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Sri Lanka back on investment radar

[AFP, Sunday, 6 December 2009 09:29 No Comment]

Sri Lanka is back on the global investment radar after government forces in May ended a nearly four-decade separatist war with Tamil guerrillas, fund managers and analysts say.

Sri Lanka’s small stock exchange has become one of the world’s top performing bourses, climbing over 96 percent this year as it reaps a peace dividend from the ending of the island’s bloody ethnic conflict.

"With the war coming to a close, there is a lot of interest in Sri Lanka. It is like the hottest place to invest your money," said Mark Mobius, executive chairman of global mutual fund giant Templeton Asset Management Ltd.

Investors are banking on renewed economic strength and profits in the country now that the protracted civil war which claimed up to 100,000 lives is over.

"Sri Lanka clearly interests investors on the macroeconomic level now with interest rates and inflation coming down," said Channa Amaratunga, an analyst at Colombo-based CT Capital Private Ltd.

"The end of the war has opened up endless investment opportunities across real estate, healthcare, plantations, infrastructure," said Amaratunga.

Mobius told AFP the Sri Lankan government still needed to relax strict controls on the economy to attract more global funds and that liquidity in the stock market remained poor, making it tough to trade shares.

"Sri Lanka needs to loosen up a bit in order to attract private capital into infrastructure, specialised manufacturing and property development," Mobius said on a recent visit to the tropical island nation.

"The government doesn’t want to privatise or list state entities. Private firms are mostly family-run and they’re not keen to loosen control," he said.

Templeton exited Sri Lanka’s stock market during the civil war, in which Tamil Tiger rebels fought to carve out a separate nation in the Sinhalese-dominated country.

During his recent visit, Mobius said he had met private firms with interests in such areas as tea and garment exports to discuss making private equity investments through Templeton’s Strategic and Frontier Markets fund.

The fund has already invested about 850 million dollars in government bonds.

"There is a lot of appetite out there for Sri Lanka right now, be it debt or private equity," said Douglas Clayton, chief executive of Hong Kong-based Leopard Capital, which aims to raise 100 million dollars to invest in Sri Lanka.

Clayton said Leopard’s private equity fund would promote management buyouts of local firms and try to put between 10 and 20 percent of its resources into power, plantations, retailing, information technology and tourism.

"The next decade could be a renaissance for Sri Lanka," said Clayton, adding that Leopard was also launching a smaller fund to invest in firms listed on the Colombo bourse.

Sri Lanka’s central bank recently raised its economic growth forecast for 2009 to 4.5 percent from an earlier estimate of 2.5 percent. For next year, it is hoping for expansion of six percent.

Singapore-based investment company Calamander Group Pte, said it was currently raising up to 75 million dollars to invest in private firms involved in tea, rubber, timber, coconut, banking and ceramics.

London-based Aureos Capital Ltd has been investing in Sri Lankan firms that have expanded into the Asian region since 2003. "Our pipeline of projects looks more robust than before the war," said Nissanka Weerasekera, an investment manager for Aureos.

Chaminda Ranasinghe, who helps run a local IT electronic payment processing solutions provider called Interblocks, says companies are hunting for funds to pay for expansion.


Kumar Jayasuriya, the Sri Lankan chairman of British-based tea group Finlays, said: "There’s a paucity of funds to upgrade and grow businesses locally. Private capital can play an important role."

AFP: Sri Lanka back on investment radar

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