BOI beats global crisis by attracting highest ever FDI of US$ 889 m in 2008

The Board of Investment (BOI) has managed to beat the impact of global financial crisis by successfully attracting US$ 889 million worth of Foreign Direct Investments (FDI) in 2008.

“This is the highest ever FDI recorded in Sri Lankan economy – by passing the previous best of USD 734 million in 2007. This also reflects an impressive 21% growth in the year 2008 compared to 2007,” BOI said.

It said the significant achievement was further represented by fifth consecutive year of growth in FDI with USD 234 mn. in 2004, USD 287 mn. in 2005, USD 604 mn. in 2006, USD 734 mn. in 2007, and USD 889 mn. in 2008, reflecting investors’ confidence that Sri Lanka remained a preferred destination for business operations.

The sectorwise analysis of FDI inflow in Sri Lanka reveals that the maximum FDI has taken place in the services/infrastructure sector accounting for 78% of total FDI (USD 697 mn.) followed by manufacturing sector with 21% (USD 189 mn.). The services / infrastructure sector has been the fastest growing sector recording a 25% growth in 2008.

Services / Infrastructure
FDI inflows to construction activities have led to a phenomenal growth in the economic life of the country. Sri Lanka has become one of the most prime destinations for construction and service activities particularly in telecom, power, real estate and information technology.

The telecom sector maintained its position as the leading sub-sector, contributing to 62% of FDI (USD 553 mn.) with a growth rate of 36% in 2008.

Telecom industry is a highly developed and one of the most competitive sectors in the Sri Lankan economy. With more international companies entering the industry, the FDI has been phenomenon. The rapid development of the telecommunication sector was due to the FDI inflows from international players entering the market and transfer of advanced technologies. A number of telecom service providers are operating in this sector. The two most crucial causes behind the huge success of the telecom sector are the growing demand for mobile phone services and private sector participation in the telecommunication industry. The private sector participation in the telecommunication sector in Sri Lanka is increasing at a rapid pace. The government of Sri Lanka has taken measures to ensure pro-active and positive policies to boost the FDI in to telecommunications sector.

The power sector recorded the 2nd highest FDI of USD 88 mn. in 2008. This was followed by Housing/property Development (USD 20 mn.) and IT/BPO (USD 14 mn.).

Construction projects which received FDI in 2008 include housing, commercial premises, hotels, resorts, recreational facilities and educational institutions.

Manufacturing
During the year 2008, the FDI into manufacturing sector registered a growth of 9% despite the impact of the global economic slowdown particularly in export oriented industries.

The FDI in Textile and Apparel sector experienced a growth of 16% registering USD 72 mn. in 2008. This was followed by Rubber Products (USD 35 mn.), Agro-products (USD 15 mn.), Electrical & Electronics (USD 15 mn.), Non-metalic mineral products (USD 12 mn.), Fabricated Metal (USD 10 mn.) and Garment Accessories (USD 8 mn.).

The rubber products sector experienced a substantial growth in the year 2008. Existing foreign investors continued to reinvest and expand their operations in Sri Lanka especially into higher value added rubber products.

Malaysia remained as the largest source of FDI for the 4th consecutive year with USD 150 mn. investment – a 49% decline compared to 2007.

India emerged as the 2nd largest source of FDI in 2008 with USD 126 mn. compared to USD 43 mn. in 2007 reflecting a three-fold increase.

This was followed by Netherlands with USD 117 mn., UK (USD 87 mn.), Luxembourg (USD 82 mn.), Hong Kong China (USD 74 mn.), USA (USD 57 mn.), Sweden (USD 38 mn.), Peoples Republic of China (USD 27 mn.), Singapore (USD 21 mn.), Japan (USD 17 mn.), Belgium (USD 13 mn.), Thailand (USD 12 mn.), UAE (USD 9 mn.), Republic of Korea (USD 9 mn.), Australia (USD 9 mn.), Italy (USD 7 mn.) and Germany (USD 4 mn.).