‘The gateway to South Asia’: Singapore businesses set up shop in Sri Lanka

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By 2018-02-14

With more than 40 years in Sri Lanka, Singapore brand Prima is a household name in the country. The company, which entered the country in 1977, started out as a flour mill but has since grown from strength to strength, expanding into baking industry training, feed milling, commercial poultry farming and even IT services. Today, it is one of Sri Lanka's largest foreign investors.

When it first tried to make inroads into the country, Prima's group general manager for Sri Lanka Tan Beng Chuan recalled that people felt it was a risky venture. We were the first one from Singapore to come in," he said, explaining how they had entered at a time when the country's economic policies were becoming more open.

"We had already been supplying flour to the country, and we knew the Sri Lanka market for a long time.
"Through this time, we knew the government has never defaulted on their commitment."

Over the years, the 71-year-old Mr Tan has borne witness to Sri Lanka's development – and the emerging opportunities the country offers for Singapore companies. "There are many more skyscrapers now, and construction going on in the last few years," he said. "It is very much the same as in Singapore, in the old days."
Over the years, more Singapore companies have been venturing into Sri Lanka. Today, there are about 90 Singapore companies in the country.

An upcoming Free Trade Agreement (FTA), which was signed by Singapore and Sri Lanka over the course of Prime Minister Lee Hsien Loong's official visit to Sri Lanka from Monday (Jan 22) to Wednesday, is a boon for these companies, and an encouraging development for those looking to enter.

A GATEWAY TO THE REST OF SOUTH ASIA
When looking to expand its anchor brand PastaMania into the South Asia region, Singapore-based investment company Commonwealth Capital opted to open its flagship outlet in Sri Lanka's commercial capital Colombo.
Describing the country as the "gateway to South Asia", the company's executive director of international business Wilson Lim explained that Sri Lanka's per capita income is double that of India and triple of Bangladesh.

"With a population of more than 1 million people, Colombo also serves as a very good test bed for us to bring in our concepts and acclimatise our brand before expanding into the larger South Asian nations," he added. "
"It helps us to understand the cultural nuances of the South Asian countries, and localise the menu to get it right."
The same goes for the founder of the Star Anise Boutique Hotel Vigneswaran Mohan, who saw a niche in the Sri Lankan market for accommodation catering to luxury backpackers.

"When I came here six years back, I saw there were bunk beds catering to the low-end backpackers, and the high-end hotels," he explained. "This concept was doing quite well in Singapore, so I thought, why not?"
Established in 2016, his capsule hotel can accommodate up to 44 guests and boasts clean toilets and comfortable beds.
Together with his Sri Lankan partner, he hopes to set up two more hotels, a travel agency and a "Singapore-style hospitality corporate training institute".

"Sri Lanka is booming, and there are a lot of opportunities here to try out a new industry," he said, pointing out that infrastructure in the country has improved significantly since the end of the civil war in 2009.
"It's strategically located between Southeast Asia and the Middle East, and in a way, it reflects South Asia generally, but with less red tape," he added. "So if you want to do something in India, try it in Sri Lanka."

WORKING AROUND THE CHALLENGES
The companies also highlighted the challenges they faced.
Commonwealth Capital's Mr Lim pointed out the high tariffs and copious amount of documentation required to import food items into Sri Lanka.

"What is in the food, do you have this test report ... so you really need to have strong local partners who can help smoothen the whole process." To that end, Mr Lim has been working around the challenges by looking at what ingredients can be sourced locally.

"We are looking at leveraging on local ingredients, vis-a-vis proprietary items like pasta and tomato sauce," he said.
"Sri Lanka is very rich in seafood items, so why can't we work on a pasta that's related to say, Sri Lankan crabs?" Meanwhile, Star Anise's Mr Vigneswaran described getting skilled labour as a "very big problem", recounting how, three months after he opened, he had to fire his entire housekeeping staff when he caught them stealing from the guests.
He explained: "Quite a bit of the Sri Lankan population is overseas, and people here aren't fully trained, especially in the hospitality industry.

"That's why we want to set up the institute to train people to work at different levels, whether it's hospitality, tourism, office or admin."

Nonetheless, the companies are looking forward to the upcoming signing of the FTA.
"Singapore businesses will be at an advantage compared to others," said Star Anise's Mr Vigneswaran. "The Chinese and Indians are also here. If we have an FTA, Singapore businesses can come in, and there's also an incentive for local businesses to work with them." "From the perspective of reducing taxation, customs duties and tariffs for our food items coming into
Sri Lanka, that's going to be highly beneficial for us," added Commonwealth Capital's Mr Lim.

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