The Central Bank of Sri Lanka has acknowledged that the government’s decision to suspend and review the Colombo Port City project last year, had adversely affected Foreign Direct Investment (FDI) inflows in 2015, amongst several other reasons. According to the Bank’s 2015 Annual Report, total FDI inflows, which include foreign borrowings of Board of Investment (BOI) companies, reduced significantly from US$ 1.64 billion in 2014 to US$ 1.16 billion in 2015 while the FDI, excluding foreign loans to BOI companies, fell from US$ 894 million to US$ 681 million in 2015.
“The decline in FDIs in 2015 can be attributed to several reasons. Firstly, two national elections held during the year prompted investors to adopt a wait and see approach until the political environment stabilises. Secondly, with the possibility of the rate hike by the Federal Reserve of the US, many investors were reluctant to invest in emerging markets in the backdrop of continuous outflows, particularly from securities markets of emerging economies. Thirdly, the suspension of the Colombo Port City project due to the government’s decision to review the project, also adversely affected FDI inflows during the year,” the Report pointed out.
It noted that of the FDI inflows in 2015 were channeled largely to projects related to property development, tourism, and telecommunications sectors.
“Accordingly, property development, tourism and telecommunication projects accounted for 22 per cent, 19 per cent and 14 per cent of the total FDI inflows, respectively,” the Annual Report pointed out.