Indian investment into Sri Lanka zooms

The Sri Lankan government has set a target of $3 billion (around Rs 13,500 crore) FDI inflow into the country by 2015, of which the 15-20 per cent is expected from India, according to a senior government official from Sri Lanka. During January-October this year, the Sri Lankan government has granted approvals to nine Indian projects with an estimated investment of $168 million (around Rs 756 crore).

Since the end of its 25-year civil war in 2009 Sri Lanka has been working to improve the investment climate, including making fiscal and tax reforms under the guidance of the International Monetary Fund (IMF).

By 2015, Sri Lankan government’s FDI target is around $ 2. 5 billion to $3 billion, of which 15-20 per cent would come from India and the trade is expected to touch $900 million between the two countries, said Sam Wijesekara, counsellor (Commercial), Sri Lanka Deputy High Commission in Chennai.

Last year alone, the country has attracted foreign direct investment (FDI) worth $516 million from various countries. India has registered an upward swing over the last seven years.

In 2005, FDI flow from India to Sri Lanka was $18 million which peaked in 2008 at $ 126 million and now India stands within top five investors in Sri Lanka, with $ 457 million on cumulative basis. The top investments include Cairns India - Oil exploration, Bharti Airtel, Indian Oil , Piramal Glass, TATA groups - Tata Communication, Taj Hotel, Ashok Leyland, Ultra Cement, CEAT, L&T, Asian Paints among others. Besides, four banks including State Bank of India, Indian Overseas Bank, Indian Bank and ICICI also have branches in the island nation, said Wijesekara.

During first half of 2011 FDI inflow from India was $47 million, according to the Sri Lanka Board of Investment (BoI) data. During January-October this year, the Sri Lankan government granted approvals to nine Indian projects with an estimated investment of $168 million. At least eight of these projects have begun commercial operations. This is a big jump as last year approvals were granted for 15 projects with a total estimated investment of $72 million, according to reports.

Investments flow from India to Sri Lanka in 2009 was $77 million and it increased to $110 million in 2010.

In the recent days companies which are forayed into Sri Lanka include Shriram EPC, a renewable energy company, MARG an infrastructure company from Chennai.

According to Wijesekara, real estate- commercial ô residential, ITPO, hotels, food processing are some of the key sectors which are driving the investments into Sri Lanka from India.

The last few years have also witnessed an increasing trend of Sri Lankan investments into India, said Wijesekara. He added, the investments in India include Carsons Brandix (around $1 billion 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.