September 29, 2020
I’m pleased to be here and have a chance to see people in person as opposed to virtually which was our fashion for so long.
I want to thank Presantha and the rest of the board, and of course Vrai and the team at the American Chamber for inviting me this evening and for the close collaboration throughout the year. We’re appreciative of that. I knew that a new board is going to be officially selected momentarily, but I’ll offer early congratulations to those that will be taking seats. And in that vein, I also would like to thank outgoing members for their service and offer a warm welcome to new members.
I know that our U.S. Embassy board representative, Economic Chief Susan Walker — she’s not here this evening, but is known to many of you — really looks forward to working with the board and with AmCham’s members and the AmCham Director in the coming year, the boards and the Chambers priorities and a host of other issues as do I. I think it goes without saying that this is a very important connection for the U.S. Embassy here, the business community. We want to maintain that relationship.
I think most of you would not be in the American Chamber if you didn’t have some sort of business linkage, probably to the United States. You might have personal connections, maybe through friends you’ve made or time you spent in the United States or children in pursuit of an education in the U.S. Thinking about these connections led me toward what I wanted to say tonight. I want to offer a couple of observations about how both of our countries are weathering the economic storm of COVID and more importantly, how we can work together going forward.
I want to start with what’s happening in the United States. A lot of news there. I know it might impact your bottom line as well. Then I’ll finish with some of our efforts to grow the Sri Lankan economy and some observations on some of the things that we’ve been working on together.
Private sector led growth remains a very important feature of our policy globally but here in Sri Lanka as well, and we continue to believe that the future is going to be generated by the private sector — generating jobs, generating new industry, bringing innovation, whether that’s in the form of technology or in some other space. We think that that’s what is going to lead a kind of post-COVID resurgence, if you will. And we want to be working with you, with the AmCham, with others to expand access to the U.S. market, to invite your investments in the United States, to look at how to gain competitive advantage through financing or preferences, and to take advantage of the changing priorities that are out there.
I never want to say that in a tragedy like a global pandemic there is opportunity, but there is certainly a moment where things are changing, and that means an opportunity to adjust. If nothing else, then that might turn out to be a good adjustment at the end of the day.
So, what’s happening in the United States? As you know, COVID has been a challenge there as in many places. Our federal structure in the United States really gives a lot of leeway to local governments to form their own policies. Different states in the United States, different municipalities handle public health issues a little bit differently. It’s a free society. We also do not censor the media or limit what people can post online. It may be a little confusing because the COVID response there of course has happened without any filter to the rest of the world. And of course, it is a challenge that we’re working to address. With a population of 330 million people, it’s having certainly a sizeable impact but one that we can work through.
We’re also, I think, proud of the freedom of expression, the ability to convey what’s happening either at the citizen level through social media, the newspapers. But just like I say here, I wouldn’t believe everything you read in the press. Sorry to our members of the fourth estate who may be present tonight.
COVID definitely has posed some challenges in terms of shutdowns, which have differed from location to location, and of course in terms of the people who become victims of this virus. But the U.S. is still open to business. We’re eager to receive investments. We’re still buying, we’re still selling, and even though Sri Lankan exports declined to the U.S. earlier this year, the recovery has been strong and we’re looking forward to continuing to expand the relationship.
In that sense our focus really has not shifted at all. We want to be promoting Indo-Pacific business opportunities. I think Susan, in fact, has already shared with some of you that very shortly the United States along with the Vietnam Chamber of Commerce and Industry will be hosting the third Indo-Pacific Business Forum. It will take place in Hanoi, October 28 through 29. The forum will be virtual this year. Its purpose is to promote trade, investment and economic cooperation between the United States and partners throughout the Indo-Pacific region. So, this year’s virtual event is going to bring together government representatives and business leaders and will feature the latest business environment developments for key sectors including energy, infrastructure, digital economy and health care along with new opportunities for expanded public/private partnership. I hope many of you will find it useful to attend this virtual forum. You can sign up for the sessions that interest you. That’s the benefit of a virtual meeting, you really never need to leave your desk or your armchair and have an opportunity to engage. I understand that the format has been set up in such a way that there are opportunities to chat with other businesses and to network through the event.
In support of our inclusive economic growth in the Indo-Pacific region, the U.S. Congress has also put some effort behind our initiatives. They are certainly pouring funds back into the U.S. economy, helping support efforts like this forum, helping support people back in the United States through social services, loans to businesses or other measures, so I anticipate that the economy just like in Sri Lanka is going to recover in due course.
And of course, all Americans are going to be turning their attention to our own elections that are coming up. In the United States we have elections coming up November 3. Unlike in Sri Lanka we want a simultaneous election. So, all of the offices that are coming up for election will be on a single ballot on November 3, such as presidential candidates, governors of states, members of Congress, or local municipal leaders. Each ballot is different by location. Again, we don’t do this on a nationwide basis, it’s done state by state.
Everybody will be watching very closely to see what happens, for the outcome of, course, this special year with the presidential contest. I can’t tell you what will happen. I’ll have to talk to you after the third. But I anticipate that our interest in the Indo-Pacific region is going to remain strong. That has continued through administrations and we’re certainly going to continue to look forward to work with businesses here and in other places.
Sri Lanka, now post-election. With COVID well managed. And congratulations to the government for having done that so successfully. I know we would not be sitting here right now largely unmasked and rather close together, even though I know we’ve been warned not to do this, so at your own risk, but we certainly wouldn’t be doing this if we hadn’t had such good results here. That of course bodes well for the economy, although there are constraints. This has a global impact.
It is a moment certainly to reenergize the economy and think about best ways forward. President Rajapaksa said in his UN speech that Sri Lanka has committed to the 2030 agenda of sustainable development. He said poverty alleviation through an agri-based production economy is a major goal of the government. I know through numerous discussions with the current team in government that economic growth and development are indeed a priority, as I’m sure you know too.
I do want to share a little bit on how we’ve been working with AmCham to support these goals and with other businesses. We continue to believe that, again, a private sector-led approach is going to be really essential. We need the finances that come with the private sector and I would argue, also, the innovation and flexibility that come with the private sector.
Even with new economic possibilities opening up, I think you would also agree that there remain some structural issues that the government does need to address here in order to attract more investment, and domestic investment as well. Not just FDI but domestic as well.
In my opinion, there are some big issues there and I know there are some solutions and policies that have been proposed, and I certainly want to encourage some resolutions. The high foreign investment levels are obviously a challenge going forward. Low projected growth, that’s going to be a challenge. And maybe just a reflection of more of what’s going on. Of course, the revenue losses due to essentially almost closure of the tourism sector and the tax cuts that remain, not in anticipation of course, of the pandemic and the impact of the economy.
That means there’s a lot less with which the government, I think, has to work. Another reason why courting private sustainable high-quality investment has got to be a priority. There’s just not enough resources out there.
I do applaud the effort to put in some business-friendly policies to promote economic growth. We’ve seen some movement on that front.
The World Bank Ease of Doing Business ranking currently puts Sri Lanka in the 99th position. That’s out of 190 countries assessed. And I know there’s a concerted effort to improve that ranking and I’m excited to see when the new rankings come out if there’s any movement. A year from now, I’ll probably be even more excited after some changes and efforts have had a chance to take impact.
Right now, Sri Lanka’s in the middle of the pack, but I believe that the country can move up in the ranking. This ambition is not a crazy one. It’s actually achievable, realistic.
What are some of the things that can be done? I hope I’m reflecting some of the thoughts that you’ve also had about how ease of doing business could be improved. They would revolve around improving contract enforcement and I’ve had conversations with Justice Minister and others around attention to that, and he has it on his agenda. Stabilizing tax policy I think would be very helpful, particularly for foreign investors but for domestic investors as well. There have been wide swings over the last couple of years that have really impacted the bottom line and made it very difficult to put products out in a way that are affordable to the consumer.
Simplifying the registration of property would be another issue, or even just obtaining property through appropriate means, to establish production facilities or whatever it is that needs to be done.
Improving access to credit I think is also important. I think for most of the big companies that’s usually less of an issue, but for the small and medium enterprises that’s definitely more challenging.
These are just some of the issues that are out there upon around which I regularly have conversations with the government. I think if there’s focus and political will, there can be improvements in this space, facilitations can be implemented, and the ease of doing business is going to get a lot better.
We’re not just sitting by and criticizing and watching these efforts to improve the business environment from the sideline. We try and put our money where our mouth is and not only talk about it but work closely with institutions that can facilitate. We do work closely with the Board of Investment, supporting U.S. companies already operating in Sri Lanka as well as those looking to invest. And there are investors interested. Attracting FDI is already part of the strategy. Obviously, they want to diversify Sri Lanka’s exports, grow the economy. So, I think we’re pushing on an open door, but it would be great to see some results from the Board’s commitment to problem solving. They have been taking a hard look at what’s working, what’s not, and to finding solutions and there is a lot to offer here.
If I were an investor looking, certainly the strategic location of Sri Lanka, along international shipping routes, looking at a talented labor force, a strong tradition of quality exports, free trade agreement, one of the world’s largest markets: These are all great selling points.
These assets aren’t going to mean much though if Sri Lanka’s investment rivals have fewer barriers to investment. I know the Board recognizes it, so I look forward to collaborating there. In a way there is a little bit of a race against the clock to make sure that business can be attracted and some of these challenges can be overcome in time to land that investment here.
I think investor friendliness can also be further improved by genuinely welcoming investors from around the world. That means pulling some deals across the line from a whole variety of countries and companies and probably sectors. Actions in this regard have been really important in showing that there’s a level business playing field and that in its fierce competition for dollars, Sri Lanka’s the right place to put the money.
According to the United Nations, global direct foreign investment is expected to decline by 40 percent this year. Forty percent. That’s huge. I actually don’t know what the total volume is but I’m imagining trillions and trillions and trillions of dollars. That’s going to be a lot. So, it’s going to be a very competitive environment and selling Sri Lanka as a smart investment destination is going to take a combined effort.
I noted earlier that foreign investment, of course, is not the only source of investment. Some of the investors don’t need to arrive, they’re already here. Many of them might even be you. And domestic investment really is important I think to ensuring a robust economy. And the FDI of course helps with technology transfer and job creation, access to international markets and financing.
A Brookings study found that for every dollar of FDI in the country there’s usually an equal domestic investment. So it’s a multiplier. And I probably again don’t need to tell this to you, domestic investment obviously brings jobs even if it’s on a smaller scale than some of the lager multinational investments. Sri Lanka’s investment in the future is really going to matter. And I think again, there’s no shortage of innovation and forward-looking Sri Lankan businesses.
I’ve had a chance to visit some of the best innovators in Sri Lanka. I’m looking for the opportunity to visit more. I was just over at MAS visiting their Innovation Center last week which is very impressive. I spent a lot of time talking to Coca-Cola about some of their CSR and other commitments. And I know, actually, that single use plastic recycling is a major theme now for the government. It’s something to work on there together in a public/private partnership.
I think the future is going to be really bright.
And this is a good transition to divvy into what we’re doing with AmCham. Strengthening commercial ties and a partnership between our countries is one of my top priorities. I want to be clear about that because with the jumble of things you might read in the media, quotes taken out of context, all sorts of strange things getting pushed forward, this is one of the big priorities for us. We think that there’s a lot of potential for improved inclusive economic growth in Sri Lanka, great opportunities for U.S. businesses to be part of that growth, and at the end of the day something that can work well for both of our countries and both of our peoples. And certainly, building on those strong people-to-people connections that are really growing every year.
Our partnership really is focused on increasing trade, diversifying the supply chain, growing businesses and raising awareness of U.S. support for private sector development through incentive programs.
One of these incentive programs is one I think I’ve mentioned in the past, and it’s the Generalized System of Preferences. I’ll note another new one which is our new Development Finance Corporation, some of you may have heard of that one too. I’ll come back to both.
So, COVID, again, has been a huge disruptor of our activities with the AmCham. We had a big trade show planned. At this point it should have been several months behind us, and we would all be excited about the big success. When the time is right, we’ll be able to pull that together again. It’s obviously not possible in these circumstances. We really do want to bring a business delegation to Sri Lanka, have a chance to introduce them to all of you and work on that going forward.
And in general, despite limitations, in fact, I’ve been very impressed with the Chamber and how you’ve moved on with the webinar Knowledge Hub series, and the Bounce Back initiative. These targeted specific topics. I think have been very useful. If nothing else our lockdown gave us time to ruminate and think about the future and what does everything mean. So AmCham playing a role in that I think is very useful, continuing to advance knowledge of the business climate is really key.
And I know that there does continue to be interest in maximizing trade with the U.S. You all wouldn’t be here I think if you weren’t interested in that. And of course, this is a time when companies are looking to spread their risk more global. So, the effort to make business to business connections, especially in relation to supply chain, are ones that the U.S. Embassy supports and will continue to stay engaged in.
One important piece of these efforts is a direct collaboration between USAID and the Chamber. We’ve been closely coordinating for months and we’ll host an event on October 14, I believe, to examine opportunities presented by the global supply shift as described in a recent report called the Global Supply Chain Strategy, Current Trends and Future Shifts report. So exactly as advertised.
The report was offered by USAID’s partner activity that has been helping with trade promotion and other efforts working both with the private sector and government. And the report does provide insight in the supply chain strategies of international businesses and anticipates some likely drivers of change.
I hope that this October 14 meeting is really only the beginning of the discussion and a deep dive into how to look at this shift globally and see what possibilities there might be for Sri Lanka’s business there. And frankly, for looking at other global investment opportunities as a part of that.
Another collaboration that might be of interest to you, although not directly related to the Chamber, involves one of the Chamber’s members and that is the collaboration between USAID and Stax, I see Kumudu is here tonight, and I had the pleasure of joining him, just last week I think it was, to launch this platform which is called Sri Lanka@100. Its purpose is to provide business advisory services to Sri Lanka’s mid-market sized firms, to optimize operations and access resources of capital. This is where our commitment really is, into putting resources into helping Sri Lankan businesses help themselves. We’ve had a series of programs over the last 10 or 15 years that has helped small Sri Lankan enterprises launch, some of whom are now exporters today but are big in the domestic market whether it’s a dairy or spice production. It happens to be agriculture pops to the top of my head, but there are businesses in other spaces too. But I think the Sri Lanka@100 platform is going to make a big difference for about 50 medium-sized businesses that are mature and ready to move on to the next stage.
I imagine too, as potential investors yourself, there may be an opportunity to make investments in some of these companies. And of course, there may be other opportunities one day to welcome some of these businesses into the Chamber when they reach a certain size. So again, I’m really pleased to watch that platform.
In addition to USAID’s activities the U.S. government has other incentives such as trade preferences, Generalized System of Preferences, I think we’ve mentioned. I don’t want to say too much about it other than it can be a missed opportunity for Sri Lankan businesses. 5.32 percent of the total exports to the U.S. in 2019 were under GSP, and while it seems like a small percentage, actually, access to the Preference is a marketing advantage.
What we’ve been finding is that exporters often don’t know how to initiate the Preference. It literally comes down to checking a box on a customs form and then the preferential rates are given. This can be a game changer in terms of pricing for customers in the U.S. We have done some briefings in that regard and will continue to do so if there’s interest.
Another tool that we’ve used is the Development Finance Corporation. I mentioned that. If you’d like more information Susan Walker, our Economic Chief, or Jamal Jones who’s here tonight can provide some information. We have had some members already in touch with the Development Finance Corporation. They have a portfolio cap of $60 billion globally — not just for Sri Lanka, but globally — to support private sector development. This is their mission and they are very interested in working here. They offer support through equity and debt financing, political risk insurance, technical and feasibility proposals. This is the kind of support that often can make or break a deal. There is an application process. It’s very easy. It’s all online and you can look up DFC online to read more about it. We can also supply you with more information.
But I think that this is a new opportunity to look at ways to obtain financing, particularly for projects that have an American angle, but in fact with their new authorities, DFC doesn’t actually require an American component the way the former Overseas Private Investment Corporation did.
So, a lot of talking. I know we need to get on with the program here. I just want to sum up by reiterating U.S. government and our commitment. We are applying resources to make the private sector relationship happen. We were doing so through our assistance programs, we’re doing so through our advocacy, our partnership with the Chamber and our work to apply tools like the DFC here in Sri Lanka.
We also want to continue to build these relationships and generate conclusive economic growth that protects Sri Lanka’s sovereignty and enhance the capacity of the talented people here. I didn’t even talk about some of the work that we have done to enhance the labor force. We’ve had chances to talk about that in the past. But we really believe that Sri Lankans helping Sri Lankans are the path forward.
I think there’s no doubt that a strong sovereign Sri Lanka is the best partner for the United States. I hope through your membership in the AmCham, we are also committed to maintaining and advancing these business relationships, a really vital connection between our two countries.
I hope you’re also committed to the inclusive economic growth that these relationships can engender and that some of the initiatives the Chamber and your companies have put forward also can contribute to.
Thank you very much for your time and your collaboration over the past year. I look forward to working with the AmCham in 2021 and beyond, and again well wishes to the new board and a big thanks to the outgoing members. So, thank you very much.