By P.K. Balachandran, IANS
Attn Editors: This is the second in a series of stories to mark Sri Lanka’s 60th anniversary of independence.
Colombo : India has emerged as one of the largest foreign investors in Sri Lanka, with a commitment of over $200 million since 2000. There are signs $364 million will be added to this soon, if some prestigious projects fructify.
The Lanka Indian Oil Corp (LIOC), which is a wholly owned subsidiary of IOC, is the largest Indian investor, having pumped in Sri Lankan Rs.7.57 billion ($74.2 million). LIOC is among the top 10 foreign investors in the island.
But if Bharti Airtel does enter Sri Lanka this year with an investment of $150 million, the Indian telecom giant will be the top dog.
What is especially noteworthy is that new areas like infrastructure and private property development as well as IT parks are attracting Indian investment. Infrastructure projects worth $122 million and property development schemes worth $58 million are in the pipeline.
The Sri Lankan Board of Investment (BOI) says that 50 percent of Indian joint ventures and 54 percent of Indian equity investment in South Asia are in Sri Lanka.
The Tatas have been in Sri Lanka in a big way for a long time, with an interest in hotels and plantations. Two Indian cement companies, UltraTech and Gujarat Ambuja, are constrained by administered pricing of cement and are only in packaging cement. Tyre company CEAT has overcome its teething troubles and has added new facilities to its plant.
Lanka Ashok Leyland, a joint venture between Ashok Leyland and the Sri Lankan government, is a major player in building bus bodies. In recent times, Nicholas Piramal has entered the glass industry with the acquisition of Ceylon Glass. It has started a new plant in the country.
Indian public sector companies are exploring big investments in power.
The State Bank of India has the reputation for being the oldest bank in the island. Two Chennai-based banks, Indian Overseas Bank and Indian Bank, have also been in the country for long. All three excellently service India-Sri Lanka trade. The new entrant, ICICI, is setting a new pace in retail banking.
The BOI’s 2005 list of successful Indian investors includes LIOC SLRs.7.57 billion ($74 million), Gujarat Glass SLRs.2 billion ($19.6 million), Haikawa Industries, manufacturers of air conditioners, SLRs.816 ($8 million), Motherson Electrical, auto cable makers, SLRs.163 million ($1.6 million), and CEAT tyres SLRs.155 million ($1.5 million).
LIOC, which has 170 petrol stations, has started a lubricant plant. It is thinking of a refinery with a capacity of seven million tonnes to serve the local as well as the overseas markets.
Indian investments in Sri Lanka, or for that matter, any Indian activity in Sri Lanka, tends to generate controversy, given the xenophobia about Indian domination. But Sri Lankan companies are also venturing into India, albeit in a smaller way.
The niche market furniture company, Damro, has as many as 25 outlets in India, especially southern India. Ceylon Biscuits (manufactures of locally popular Munchee brand) has manufacturing facilities in India. Sri Lankan garments giant Brandix has a factory at Visakhapatnam. MAS Holdings, which has a franchise for Victoria’s Secret, also has interests in India.
Leveraging Sri Lankans’ long experience in the hotel industry and a natural talent for hospitality, Aitken Spence runs the Poovar Island resort in Kerala. The resort offers floating cottages on the picturesque backwaters of the southern state.
Apart from investments, India has given credit lines totalling $281 million for imports of essentials and consultancy services. Another $100 million is on offer for the rehabilitation of the southern railway corridor.
The two countries are on the verge of signing a Comprehensive Economic Partnership Agreement (CEPA) though Sri Lankans continue to be wary about the influx of Indian professionals.
Although bilateral investments have been growing, there are hurdles on both sides. If high costs and political and security uncertainties in Sri Lanka deter Indians, Sri Lankans face non-tariff barriers and delaying tactics in India.
But experts say that increasing liberalization in the years to come will trigger changes for the better.