Sri Lanka Attracts US and Indian Foreign Investment

31st October 2010, www.sundaytimes.lk

A top US multinational has invested its pension fund in the Colombo bourse while top investment delegations from India, China and Germany are due to visit the island next month as Sri Lanka draws foreign investor interest at the end of the conflict.

“There was no point in time in history when the country received so much interest. This is solely due to these two reasons,” External Affairs Minister, Professor G.L. Peiris told an eminent gathering in his address as the Chief Guest at the inauguration of the 31st annual conference of the Institute of Chartered Accountants of Sri Lanka (ICASL), on Thursday.

He said the recent past saw US-based General Electric (GE) deciding to invest its pension funds in the Colombo Stock Exchange (CSE) while Janus Fund has already bought large holdings in blue chips. “Shangri-La Chairman Ian Koch spent 3-days on invitation to Sri Lanka and has decided to build a hotel in Colombo and another in the deep South. Ananda Mahindra of the Indian Mahindra and Mahindra Group will come into the leisure sector in a very significant way,” he said. He said other top delegations from India, China and Germany are also due to visit Sri Lanka.

He said that in this regard, the removal of road blocks by the government this week was a conscious decision to improve the ‘optics of this situation (to attract more investment)’ and also in the reduction of emergency rule.

He said that a report on the modalities for simplifying the tax structure is out now and asserted that this will make the tax structure predictable, which in turn will facilitate foreign investment. Delivering the keynote address, Attorney General Mohan Peiris noted that Sri Lanka is on the springboard of development and prosperity. “We are witnessing a resurgence of foreign direct investment from all parts of the world. The 31st ICASL National Conference is taking place at a time when reconstruction, rebuilding and the march towards peace, brotherhood and economic prosperity have become the clarion call of all citizens of the country. We have promising signs of development emerging in all parts of the country that tell us how resilient we are in moving towards economic prosperity and millennium development goals,” he said.

He also noted that the CSE became the second best performing bourse in the world, while development has commenced in the areas of ports, shipping and aviation. “The indicators of development are manifest today when one notes the drop in inflation, interest rates, the existence of forex reserves of almost $6.5 billion which is equivalent to six months of imports.

These factors coupled with a stable government in place sans an election for the next six years gives Sri Lanka the potential for its growth in investment and makes it the cynosure of all eyes,” he noted.

Mr. Peiris noted that the accounting profession comes into contact with the drivers of economy – namely the multinational companies and foreign investors at various stages. “When a year draws to a close, annual reporting is a mandatory requirement and the corporate world looks to you for the proper preparation and presentation of financial statements. The auditors, in the auditors’ report, express their opinion on the truth and fairness of the financial statements and an investor would be looking at your unqualified opinion in order to make his investment,” he asserted, adding that it’s this statement that the

investor will use as a monitory mechanism of the buoyancy or of the company.

Some pertinent questions were also posed by Mr. Peiris to the accountants. “What happens if those investors claim that they have relied on your opinion to make a decision and they suffer loss owing to wrong opinion given by the auditors in the auditors’ report? Are the auditors liable to third parties for negligent misstatements in the auditors’ report? For example, the auditors express the opinion that the financial statements truly and fairly present the financial position and results of the operation of the client company but in fact the financial statements contain material misstatements.

Of course there would be sanctions imposed by regulatory bodies such as the Accounting and Auditing Standards Board and impaired professional reputation. But could there be litigation by the investors? How does the legal liability of the Accountants for misstatements stand at the moment? These are the questions I would like to look at as the world sees opportunity in Sri Lanka,” he said.

Image: Seen here former BOI Chief and now a Singapore - based investment banker, Arjuna Mahendran (right) in conversation with local businessmen at the conference.

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