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COLOMBO, Sri Lanka Despite the recent flare-up of violence, Sri Lanka expects to attract a record level of foreign direct investment this year, the government said. For the first eight months of the year, US$340 million (€271 million) has flowed into the country, well above last year's foreign direct investment total of US$285 million (€227 million), authorities said. "The performance so far is encouraging" Investment Promotion Minister Rohitha Bogollagama told reporters late Wednesday. Sri Lanka's investment arm, the Board of Investment, has set a full-year target of US$500 million (€398 million) to US$600 million (€478 million), down from an original forecast of US$1 billion (€797 million) made at the start of the year. Analysts say they believe the government will be able to achieve the full-year target despite security fears and a lagging peace process amid the recent escalation of violence between government troops and Tamil Tiger rebels. Bogollagama said the January-August total consisted mostly of investment in telecommunications, garments and business process outsourcing. As part of efforts to spur investments and attract bigger investors, the BOI raised the minimum foreign direct investment requirement in March to US$250,000 (€199,000) per company, from US$50,000 (€39,900) previously. The BOI's original target of US$1 billion included a planned coal power project — worth US$400 million (€319 million) to US$450 million (€359 million) — by National Power Thermal Corp. of India, which has since been delayed until at least next year. "Investors would probably be encouraged by economic factors like high interest rates, so we expect the government's full year FDI to reach around US$525 million (€419 million)," said SC Securities analyst S. Umasudhan. The central bank has hiked policy rates by 8.75 percentage points so far this year to cool rising inflation and credit growth, with more increases expected before the end of 2006. The benchmark overnight repurchase rate is currently 9.625 percent, while the reverse repurchase rate is at 11.125. Associated Press
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