The Sunday Leader

AfD To Takeover BoI Functions?

by Wiraj Silva

Prof. Prema-Chandra Athukorala

Good governance activists are condemning moves to takeover several functions of the country’s investment promotion agency – Board of Investment (BoI) of Sri Lanka by an unincorporated body – Agency for Development (AfD).

Sources told The Sunday Leader that a certain ex-Chamber official who has no experience in investment facilitation has already been approaching investors promising incentives and making representations that he has the backing of the Ministry. But when inquired by The Sunday Leader, the official in question refused to comment but accepted that he was working under the aegis of the Ministry of Development Strategies and International Trade.   Many question as to why basics tents of good governance is being violated since although Ministry of Development Strategies and International Trade promised to present the Agency for Development (AfD) Bill to Parliament long time back, the government has yet failed to present the same. During the rule of former President Mahinda Rajapaksa, his sibling and then Minister of Economic Development – Basil Rajapaksa got the Strategic Development Projects (SDP) Act enacted to attract FDIs through incentives offered for specific investors provided through BOI giving government a large, direct role.

The SDP Act in particular provides fast-track approvals, exemptions from a range of income and border taxes, and special treatment on land ownership. The act allows for negotiation of individual deals and the eligibility of projects are discretionary; whether a project is strategic in nature can be left to interpretation by the subject minister, so long as it is in a sector that is specified in the act.  Many of the 13 SDPs that have been approved have been unsolicited proposals. There is little reporting on their terms, particularly tax benefits and the terms for use of land, nor is it possible to determine fiscal impacts by available budget data. The upshot of these regimes is that prospective investors have a strong incentive to negotiate with government to secure privileges. This is particularly the case with SDPs where terms are decided on a case-by-case basis; BOI incentives are uniform for all investors. (http://www.thesundayleader.lk/2016/07/31/making-sri-lanka-a-prime-destination-for-fdis/) In addition the then Sri Lanka Ports Authority (SLPA) Chairman Dr. Priyath Bandu Wickreme implemented an SLPA project scheme alternative to the BoI regime.

Moreover, think tanks and economists lament that Sri Lanka has a long way to go in removal of para-tariffs (taxes over and above normal tariffs) and trade liberalization to make Sri Lanka a haven for investments. (See http://www.thesundayleader.lk/2016/08/28/driving-global-production-sharing-in-sri-lanka/ )

To attract Foreign Direct Investments (FDIs) for Sri Lanka, its burgeoning Indian Ocean Island economy, should cut barriers to trade and investment, top trade economist Prof. Prema-Chandra Athukorala said at a forum organized by Advocata Institute, a Colombo-based free market think tank.

“This would form a natural progression from garment manufacture, on which the country is now heavily reliant. Sri Lanka’s protectionist trade policy and erosion of confidence in the legal system are key factors that have discouraged investors resulting in a decline in Sri Lanka’s share in world manufacturing exports from around 2000,” he said.

 

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