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FDI and Technology Growth in Sri Lanka PowerPoint PPT Presentation

FDI and Technology Growth in Sri Lanka Vijaya Kumar Chairman, CSTD University of Peradeniya, Sri Lanka Sri Lanka and FDI 1977 – Promotion of FDI Annual averages for five year periods: 1975-1979 – US $ 9.5 m 1980-1984 – US $ 45.2 m 1985-1989 – US $ 37.4 m 1990-1994 – US $ 106.2 m

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FDI and Technology Growth in Sri Lanka

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FDI and Technology Growth in Sri Lanka

Vijaya Kumar

Chairman, CSTD

University of Peradeniya, Sri Lanka


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Sri Lanka and FDI

  • 1977 – Promotion of FDI

  • Annual averages for five year periods:

    • 1975-1979 – US $ 9.5 m

    • 1980-1984 – US $ 45.2 m

    • 1985-1989 – US $ 37.4 m

    • 1990-1994 – US $ 106.2 m

    • 1995-1999 – US $ 208.2 m

      G. Wignarajah, Commonwealth Secretariat FDI Conference, 2001


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FDI Promotion

  • Powerful agency – Board of Investment

  • Four week FDI approval

  • Attractive investment incentives

    • 5-20 year tax holiday

    • Duty free imported inputs

    • Free repatriation of profits and capital

  • 1998 – Indo-Lanka Free Trade Agreement

    • Phased tariff reduction, 35% local origin

    • Negative lists


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Nature of FDI

  • 1987-1992 16 % High skill

  • 1995-1998 27.5 % High skill

  • Manufactured exports 1998 $ 3.5 m

    • 68.2% Textiles and garments

    • 79.7% of foreign firms in textiles and garments

  • Portfolio equity flows low

  • Good, Bad and ugly FDI attracted


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1994-2000

  • 1994 – 2000 average of $ 208 mean of:

    • 1994 -$ 166 m, 1995- $ 65 m, 1996-$ 133 m

    • 1997-$ 435 m, 1998 - $ 206 m, 1999 - $ 202 m

  • Boost in 1997 due to privatization

  • $ 300 m from Telecom/Airline part sale

  • FDI excluding privatization below $200m

  • Affected by conflict in the North


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Privatization

  • Terms often disadvantageous

  • Less than 50% ownership but 100% management control

  • Monopoly marketing agreements

    • Five year monopoly – Gas, Lubricating Oils

    • On overseas calls – Sri Lanka Telecom

    • No free market, price increases

  • Access to country quotas - garments


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FDI in technology and industry

  • Telecommunications

  • Some FDI in Information Technology

  • Power Generation and Marketing

    • Shell ($ 20 m storage), AES for local market

  • Sri Lankan Airlines

    • Emirates – Inputs from Dubai

  • Cement, Flour milling for local market


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Telecommunication Sector

  • Most investments through FDI

  • Land line monopoly – minority holding

    • Large expansion/modernization of networks

    • Call rates remain high

  • Two Wireless loop operators -FDI, local partners

  • Four mobile phone operators – Mainly FDI

    • Originally catered to land line shortfalls

    • Mobile phone culture


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Information Technology Sector

  • Hardware – one enterprise making memory chips

    • Indian owned US firm with Sri Lankan involvement

  • Software – FDI low, outsourcing

    • Partnerships with foreign firms

    • Swedish, British, US involvement

  • Software training

    • Branches of foreign, usually Indian or Far East firms

    • Lacunae in local education

    • Usually no software development


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