Investments: With or without the BOI

"In the final analysis – BOI or no BOI, any institution should steer clear of politics. Racing to develop, attract investments, do away with rules and regulations for the ‘greater good of the country’ is not the right path to growth and would be disastrous on the long term."

by FS

(September 29, Colombo, Sri Lanka Guardian) The Government should be applauded for taking the bold step of scrapping the Board of Investment (BOI) and replacing it with a new institution with wider powers.

Over the years the BOI has had varied levels of competence but in recent years bureaucracy and red tape as a Business Times poll showed this week has been killing the goose with the golden egg. Not really anyway, as the BOI itself has struggled to revive flagging investment interest during nearly 30 years of conflict.
Now that the conflict is over, the government – particularly the Rajapaksa clan (who else is running this country when the President and his brothers control all the important portfolios) – believe that a more powerful body with wider powers and better efficiency needs to be created since the BOI under its current structure won’t be able to effectively tap into the enormous investment interest expected in post-war Sri Lanka.

The BT poll reveals the need for a new organization to replace the BOI and this is one of the few occasions when respondents to our polls have shown support to a government-initiated move. The recent case of a Swedish hotel investor who waited for years to get all approvals is a case in point of lack of coordination between the BOI and other agencies, though the BOI’s mandate is a one-stop shop intended to clear all bottlenecks for investors.

While the modalities of the new institution are yet to be worked, one reservation expressed, and rightly so, in the poll is whether this investment unit would be tightly controlled by the President and his brothers rather than allow professional management to run it. “Will it again be politicized?” asked one respondent.

Whether or not it’s for the benefit of institutions concerned, the hand of the Rajapaksas’ is all over the economy, controlling and driving the country’s economic, political and social agenda. This was clearly seen in the recent amendments to the Constitution where even before the President could start his second term, there was pressure on parliament to formulate laws to allow unlimited elected terms for an incumbent or former president and also sweeping powers to the president to appoint key persons including the judges.

Earlier the Urban Development Authority (UDA) was brought under the Defence Ministry, two institutions which are as different as chalk and cheese. The role of the Defence Ministry is to protect the nation and the UDA to develop the nation and infrastructure – nothing in common. However urban development would now be with military precision, discipline and no-nonsense, clearly evident the way settlers at Slave Island were un-ceremonially ejected from their homes in the name of development.

Beggars are being chased away and various parts of the city cleared for development in a move using the government’s military might. Whether this is the right way to do things and ignore local government rules and guidelines is not good for governance. However the message here is that bureaucracy and red tape have always been a deterrent to growth and using brute force to develop the country justifies the means to a ‘successful’ end.

The next step in this steamroller route to development is the replacement of the Colombo Municipality with a new authority – again aimed at increasing efficiency and speeding up approvals and other public needs. Quite a few residents in Colombo are in favour of the move given the inefficiency not only of this council but all local bodies across the land. However circumventing rules and regulations that have also been time-tested and ensures good governance and transparency, however much there are delays, is not the right way to go.
This institution can also end up as a politicized body amidst speedier work. The BOI is an offshoot of the Greater Colombo Economic Commission (GCEC) created by then President J.R. Jayewardene to fast-track foreign investment through a special investment zone (the FTZ or EPZ) in 1978. Dynamic entrepreneur Upali Wijewardene was brought in to steer it and it fulfilled its role in the initial years until the conflict slammed the doors on any key investment coming in. Several other zones were set up subsequently with more and more tax incentives offered to entice hesitant investors.


Dr. Indrajit Coomaraswamy, a former Treasury official, also believes the BOI needs to be restructured as it still prevails as the old model of investment promotion. He said a more vibrant investment promotion agency is essential for the country recovering from a war and rushing to draw investors. BOI Chairman Jayampathi Bandaranayake is a capable private sector professional and one hopes that he would be installed as the head of the new investment promotion unit once established. However even the best professionals are known to bend under political pressure and it remains to be seen whether the BOI chief - in his present post or potential, future position – would be able to resist political maneuvering. Very unlikely indeed given past experience.

In the final analysis – BOI or no BOI, any institution should steer clear of politics. Racing to develop, attract investments, do away with rules and regulations for the ‘greater good of the country’ is not the right path to growth and would be disastrous on the long term. Take the example of President Ranasinghe Premadasa who took many short cuts to develop the public service and created a super-bureaucrat R. Paskaralingam. The moment the duo –Premadasa and Paski – were out of the way, the system buckled and collapsed. Lessons we need to learn but never seem to do so.