China becomes Sri Lanka's largest source of FDI in 2013

COLOMBO -- China has emerged as Sri Lanka's largest foreign direct investor accounting for 24 percent of the inflows for 2013, an official said here on Tuesday.

Sri Lanka's government has set a target of $2 billion in foreign direct investment (FDI) for 2013 and as of November had achieved $1.2 billion.

Investment Promotion Minister Lakshman Yapa Abeywardene told media that companies from China accounted for the largest amount of FDI into the country followed by Hong Kong with 12 percent.

Singapore came third in line with 10 percent while the Netherlands and Malaysia rounded out the top five.

"We are very satisfied with the FDI progress this year. Last year FDI was $1.2 billion. We have already matched this amount and are confident of exceeding it by December. This year FDI created 10,000 additional jobs in Sri Lanka," he said.

Thirty one percent of the FDI was for manufacturing with 19 percent for port terminals and 17 percent for telecommunications. Property development received 13 percent of the investment while hotels and restaurants grabbed 6 percent.

In contrast, agriculture, IT and business process outsourcing industries only got 1 percent each of FDI.

"In 2013 the state-run Board of Investment approved 118 FDI projects with a combined value of $1.9 billion. Of these 105 projects have had their agreements signed while 55 have begun implementation," he added.

China and Sri Lanka exchanged 15 delegations during 2013 and the minister expressed confidence that the relationship between the two countries would continue to grow.

Over 100 Chinese delegates participated in the Commonwealth Business Forum held last month on the sidelines of the Commonwealth Heads of Government Meeting, where deals amounting to over $1.5 billion were signed with Chinese companies.

Among them, the China Harbor Engineering Corporation signed a $640 million deal to build two hotels and a golf course in Sri Lanka, while the China Communications Construction Company signed preliminary agreements to build a port city redefining the shoreline of capital Colombo with an investment of $1.3 billion.

The Hong Kong-based AVIC International Engineering will build a mixed development project worth $259 million.

Since Sri Lanka ended a 30-year war in 2009, China has emerged at the island nation's largest loan provider with $1.2 billion in loans in 2009 and $821 million in 2010.

In 2011 the amount fell to $784.7 million but China remains involved in almost all the large-scale projects taking place, according to the Finance Ministry.

Some of the biggest projects include a $1.3 billion coal power plant on the northwestern shore and a host of other investments in the south of the country that are estimated to exceed $4 billion, including a $1.2 billion harbor.

Railways, highways, airports and more are all part of this development push that has been actively pursued by President Mahinda Rajapaksa's government with support from China.