SL seeks Indian FDI to restructure state corporate sector

Sri Lanka is taking steps for economic revival in the backdrop of the first tranche of the bailout package from the International Monetary Fund (IMF) and this would open up opportunities for the Indian corporate sector.

One of the measures Lanka will pursue is restructuring of its State-owned enterprises. As part of its economic recovery and fiscal consolidation plan, the Sri Lankan government has shown interest in divestment in the airlines, hotels and hospital sectors among others and this would open up opportunities for Indian investors, ET has learnt. Sri Lanka received USD 330 million as the first tranche of the IMF bailout programme worth USD 2.9 billion on March 22. ADB forecasts Sri Lanka’s economic growth to dip to 2.4% in 2022 and improve marginally to 2.5% in 2023.

But economic recovery would require much more, especially boosting its lead sectors including airline services, hotel and hospital industry which in the past generated huge amounts of foreign exchange and direct and indirect employment, sources said.

The likely divestment move of Sri Lanka opens up huge opportunities for the Indian investors in the sectors proposed for divestment, ET has learnt. India’s leading industrial house Tata Enterprises which recently acquired the government owned Air India could be seen as a potential investor in Sri Lankan Airlines, a Colombo based source told ET. Sri Lankan Airlines was a very profitable airline when it was privatized offering 40% of its shares to Emirates Airlines for management.

However, Sri Lanka’s national airline was renationalized in 2008 and since then, recorded cumulative losses of Rs. 302 billion and not shown a single year of profit since 2008. In dollar terms, the accumulated losses of the SriLankan were estimated at USD 1.5 billion. Another important part of the Sri Lankan strategy of economic recovery hinges on revival of its tourism industry.

Reportedly, two of the finest Sri Lankan hotels Grand Hyatt Colombo and Hilton Hotel Colombo are under consideration for divestment. After completion of 60% of work at Grand Hyatt, about USD 103 million is required to complete the project.

Sri Lankan hotels are a good investment for the Indian hotel groups as Indian travelers are the top tourist source destination for Sri Lanka.

Another lead sector where Indian investors could seek opportunity in Sri Lanka’s divestment move is the Sri Lankan hospital industry.

Many analysts feel that there is no sound reasoning in the government’s control over hospitals like Lanka Hospitals PLC whose 51.34% stake is owned by the Sri Lankan government.

Indian investors from the hospital industry could add capital, quality and brand if the sector is opened up for joint ventures and collaboration by Sri Lanka, according to Colombo based sources. (www: economictimes.indiatimes.com)