looking after it’s workers.

We are the only middle income country in Asia which has GSP Plus status, of course, we politicians like to take the credit for it, but the real credit should be given to our employers and employees, who because of their model privileges as well as model service have been recognized by the European Union as deserving of GSP Plus.

So, we have a very good work force and educated work force and India and Sri Lanka has a very good scientific cadre which is very important if you care going in for a type of oil exploration and gas exploration that we are contemplating.

Foreign investment

I want to say a few words about my Ministry, the Ministry of Investment. We are very private sector friendly. The Government is looking for Foreign Direct Investment. We have very good relations with our friendly countries. We do get assistance. But the Government is now trying to shift more to direct investment.

We don’t want to get more and more into debts by borrowing more and more. We would prefer very much, if companies invest in Sri Lanka, use our technology, use our hub status and the facilities that we have created. So Foreign Direct Investment is welcome.

In 2006, we doubled the amount of FDI from 250 mn. US$ we went up to 600 mn. US$ and the day is not far off when we will be having an FDI of US$ One billion, which will rate very well in our region, for which the Government has provided many incentives under the BOI.

In future the companies that will be prospecting oil and gas will presumably be BOI companies, we have a large range of tax concessions, ranging up to 15 years of tax free activity.

You are allowed to repatriate your profits and dividends, the Constitution guarantees that in case of an expropriation of your capital, the Government is bound to repay you.

I hope that will not happen, but it is Constitutional guarantee, the BOI is a one stop shop and you are also allow the coming in of expatriates and the remittances of their earnings in full. So we have a very attractive investment regime.

I can give you the details, when we have the one to one. I think it will be fair to say that we are the most attractive tax and incentive regime in South Asia at present.

So we have very many things on offer and finally I must say something I should not boast about generally people say that Sri Lankans are quite friendly. We have all the facilities, we are a tourist destination, we have got good hotels, we have good entertainment, we have all those things that expatriates look for.

The people are friendly, if you are looking for investments in this very vital area, Sri Lanka will figure very high for the reasons that I have mentioned to you and also for many other reasons but particularly because of our people.

Double digit growth

I think many people who have invested in Sri Lanka beginning with a whole bunch of Scottish planters who came to Sri Lanka in the early 19th century, and investors like P & O have been satisfied with their activities in Sri Lanka. The Government is committed to preserve your investment to work together with you and develop our country.

We are now having 7 to 8% growth. We look forward to double digit growth, which is now common in our region and that is possible I think with this milestone oil exploration.

My colleague Fowzie is well known in Sri Lanka as a very lucky person, whatever, he handles turns to gold and he is very lucky and he somehow works 24 hours and get his job done. So we have great faith in him and I think his luck will be seen once again when Sri Lanka will add the missing link to our growth trajectory that is the discovery of Oil and Gas.”