Sri Lanka is a unique business destination for foreign investors because of its strategic location and access to both east and west sea routes, a recent survey conducted by the Ceylon Chamber of Commerce found.
The survey, conducted among the prospective investors who attended the Ceylon Chamber’s ‘Sri Lanka Investment and Business Conclave 2016’ held during the first week of March 2016, revealed that ‘Access to Regional Markets’ as the top factor of attraction by over one-third of respondents, and ‘Geographical location’ was ranked highest among factors that shape their decision to invest in Sri Lanka.
Among the other factors that investors looked for in Sri Lanka, 18 percent reported ‘Economic policy certainty’, 16 percent reported ‘Political stability’, and 12 percent ‘Low cost of production’. ‘Quality of infrastructure’ was considered as a key factor by only by just 6 percent, possibly indicating that investors perceive infrastructure in the country as having improved, relative to other competing investment destinations they may be exploring.
Meanwhile, ‘tax incentives’ was also a low consideration, as only 6 percent of respondents, said it was a key factor for investment consideration.
“This has important implications for policies around investment attraction. Growing international evidence suggests that tax breaks are low on the priority list among good quality investors, compared to other factors that shape the investment climate like policy predictability and political stability, access to markets, rule of law, finding skilled workers, etc.” said Anushka Wijesinha, Chief Economist of the Ceylon Chamber of Commerce, commenting on the findings.
“The fact that, overwhelmingly, the investors we surveyed said that Sri Lanka’s location and access to big markets like India, Pakistan, and eventually China, was a key attraction in their decision to invest here reiterates the case for focusing on our trade, investment and logistics policies. We must become an attractive regional hub.”
When asked to rank (on a scale of 1 to 5, with 1 being lowest and 5 being highest) various factors that influenced their decision to invest in Sri Lanka, ‘Geographical location’ ranked the highest (4.33 on average), followed by ‘Political stability’ (3.96), ‘Quality of the workforce’ (3.88), ‘Quality of infrastructure’ (3.59), and ‘Macroeconomic stability’ (3.51). ‘Geographical location’ received the most number of respondents ranking it high at 4 or 5, and ‘Quality of infrastructure’ received the most number of respondents ranking it low at 1 or 2.
In terms of other characteristics of the respondents, the majority of respondents, accounting for 46 percent of the respondents indicated that the key reason for attending the conclave was to meet potential investors and JV partners, while 37 percent reported that it was to gain market insight, and 17 percent has come to meet government officials and decision makers. The majority of the respondents (61 percent) were investors (including investment groups), while 19 percent were business support providers, 4 percent were from research institutions, 2 percent were buyers, and the rest did not classify.
The top five industry sectors that the investors came from were export manufacturing (21%), infrastructure providers (including equipment) (19%), agriculture (8%), tourism and leisure (8%), and petroleum, telecoms, power and energy (10%).
The ‘Sri Lanka Investment and Business Conclave 2016’ attracted over 120 foreign investors, including large delegations from East Asian and Middle East countries and was the first such initiative by a Chamber in Sri Lanka.