Colombo, Sri Lanka: Two years after the economic crisis and the subsequent Aragalaya protests, Sri Lanka continues to permit contentious foreign direct investment (FDI) without proper oversight. An investigation by Asia news post has revealed that the Board of Investment (BOI) of Sri Lanka is not thoroughly scrutinizing the sources and origins of funds brought into the country by businesses or corporates that are under investigation elsewhere in the world.
RTI Findings
A Right to Information (RTI) query filed concerning the investment by telecom giant Lycamobile uncovered significant lapses. The query was filed as part of an year-long investigation funded by the International Center for Journalists (ICFJ).
The BOI admitted it is not currently investigating the origins and methods of foreign funds. Instead, it claims that overseeing the inflow of financial resources during foreign investments falls under the responsibility of commercial banks, which is beyond the BOI’s jurisdiction.
Controversial Investments
Lycamobile, despite being involved in major tax fraud cases in the UK and France, continues to invest heavily in Sri Lanka. In 2020, Lycamobile faced a £100 million fine for tax fraud in the UK, and in 2023, a French court imposed a 10 million euro penalty for tax evasion. These controversies have raised serious questions about the sources of funds being invested in Sri Lanka.
Expert Concerns
Several experts have criticized the BOI’s lax oversight. An unnamed economist warned of potential long-term impacts, suggesting that future investigations into money laundering and tax evasion could hinder investment efforts if there are changes in Sri Lanka’s government. The economist also highlighted the risk of increased mafia activities, leading to higher levels of crime and a decline in cultural standards.
Professor M. Ganesamurthy, a Senior Lecturer at the University of Colombo, emphasized the importance of scrutinizing foreign investments. He pointed out that countries like Singapore rigorously vet new investors, including their backgrounds, past performance, involvement in legal disputes, and corporate history. In contrast, Sri Lanka lacks such rigorous processes.
Need for Robust Measures
Professor Ganesamurthy urged the Sri Lankan government to adopt a comprehensive mechanism to assess foreign investments, ensuring transparency and accountability. He suggested that the BOI and the Central Bank of Sri Lanka should play crucial roles in scrutinizing the financial sources of foreign investments. Implementing robust measures to evaluate the legitimacy and potential risks of each investment is essential to safeguard Sri Lanka’s economic integrity and national security.
If the sources of funds entering Sri Lanka are not properly scrutinized, there is a risk of a black money market emerging, similar to what has occurred in some African countries during economic crises. It is crucial for Sri Lanka to implement stringent measures to ensure the legitimacy and safety of foreign investments, protecting its economic integrity and national security.
Lycamobile’s Global Operations
Lycamobile operates extensively across the globe, with multiple entities in the UK, France, the USA, Luxembourg, Poland, Austria, Cyprus, Denmark, Germany, Switzerland, and Uganda. In the UK, the Lyca Group was fined £100 million in 2020 for alleged VAT fraud involving its subsidiary companies. During the period from 2011 to 2016, Lycamobile’s founder, Alliraja Subhaskaran, donated approximately £2 million to the ruling party in England, reportedly influencing the Conservative Party government to increase financial aid to war-affected communities in northern Sri Lanka.
In Sri Lanka, Lycamobile is investing through various entities, including Ben Holdings (Private) Limited, Asia Media Global Private Limited, Athavan Media (Pvt) Limited, EAP Broadcasting Company Limited, South Eye (Private) Limited, Lyca Productions Lanka (Private) Limited.
Awaiting Responses
Despite repeated inquiries, Lycamobile did not respond to requests for comment, and a response from the BOI is still awaited.