The Silk Road journal by Mahika Ming

Most powerful economic machines of the world didn’t run efficiently during 2020 and are still struggling due to lack of investments. As per Chinese Commerce ministry statistics, the foreign direct investment (FDI) into the Peoples Republic of China (mainland only) have increased by more than 35% from January to May 2021 compared to 2020. More than USD 26 billion FDIs have flowed into PRC during January & February 2021 alone. Compared to 2020; European Union FDIs into China has increased by nearly 32%, Belt and Road partner states pumped 26% more & the Association of Southeast Asian Nations increased FDI by 28%. The PRC started attracting FDIs in 1979 soon after the tropical island Sri Lanka initiated FDI attracting through FTZs etc. In comparison China modified its approach continuously to become the world’s best FDI attractor even amid the COVID-19 pandemic. They recently opened more sectors for FDIs by adding 127 new items to the list of industries liberalized for FDIs.  The PRC became the world's number one receiver of FDI in 2020 as per United Nations Conference on Trade and Development (UNCTAD). In 2020 FDI into China increased by 4% (USD 63 billion) while the USA secured only USD 134 billion (ref. UNCTAD Investment Trends Monitor).

Hainan in south China is the PRC's only tropical island. It plays a key role in their strategic economic liberalization plan. Since June 2020 Hainan became centre stage with the announcement of the free trade port development plan targeting to be a globally influential duty-free center by 2050. Hainan has attracted more than 5 billion USD FDIs from more than 80 states since 2019. Attracting FDIs to develop existing infrastructure is a key feature of the Hainan development plan. It should be carefully studied by those who are scared about foreign investors running away with the colonial buildings located in Colombo’s proposed Heritage Square.  Some Sri Lankans are very interested in long negative lists when it comes to FDIs. Hainan has one of the shortest foreign investment negative lists. Hainan negative list now has 27 items. It had more than 33 items in 2020 (ref. China stats). This indicates the collective interest of the PRC to attract FDIs to their country. It is therefore, not a surprise to see FDIs flowing into China. Hainan has the lowest corporate tax rate. Enterprises enjoy a 15% rate in comparison to 25% in other parts in the PRC.

Sri Lanka is a tropical island nation. We are also trying to develop the country with FDIs since 1978. President Gotabaya recently said that the government is proactive & pro-business. He also promised to do the utmost to create an enabling environment for the success of such investments while delivering the keynote address at the Sri Lanka Investment Forum 2021. He can’t do it alone. Citizens can use social media to study how other tropical islands are developing while watching those Sri Lankans who criticize new initiatives. Then they could compare and decide themselves.

The writer is an analyst with interests in the financial and sustainable development sectors with postgraduate exposure in the Far East (mahika.ming@gmail.com).