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Sri Lanka needs Foreign Direct Investment: Dr. Karunasena Kodituwakku

Sri Lanka needs Foreign Direct Investment: Dr. Karunasena Kodituwakku

The second Sri Lanka investment summit in Asia, first ever in Hong Kong was held on March 16 at the Ritz-Carlton Hotel,

Kowloon, Hong Kong with the participation of over 200 investors. Sri Lankan Ambassador to China Dr. Karunasena Kodituwakku, addressing the Summit in Hong Kong said Sri Lanka needs Foreign Direct Investment and access to Global Markets.

Following is the full text of the speech:

“As the Ambassador of Sri Lanka to the People’s Republic of China, I would like to warmly welcome all delegates to the Second Sri Lanka Investment Summit in Hong Kong. I believe Hong Kong is a rather apt choice as the location for this summit, as it played an important role through FDI when China opened its economy in 1979. As you are well aware, today Hong Kong is a part of the People’s Republic of China although its economy and system of governance are different under the “One Country Two Systems” principle introduced by the late leader Deng Xioping, who guided Chinese economic reforms in the late 1970s under the banner of “socialism with Chinese characteristics”. Even just a few days ago, on 55h March, during a presentation of a report on government work, the Prime Minister of the People’s Republic of China, Li Keqiang, declared that the government would continue to follow the leadership of the party Central Committee, with comrade Xi Jinping as its core and Den Xiaoping’s theory as its guide.

Since this summit is being held in Hong Kong and I have lived in Beijing for the past one-and-a-half yeas, I have been able to experience and see the impact of development in Beijing, as well during several visits to Hong Kong, the adjoining Shenzhen, shanghai, Chongq1ing, and many other provincial cities during this period. I would also like to touch on my observances from with I was previously Sri Lanka’s Ambassador to Japan and South Korea, which enabled me to observe the Japanese miracle in the late 1980s and the South Korean miracle in the early 1990s. It was an unusual and rare opportunity to witness the positive impact of foreign investment in these two countries and learn about how these countries were later able to share their prosperity gained through export led foreign investment with the rest of the world, particularly many emerging Asian economies.

Today, in the United States and in several countries in Europe, anti-globalization sentiments have become a popular tool for political gain. Globalization broadly refers to the movement of trade, both goods and services, investment capital, human resources etc. Development requires a global path without constraints. Therefore, these attempts to obstruct this path in many countries for narrow political gains would deprive possible positive gains for many millions of the poor in less developed countries, particularly in Asia and Africa.

When we look a the gains of globalization in the three countries in which I have served as Ambassador and in many other countries in Asia such as India, Indonesia, Malaysia, Singapore, and Vietnam, my considered view is that a development path based on foreign investment and an export led growth strategy should not be restricted. When we compare the living standards in these countries now and fifty yeas ago, no one can deny the positive impact of foreign investment and globalization on the lives of millions and millions of poor Asians during this period. It is true that there are still also many millions who suffer from poverty, hunger, and unemployment, but rapid economic development with social justice remains as the solution, not any other magic formula.

Fortunately, most countries in Asia, their leaders, and majority of the people have understood this reality. The election result in the United States may have stalled the Trans Pacific Partnership agreement, but the 16 Asian partners, including Australia and New Zealand, are no preparing for a regional pro globalization drive through a Regional Comprehensive Economic partnership Agreement. While the largest South Asian Economy, India, is part of this partnership, Sri Lanka is unfortunately not part of this grouping, perhaps due to its GDP still being at around US$ 80 billion only.

Recently, the RCEP grouping has been referred to as the “world’s major new mega FTA”. The grouping has the backing of the Chinese Government, and in the same report I referred to earlier, Premier Li Keqiang declared that I quote “Economic globalization is the fundamental interest of all countries. China will not shift in its commitment to promoting global economic cooperation, will uphold the multilateral trading regime as the main channel of international trade. China is ready to join hands to conclude talks as soon as possible for the RCEP agreement and to advance the development of the Free trade Area of the Asia Pacific. We will continue to negotiate investment and trade agreements with relevant countries and region” unquote. President Xi Jinping expressed similar sentiments in Davos as the World Economic forum.

Therefore, I hope that, with the blessings of the major economies in Asia, such as China, Japan, and India, export-led investment in Asia will continue to prosper disregarding the sentiments being expressed in the US and Europe, However, I would like to emphasize that the export-let FDI strategy is not a panacea for all socio-economic problems in emerging economies. What emerging economies should do is to use the strategy as a tool to build strong national economies with the support of the FDI and the export markets. That is what Japan, South Korea, and Singapore have already done and what China, India, Indonesia, Malaysia, and Thailand are doing presently.

Before I conclude, I would like to briefly touch one the role that Hong Kong has played in providing foreign direct investment to China when it opened up in 1979, as well as the pioneering role that Shenzhen which has a relevance to Sri Lanka played as the first “Special Economic Zone” According to a study done by Professor. Before I conclude, I would like to briefly touch on the role that Hong Kong has played in providing foreign direct investment to China when it opened up in 1979, as well as the pioneering role that Shenzhen which has a relevance to Sri Lanka played as the first “Special Economic Zone”. According to a study done by Professor Michael J. Enright – I will quote “the result of this step-by-step approach to opening (of China) has been dramatic rise in inward foreign direct investment, which went from virtually zero in 1980 to exceed US$ 100 billion per year by 2008 and reach nearly US$ 1.6 trillion in cumulative inward foreign direct investment (FDI) by 2014” unquote. The massive flow of foreign direct investment resulted in 810,163 investment projects in China during this period. The total impact of this FDI on the Chinese economy has been in the order of 33 percent of China’s GDP and 27 percent of China’s employment.

Meanwhile, the experiment done with economic reforms at Shenzen, the first “Specialized Economic Zone”in China paved the way for remarkable success and has transformed the Chinese economy into the second-largest economy in the world today. The success of Shenzhen is a role model for the Sri Lankan government’s effort to turn Hambantota, as our PM mentioned last year when he visited China. Hambantota is currently a rural region with several white elephant projects that are an enormous burden for tax payers and the Finance Minister who is here with us, intendes to transform it into a successful economic zone.

A remarkable fact with regards to the source of the FDI to China is that FDI originating from Hong Kong, the city where we have gathered, accounted for 478 percent of the total value of the FDI. The absolute figure was US$ 744.8 billion. Another 8.3 percent, or US$ 132.1 billion, came from the British Virgin Islands, which is considered as a tax haven for many Hong Kong based companies. Therefore, it would be correct to say that more than 50 percent of the FDI that came to China originated from Hong Kong. Four other miracle economies, Japan, Singapore, Taiwan, and Korea-South, provided a respectively 6.2, 4.5, 3.8 and 3.8 percent of FDI to China during this period.

Hong Kong became a British territory in 1842 with the signing of the Treaty of Nanking between China and the UK after the opium wars. Before the Nanking Agreement. Hong Kong was offered to the UK under the Convention of Chunpee (in Canton) one year earlier, but both governments (China and the UK) were unhappy about the agreements made, resulting in the sacking of the signatories on both sides. The Chinese Emperor considered the island an important place and punished his Grand Secretary left Canton in chains, condemned to death. His wealth, which was estimated at 10 million, was also confiscated. Ultimately, the Grand Secretary’s death penalty was revoked, but he was exiled to a frozen region, where he passed out of history.

The British Foreign Secretary at that time, Palmerston was also unhappy about his envoy Captain Charles Elliot accepting only Hong Kong, instead to other sea ports that the British were eyeing. He sacked the envoy writing to him. I quote “you have obtained the cession of Hong Kong, a barren island with hardly a house upon it. Now it seems obvious that Hong Kong, a barren island with hardly a house upon it. Now it seems obvious that Hong Kong will not be a Mart of Trade, any more than Macao is so. However it is possible I may be mistaken in this matter” - unquote. Charles Elliot was chased out from Canton.

However, only one year later, Hong Kong became a British territory and continued to be so for 150 years, Today, we can see that the British Foreign Secretary was very mistaken; Hong Kong has proved to be much more than a barren island. At the time of the handing over of Hong Kong to China, the Island had a prosperous economy. The blessing in disguise was the emergence of Hong Kong as the major source of the FDI when China opened its economy in 1979 for foreign investment. Hong Kong was a gift that kept giving to China continuously.

The last segment of my presentation is about Shenzhen, which was considered by Sri Lanka as a model for developing our southern development hub, Hambantota. Shenzhen was only a small fishing village of 30,000 residents in 1979, but now its population exceeds 10 million. During this period, the value of total foreign investment in Shenzhen has been US$ 65 billion. 52 percent of industrial output came from the FDI. Today Shenzhen is not only one of the richest municipalities in China with a GDP of US$ 283.8 billion, and it also accounts for 62 billionaries of China’s 609 billionaires while Hong Kong with its GDP of US$ 387 billion has 71 billionaires.

Another coincidence with regard to Shenzhen’s remarkable development was the involvement of China Merchants Group, state-owned enterprise based in Hong Kong.

The first area under the Shenzhen Master Plan was Dhekou Industrial Zone, and it was developed by China Merchants Group, Which has relevance to Sri Lanka, constructed the infrastructure, utilities, and ports. Within a few years, Shekou attracted foreign investors, with the majority from Hong Kong, and transformed the fishing village into an energetic industrial city.

The Sri Lankan authorities too have now selected the same China Merchants Group, which is already successfully running one of the container terminals in Colombo Port, as the core investor for Sri Lanka’s Shenzhen, Hambantota. Our sincere hope is that with their coordination and investment, Sri Lanka would be able to convert its Hambantota “fishing village” into another industrial hub in the Indian Ocean.

I would like to conclude my speech by once again welcoming all the participants and extending my sincere thanks to both the organizers, Hay-market Media, and the sponsors. Just like many other Asian countries have transformed their economies with the backing of FDI, Sri Lanka too wishes to transform its economy with the support of the FDI into a strong economy in which all Sri Lankans are able to enjoy a high standard of living.” (Daily News)

 

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