Amid record inflows into developing countries, Sri Lanka remains the least attractive for Foreign Direct Investments (FDI) in South Asia, judging by the UNCTAD’s World Investment Report 2005 released last week.
According to the report Sri Lanka had managed to draw US$ 233 million in FDI in 2004, higher by only US$ 4 million or a paltry 1.7% over 2003.
However FDI inflows to rest of South Asia have been booming. Inflows into the region amounted to $ 7 billion, up by 31% over 2003.
India attracted the biggest chunk of US$ 5.3 billion, up by 25% or $ 1 billion in 2004. Pakistan saw a high 78% increase ($ 418 million) to $ 952 million while Bangladesh recorded a 71% increase ($ 192 million) to $ 460 million in 2004.
Analysts said that Sri Lanka’s success in attracting FDI was dismal considering the so-called open and liberal policies it has maintained.
According to a recent World Bank survey, Sri Lanka ranked at number 75 in ease of doing business ahead of competitors such as India’s 116th and China’s 91st ranking but behind several South Asian countries such as Maldives 31, Nepal 55, Pakistan 60 and Bangladesh 65.
In the World Bank’s Ease of Doing business report it was highlighted that Sri Lanka’s rigid labor regulations and mandated high severance payments continue to represent a significant barrier to job creation.
The country is ranked 150th on “difficulty of firing.” Only in Sierra Leone are companies required to offer more severance pay to dismiss redundant workers.
Meanwhile UNCTAD said last week after three years of decline, global foreign direct investment rose slightly in 2004. The rebound was the result of increased flows to developing countries as FDI in developed countries continued to fall.
At US$ 648 billion, global FDI inflows were 2% higher than in 2003. But the global figure masks diverging trends. Flows to developing countries surged by 40% to reach US$ 233 billion - the second highest level ever recorded - while developed countries saw inflows decline by 14%, to US$ 380 billion.
“The high level of FDI to developing countries is likely to be sustained”, said Anne Miroux, head of the team that produced the UNCTAD report.
TNCs are seeking to improve their competitiveness by expanding in the fast-growing markets of emerging economies and by seeking new ways to reduce costs, she said.
This is affecting the location of even highly knowledge-intensive activities, such as research and development.
Higher prices for many commodities have further stimulated FDI in those developing countries rich in natural resources- another trend likely to continue, she added.
The top five FDI recipients among developing countries were Hong Kong, China; Brazil; Mexico; and Singapore.
Courtesy Sunday Times
According to the report Sri Lanka had managed to draw US$ 233 million in FDI in 2004, higher by only US$ 4 million or a paltry 1.7% over 2003.
However FDI inflows to rest of South Asia have been booming. Inflows into the region amounted to $ 7 billion, up by 31% over 2003.
India attracted the biggest chunk of US$ 5.3 billion, up by 25% or $ 1 billion in 2004. Pakistan saw a high 78% increase ($ 418 million) to $ 952 million while Bangladesh recorded a 71% increase ($ 192 million) to $ 460 million in 2004.
Analysts said that Sri Lanka’s success in attracting FDI was dismal considering the so-called open and liberal policies it has maintained.
According to a recent World Bank survey, Sri Lanka ranked at number 75 in ease of doing business ahead of competitors such as India’s 116th and China’s 91st ranking but behind several South Asian countries such as Maldives 31, Nepal 55, Pakistan 60 and Bangladesh 65.
In the World Bank’s Ease of Doing business report it was highlighted that Sri Lanka’s rigid labor regulations and mandated high severance payments continue to represent a significant barrier to job creation.
The country is ranked 150th on “difficulty of firing.” Only in Sierra Leone are companies required to offer more severance pay to dismiss redundant workers.
Meanwhile UNCTAD said last week after three years of decline, global foreign direct investment rose slightly in 2004. The rebound was the result of increased flows to developing countries as FDI in developed countries continued to fall.
At US$ 648 billion, global FDI inflows were 2% higher than in 2003. But the global figure masks diverging trends. Flows to developing countries surged by 40% to reach US$ 233 billion - the second highest level ever recorded - while developed countries saw inflows decline by 14%, to US$ 380 billion.
“The high level of FDI to developing countries is likely to be sustained”, said Anne Miroux, head of the team that produced the UNCTAD report.
TNCs are seeking to improve their competitiveness by expanding in the fast-growing markets of emerging economies and by seeking new ways to reduce costs, she said.
This is affecting the location of even highly knowledge-intensive activities, such as research and development.
Higher prices for many commodities have further stimulated FDI in those developing countries rich in natural resources- another trend likely to continue, she added.
The top five FDI recipients among developing countries were Hong Kong, China; Brazil; Mexico; and Singapore.
Courtesy Sunday Times
