ASSINGMENT 1 In recent years

ASSINGMENT 1
In recent years, Srilanka have seen an increase of foreign direct investment (FDI) flowing in to the country. This is evident especially with the Chinese Belt and Road Initiative (BRI) , the BRI have brought opportunities and infrastructure investment into Srilanka .From your own point of view analyses and discuss if the Chinese investments are helping the Srilanakan economy or vice versa.

Subject : -INB2102D
Name : – VIDUSHIKA WIJETHILAKA
Student ID: – WIVDD152
EXCECUTIVE SUMMERY
Sri Lanka is a major country on the String of Pearls which is part of the Chinese strategic initiative in the Indian Ocean, known as the Maritime Silk Road and is part of the bigger development strategy known as the One Belt, Sri Lanka was one of the first countries to recognize the People’s Republic of China. Since then, the two countries have regularly carried out high-level visits, which have led to a many agreements. China has provided economic, military and technical assistance to Sri Lanka. Colombo Fort City is China’s largest investment in the history of Sri Lanka.

The main purpose and purpose of this report is to determine whether Chinese investment will help the Sri Lankan economy. The report consists of a basic introduction, which is BRI. In addition, the effects of FDI in Srilanka and the pros and cons of FDI in Srilanka .

TABLE OF CONTENT
INTRODUCTION………………………………………………………………………………………… 04
INVESTMENT FROM CHINA …………………………………………………………………….. 05
PORT CITY ………………………………………………………………………………………………. 06
ADVANTAGES OF FDI ……………………………………………………………………………… 08
DISADVANTAGES OF FDI …………………………………………………………………………. 09
LEGAL AND POLITICAL ENVIRONEMNT ……………………………………………………. 11
FINANCIAL CLIMATE ………………………………………………………………………………… 12
THE MANAGEMENT AND LABOUR CLIMATE ……………………………………………..14
THE REGULAR ENVIORNMENT ………………………………………………………………… 15
KEY PLAYERS WITHIN THE INDUSTRY ………………………………………………………. 16
KEY CONSUMERS …………………………………………………………………………………….. 17
KY INTERNATIONAL COMPETITORS …………………………………………………………..19
CONCLUTION …………………………………………………………………………………………… 20
REFFERENCES …………………………………………………………………………………………… 21
INTRODUCTION
Foreign Direct Investment (FDI) has been one of the defining features of the World economy over the past thirty-five years. Firms in all industries are expanding their operations through FDI than ever before in both developed and developing countries. FDI considered as one of the important economic force through which developing countries can carry out economic growth consequently. In this backdrop, SriLanka is also inviting FDI itself for the reason that FDI plays a major role in contributing to the local resource base available for the investment to obtain sufficient rates of economic growth, which will improve standard of living of the people. In this regards, Sri Lanka offers attractive investment opportunities for foreign companies and has adopted a number of policies to attract foreign direct investment into the country.

Hence, Sri Lanka revised its policy extensively in 1977 from extreme controls to the far-reaching liberalization. The role of FDI has ideally recognized as a growth-enhancing factor in developing countries. FDI helps host countries to achieve investment levels beyond their own domestic saving in various ways. More importantly, FDI is an important means of transferring modern technology and innovation from developed to developing countries. However, there is convincing evidence that the growth enhancing effect from FDI seems to vary from country to country. FDI can even adversely affect the growth process for some countries. In developing countries, FDI helps to tackle socio-economic problems such as unemployment, deficit balance of payment, lack of capacity, scarcity of foreign exchange, and poor technological ability, etc
In 2017, the highest FDI come from countries such as China, India, Hong Kong and Singapore. China has been one of the main inventors of Srilanka where investments have been following through the Exim Bank of China.

INVESTMENT FROM CHINA
China within the recent years has become one in all the main inventors of Srilanka. wherever they need invested with on the point of USD one.3 Billion within the year of 2017 that account s eighty you rather than the overall FDI inflows (Economy Next,2017) .Even though UK and USA have shown a rate of growth on top of that of China , volume of FDIs by those 2 countries were considerably not up to china that in turns affirms the prominence of Chinese investments within the Srilankan economy(Sunday Times , 2017) 
According to sources such as BOI, Chinese FDIs over the past few years have directed targeting the development of infrastructure and sectors such as power and energy. Given below are few major Chinese investments in Srilanka over the past years (Financial Times, 2017)
Mattala Airport –USD 210 Million
Hambanthota Seaport – USD 461 Million
Norochcholai Coal Power Plant – Funded by concessionary loan of USD 450 million.

Exclusive Economic Zone in Mirigama
Colombo – Katunayake Expressway – USD 248.2 Million
Colombo Port City project – USD 1.4 Billion.

EXAMPLE
Port City
“One belt, One Road”

Port town Colombo could be a fresh town development designed as associate degree extension of the Central city district of Sri Lanka’s spirited business capital, Colombo. Spanning 269 hectares of rescued land from the ocean. Main Goals ofthis project is developing 5 different precentcints the Financil District,Central Park Living,The Marina and the International Island.

According to media reports, this land will be developed by constructing a Formula 1 racetrack, yacht marina, a mini golf course plus hotels, skyscrapers, apartment residencies and high-end shopping malls to cater for the ultra-rich from developed countries as well the oil-rich countries in the Middle East and of courseChina.

once completed, Port town Colombo can have over five.6 million sq. meters of designed area, boast the simplest in style and standards. Its manner and business offerings can embrace glorious facilities and areas in care, Education, amusement, Hotels and Restaurants, Retail associate degreed workplace with an Integrated Resort and a dockage, giving the simplest in living by the ocean. designed on the most recent property town styles and good town ideas, Port town Colombo are going to be the liveable town in South Asia.

Portcity will provide the highest quality commercial, entertainment, medical, education and lifestyle opportunities..

CHEC Port City Colombo (Pvt) Ltd through China Harbour Engineering Company (CHEC) is part of China Communications Construction Company Limited (CCCC). Incorporated in 2006, CCCC is listed on the Hong Kong and Shanghai Stock Exchanges and currently employs over 120,000 employees, with presence in 145 countries and regions. CCCC is the world leader in port design and construction, road and bridge design and construction, dredging, container crane and heavy machinery manufacturing. In addition, CCCC is also vastly experienced in building construction and is a major real estate investor and developer. CCCC has been actively involved with the development of Sri Lanka since 1998, executing massive construction projects, such as the Southern Highway, Outer Circular Highway, Hambantota Port, Mattala International Airport, Colombo South Container Terminal and many other major infrastructure projects.

ADVANTAGES OF FDI FLOWING IN TO SRILANKA

Development of accommodation Facilities
Development of roads networks including highways, expressways, Flyovers.

Improves the Technology within the country
FDI provides local economic benefits in multiple locations.

FDI makes international trade easier to complete.

Foreign income can increase.

It improves human resources.

FDI creates new opportunities for workers.

Tourism arrival has increased
Development of accommodation facilities and other infrastructure
It creates new opportunities for workers.

DISADVANTAGES OF FDI

Environmental Problems- Soil Erosion, Ocien is grabbing, Air pollution.

Port city project is mainly effected to the fisherman because of this project they cannot get fish in port city areas.

These project will be problem for corals and sea lifes in the ocean.

FDI effect to our culture because of the culture mixing.

Oportunity problems – Immigration harms the realearningsof local workers with similar skilllevels to thoes of thearrivingworkers(Chinese sector) (Silva,2011)

THE LEGAL AND POLITICAL ENVIRONMENT
Legal Environment
Once it come back to the surroundings of Srilanka, there square measure several reasons why foreign inventors ought to invest within thecountry.  A number of them square measure as below,
Sri lank being one of the safest countries to invest in as the Article 157 of the constitution guarantees the safety of the investments.

As the country has signed bi- later agreements (investment Protection agreements) (IPA) with 28 countries.

The court system of the country in independent, which also address any concern of the investors’.

Srilanka is one of the founder members of the Multilateral Investment GuaranteeAgency (MIGA) .This eliminates the risk of expropriation and non –commercial risks.

With the event of the BRI , the port town are going to become a special monetary and city district of Srilanka with a newest of laws wherever spate system can be operated at intervals the Port town subjected to the ultimate finding of fact of the Supreme Court (The Economic Times, 2016)
Political Environment
Sri Lanka is a constitutional multiparty republic. In 1978, Sri Lanka shifted away from a socialist orientation and opened up to foreign investment, although changes in Government have often been accompanied by reversals in economic policy. The current coalition Government led by President Sirisena and Prime Minister Wickremesinghe follows a pro-business stance with an emphasis on expanding exports, upgrading industry, and boosting private investment and public-private partnerships. President Sirisena’s Sri Lanka Freedom Party has a socialist orientation. Prime Minister RanilWickremesinghe represents the pro-business United National Party. Former President Rajapaksa (2005-2015) followed a statist economic policy, advocating for Government control of strategic enterprises and expanding the role of the state. The Rajapaksa administration also introduced a substantial Government infrastructure development program, largely financed with Chinese loans. 
THE FINANCIAL CLIMATE
According to the many sources, China has offeredmoreloans to countries which are taking part in the RBI where Srilanka will also be able to benefit from the same.as of now, Srilanka is struggling to reply a debet of USD 8billion to China which was obtained previously for other projects such as Hambanthota Airport, However the good news Is that China is willing to grant more loans amounting to a total of USD 24 Billion as a part of the BRI(Economics Time , 2017)
Along with the debts taken by the previous government,Srilnaka’sdebet has grown close to USSD 25 billion where the commercial loans account to a considerable portion of the total.

THE MANAGERIAL & LABOR ENVIRONMENT
Srilanka’slabor market currently consist of a limited pool of skilled workers wherebyprofessions such as Accounting ,engineering ,Legal follow high standards even trough its visible that the local talented for design in yet underdeveloped .labor is available at an affordable price but relatively costly than that of other Asian countries due to the skills of the work fore .In 2016 the labor force of Srilanka comprised of 8 million individuals .

BRI can be considered as one of the major employment creators in the recent year where it will approximately create close to 1,00 new jobs .8 year construction project will be carried out by over 2000 local and Chinese personnel, Upon completion , project will create over 10000 direct and indirect jobs(Abeyratne, 2014) Government believes that this initiative would reduce the skill migration out of the country as it will create high value jobs upon its completion.

In general , during the past few years over 20600 srilankan work visa have been issued to Chinese workers to attract skilled labor to the country .Below figures shows the number of Chinese workers attract skilled labor to the country .below figures shows the number of Chinese workers who have migrated to srilanka for work.

THE REGULATORY ENVIRONMENT
In order to promote thebusiness environment and to reduce the translation costs of the business operations it is inevitable that country’s legal and regulatory frameworks is modernized and up to date .Srilanka Government places a significance on commercial law reforms to improve the quality and efficiency of the legal system (Trade Chakra,2008)
All the foreign investments in Srilanka are primarily governed by the below acts (Board of Investment in Srilanka,2017);
Board of investment Law No.4 of 1978 – BOI acts as the central facilitation point for foreign investors while it is being empowered by the government to enter in to agreements with the inventors providing them facilities such as tax holidays, tax concessions etc.

Exchange Control Act No.1284/19 of 2002(Amendment)
With regard to the current foreign trade policy of srilanka , it is possible to state that is aims at integrating Srilanka with other global economics while adopting attributes of free market economy. Tariffs and other levies take a prominence in regulating the foreign trade policies in srilanka where there hardly any barriers in terms of licensing and quota on import and export
In April 2018, central bank of srilanka cut its ceiling policy rate by 25 basis points to 8.50% while keeping the floor rate at 7.25% as a move of narrowing down its policy corridor. The main reason of this rate amendment ids the upward movement of money and debt markets as a reaction to recent tax changes(Economy next ,2018)
KEY PLAYERS WITHIN THE INDUSTRY
As discuss above BRI is carried out by China Communication Construction Company (CCCC) via china harbor Engineering Company (CHEC).CCCC can be considered as the world leader in the design and construction of Ports, Bridges, Roads as well as a major estate investor and a developer.(Port City Colombo, 2018)
In the recent years, Sri lanka Construction industry majoring benefited from the rapid economic development of the country. These are over 2500 registered construction companies in srilankan where the companies are categorized by ConstructionIndustry Development authority (CIDA) on a scale of 1 to 1 based on their technical capabilities, financial position and the field expertise.

Some of the key players in the construction industry of srilanka along with their major projects are given below,’
Access Engineering PLC- Access Road HambanthotaInternational Airport, mega Port –Phase II ; III, Port of Colomo,Design 7 Construction of RajagiriyaFlyover etc.

Sanken Oversees- Kelanitissa Power Plant, house of fashion Project, Trillium Residencies
MagaEngneering (Pvt) ltd-srilanka – Japan Friendship ridge, hambanthota Port Bypass Road, NSBM Green University town
Tudawebrothers (Ovt0 ltd,- Sothern Expressway – Toll Plaza And Toll- Office building , Dialog Axiata Building ect
One of the major challenges faced by the construction industry in srilanka is the lack of skilled labor which causes massive delays in delivering projects .further, industry also faces challenges in terms of the availability of resources such as sand,.cement,metal etc.. Which also threatens the high – quality delivery of the results.

At present Chinese construction firms are involved in 40 % of the construction projects that are ongoing in Srilanka .This can be considered as one of the major threats to the local players in the industry as china is hoping to increase the share up to 70% .this will hinder the growth of Srilankan players as they will have less contracts over the years come .In order to migrate this risk , Government can enter in to move with China to share projects with local companies.

KEY CONSUMERS
BRI is being developed based on the main principles of “Sustainability and quality of life” where by the project is being designed on four main factors such as livability, socialsecurity, tolerance and inclusion which contributes to a higher quality of life.

Port city Colombo, will have five main districts namely financial district, marina International Island, centralPark Living and Island living with many uses to its consumers. This will allow the users to have a’live + work+ play ‘environment within the city.

This city willaccommodate close to 70000 residents and 200000 workers and will feature facilities such as residences, hotels, schools and commercial spaces. Further, a range of public spaces such as parks, plazas, waterfront prominences etc. will also be developedwithin the city, which will facilitate recreational activities and promote a healthy life style to all ages and people who will live in the heart of the city. Hence the main consumers of the BRI will include the residents,employees and other workers. Shoppers etc.

Furthermore, when it comes to Chinese investments in srilanka , there are many that comes to anyone’s mind as China happens to be Srilanka’sbiggest investor .some of the major investments by China in the recent years and their consumers include below,
Expressway – Drivers of travels and goods transport,passengers, retailers in service areas etc.

Hampanthota Port- frightforwarders, Logistics companies, Shipping lines, export/imports companies etc.

Mattalaairport – passengers Employees of airlines, Ground staff etc.

Hotels – diners, guests, employees etc.

KEY INTERNATONAL COMPETITORS
When it comes to key international competitors that invests in srilanka , countries such as india, Singapore, Netherlands, united states, United kingdom, Japan, Sweden etc. Apart from China , UK and USA are the two major inventors of Srilanka where in the recent years FDI have come from areas such as manufacturing , IT educational etc.

Along with the Chinese dominance in the Srilanka market , india has stepped in to country’s mega construction project in north & East regions with the construction of over 38000 houses in the area, railway expansion projects, Coal power projects in Sampur in trincomalee etc.(Business times,2010)As a result of major investments by china in SriLanka , Indi fears that the cultural and commercial ties with Srilanka will threatened .However the geographical proximity and the cultural similarity will allow india to secure a place in Srilanka’s development.

CONCLUSION
A country cannot achieve economic development by focusing on developing its export industry alone simply because less than 8% of the countries in the world possess the invaluable natural resources (diamonds, crude oil etc) which would enable them to sustain and grow the economy by the exporting of the resources/finished goods alone. Due to this reason, it is of the wrong assumption to presume that the only path for a developing country to achieve economic development is through exports. Although the promotion of exports is without doubt an excellent way for a developing country to grow their economy, it is not the only way. For a country to achieve substantial growth, a series of strategies and policies need to put in place. There strategies and policies should include the promotion of exports, the promotion of FDI as well as the promotion of the service sector. By following and promoting all three of these methods, a country will surely be able to achieve a rapid economic growth and development. Therefore, I would like to conclude by stating that it is entirely wrong to presume that the only path for economic development is through the promotion of exports and economic growth cannot be achieved by focusing on promoting the export industry alone.

REFFERENCES
Abeyratne.D.S (2014) Colombo Port City Development Project to generate over 10000 jobs, 2 edn.

The Economic Times (2017) ‘China willing to give Sri Lanka 424 billion more as part of OBOR’, , (), pp. .

BOI (2017).Sri Lanka Achieves Highest Ever FDI in 2017.

Business Times. (2010),’Chinese and Indian companies dominate Sri Lanka’s mega project business.

The Economic Times. (2016), Colombo Port city project to be given special status: Sri Lanka PM Ranil Wickramasinghe
Economy next. (2017).Sri Lanka FDI doubles to US41.6bn 2017 helped by China.

Froot, K.A (2008).Foreign Direct Investment. The University of Chicago Press.

LMD. (2017). Foreign direct investment of Sri Lanka .where are we heading. ?
Hollensen, S. (2016).Global Marketing.Perason Education.

World Bank. (2017).Development Indicators; Sri Lanka.

Warnasuriya.A. (2018).Suspension of Port City Project a Political Gimmick?
The Economist. (2016).Foreign direct investment;Economic and financial indicators.

Trading Economics. (2018).SriLanka Foreign Direct investment: Net Inflows, Central Bank of Srilanka.

Root,F.R(1994).Entry Strategies for International Markets. Lexington Books.