ďWe see an upward trend in investmentĒ

The military victory over the Liberation Tigers of Tamil Eelam (LTTE) spells out not only the dawn of peace and security for the country. It also opens up many opportunities for investment, especially by foreign investors who kept away for nearly three decades because of the war. Non-Cabinet Minister for Investment Promotion, Navin Dissanayake is confident that once basic issues such as land, labour and capital are solved, and investor confidence returns, Sri Lanka can take off as a nation. But, he pointed out in an interview with The Nation, that to attract the investor, not only infrastructure facilities such as transportation, telecommunication and electricity have to be there, but also, there has to be a law protecting the investment. Talking of his political career, Minister Dissanayake affirmed that he would contest the next Parliamentary election under the Peopleís Alliance, and does not harbour any expectation to return to the United National Party (UNP), from which he defected with 18 other members a couple of years ago

Following are excerpts:

By Vindya Amaranayake
Q: Now that the war is over, are there any visible changes in the current of investment?
We see an upward trend in investment flows. Thereís a lot of interest shown, particularly by Indian and Chinese investors who see the potential in our country. This week, we have delegations from China and India visiting the Board of Investors, on the invitation of the Prime Minister. I see a lot more interest shown towards coming to Sri Lanka. Since the main problem is over now, the investors see a potential for investment in Sri Lanka. Certainly, within the next one year, I predict that the overall macro situation will change, economically. But, it doesnít happen overnight. We have been inflicted with this conflict for the last 30 years, and still there are issues that we need to sort out. Because of the military expenditure we incurred, it will take the pendulum to come to the middle. For the war, we have been borrowing domestically very heavily from the local markets, and because of that, interest rates went up. The private sector did not have any capital to borrow from the local market. The government, through Treasury Bills etc., squeezed out the money for war expenditure, that was the only source of funds. Since that phase in now over, you see the interest rates coming down, you see the stock market doing very well Ė itís coming up as an emerging market. Certainly, I feel that building blocks for development have been put in place. Although you can be critical, saying that things are not happening, things are not moving forward, it is not fair. May 19 was the day the war was finished. We are now into August, and in two months you cannot expect miracles. But certainly, I see a keener interest among people who kept away from Sri Lanka, to come back and, at least, explore the possibilities of investing through the BoI.

Q: What are the new avenues of investment that can be explored, now that the war factor is behind us?
We are looking at the Eastern and Northern Provinces (NP) as the areas. We are developing Mannar as a strategic town, economically, and Trincomalee as a tourist destination. We are already in the process of zoning the Trinco Town. We have identified 30 plus beachfront properties for development, and the BoI is trying to attract investors into that area. The infrastructure development is already taking place in these areas Ė road, electricity, telecommunication, all these are developing at a very rapid pace. So, the next frontier for Sri Lanka will be the Northern and Eastern Provinces (EP), and I think this is where the investors would also want to go. The major problem we have now is transportation; we need to have a high speed rail link or road that would take the investors there. I feel that these are the two areas that the government will concentrate on. As far as the Western Province (WP) is concerned, it is still the major area. As you know, half the GDP is coming from the WP. So we need to develop strategies to get investors out of the WP to the rural areas. That we do through the ĎNipeyum Sri Lankaí programme Ė the 300 factories programme Ė where the BoI is giving concessions to companies to go out of the WP. So, I think, once business confidence and investor confidence comes in, and with this free economy that we have, we can really take off as a nation.

Q: When it comes to the Northern Province, a lot of de-mining activities have to be done. Will not this come in the way of devising rapid development strategies?
The de-mining activities in the NP will take about eight-months to a year to be completed. Meantime, we can put the regulatory framework in place. We can certainly identify the areas and the key sectors that we want to develop. All the background work can be done. And that is what is happening now. So, once the de-mining is finished, we can accelerate the development in that area. Just because thereís de-mining, it doesnít mean the other work has to stop. For example, projects need feasibility studies, land issues have to be sorted out, all that should not wait until de-mining is over. It has to be a parallel strategy, where we get the investors, identify the land, see what the shortcomings are, see if thereís a power shortage etc. We are now doing a massive power upgrade in Jaffna. Then, thereís a plan to develop the Kankesanthurai cement factory. So, like that, it will be a very strategically focussed effort. And I think all the key stakeholders have to be consulted on that. So, especially if the private sector is planning to go to the NP and EP, that level of comfort has to be there Ė that, when they go there, their investment has to be secure. Certainly, where the EP is concerned I donít see any problems, because companies such as Prima and Mitsui have been there for the last 20 years, despite the LTTE being there. So, for the EP you have to have your strategy right. You cannot have very heavy, polluting industries there. Those investments that go there must be environmentally friendly. It is a really beautiful area and we have to follow the environmental trends in the world as well. And if youíre going to get high value added tourists to come, you must pitch the EP as a high value added destination. You must encourage hotels to come up that would charge about US$ 500 per night. For the EP we must have that kind of upmarket strategy. So, that is the vision of the government to do that.

Q: Vasudeva Nanayakkara is preparing to file FR applications against some of the big investments made by several companies. And then, there are the Supreme Court judgments made with regard to Waters Edge and Sri Lanka Insurance Corporation. Arenít these types of activities discouraging investment in Sri Lanka?
I think, in a free country, where individuals can go to courts and take up legal issues against privatisation deals and the way they have been done, is acceptable. Itís not only Sri Lanka, it has happened in other countries as well. When it comes to those two particular instances, those orders were given because there has been a lack of transparency and a lack of following regulations. But that does not mean that other privatisation deals have been challenged. I think itís very important to get the balance. Individuals have the right to go to courts and see what the issues were, and if they feel some wrongdoing has happened, they must expose that. But the companies that have followed procedure and are transparent, they have nothing to worry. Itís only because of some issue that had happened, and that they did not follow procedure, these things happen. For example, Waters Edge land is actually a flood retention land. The issue is do you build a golf course on flood retention land? Similarly, there are some other issues involving that deal. Also, in the SLIC deal, it was found out that there were several discrepancies in the process of privatisation. That is very good, because for a democratic country, people must have that right. SLIC was a public institution. It was maintained by public funds. It was built up through government expenditure. When you have so much government investment in a public institution, when privatising it, the public must get a fair share of it. Because it was not done properly, the Supreme Court gave that judgment. That does not mean the investors should get scared of coming to Sri Lanka, because, if they follow the correct procedure, then they have nothing to worry about.

Q: What are your achievements since you took over the ministry?
Well, I have been concentrating on the 300 factories programme. We are doing that in a very steady way. Iím very happy about the progress we have made, taking these factories to the villages. As far as investment process is concerned, last year and this year was unproductive in the sense that, although we have made a pitch for investors to come in, because of the negative publicity weíve had, it has been a difficult task. But I can tell you that, with my interactions with certain Indian and Chinese companies, they are very interested in coming to Sri Lanka. So, we have really laid the foundation. Over the next year, we can see a lot of investments coming in.

Q: The global recession is not fully over yet. Will not this affect foreign investment into Sri Lanka?
Well, if you look at the West European countries, they have not really looked at Sri Lanka as an area for investment, may be for various reasons. Maybe they saw the war in a different context, than how we saw it. But Iím very bullish on India and China. If you look at Chinaís growth, it doesnít seem to have been affected by the global recession. Thereís I think is a quarter to quarter growth of 13%. China has so much of cash, they donít know what to do with it. So is India. If you can get a few strategic investments coming in here, for example, we are having two power projects coming up in Trinco. If you concentrate on India, China and Japan, these three countries are enough for us to sustain our investment flows. Thatís my thinking. When you look at the Western companies, they are really hit by the recession. They are battling with liquidity issues. Their balance sheets do not provide them with enough cash to invest outside. But these three countries, maybe with the exception of Japan, we can a get a lot of investment from them. But, we also must get our act together. We must now come up with a political solution. This cannot be a hangover for us. Just because we got over the military phase, we must not think that the problem is finished. Also, there has to be an investment protection law that guarantees the security of investors when they come here. Then, sometimes investors want lands in extent to 1,000-2,000 acres. Sometimes, the government is not forthcoming in giving it to them, for whatever reasons. But if you are going to develop Sri Lanka, once the diligence test and compliance is done, and if you feel that the company is genuine, and its background is good, I donít see any reason why we should not give the land to them. But a certain Socialist outlook is that if you give lands, you are exploiting. That word exploitation always comes up. But in a liberal economy, itís always give and take. So, Sri Lankaís economic model should be very liberal. That is, private sector companies should have the facilities, capital, labour, land and cheap electricity to set up factories and start production. Thatís the only way you can up productivity. We havenít got the capital base to make these investments. Then, we must get foreign investments coming in. To do that, we must have these factors in place. Together with that, we need to have a macro policy of having a very clean environment. Although we have a 6-7% growth rate, we havenít achieved the potential we have. I think our potential to develop this country will be 10% growth for 10 years. Then we can certainly rise up to be a middle income country. We are getting about US$ 2,000 per head now. We can easily target US$ 5,000-6,000 per capita income level. And if you can get that 10-10 equation going, you can do that.

Q: Is there a possibility of you joining the SLFP?
Iím already an organiser of the Peopleís Alliance (PA). I will be contesting under the PA ticket. I will be appointed the SLFP organiser in Nuwara Eliya. I donít see any problem with that. Although my background is as a UNPer, all of us who joined the government, will have to secure our political futures. There are two bases in the country; one is the UNP and the other is the SLFP. You have to belong to either one of these bases. Otherwise you are just going to be in limbo. Certainly, if Iím going to contest, I will need that SLFP support base to get into Parliament. There are two options; either I contest from the UNP, or the PA. Right now, my commitment is, because Iím with the President, to contest from the PA. This is what all those who joined the government will do. There are about 25 MPs who have joined the government. And more will be joining. They will all be contesting under the PA symbol.

Q: How do you assess the crisis within the UNP?
Well, I cannot really comment on it, because Iím not really in the nitty-gritty of the UNP thinking. My thinking is that this is a perpetual crisis. Itís a crisis that never ends. Itís always there. There has to be major structural changes within the UNP for the crisis to finish. Thereís a large number of MPs unhappy about what is happening. For a political party not to come to power for such a long time is like being a fish out of water. Without the water, the fish dies. So, this is how I see a political party; without power, the political party will just stagnate. Itíll just be in the wilderness. So, that is what is happening to the UNP right now. Given the election flows in this country, once you secure one election, for example, if the President secures the presidential election, then the general election is also yours. You cannot expect the President to win the presidential election and then lose the parliamentary election. That wonít happen. Once the presidential election is won, then the UNPís vote base will further come down in the parliamentary election. This is how J.R. Jayewardene made the Constitution. He really made the Constitution for the UNP to be in power indefinitely. Now what has happened is, because of so many factors, the UNP lost power and hasnít been able to regain itself. It has not been able to position itself as a people-friendly party. If you look at the election results, you can only see the UNP doing well in the urban areas; in Colombo, Kandy. But when it comes to the villages, itís a different story. The UNP Working Committee and the Politburo has to discuss this so called crisis within the UNP and come to a decision. It requires some honest thinking. When I was in the UNP, I always said that we need to look at the reality. When we are getting 3.5 million votes, we cannot say we will get 4.5 million votes. When we are losing elections, we cannot say we can easily win the next election. Itís a trend. The UNP has been losing so many elections, when is it going to win an election? The UNPís strength will return when it wins an election. Like when the PA won the Southern Provincial Council election in 1994. It started a trend. When is the trend going to come for the UNP? I donít see that trend happening.

Q: If thereís going to be a leadership change, and a structural change within the UNP, will you consider re-joining the party?
Not really. When I was young, I was an idealist. I used to always think about the long-term. Not any more. After doing politics for 10-15 years, I have come to the realisation that in Sri Lanka you cannot have long-term ideals. Itís a day-to-day process. Itís a grinding process. In cricket parlance, I would say, ĎI will bat the way the ball comes.í People like my father [Gamini Dissanayake] and Lalith [Athulathmudali], they had many ambitions and plans. But, external factors beyond their control, somehow controlled Sri Lankan politics. If you take President Mahinda Rajapaksa, six years ago, if you asked the people whether he would become the President, not many people would have said yes. But today, he is the most popular President ever. That is Sri Lankan politics. It can change in 20 hours. I think, for myself, being a thinking politician, I cannot fit into the current level of UNP leadershipís thinking. They are not doing the obvious things the party should be doing. Whether the leadership change happens or not, I donít know, Iím not a soothsayer, but I feel that even if there is a leadership change now, it is very difficult to revive the party right now. Thatís why we said in 2005, that this structural change should happen. A lot of people within the party said, ďletís have these changesĒ. The party is now facing the consequences of not making those changes. If thereís a wound in your hand, you must first understand thereís a wound in your hand. Then take medication for it. Keep saying that thereís no wound and Iím not bleeding is not going to change the situation. Thatís what has really happened to the UNP; not understanding the reality of Sri Lankan politics, and not changing their methodology accordingly, has really perpetuated and accelerated the crisis within the UNP.