Sri Lanka becoming a powerful player in investment field

Alex Hobbs, Courtesy: worldpolicy.org 

Sri Lanka, the island-nation of over 20 million people off the tip of the Indian sub-continent, boasts over 3000 years of recorded history and a rich cultural heritage. But, from 1983 to 2009, that history was marred by a violent civil war. Despite the decades of violence, Sri Lankans remain optimistic. Since the end of hostilities, a spirit of entrepreneurial enterprise has lent itself to new development. In an effort to stimulate new industry – beyond the historical contract textile business – entrepreneurs are thinking up and investing in promising new projects.

At a recent gathering of Sri Lankan business leaders in New York, the belief in the country’s ability to become a powerful player in the Southeast Asian economy was palpable. “The war is over,” the businessmen, all CEOs and directors of their companies, agreed, “The whole country is safe and totally open. No one wants to see the war start again. It is time to start looking to the future.”

Building a new future: Mr. Niro Cooke, Director of Kings Investments Ltd., a private firm developing renewable energy projects, embodies the new breed of Sri Lankan entrepreneur, forward-looking and socially aware. Mr. Cooke moved back to his native Sri Lanka in 2007, after spending several years in London. 2007 marked the 24th year of civil war between the Sri Lankan government and the Tamil Tigers, the rebel group who controlled the north of the country at the time. “When I first moved back, it was tough,” Mr. Cooke said, “No one thought the war was going to end. No one wanted it anymore, but I did not come back preparing for it to end.”

When he returned to Sri Lanka, Mr. Cooke spent a year “just meeting people,” getting the lay of the land, and looking for business opportunities. “But it was hard to raise capital,” he remembered, “Doing business was really difficult. There were times when I was really disheartened and thought about returning to England.” He decided that despite the obvious hardships, he would remain in Sri Lanka, where he felt he could have a greatest impact and play a more significant role than in England. When the war ended in 2009, Mr. Cooke saw an opportunity to help people transition to a peacetime economy and began developing a hybrid wind-solar power project in Jaffna, the former capital of the rebels. The former conflict zones “cannot be left fallow” Mr. Cooke said, “metaphorically and literally…We need to give them the tools and the alternatives to live a peaceful life.” By developing renewable energy projects, Mr. Cooke is helping his country move towards a sustainable, environmentally-friendly economy, while providing jobs in former conflict zones.

Peace through investment: The desire to help Sri Lanka prosper, which Mr. Cooke refers to as “peace through investment,” is shared with another Sri Lankan entrepreneur, Dr. Lawrence Perera, founder and CEO of Micro Cars Ltd. & Micro Holdings. An automotive engineer by training, Dr. Perera spent time in Europe with BMW and Volkswagen before returning to his native country to build Sri Lanka’s first domestically designed and manufactured automobile. In 1999, when Dr. Perera built the first prototype of his car, cars were considered a luxury item which few Sri Lankans could afford. Dr. Perera wanted his car to be affordable and accessible to a wider audience. “Sri Lanka needs its own car,” he said, “a car is a dream for everyone.” But purchasing a car incurred a weighty sales tax, and automobiles were prohibitively expensive for most Sri Lankans. However, in 2002, a new government reduced the excise taxes on automobiles and building one became economical. At the time, with the civil war still raging and few investors interested in the island, no one thought about putting money into Sri Lankan industry so Dr. Perera had to finance his own project. His investment paid off; Micro is still Sri Lanka’s only domestic car manufacturer.

Now, Dr. Perera sees a greater opportunity for the expansion of the automobile industry. Parts of the country formerly held by rebels are now safe – once again open to travel and trade. Roads are being built to connect those parts of the island that were off limits during the quarter century of civil war, bringing with them the opportunity for industry and development. “With roads comes a demand for cars,” noted Dr. Perera. Indeed, he observed that it is not uncommon to see families with three cars where once even one was a rarity.

And with demand comes the need for suppliers. Dr. Perera sees himself as fulfilling the role of both industrialist and philanthropist, stressing the importance of the aid that his company brings to formerly rebel held areas. His company is currently working to create jobs by building factories and training people who would not otherwise get into university for automotive and industrial jobs. “There is a big labour force available now (after the war)” he said, “We are working to train them.”

Looking towards the future:  Shared among the assembled businessmen in New York was a sense that they are part of a vanguard to modernize Sri Lanka and usher the country into an age of post-war development. “The war was caused by economic hardship. If we take hardship off the table, it can’t be an option. We are developing the Island and giving people a purpose in life beyond the war,” said Mr. Ajit Gunewardene, Deputy Chairman of John Keells Holding PLC, which is in the process of developing an $850 million gaming complex and resort in Colombo.

In an effort to transform the country into a regional competitor, Sri Lanka is trying to attract investors for new industry and infrastructure projects. It’s simultaneously doing so while capitalizing on its proximity to the enormous Indian market and its ideal location amidst major international shipping lanes. But so far most foreign direct investment (FDI) has come from China and India. “We have not done enough to tell our story,” said Sumal Perera, Chairman of Access Group, lamenting that his country is not currently attracting enough investment. He called the roughly $500 million in FDI the country has received this year “peanuts,” only a quarter of the $2 billion target for 2013. “We can’t realize our full potential on our own,” said Mr. Perera, “Sri Lanka has the potential to be a great economy, but we need help.”

The mystery lies in just what Sri Lanka’s full potential might be. But with a steady annual growth in GDP of 7.2%, a strong emerging post war domestic market, and easy access to the booming Indian and Asian economies, Sri Lanka does seem poised to develop into a powerful player in the Southeast Asian economy.

Alex Hobbs is an associate editor at the World Policy Journal –

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