US firms here concerned by policy instability, report says
Sri Lanka scores low on providing a conducive business environment for US companies operating in the country owing to policy instability while conditions for attracting Foreign Direct Investment (FDI) from U.S. companies remain undesirable, according to a latest report by American Chamber of Commerce (AMCHAM) and Stax Inc.
Addressing the launch of a report titled ‘FDI Landscape and Investor Sentiment in Sri Lanka 2018,’ in Colombo yesterday, Stax Inc. and Stax Dev Corp. Founder/ceo Rafi Musher highlighted that 59 percent of the US companies operating in Sri Lanka have faced operational challenges due to policy instability and 63 percent were troubled by shortage of qualified labour.
US was among the top 10 countries of origin of FDI inflows to Sri Lanka. However, it accounted only for 4 percent (US $23 million) of BOI investments in 2017.
“From a US perspective, conditions for attracting FDI are not optimal. The current quantity of US FDI flowing to the country is not sufficient,” the authors of the report noted.
According to the report, over 57 percent of the US companies, which are members of Amcham, have attracted FDI into the country at some point. However, the majority of the FDI was one off – usually at the inception, with only 18.5 percent of respondents attracting FDI on a recurring basis.
“Unpredictability is one of the biggest hindrance to FDI into Sri Lanka as well as our business – there is no industry dialogue with the relevant line ministers, and fast decisions are made for PR reasons,” a US beverage manufacturer stated in the report.
The authors stressed that lack of transparency and corporate governance in the local business environment also need to be addressed by the government parallel to the reforms carried out at a regulatory level in order to improve the FDI inflows from US.
“My main concern is the political instability. Moreover, we need a good balance between just governance and speed of execution. Sometimes, democratic decision making means this government is very slow to act,” a US apparel manufacturer operating in Sri Lanka was quoted as saying in the report.