Investments

According to latest figures Board of Investment (BOI) of Sri Lanka, India is among the top five overall investors in Sri Lanka. Investments from India picked up rapidly after the signing of the FTA. The FTA has spurred bilateral investments by capitalizing on the opportunities generated by the FTA and availing of the comparative advantages both countries possess.

Cumulative investment proposals since 1978 up to August 2007 are estimated to be approximately US$ 250 million. Of these, actual investment that has fructified is US$ 197 million. During 2002 and 2003, India was the largest investor in Sri Lanka. However, investments slowed down subsequently as reflected in India’s 4th position in 2004, fifth in 2005 and ninth in 2006. In 2007, again investments from India rebounded, and India was placed at 4th position.

FDI figures, as available from Board of Investments of Sri Lanka as under:

Investment projects in commercial operation set up under Section 17 (BOI law under which certain incentives are available) were 59 in number with a total investment of Sri Lankan Rs. 7 billion (US$ 74 million converted mean exchange rate 1 US$ = SLR 95) employing 5,847 people. Chief among them is investment of about US$ 40 million by Lanka IOC in petroleum products. VSNL has also invested about US$ 1.5 million for operating an external gateway for international communications under this law. Other sectors covered include real estate development; steel; vegetable oils; marble, granites and tiles, non ferrous metals, and power plants.

In addition, there are 96 projects which are in commercial operation under normal laws of the country. The total investment involved is SLR 4,060 million (US$ 43 million converted at 1 US$ = SLR 95). Of these, 64 projects were started after the signing of the FTA. These include investment by Ambuja Cements, Ultratech Cements, ICFAI and MAFOI in education, and LIC. Investments that predate signing of the FTA include investments by Taj Hotels, Lanka Ashok Leyland, investment by TATAs in Watawala tea plantations, CEAT in rubber products and tyres, and Nicolas Piramal in glasses.

Besides, Sri Lanka also has four Indian banks (SBI, IOB, Indian Bank and ICICI), and Jet Airways, Jetlite, Air India Express and Indian Airlines in the civil aviation sector.

Some of the success stories of Indian investment in manufacturing sector have been CEAT and Nicholas Piramal, who have taken over sick units, turned them around, expanded and are now earning profits. Another notable investment was by Lanka IOC, which entered the Sri Lankan market in Aug 2002 and revolutionized the retail petroleum sector. They have plans for further expansion and investments.

Upcoming investment projects for which Sri Lankan Board of Investment approvals have been obtained involve an investment of approximately US$ 364 million. These investments are by Bharati Airtel Ltd in mobile telecommunication which is about US$ 150 million and projects in real estate and infrastructure development sectors which is about US$ 58 million and US$ 122 million respectively. The notable names include L&T which is in luxury apartment construction and NEB Ltd, a Bangalore based company that is into apartment construction and is working on a project for Metro construction in Colombo.

. Further there are other major projects in pipeline which if they were to fructify would involve large investments. These include IT Parks, SEZs, power projects, airports, etc. Besides, according to BOI, some other major projects in pipeline include investments of US$ 125 million by South Asian Petrochemicals in PET plant, and of US$ 100 million by Aditya Birla Group in Carbon Black.

The last few years have also witnessed an increasing trend of Sri Lankan investments into India. Main Sri Lankan investments in India include Ceylon Biscuits (Munchee brand), Carsons Cumberbatch (Carlsberg), Brandix (to set up a garment city in Vizag), MAS holdings, John Keels, Hayleys, and Aitken Spence (Hotels). There are also investments in the freight servicing and logistics sector from services industry.

Development Cooperation with Sri Lanka

(i) Infrastructure Development

India is participating in infrastructure development in Sri Lanka. A line of credit of US$100 million has been extended for the refurbishment of the southern railway corridor from Colombo to Matara. The project involves track laying on the Kalutara-Matara sector by IRCON and provision of training and rolling stocks by RITES. The total cost of the project is likely to be around US$ 167 million and is likely to be implemented in two phases.

In the power sector, as mentioned earlier, NTPC Ltd. is in discussion with Government of Sri Lanka to set up a 500 MW coal based thermal power plant in Trincomalee as a joint venture with Ceylon Electricity Board (CEB). An MoA was signed between NTPC, CEB and GoSL on December 29, 2006 at Colombo. The project would involve investments of US$ 500 million and would be implemented by a JV company to be formed with a stake of 50% each by NTPC and CEB.

Another power related project relates to setting up an interconnection of the electricity grid between India and Sri Lanka to enable Sri Lanka to source electricity from India. The two sides have set up a Steering Committee at Power Secretary level and a Task Force to carry out negotiations on the modalities of implementation.

Lanka Indian Oil Corporation has invested in Sri Lanka and now operates 170 petrol pumps in Sri Lanka and has successfully raised money through an IPO to fund expansion of its activities, including the setting up of a lubes plant in Trincomalee with an investment of US& 5 million.

(ii) Capacity Building in Sri Lanka

India provides about 150 training slots for middle and higher level professionals under the ITEC, Colombo Plan and BIMSTEC schemes. These courses have proved immensely popular and have been utilized by Sri Lankan professionals in wide variety of areas such as entrepreneurship development, biotechnology, water resources, financial management etc. To assist in capacity building in agriculture, there are training programmes, scholarships, research projects and exchange of visits of farmers. 16 MSc and 21 PhD slot at Indian Agricultural Research Institutions have been made available to Sri Lankan students. Specific education projects include upgradation of the educational infrastructure of the schools in the Central province including teachers’ training, and setting up of e-libraries and computer laboratories. In addition, scholarships are awarded annually to 100 Sri Lankan students each year under the Mahatma Gandhi Scholarship Scheme instituted last year. Another set of 75 scholarships is awarded by the High Commission of India to Sri Lankan nationals for pursuing under-graduate and post-graduate courses in various reputed institutes and universities in India.

(iii) Development Cooperation

India is active in a number of areas of development activity in Sri Lanka. The last four years have witnessed extension and utilization of credit lines amounting to US $ 281 million. These credit lines have been utilized for wheat, buses, petroleum products, commodities and consultancy services. As mentioned above, another line of credit of over US$ 100 million has been offered for the rehabilitation of the Southern Railway corridor. The project is under implementation by India companies – RITES and IRCON - involving supply of DMU Sets and Locomotives, track laying on the Colombo-Matara sector, training of personnel, and creation of maintenance facilities.

A number of development projects are also implemented under ‘Aid to Sri Lanka’ funds. In order to support the Government of Sri Lanka’s e-Sri Lanka initiative, the Government of India has established 20 Nanasalas at a cost of SL Rs. 13 million in 2007. A proposal to set up another set of 20 Nenasalas is under consideration.

As part of “English as a Life Skill” project of the Government of Sri Lanka, a proposal to set up a Centre for English Language Training in Colombo to train English teachers is also under consideration which aims to develop Sri Lanka’s BPO sector. Already 41 scholarships to English Teachers in Sri Lanka have been granted to train in modern English teaching methods at the English and Foreign Language University in Hyderabad.

India and Sri Lanka have also signed an MoU in April 2008 for creation of vocational training centre in Puttalam which is under implementation.

During the Joint Commission meeting in 2005, EAM announced a scheme for Small Development Projects. An MoU on Cooperation in Small Development Projects has been signed. India has started work on several such projects at a cost of Rs. 40 million each and the numbers are likely to increase with the period of time. Some of the projects being implemented include providing fishing equipments to the fishermen in the North and East of Sri Lanka, Solar Photovoltaic Aided Computer Education in Uva Province of Sri Lanka, creation of an Ayurveda faculty in the Eastern University of Sri Lanka, supply of 4 Air Quality Monitoring Stations to GoSL and renovation of a Railway Station in Colombo.

In the health sector, India has assisted with supply of equipment and renovation of OT at Dickoya, and work is on for implementation of a project for construction of a 150-bed hospital at Dickoya and for upgradation of the hospital at Trincomalee. A proposal for supplies of equipment to the medical faculty in Eastern University is also under consideration. This is in addition to donation of medicines to the hospital in Point Pedro, supply of 4 state of the art ambulances, a cataract eye surgery programme for 1500 people and donation of equipment to hospitals at Hambantota and Point Pedro.