- Sri Lanka has seen a notable increase in investor confidence
- Policy consistency, ease of doing business and the expansion of trade are key to attract FDI
Standard Charted Bank Chief Economist Asia Global Research David Mann said foreign investor confidence in Sri Lanka has seen a notable increase, especially in investing in fixed income channels including sovereign bonds and local currencies as the yields were quite attractive compared to other countries.
“There are extremely high yields compared to other economies, which had a lot more foreign participation. More gains are in store for Sri Lanka bonds due to their performance. You can say it is partly because of the IMF program and the path of travel,” he told journalists in Colombo yesterday.
Despite the speculation of a gradual depreciation, he said it was impossible to ignore the attractiveness of Sri Lanka’s yields. In terms of the global perspective, Mann said the big focus for the next few months was to see if US President Donald Trump would deliver actions rather than words, which is threatening a Government shutdown and the start of a war where markets will be put on shakier ground.
It was pointed that there is a lot of money on the sidelines still waiting to enter emerging markets for either better value or for some major event driven sell-off which will then trigger the offering of the opportunities they are looking for. “They are still spending the whole time waiting, meanwhile everything keeps climbing stronger and you actually see a lot of foreign investors starting to be obliged to get more adventurous. That is exactly somewhere behind why we have seen a surge of interest for markets like Sri Lanka, amongst all our foreign investor clients.
Further, it was highlighted that policy consistency, ease of doing business and the expansion of trade agreements were key factors to attract much-needed foreign direct investment (FDIs) to Sri Lanka, while admitting FDI per capita was low compared to other countries from the region.
“Tax changes have been ad hoc in the past. The investor needs to be assured that the tax policies will not be changed and getting the whole Inland Revenue Bill is critical at this point. Sri Lanka needs to attract FDIs that can bolster exports as most of the FDIs that have come to the country are in non-tradable sectors like construction.”
While acknowledging that the Government was working on these issues to smoothen the inflow of FDIs, he noted that the revamping of the Board of Investment (BOI) and Customs Department were time consuming. However, he expressed optimism over non-tradable FDIs once the Colombo Port City Project commences towards the second half of next year.