A speech by H Z Cassim - Deputy Chairman Overseas Realty (Ceylon) PLC, Director Mireka Capital Land (Pvt) Limited (Havelock City project)
Good morning Ladies and Gentlemen,
I am privileged to have been given this opportunity to be with you this morning. .
My task before you is to brief potential investors of my personal experience of doing business in Sri Lanka and about the prevailing circumstances there. Therefore, I am not going to focus on the economy of Sri Lanka nor am I going to provide you justifications as to why you should invest there. The World Bank Report on 'Doing Business 2012 data for Sri Lanka' is a good guide providing statistical information you could refer to make an informed investment decision. Therefore, there is no benefit in me repeating it here.
In my total working life I absorbed two distinct cultures; the Singaporean culture and the Sri Lankan culture. In my early years I adopted a Sri Lankan culture running a successful Shipping Line in Colombo. Two important lessons I learnt while doing this is the significance of establishing credible, reliable contacts and having a good working relationship with government officials. For personal reasons I moved to Singapore during the 1970s. I worked here for more than 25 years at the Shing Kwan Group where I was exposed to Singapore methodology and efficient, forward thinking mindsets. I consider this to be the most gainful part of my life which stood in good stead when I returned to Sri Lanka.
While in Singapore I was involved in three industries namely; textiles, diamond and gold jewelry manufacturing and shipping. Being involved with these industries I worked very closely with the EDB and developed a strong relationship with them. The coordination from the EDB was excellent. I recall the many times the coordinator from EDB who I worked with calling me to ask how I was progressing and whether I needed any help and whether they could be of any assistance. Those calls gave me much courage to progress with business because I knew that should I need advice or an additional helping hand from the authorities, it was only a phone call away. That level of investor support is yet to happen in Sri Lanka - I might say that there is no equal anywhere else in the world. While this was happening, at one point, the Singapore authorities indicated that the primary industries I was involved in could not be sustained in the long term because other developing countries were taking over those sectors.
This prompted me to return to Sri Lanka in 1991 at the request of my Chairman, Mr S P Tao, to set up and oversee his investments in Sri Lanka through Overseas Realty (Ceylon) PLC. S P Tao's investment was and still is the largest foreign private/individual investment in the country to date. His initial investment was in the region of US$130 million in 1990 for construction of the World Trade Center (WTC for short) which was constructed in the heart of the CBD in Colombo. At that time, the WTC was designed to be the largest commercial development in Sri Lanka.
Mr Tao's investment was driven by the suggestion of the Singapore government to go regional. But that initiative came during a difficult time in Sri Lanka's history - albeit the worst time when the LTTE aka the Tamil Tigers were doggedly continuing their terror campaign leaving foreign investors second guessing their decisions. To tell you honestly, even I was mildly skeptical at that point.
But Mr Tao's history with Sri Lanka and the resulting attachment he had for the country underpinned by his inspirational foresight and persistence made what seemed impossible and unattainable - possible and rewarding. I must confess that although the government was not fully geared up for foreign investors at that time as they are now, mainly because of their efforts being concerted towards containing the LTTE aggression, they went out of their way to accommodate and facilitate the development of the WTC as much as possible. This support was received from four successive governments from opposing sides. The Board of Investment or BOI for short is the government body that administers foreign investments in the country. BOI declared the WTC a flagship project providing investment incentives that were generous. The contacts I had developed during my shipping days in Sri Lanka played a very useful part doing business back in the country.
Notwithstanding the support of the government, there were countless issues we had to deal with to make the project a reality. Having got accustomed to the efficiency of working in Singapore, it took patience and adjustment for me to get used to the Sri Lankan way of working. Despite these issues we completed construction of this icon within 4 years. The World Trade Center has two 39 storey office towers, retail spaces and onsite parking for 550 vehicles which all account for about 1.1 million sq.ft. of gross built-up space. To this day, there is no equal in Sri Lanka or the south Asian subcontinent. We have received International accolades for WTC Colombo.
On a lighter note, one interesting incident which I recall was that during construction of the WTC we found one construction worker sleeping at a time when he was supposed to be working. When action to reprimand this individual was taken there was a protest from the other workers which brought all construction work to a grinding halt. One worker even climbed a tower crane and refused to come down. Finally the matter was resolved amicably and during the inquiry into the incident we learnt that this particular worker who was found asleep was travelling from afar and had come to work without having a decent breakfast which made him feel exhausted. This was found to be the case among quite a few of the workers and therefore we decided to give a "power breakfast" to all workers. Within a very short period we saw a 50% increase in the efficiency of all workers. Whether there is lesson you could draw from this I don't know – I will leave that to you to decide.
The official opening of the WTC was held on 12 October 1997 and the occasion was graced by the then President of Sri Lanka Mrs Chandrika Bandaranayake Kumaratunga. Two days after the opening, the LTTE detonated a truck load of explosives within the Galadari Hotel car park which was bordering the WTC. There was significant damage caused to our new building. Our hearts cried out because we knew what we had to endure to have it constructed the first time. We however did not accept defeat but rose from the ashes and reconstructed the WTC to its original glory. The cost of reconstruction was partly compensated by the Government of Sri Lanka and the rest through insurance. We were back in business in no time – 6 months to be exact.
I recall that in the course of negotiations with Mr S P Tao, one minister, in the lighter vein, asked him "Mr Tao, do you ever gamble or go to the casino?" He replied, "I gamble and the biggest gamble I have taken is building the World Trade Center in Colombo. It has eventually paid off".
What I have related about the past has changed dramatically now. Under the present government the climate today for foreign investors is totally positive without any obstacles or barriers. Any investor can be assured of accommodating and receptive BOI intervention with liberal concessions being granted comparable with any emerging Asian economy. With such assistance we have embarked on our second mega project which is Havelock City. Havelock City is Sri Lanka's largest mixed use development comprising over 1,000 residential apartments, club house, commercial complex, two 25 storey office towers and possibly a hotel. It is being developed in 18 acres of land located approximately 6 km from the CBD. The first phase of Havelock City comprising 226 apartments has been completed and sold out. Construction of the second phased with another 228 has commenced with piling works already completed. 80 apartments have already been pre sold. Piling works for the clubhouse and commercial development are in progress. The entire project is targeted for completion by 2015.
I would like to draw your attention to a few points which are specific to doing business in Sri Lanka. The Sri Lankan economy is small comparative to other Asian economies. The GDP of Sri Lanka for 2011 was estimated to be approx US$58.8 billion compared to Singapore which is US$266.5 billion. However, the economy is well established and has good fiscal management. The environment there is more like close-knit where everyone in the business community knows the other. Competition is limited which provides a greater chance for business success. Having been affected by the civil war which lasted for over 30 years, the country is now at peace and starving for accelerated growth, investment and development. This presents new opportunities for investors. The country's legal framework and financial reporting systems are based on international standards and implemented without intervention. Although Sri Lanka may not have the same work efficiency as Singapore where most things take time to get done which is sometimes frustrating, I would like to stress that the task you want to get done can be done. This is what convinced us to proceed with our second investment in Sri Lanka, the Havelock City project. I can assure intended investors that you will find your investment rewarding beyond your expectation. A critical ingredient for this is to have a credible local partner or counterpart with the necessary knowledge of the local business environment. This will go a long way. Have an open mind to how Sri Lanka does business and don't compare it with Singapore.
Finally I would like to warmly invite any of you to visit us in Sri Lanka where we would be happy to provide you with a tour of the World Trade Center and Havelock City, share our experience in detail with you and even guide you.