Firms venture abroad owing to high risks in SL

Increasingly local firms are eyeing investment opportunities beyond Sri Lankan borders to rise above the many risks – especially political – that are increasingly more difficult to discern and deal with, observers say.

After all, volatility in Sri Lanka may not affect stocks and bonds in Asia, or in industries in Africa, so investing in that part of the world may minimise and offset the risks of investing at home.

With high-speed Internet and social media access around the world, it’s easy for entrepreneurs to treat the world as just one big homogeneous market, and project their business with scale accordingly, a company CEO who is looking to invest in Cambodia explained to the Business Times.

He also noted that as many firms with value-generating technological or managerial capabilities have invested abroad and shown, their shareholders and the host country’s citizens both stand to benefit.

Now more than ever, there is a strong tendency towards intra-regional investment in Asia and Africa as local firms seek to replicate the success in their home country by investing across the national borders.

Many companies have been successful in investing in the African continent. They are taking advantage of their expertise in agriculture, renewable energy etc to set up operations in African countries.

A recent example is LOLC’s Browns Investments PLC which bought control of a bio-fuel producing sugar farm in the West African coastal state of Sierra Leone. It is one of the largest sugarcane agricultural projects in the African continent. Many others are lining up to channel investment from here to African countries, especially in East and West Africa.

“Partnerships are important for investors, as they can contribute to reducing the costs of complex local administration, and for legal reasons in some contexts. We can see that many foreign investors had built partnerships with domestic companies in Sierra Leone,” an official from Sierra Leone Investment and Export Promotion Agency told the Business Times last month in Freetown, Sierra Leone.

LAUGFS Gas PLC plans to venture to Myanmar and Kenya in East Africa to supply LPG. “Mombasa in Kenya is a gateway to other landlocked East African countries. We are exploring venturing to Mombasa as well. Initially we want to supply in bulk,” an officials told the Business Times recently.

Asia is another hotspot. The LOLC Group’s financial sector, especially in the micro financing area has grown by leaps and bounds through overseas tie-ups. Apart from Prozac in Cambodia which the company managed for the last one and half decades, LOLC also has another micro financing arm In Cambodia called LOLC Cambodia. The group also operates in Myanmar, Pakistan, the Philippines and Indonesia in the micro financing space. LOLC’s model in venturing overseas in micro financing has been two emerging markets with high population. According to officials this group is eyeing a few other ventures in Asia and Africa. “We want to start a venture in India and also in Zambia. We will be going to these places as usual with strong partners,” an official told the Business Times. Now LOLC is harnessing three quarters of its profits from abroad.

Expolanka Holdings PLC as a result of the expanding logistics opened its Malaysian office last November. Expolanka already has offices in their logistics sector in Vietnam, Cambodia, Philippines, Hong Kong, Myanmar and China. There is a reason for this. Most apparel buyers, which Expolanka services are moving towards Southeast Asia. With the shifting exports, it makes sense for the company to open offices in the intra-Asia region.

Commercial Bank’s branch in Bangladesh adds 15 per cent to the bank’s bottom line. In addition to the branch in Bangladesh it has a joint operation in the Maldives and is operating a micro financing license in Myanmar. In the last two years the bank ventured out to Myanmar and the Maldives.