While Sri Lanka makes much of a ‘post-conflict economy’ foreign direct investment actually fell in the first six months of 2010 compared with the same period last year, the Central Bank reported in August.
FDI dropped to $208 million, compared to $250 million in the first half of 2009, logged amid the final stages of the war, Reuters reported.
And the reason? Uncertainty and government policies.
"War was only part of a problem. Uncertainties are still there, and the economic policies are not favourable to foreign investments," said Sirimal Abeyratne, a senior economics lecturer at the University of Colombo.
"(Foreigners) are not certain about the macro economy in the long run. The reform process has not yet started, and the government policy document itself is against foreign investments, blaming the open economic policies," he told Reuters.
Interestingly, according to HSBC Private Bank Managing Director Arjun Mahendran, telecommunications, not manufacturing, accounted for most of the surge in FDI in 2005-2008.
Mr. Mahendran speculated that manufacturing FDI is on a downswing because of Sri Lanka’s over-reliance on textiles, The Island reported.
According to provisional government figures on FDI quoted by Reuters, $124 million was invested in infrastructure sectors, $56 million in manufacturing, $26 million in agriculture, and $2 million in the service sector, including tourism.
Meanwhile, Indian mobile operator Bharti Airtel’s Sri Lanka arm recently announced it had completed expanding its coverage in the Tamil areas.
Indicating full availability of services in Jaffna, Vavuniya and Mannar, the mobile operator said expansion of its network's meant that it had achieved island-wide coverage in just two years. However, this was at a cost to its 5-year investment pledge: the $200 million has been spent in the last two years.
