Author: Neluni Tillekeratne, Sri Lanka Project Officer
Part 2: Assessing the impact of the report compiled by the “Sector Targeting Team”
Just over one and a half years ago, Sri Lanka's Board of Investment (BOI) and Export Development Board (EDB) collaborated with the Center for International Development at Harvard University (CID) to study economic sectors for their investment and export potential.
Twenty officials from the BOI and EDB formed a "Sector Targeting Team" (or "T-Team"). The team assessed 30 sectors – all tradable activities (goods and services) of the private sector – and finally ranked their top sectors for investment and recommended strategies for promoting them. Using the Problem Driven Iterative Adaptation (PDIA) approach of CID's Building State Capability program, the T-Team met weekly, working continuously over a three-month period. The resulting study represents the hard work of these dedicated government officials.
The previous post described the methodology of this study. It explored the numerous stages in which raw data across multiple indicators was analyzed, ultimately deriving a final list of subsectors with the highest potential of succeeding in the export market as products from Sri Lanka.
This post will explore if this detailed research effort went on to catalyze impact in Sri Lanka’s efforts towards export-promotion.
The team shared that despite the study being released just a short while back, it has impacted BOI across multiple tiers of strategy, action and influence. In particular, they described how the study has catalyzed impact in 8 different ways.
To document the tangible outcomes that emerged as a result of this study, I met with the lead authors (and beneficiaries) of this research initiative at the BOI: Mrs Champika Malalgoda (Executive Director, Research and Policy Advocacy), Mrs Priyanka Samaraweera (Director, Research and Policy Advocacy), and Mrs Ganga Palaketiya (Deputy Director, Research).
The team shared that despite the study being released just a short while back, it has impacted BOI across multiple tiers of strategy, action and influence. In particular, they described how the study has catalyzed impact in 8 different ways.
1. Informed strategy
Strategies derived from the BOI-EDB-Harvard study were incorporated into the BOI 2017-2020 corporate plan. The document, also known as the strategic plan, defines key targets for the institution, specifically in terms of:
- stating the BOI’s broad objectives and strategies,
- setting specific targets such as for FDI, exports, employment creation, export as a percentage of national GDP,
- identifying countries to focus on, in terms of top sources of outward investments, counties who have come to the region, and how we could approach them.
Mrs Malalgoda commended the corporate plan as the most comprehensive in the recent history of BOI, in part due to its identification of “target sectors”. The BOI focused on the top sectors recommended in the BOI-EDB-CID study, since the report predicted a high probability of returns for the investment of effort and time into these specific sectors.
2. Renewed plan of action
Given that the new corporate plan altered routine strategies of the BOI, the action plan of the institution was also revised. BOI incorporated new activities based on recommendations made by the BOI-EDB-Harvard study. The new action plan actively pursued the potential of target sectors.
The team immediately took to studying the top sectors. Mrs.Ganga was an active member of a team which acted on requirements of the action plan. Out of the identified sectors, “Electronics”, suggested “solar panels” as the highest scoring sub-sector with the highest potential of attracting a foreign investor (see figure 5).
The team identified the solar panels sector as a target sector, it was actively explored as an option by the Investor Engagement Team (I-Team). The I-Team was set up to specifically study the potential of solar panel manufacturing and other promising sectors, create pitch books, and promote the potential of the sectors to foreign investors. The team immersed themselves in practical study methods including, site visits and meeting with potential/past investors to understand the exact process through which an investor could be convinced and supported to launch a solar manufacturing initiative in SL through an FDI.
3. Reforming outdated policies
The implementation team discovered a significant number of challenges when navigating policies which governed the process of facilitating FDI and so the BOI attempted to advocate for new policies which accommodated interests of the investor and the government. Coordination with the top levels of the government helped the team secure approvals to change policies.
4. Securing investment for the “Solar panel” sector.
Investor confidence was increased as a result of such efforts. The team was ultimately responded to by one of the largest solar manufacturers in the world. Negotiations are currently underway for an FDI with this - a reward for months of dedication.
The investment was secured as a result of the team investing 6 months to study the sector. The pitch books created through the process proved to be a success.
The success of pitch books has encouraged the government to train 40 officials (from BOI and EDB) to be specialists in 10 more sectors, in hopes of finding the same success enjoyed by the I-Team in securing a much needed FDI for the country. The pitch books will be distributed to Sri Lankan Embassies and multinational companies who could potentially invest in Sri Lanka.
5. Ensuring oversight of a Coordinating Committees
A common challenge in the government structure is the existence of multiple ministries and line-agencies whose functions overlap each other. When coordinating with these agencies, 36 line agencies were identified in the process of approving all grants needed to secure an FDI for the solar sector with each line agency needing up to 12 approvals. The process is a constraint which discourages interested investors. The T-Team addressed the clear need for a coordinating committee to overlook and administer the approvals process by facilitating the formation of a committee to coordinate line agencies, in January this year.
"The study shows the need for exports and investments to be a national endeavour with multiple stakeholders in different tiers of investor promotion" – Mrs. Champika Malalgoda
6. Informing Sri Lanka’s National Export Strategy
Mrs Malalgoda shared that the prioritization of sectors suggested in the report was used to support the formulation of the recently launched National Export Strategy (NES) of the EDB. The integration of research into initiatives across the government is an example of knowledge sharing across institutions.
7. Facilitating the launch of new industrial zones in SL for the first time in 15 years
The BOI even addressed crucial bottlenecks in FDI promotion, especially the availability of land for industrial zones. Mrs Priyanka Samaraweera was part of the land team which set out to understand the issues around the lack of suitable land for new manufacturing plants. The following success story of the land team was shared as one of the most rewarding results of the T-Team report.
“Access to land for new ventures is considered a bottleneck in the process of securing investor confidence. More than 80% of land in the country is owned by the government, and the government’s export processing zones are for the most part fully occupied; as a result, interested investors often turn away due to the lack of suitable industrial locations. To further understand the land constraints, an L-Team (land team), engaged in a research exercise. They compiled a comprehensive database on potential plots of land which could be used as Industrial zones. The team conducted a land analysis and matched the available facilities in vacant plots of land, to the specifications required by an investor of a targeted sector, with the preliminary analysis assessing over 80 plots of land.
It was interesting to note that when ideal requirements for an industrial zone were assessed, the newly identified lands offered conditions comparable to the BOI’s existing zones such as in Katunayke and Biyagama. Finally, 25 lands were identified as potential industrial zones” – Mrs. Priyanka Samaraweera
Three lands have now been identified by the government to be developed into industrial zones, including Mawathagama, Bingiriya and Milleniya, an initiative by the government for the first time in over 15 years. This is one of the most impactful results of the study. This progress is a direct result of the BOI-CID study. Coordination toward establishing a new industrial zone improved through the identification of new sectors through the study.
Will this impact continue to multiply?
Mrs. Malalgoda believes the study will go on to inform a policy framework which will support new zones. The policy will be designed to maximize the output and facilitate efficient administration of each zone.
"The final outcome is a rich resource in which any potential investor, researcher, or another interested party can obtain over sixty data points on any sector, as well as aggregated index scores for six major factors. We also hope that by providing access to this research, it may serve as a model for other economic development institutions as well." - Mrs. Champika Malalgoda
A number of institutions supported the hard-working team at the BOI including the Department of Census and Statics and the Department of Customs who provided in-depth, high-quality data to support the research initiative. The report informed many stakeholders who work towards a common goal of reviving the Sri Lankan economy. We look forward to visiting this team again in a year or so, to hear more stories of the impact of the T-Team report.
“I have realized why by observing this team in Sri Lanka: they are more committed to the work than any outside consultant I have ever seen (because it is their country, and the result of today’s diversification efforts will have a huge impact on the team members’ children) and bring vital contextual know- how to the job better than any outside consultant” - Matt Andrews, Senior Lecturer in International Development, Harvard Kennedy School Faculty Associate, Harvard Center for International Development
