Embassy of the United States

Letters and Speeches

Ambassador Blake's Address at the Second Economic Summit of the Ceylon Chamber of Commerce Regarding "Importance of U.S. Investment and Trade in Sri Lanka"

Minister Sirisena, Minister Wilgama, my friend Julian Wilson, Mr. Rodrigo, thank you for the invitation to speak today about the "Importance of U.S. Investment and Trade in Sri Lanka."   This is a subject very near and dear to my heart.  The U.S. is one of Sri Lanka’s top two trading partners and we would like to build on that record.  High level officials of the Office of the U.S. Trade Representative meet regularly with their Sri Lankan counterparts about how each country can remove or reduce barriers to greater trade and investment.

U.S. investment and trade have played important roles in enhancing Sri Lanka’s economic development.  Sri Lanka's garment industry is a case in point.  Most of you already know how a U.S. company called Mast Industries, Inc., came into Sri Lanka in the mid-1980s.  Mast and its local partners used outstanding corporate and business practices, and set very high industry standards that have helped make Sri Lanka today a supplier of choice of specialty high-end garments.  U.S. labels such as Nike, Gap, Abercombie & Fitch, Ralph Lauren Polo, and, yes, Victoria's Secret source their most sophisticated garments from Sri Lanka, both for their quality, and the high labor, occupational safety and health standards.  These high standards underpin the industry’s “Garments without Guilt” campaign for which Sri Lanka can be justly proud.   

U.S. investment also increases wages and creates opportunities for local labor to advance.  U.S. companies frequently offer among the highest salaries to both managers and line workers.  Several prominent U.S. companies in Sri Lanka, including Citigroup and Chevron, have demonstrated their long-term commitment to hiring and developing local employees, with a history of local hiring clear up to the CEO level. 

U.S. investment has brought to Sri Lanka the cutting-edge technology any economy needs to be globally competitive.  For example, at the AES power plant in nearby Kelanitissa, sophisticated General Electric steam turbines add to total output efficiency by capturing heat from the diesel generators that would otherwise go to waste.  On a smaller scale, Zone 24X7, a U.S.-Sri Lankan IT company provides laptops for its employees to use wherever and whenever they get a new idea.

Finally, U.S. investors tend to be good citizens in their host communities.  For U.S. companies, Corporate Social Responsibility is not just a marketing exercise.  It is a core corporate value.  Microsoft-Sri Lanka's program to train reformed drug addicts in IT skills is a case in point.  With Microsoft's assistance, these former addicts now have the possibility of finding better jobs than they ever dreamed possible.  U.S. companies also tend to keep their properties and vicinities clean through strict environmental controls.  And their anti-corruption policies encourage societies to reduce the damaging impact of bribes, nepotism and other activities that reward those who are less productive.

I've covered in brief how U.S. investment has helped Sri Lanka transform.  I would also like to look at the future:  how Sri Lanka needs to transform itself to become globally competitive, and how U.S. trade and investment can help.

Which industry is Sri Lanka's next great hope?  As wages rise in Sri Lanka and your economy becomes your knowledge-based and service-oriented, I think one of the most promising sectors for growth is Information Technology, along with IT-enabled Business Process Outsourcing.  IT firms such as Virtusa and other U.S.-Sri Lankan ventures already are defining a different sort of business model.  Rather than going for mass numbers of employees, Sri Lanka's IT companies develop globally-competitive software solutions and provide high-end back office services. 

There is scope for much more growth in this sector.  But Sri Lanka’s IT leaders report they are constrained by the short supply of qualified employees.  The demand for creative, English-speaking, well educated individuals is already larger than the supply, and the shortage is worsening.  Staffing the nascent IT sector will be one of Sri Lanka's most important challenges over the coming decade. 

How can this be done?  Sri Lanka must first transform its tertiary or university educational system, or it will lose out on the tremendous opportunities in the IT and related sectors.  In the increasingly knowledge-based economy of the 21^st century, Sri Lankans’ knowledge and training will ultimately drive the economy.  But your capacity to develop that knowledge and training is severely constrained.  Approximately 85% of Sri Lanka’s youth who qualify for university are not admitted because the university system lacks the capacity to accept them.  That is a catastrophic loss for your youth and your country.

One way to expand capacity would be to welcome partnerships with private American universities.  I realize that the concept of private or semi-private education at the university level is controversial here.  Some argue that private universities would create a double standard because they could charge high tuition fees and thereby attract the best professors from the public sector universities while students with fewer financial resources would be left to attend allegedly less attractive public sector schools.  Experience elsewhere has shown, however, that competition raises the level of all public and private sector schools and that private universities go to great lengths to provide financial aid to students with fewer means. 

Many of you here in the room today had the opportunity to attend universities abroad.  Foreign education played a crucial role in many of you getting where you are today.  To make that kind of opportunity more widely available to everyone in Sri Lanka, I recommend a simple solution:  bring foreign universities here, both to operate on their own and to partner with local institutions.  I can assure you that U.S. universities -- the best in the world -- would be willing and productive investors here. 

Another potentially significant opportunity for Sri Lanka to attract U.S. investment is in your hydrocarbon sector.  Several U.S. agencies (the U.S. Trade and Development Agency, the U.S. Department of Commerce, and our Minerals Management Service) have given technical assistance to help Sri Lanka develop its offshore oil and gas reserves.  Our goal has been to help Sri Lanka conduct the planned offshore licensing process in accordance with international standards of transparency and fairness.  Only that can ensure that both the bidding companies and Sri Lanka will benefit fully from this potentially valuable resource. 

I myself traveled to a major offshore oil conference in Houston last month with Minister Fowzie to brief U.S. oil companies about Sri Lanka's promising potential in this area.  But oil exploration involves high stakes financial risks.  Companies won’t invest if they don’t think the market is fair, managed in accordance with international standards and offers reasonable returns.

Let me mention a few ways Sri Lanka could significantly improve its appeal as an investment destination.  My former boss, Secretary of State Colin Powell, put it clearly:

"Capital,” he said, “is a coward; it will go nowhere where it is put in fear. Money will fly and go away from corruption and bad policies. It does not want to be around conflicts. It does not want to be around political unpredictability or instability. It goes where it is welcome and where investors can be confident of a return on the resources they have put at risk."

Peace is critical for developing a solid, growing economy.  As long as Sri Lanka remains torn by conflict, it loses out to other countries as an investment destination.  And, as long as the conflict persists, you must recognize that the investors who do come in require higher returns on their investments to compensate for the added risk of doing business here.

A second critical factor for Sri Lanka is the investment environment.  The World Bank ranks Sri Lanka 90^th out of 175 countries on contract enforcement.  And it rates Sri Lanka 89^th in what it calls "ease of doing business."   These rankings make it clear that, to compete in the global marketplace, Sri Lanka needs to work hard to improve its performance in these areas.

Ladies and Gentlemen, let me conclude by reaffirming that relations – trade, investment, and political relations – between the United States and Sri Lanka are very good.  The United States and Sri Lanka have been friends for more than 50 years.  Let me also reaffirm my optimism that Sri Lanka has the potential to match the growth rates that countries like India and China are now achieving.  To do so, however, will require a negotiated settlement of your conflict, a sustained increase in your tertiary education capacity, and a concerted effort to raise the level of Sri Lanka’s investment environment relative to that of your competitors.

Such changes will provide a secure, bright future for Sri Lankans and make Sri Lanka a magnet for US and other foreign investment.  America will continue to be your partner and friend as you move forward.

Thank you.