Foreign investments galore

US $ 196 million to flow in:

Shirajiv SIRIMANE

Sri Lanka is expected to have the largest inflow of foreign direct investment to the country this year.

Central Bank Governor Ajith Nivard Cabraal said that they will attract an all time record of $ one billion FDIs.

In addition with the decision to allow Sri Lankan companies to borrow from outside, another US $ 196 million is expected to flow into the country. “In addition several Sri Lanka expatriates too have already started investing in Sri Lanka bringing in more investments to the country.”

“We have also been informed of many portfolio investments that are expected to come to the country which would bring in more investments,” the Governor said.

Commenting on the Banking sector he said the banks have tremendous scope to issue fresh Tier Two capital to provide loans through long term debt instruments. “We are happy to support to raise new Tier Two capital from which a substantial portion could come from foreign capital. We have encouraged the banks to issue capital through their balance sheets,” he said.

Cabraal said Sri Lanka is getting its fundamental rights and are in looking at even better times in the future with people already seeing the fruits of development.

“We can see that people are enjoying better lifestyles and the country has comfortable levels of infrastructure which are contributing to the national level of uplift of the country. Of course there is more to be done,” the Governor said.

“The Lankan per capita income which was at US $ 2399 end of last year is expected to increase to $ 2700 by the end of 2011 which would be a fairly comfortable mark for a middle income nation like Sri Lanka,” he said.

He said the country is slowly and surely heading towards reaching a US $ 4,000 per capita income country by 2015.

“When we reach that our economy would be a 100 billion dollar economy which would be a large robust economy and it would be an exciting time for Sri Lanka,” the Governor said.

Here are some excerpts of the interview

Q: Some of the super powers and many countries in the world are facing financial crisis. Why not Sri Lanka?

A: Sri Lanka has been getting its fundamental rights in the past few years. Even when Sri Lanka was fighting a separatist war and oil prices were all time high the Sri Lankan economy never collapsed. We have developed firewalls from a long time to cushion risk. If you take US they have a fiscal deficit of nearly 10 percent. Their unemployment is nearly 10 percent. Their debt to GDP is more than 100 percent. Therefore they find it very difficult to go beyond the current 1.5 percent growth they have.

When you have a one and a half percent growth you need more investments to the country. However to have more investments you need more money to be pumped in.

But if you are already in the high end of your fiscal deficit there is very little one can do to obtain more money. In addition if your unemployment is high you need to maintain high growth.

Therefore they have got conflicting problems and a political system that is also not very conducive to growth which is hampering them. However in Sri Lanka we have the opposite. We have a stable political system and a stable government and low unemployment. Sri Lanka has reasonable physical deposits.

We have a debt to GDP ratio which is coming down every year. This way we have built a lot of spaces which has allowed us to move in the case of a risk outside as well.

This has helped us not to fall prey to wiggeries of the world and we are now in a more comfortable position to face these challengers and in the future too we would be more equipped to deal with challenges. Of course global shocks will hurt us but we will be able to survive.

This way we have built a lot of spaces which has allowed us to move in the case of a risk outside as well.

This has helped us not to fall prey to wiggeries of the world and we are now in a more comfortable position to face these challengers and in the future too we would be more equipped to deal with challenges.

Of course global shocks will hurt us but we will be able to survive.

Q: Can Sri Lanka sustain development?

A: Of course we can sustain it. We have left a substantial amount for public investment. One must remember it is not only the government that is investing even the private sector is involved on the back of government investments.

If you take the private sector investments in the Colombo Port development it would bring far reaching benefits to the country by way of employment creation, value addition, support new industries all of which would be towards the sustainability we are now moving in to.

Lowering of poverty levels, high education, better health levels, and better infrastructure environment would certainly help towards the countries forward march.

Q: How do you see the performance of the stock market?

A: It is very impressive. Now it is time for them to tell the world about all these successes.

We experienced this when we performed the road shows to raise the foreign bonds.

At this show, many people did not know Sri Lanka’s success story.

However when Sri Lanka’s success story was is told many people wanted to be a part of that story. When we wanted to raise US one billion we received subscriptions for 7.5 billion.

I think the Stock Market too should take a leaf from our success story and try to continue their forward march.

Q: Your comments on the speculation that the rupee would be devalued?

A: There is a wide range of stake holders who have ideas where the exchange rate should be. Central Bank provides stability to the economy and we have successfully done it.

Due to this our currency is a stable currency and don’t see an imminent danger of it being depreciated. We can’t manipulate it even if we want to do it.

Q: How do you see the development in India and China?

A: They are very stable and strong. In a world of uncertainty and negative growth these two countries stand out.

Both these countries being friends of Sri Lanka has given us huge opportunities to work closely and stand out in the world.

Q: What are your comments of the Sri Lanka’s bid to host the Commonwealth Games in Hambantota?

A: Sri Lanka was a rank outsider and was not even considered as a runner to the other host country Gold Coast Australia. Today we have more than a 50 50 chance and I am very confident that Hambantota would win this bid.