UK ECGD Ups Credit Guarantee to Sri Lanka to £200mn as British Interest in Sri Lanka Grows

09th March 2011, www.island.lk

The UK government has stepped up assistance to improve trade ties with Sri Lanka on heightened interest showen by British businesses in the post-conflict economy, officials said.

Two officials of the Export Credit Guarantee Department (ECGD) of the UK are in Sri Lanka on a fact finding mission and to better understand the prospects offered by Sri Lanka’s growing economy.

UK Deputy High Commissioner in Sri Lanka Mark Gooding said the officials’ visit was prompted by heightened business interest in Sri Lanka and the lure of peace dividends after a thirty year conflict. According to Gooding, the UK is Sri Lanka’s second largest trading partner (exports and imports combined at around US$ 1.2 billion) and second largest FDI source at US$ 300 million in 2010.

"We are here to find out about the opportunities and challenges in the local economy so that we can support British businesses who want to trade with Sri Lanka," Ms Olwen Renowden, a country risk analyst with the ECGD told journalists in Colombo yesterday (9).

She also said being in close proximity to one of the fastest growing economies in the world, India, Sri Lanka’s trading prospects were greater.

"A post conflict economy has high income prospects and public debt is lower and the servicing of these debts is less risky as against a country in conflict.

These are some of things we try to determine along with the level of political stability and any anything else that could be a risk," she said.

The ECGD provides credit cover to exporters of capital goods and services in the infrastructure sector and it recently increased its portfolio exposure to Sri Lanka from 150 million sterling pounds to 200 million.

Ms. Renowden said there was an "exciting pipeline of projects seeking credit guarantees", but she did not elaborate what they were. She said there were several British businesses that had already availed themselves of credit guarantees for projects carried out by British firms for Sri Lanka’s Ministry of Finance and Planning, one of them a bridge in the Northern peninsular.

She said British banks were reluctant to finance projects involving the private sectors of both countries and that lending was tight despite the ECGD guarantees. "The conflict in Sri Lanka is over and there are huge prospects, but it takes time for confidence to grow," she said.

She said when private sector-to-private sector relationships developed between the two countries and when banks were more inclined to finance such projects, the ECGD would be in a position to provide such with credit guarantees as well. "At the moment, our exposure is limited to projects involving the Ministry of Finance and Planning," she said.

A statement from the embassy said, the ECGD already has firms queued up, seeking support for £250m worth of business. "However, this does not take account of the substantial business opportunities about to be launched, not only in the reconstruction and development of the North and East, but in Sri Lanka as a whole.

For example, the Greater Colombo Wastewater Management Project, due to start by the end of this year, is alone worth over £200m. The Colombo Port Expansion project, already underway, but costed at approx. £300m, is another major project suitable for UK engineering and consultancy firms. Other major projects at feasibility stage include nation-wide upgrade of Electricity Transmission, overhaul of Highways and Rail Networks and the development of Sri Lanka’s Fishing and Marine industry."

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