Sri Lanka urged to prioritize quality over expanding investment zones
By: Staff Writer
July 26, Colombo (LNW): The Verité Research Economic Policy Group has raised concerns about the expansion of investment zones proposed under the Economic Transformation Bill (ETB) in Sri Lanka.
They argue that enhancing the quality of these zones, rather than increasing their number, is key to boosting the country’s competitiveness. In their recent research note, they suggest three strategies for improving investment zones:
Legislative Framework: Implement dedicated, overarching legislation for governing investment zones. This approach, used by other countries, ensures clarity, consistency, and transparency in investment rules.
Quality Standards: Improve zone quality by setting minimum standards and criteria for selecting investors to develop and manage these zones.
Private Sector Involvement: Encourage private sector participation by clearly separating the roles of regulators, developers, and operators, creating a level playing field. Private sector-managed zones have often outperformed public ones in terms of economic yield, market access, and amenities.
These recommendations address three main issues hindering Sri Lanka’s progress compared to regional peers:Under-Investment: Both the quantity and quality of zones have been insufficient.
The country has relied exclusively on the public sector for building and managing zones.: There is a lack of a proper regulatory framework to attract private investment and improve zone performance.
The note underscores the necessity of a stronger regulatory framework than what is proposed in the ETB, which was gazetted on 14 May and will be discussed in Parliament on 25 July. Given the scarcity of land and intense competition for foreign investments in Asia, Sri Lanka needs to adopt quality improvement measures to enhance its competitiveness.
The Verité Research Economic Policy Group has reiterated that Sri Lanka needs to prioritize quality over quantity regarding investment zones, which are set to expand under the Economic Transformation Bill (ETB).
They argue that merely increasing the number of investment zones will not solve the country’s competitiveness issues. Instead, improving the quality of zones to overcome current constraints and encouraging private sector initiatives is the path to attracting investment.
Their recommendations for improving investment zones include enacting separate, overarching legislation to govern zones, enhancing the quality of zones by mandating minimum standards, and encouraging private sector participation by separating the roles and responsibilities of regulators, developers, and operators.
In contexts where the private sector manages investment zones, these zones have typically outperformed their public counterparts in terms of economic yield, market access, and quality of amenities.
The research note addresses three critical problems that have hindered Sri Lanka’s progress compared to regional peers.
First, there has been under-investment in both the quantity and quality of zones. Second, the country has exclusively depended on the public sector to build and manage zones.
Third, there is a lack of an appropriate regulatory framework to attract private sector investment and enhance the quality and performance of zones.The note emphasizes that a more robust regulatory framework than what is proposed in the ETB is necessary due to the scarcity of land and intense competition for foreign investments in Asia. The ETB was gazetted on 14 May and is expected to be discussed in Parliament on 25 July.
