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Sri Lanka must act against corrupt government officials and businessmen and ensure local firms play fair with foreign companies if it wants to attract investors, the American envoy to the island has said.
It needs to unshackle the media, be more open to trade and better protect intellectual property rights to use the opportunity for economic growth provided by the end of the ethnic war, said US ambassador Patricia Butenis.
“It is time for public money to stop lining the pockets of the rich and powerful in both government and private sector,” she declared in a recent speech before the American Chamber of Commerce, Sri Lanka.
“To maximize international investment and economic development, it’s time for a call for a ‘war on corruption’. Laws need to be strengthened. And people need to expect and demand their public servants and private companies to uphold those laws.”
Perceptions were important in trying to woo foreign investors and transparency is an important requirement, Butenis said.
Butenis said the government is doing a good job in modernising infrastructure but needs to work on what she called the ‘software’ issues like transparency, government efficiency, protection of intellectual property rights, and openness to trade to make the economy efficient.
“What we want, and what AmCham wants, is to be able to tell our investors and our traders in the United States that Sri Lanka is a good place to do business – and we must be able to say so with confidence,” she said.
“People know that when they work with an AmCham business, it’s strictly business – with no funny business going on.”
Foreign investors will come to Sri Lanka to “kick the tires of the car” and won’t invest unless the conditions are right, Butenis warned.
She asked the American Chamber of Commerce to play a major part in encouraging ethical business practices among the business community in Sri Lanka, noting that American companies are governed by the foreign corrupt practices act.
“I hope you will encourage similar safeguards in Sri Lanka to ensure a free and open trade and investment environment in the country,” she said.
“Corruption is bad for business, and it is bad for the country. It slows economic growth, hinders development, repels investment, damages societies, and eats into the GDP.
“It is estimated that corruption costs up to two percent of GDP, and this issue needs to be urgently addressed if Sri Lanka’s growth potential is to be realized,” Butenis said.
“The lack of transparency and accountability in government procurement is depriving the country of choosing the best technology, products and services, all of which would boost growth and encourage investment.”
Butenis also said foreign investors will be deterred if they find Sri Lankan businessmen cheat their foreign partners.
“Another stumbling block is making sure that contracts must be honoured in total,” Butenis said.
“I won’t go into names, but there are several cases where US companies are working to ensure full compliance with valid contracts.
“I would like to emphasize that parties must abide by agreements with foreign companies who invest in Sri Lanka. Sri Lanka cannot expect to attract new foreign direct investment, unless the foreign companies already here are dealt with fairly.”
Intellectual property rights is another important issue with Sri Lanka having the highest rate of software piracy in South Asia as an estimated 90 percent of the software used in the island is pirated.
“Foreign companies are less likely to invest here if they worry that their technology might be ripped off, or that people will pirate it,” Butenis said.
Sri Lanka already has laws protecting intellectual property but a great deal needs to be done to ensure implementation.
“And the first place to start is with the government itself – having a government-wide procurement policy and ensuring that all of the government’s software is legally registered,” Butenis said.
American business was ready to invest in Sri Lanka to support economic revitalization and national reconciliation as shown by the visit to Colombo of executives from over 40 US firms during trade talks between the two countries a few weeks ago.
“The next big thing is to ensure lasting political reconciliation,” Butenis said.
“Only by solving the political situation in the long term can we be certain that investments will be secure, so US investors are also eager to see a political solution which empowers all Sri Lankans.”