Foreign Investment in Sri Lanka

The US Commercial Service based in Chennai in partnership with AmCham Sri Lanka led a trade delegation comprising of US companies based in India, recently. A business forum to discuss the investment opportunities and current business in climate was held at the Galle Face Hotel, Colombo recently.

In his welcome address Chargé d’ Affairs ad interim Andrew Mann emphasised the keen interests expressed by the current Sri Lankan Government to boost bi-lateral relations with the United States and the creation of an equal level field for Foreign Direct Investment (FDI) in Sri Lanka.

It was also mentioned that the US government recognises Sri Lanka as a critical partner in trade and has engaged in assisting and creating investment opportunities whilst making the country more attractive for business by creating transparent businesses and basing businesses on best practices and eliminating corruption.

It was expressed by Mann that good governance is essential to create business opportunities in Sri Lanka and such has been understood by the current Government to generate revenue for the company and for the job growth in the country.

Several large companies have already made a mark in Sri Lanka and such corporate giants are looking to invest in small medium enterprises that are engaged in innovation that will create more jobs and there are many businesses in Sri Lanka looking for joint ventures and there is high potential for partnerships. Mann also mentioned that American companies are not the only ones that are keeping an eye on Sri Lanka in order to create commercial ties.

Introductory remarks were made by AmCham Sri Lanka President Asanka Ratnayake at the event, where he mentioned that the correct policies are in place to attract investors to the country, creating a conducive environment for foreign investment.

It was also mentioned that there exists enormous opportunity for trade between the United States and Sri Lanka and Ratnayake emphasised on the opportunities available for the delegates present at the event and during their stay in Sri Lanka and to understand in detail the manner in which they can set up their businesses in Sri Lanka.

An introduction to the delegation from India was made by the Principal Commercial Officer (PCO) John Fleming, who with the assistance of his team had taken the key initiative to bring together individuals from diverse business corporation in India and to see what opportunities exist for this delegation, in Sri Lanka.

The delegation consisted of Arizona Tools Company, Authentix, The ELS Educational Services, HTC Global Services, Saggezza India, Underwriters Lab India, Asiana Hotel, Cognizant Technology Solutions as well as the $ 8 billion Fortune 500 company, OshKosh India.

AmCham Sri Lanka Vice President Felicio Ferraz also addressed the delegation on his experience of doing business in Sri Lanka as CEO of Ceylon Tobacco Company. Ferraz stated that the people in Sri Lanka are very well educated and has produced a high number of talented individuals in Sri Lanka who are willing to grow and is keen to work for reputed multinational companies who have set up in Sri Lanka.

Introductions were made by Sri Lanka Association of Software and Service Companies (SLASSCOM) Director Hariharan Padmanaban, in relation to the IT and Business Process Outsourcing (BPO) sector in Sri Lanka.

Sri Lanka ranked as one of the top 20 destinations for BPO industry
It was mentioned that Sri Lanka is ranked as one of the top 20 destinations for the BPO industry and the standards are growing even more with local parties looking for international partnerships to reach further heights in relation to the industry.

Padmanaban further explained that Sri Lanka is where you can find a tier-one location, for a tier-two price, in relation to IT, and the Sri Lankan Government along with Information and Communication Technology Agency (ICTA) will be of assistance to set up businesses in relation to IT in Sri Lanka.

Board of Investment of Sri Lanka (BOI) Executive Director of Investment Renuka Weerakoon whilst addressing the gathering mentioned that currently there are a lot of investment opportunities in Sri Lanka and so much so that companies that are ranked by Fortune as the top 100 companies are looking to set up their businesses in Sri Lanka.

It was mentioned that BOI is a one stop shop for those interested in investing in Sri Lanka and BOI will assist the investors by providing the necessary information to set up their businesses and also liaise with relevant government authorities to ensure smooth establishment of the business, and the operations thereafter.

Remarks regarding the current business climate in Sri Lanka were made by Rajendra Theagarajah who is the Director/Treasurer – AmCham Sri Lanka and also a Director and the Chief Executive Officer of National Development Bank PLC. Theagarajah whilst having vast experience in the banking sector explained to the delegates the drastic changes that took place in the country after the end of the civil war.

Presentation on ‘Doing Business in Sri Lanka’ was conducted by KPMG Manager of Corporate Finance Dushani Corea and KPMG Principle Shiluka Gunawardane. It was mentioned by Corea that inflation remains in single digits and have been the lowest rates within the past five years, but credit growth is not much as expected in post war but this year the credit growth rate has picked up.

Mismatch in skills set
It was explained that there is a mismatch in skills set, as graduates are not meeting the needs of the private sector and therefore the Government is at a critical stage of having to enhance the standards in the tertiary sector.

In 2014, it showed an increase in FDI in hospitality, harbour projects, Colombo city project but Sri Lanka is still lagging behind from the development that was projected, post war. The reasons for the delays in reaching the targets have been due to the challenges that exist due to budget deficits being in place especially due to election spending.
Key considerations to attract FDI are: political stability, economic growth and simplification of procedural surroundings.

It was also mentioned that Sri Lanka has improved its status in the World Bank’s Doing Business Rankings where Sri Lanka has gained momentum from being in the 105th place in 2014 to being in the 99th place in 2015.
Corea explained that the legal procedure of setting up business has been made quick and easy and the BOI has been made a one stop shop that will assist the investors to establish their businesses when channelling their investment through the BOI.

It was also mentioned that foreigners cannot own land in Sri Lanka but could lease land up to 99 years by paying a land lease tax and it was mentioned that Sri Lanka does not charge capital gain tax.

Compelling reasons to invest in Sri Lanka
Gunawardane explained to the delegation that the compelling reasons to invest in Sri Lanka are the expected accelerated development, strategic location and access to markets, investor friendly environment, open economy, skilled labour force, small but attractive market, international trade agreements and untapped natural resources.

During the event, the questions and answers session was moderated by Peter Zirnite, where it was expressed that proper procedures are in place to protect Intellectual Property (IP) in Sri Lanka and AmCham together with the US embassy are assisting to create awareness and put in place the right measures to protect IP and it was also mentioned the Sri Lankan government’s willingness to protect IP in the country.

Questions were raised by the delegates as to what steps have been taken by the government to address the unemployment rate in the country, and it was mentioned by Padmanaban that from BPO perspective the Government apart from the university education provided the Government along with the private sector has also been investing in tertiary education and as a result Sri Lanka has a high number of professionals who are well able to be engaged in the BPO industry.

With the conclusion of the Commercial Service Trade Mission, the delegates at the event were able to obtain an insight into the investment opportunities available in Sri Lanka and to make the right connections during their stay in Sri Lanka.

Published in DailyFT, Sri Lanka on July 10, 2015 (http://www.ft.lk/article/443895/US-Commercial-Service-delegation-explores-opportunities-in-SL-via-AmCham).

Words by Radhi de Silva

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The American Chamber of Commerce (AmCham) Sri Lanka recently hosted a panel discussion titled ‘Counterfeits and Piracy – the far reaching consequences on our lives and the economy!’ The objective of the program was to bring together key public sector officials and private sector representatives of industries affected by the rampant issue of Intellectual Property Rights (IPR) violations, in order to formulate a joint effort to address the challenges facing both sectors.

AmCham will be carrying out a series of similar programs over the coming months in order to create awareness regarding IPR and the need to fight counterfeit and piracy, since there is a strong correlation between IPR and Foreign Direct Investment and it has been further established that IPR protection is a strong determinant of inward investment.

The theft of Intellectual Property (IP) from industries is a serious matter, as it stifles innovation, slows economic growth and weakens the competitiveness of businesses. IP theft has an adverse impact on innovation, commercialisation of new products and overall economic success. However, it has been noted that Small Medium Enterprises are particularly vulnerable because they are at a distinct disadvantage in securing IPR in foreign markets and confronting its theft.

During the panel discussion, the public sector was represented by National Intellectual Property Office (NIPO) Director General Gitanjali Ranawake and Coordinating Secretariat for Science, Technology and Innovation (COSTI) Project Scientist Kumudini Gunasekera. Representation for the private sector was made by Glaxo Welcome Head of Sales for Sri Lanka and the Maldives Dr. Kusal Senanayake and Ceylon Tobacco Company Head of Legal Ranjan Seneviratne.
Sudath Perera being an Attorney-at-Law and the Managing Partner of Sudath Perera Associates, formed part of the panellists where Perera gave a valuable insight with regard to the enforcement of IP laws and legal reforms in relation to IPR, in Sri Lanka. The panel discussion was moderated by Amice van der Burg-Dissanayake, a Strategist and Commercial Lawyer, in the Netherlands and also at John Wilson Partners, Attorneys-at-Law and Notaries Public.

The private sector representatives brought to light the impact caused by IPR violations and Dr. Senanayake addressed the necessity of the public to understand the concept of counterfeit and the damage caused by such counterfeit products, for e.g. plenty of counterfeit pharmaceutical drugs are available in the market for a very cheap price but most often the main purpose of a pharmaceutical drug is lost and the desired treatment from such a drug is not achieved and such drugs can be harmful and as a result has caused many deaths.

It was also mentioned that most pharmaceutical drugs that are counterfeit are not properly stored and are channelled through illegal means for trading and therefore products such as vaccines lose its effectiveness and may even cause harmful side effects.
Seneviratne informed that tobacco products need to be properly manufactured subject to quality control. Most tobacco products that are smuggled are not up to standard and are mostly expired but such products are packed using packaging of branded tobacco products to mislead the consumer.
Monetary and non monetary impact
Counterfeit products being sold in the market has a monetary and non monetary impact since allowing counterfeiting to take place damages the goodwill of a brand; as a result most brand owners allocate a large amount from their budget to protect their IPR, which could have been used to invest in research to develop better products as done by most pharmaceutical companies. In terms of monetary losses, the Government is hit the hardest as the Government losses around Rs. 200 million every year as revenue.
In order to protect the IPR in Sri Lanka, Perera informed that the key legal regulatory procedures that IPR owners may rely on are the criminal or civil procedures, and also section 30 and 31 of the Consumer Affairs Authority (CAA) Act No.09 of 2003; where parties are prevented from misleading, deceiving and or falsely representing counterfeit products as originals to consumers and traders.
The criminal procedure is known to be the most cost effective and easiest method to rely on as the IPR owner to make a police complaint; however the IPR needs to be duly registered with NIPO in order to proceed. It was also mentioned that even though it will be time consuming most IPR owners rely on the jurisdiction of the Commercial High Court to prevent further damage being caused by counterfeit items through interim relief such as injunctions.
It was also mentioned that the Commercial Crimes Investigations Unit 2 is a special unit at the Criminal Investigation Department that handles matters concerning the breach of IPR and handles many IPR matters concerning internationally renowned brands.
Perera further added that with the assistance of AmCham, a customs recordation procedure is to be implemented shortly in Sri Lanka where once a trademark is registered at NIPO such also gets registered with the Customs, and the Customs can monitor any parallel imports taking place and take necessary action to prevent IPR violations due to such parallel imports.
The way forward for IPR in Sri Lanka
The question was raised as to what is the way forward for IPR in Sri Lanka and Ranawake explained that the necessary laws are in place but much more needs to be done and most important is to create awareness regarding the importance of protecting IPR and also the registering process of IPR to safeguard IP in Sri Lanka. It was also mentioned that government officials need to be more conversant with regard to IPR especially the government law enforcement agencies, the Customs and the CAA, and the NIPO is currently engaged in educating these officials around the country.
Gunasekera informed that amongst its many objectives, COSTI engages in linking private and public partnerships in order to commercialise and protect IPR in Sri Lanka, and create awareness regarding the importance of patenting inventions which most inventors are not aware of and Sri Lanka is quite behind in terms of innovation as Sri Lanka was ranked at 105th place in the Global Innovation Index for 2014. It was also mentioned by Gunasekera that COSTI along with NIPO and WIPO are in the process of preparing a National Innovation Policy in Sri Lanka to encourage more innovators.
Participants at the panel discussion addressed the importance of a strong IP system in a country and which will be one of the key pre-requisites to bring in FDI and therefore ensuring IPR is well protected is a vital component for a growing economy such as Sri Lanka.

Published in DailyFT, Sri Lanka on June 11, 2015 (http://www.ft.lk/article/428265/Demystifying-the-complexity-of-related-party-transactions). Image courtesy of The American Chamber of Commerce.

Words by Radhi de Silva