Finance minister urged to give fresh impetus to doing business conditions in Sri Lanka

‘Venora Group lost export orders worth US$ 300,000-400,000 due to foreign exchange issue’

‘Many companies do value addition below 10%, but government is allowing that to happen’

By Sanath Nanayakkare

Venora Group of Companies Chairman and MD – who is also the Chairman of Mechanical-Electrical-Plumbing (MEP) Industry Forum Sri Lanka told The Island Financial Review recently that he was confident the new finance minister Basil Rajapaksa could give visionary leadership to transform Sri Lanka’s ease of doing business ranking to be among the first 50-60 or so in the world.

Venora Group Chief – Engineer Sagara Gunawardana who is wearing two industrial caps said, “New Finance Minister Basil Rajapaksa has a huge task before him in the current challenging context. I am confident that he can rise to the challenges the country is faced with because when he was the minister of economic development from 2010-2015, he did a remarkable job at that time. He was able to attract foreign investors to come here by creating an environment conducive to trade and investment. He is very knowledgeable on what needs to be done to foster strategic relationships with all actors of the economy; namely manufacturers, suppliers, exporters, importers and state institutions related to trade.”

Talking about his group he said,” We are working on six or seven apartment projects in Colombo City limits. They consist of 20 to 30 floors up to 50 floors. In addition, we have undertaken installations at medium and large-scale hotel projects in the South. Although tourism has been hit hard by the pandemic, some investors are still keen on investing in Tourism related businesses. The single digit interest rates introduced by the government could be a main driver for this development. Investors used to borrow at 17%-18% a few years ago and the decision made by the government to get the banks to lend at current rates has encouraged investment, leading to a faster recovery of the economy. Another key reason that has strengthened the confidence of the business community is the government’s accelerated vaccination drive in all parts of the country. It is encouraging to see how the vaccination numbers have increased in the country and I urge everyone to get vaccinated because that is our best hope while other prevention measures must also continue.”

“Venora has been awarded the manufacturing and installation contract of power panels at the new dairy farm project in Ambewela, Pattipola owned by United Dairy Lanka (Pvt.)Ltd., Further, we have undertaken contracts of this nature for a few high-rises coming up in Union Place, Colombo including the iconic TRI-ZEN by John Keells Properties, 447 Luna Tower which is a Japanese investment and we are also working with the new Peoples’ Bank Head office and Akuregoda Ministry of Defence complex.”

“Mainly we are manufacturers of power panels and we export our products under a BOI entity named Venora Lanka Power Panels situated in Free Trade Zone at Biyagama. The COVID-19 pandemic situation opened the doors for us to export power panels to a few projects in Singapore,Bangladesh,Ethiopia and Kenya as the supply chains there were badly disrupted during the time, therefore, I urge Sri Lankan manufacturers to stay resilient and drive ahead their plants and the workforce to export finished goods because that’s where our future is.”

“According to the World Bank, Sri Lanka is ranked 99 among 190 economies in the ease of doing business. The rank of Sri Lanka improved to 99 in 2019 from 100 in 2018. This means foreign investors have almost 100 investment destinations on their radar, when we invite them to invest in Sri Lanka. This is a hard fact and we have to come up with solutions for it.”

“Authorities need to understand why foreign investors would want to come to Sri Lanka and create those conditions to attract them to the country.”

“Chinese investments in Sri Lanka are a lot. But what we need to be mindful about is whether they do enough value addition in Sri Lanka.. I know many companies that do value addition below 10% and the government is allowing that to happen. We should take a cue from late legendary businessman Upali Wijewardena, the founder and chairman of Upali Group which diversified from confectionery to electronics and automobile assembly with greater value addition on the Sri Lankan soil.”

“Today Micro Cars in Peliyagoda and Mahindra -Ideal Lanka facility in Welipenna assemble vehicles and they source some of their components locally. That’s the kind of investment we need to bring into Sri Lanka because the name of the game is ‘greater value addition’ within the country instead of just attracting FDI to the country.”

“We should invite Toyota, BMW and other reputed brands to assemble their cars here. Today a lot of our trained technicians especially those who pass out from the German Training School go to countries like Australia for employment. If we have the right companies here, we can retain this human resource in the country and allow them the opportunity to boost our production economy, taking a holistic approach to growth.”

“In recent past we could see that professional engineers and other skilled workers migrating to foreign countries because there is a high demand for them in those countries.”

“Everyone is aware that we have a US dollar shortage in the country. Due to this, we encounter difficulties in opening letters of credit (LCs) to import intermediary goods for our export orders. This has badly affected our export orders. Our local customers know about the restrictions and difficulties and they remain patient, but that’s not the case with our foreign customers. Sometimes banks take as long as a month to open an LC which leads to long lags in purchase order lead times. And this makes it impossible for us to deliver the orders on time, so we don’t accept such time-bound orders. In the past few months due to this issue. Venora Group lost export orders worth about US$ 300,000-400,000.”

“A key strategy to have our foreign reserves improved is to have foreign direct investments (FDIs) that earn foreign exchange for us. I know that between 2010 and 2015, the BOI invited a lot of investors from Japan and other countries. In fact, they came here, but now with the current situation of issues with LC opening and labour issues, some of them relocated their operations in Vietnam, Bangladesh and other countries. Investment authorities in Bangladesh and Ethiopia offer a one-stop-shop for investors. In Sri Lanka, the procedure is still cumbersome.”

“The Greater Colombo Economic Commission (GCEC) in the 1980s helped set up various industries in the country by offering favourable investment conditions for reputed investors with free-hold land, tax holidays etc. Today Sri Lanka offers little for such investors. And on the top of it, there is no consistent and cohesive investment policy in the country.”

“Policies on investment tend to change when governments change. From the standpoint of investors, this affects the predictability of their investments in important respects. What we need to put in place are ‘openings’ in the investment promotion process, not ‘barriers’.

“Foreign investors have almost 100 investment destinations on their radar when we invite them to come and invest in Sri Lanka. These are the cold hard facts that we need to address as we try to promote Sri Lanka as an investment destination.”

“Minister Basil Rajapaksa has the ability to streamline the affairs effectively to boost our exports and increase our foreign exchange earnings. I am confident that he will come up with a strategy for this and implement it. I am also confident that he can make reforms to upgrade Sri Lanka’s ease of doing business ranking to be among the first 50-60 or so in the world. Such an improved assessment of business conditions in Sri Lanka will be well-received by investors and private corporations across the world,” he said.