Nationality of capital

Posted on August 14, 2013  /  1 Comments

Two days back a Facebook debate ensued over the newly inaugurated deep-draft Colombo South Port being described as China’s port by a friend of mine who is in politics. He had said this in an interview to a Sinhala newspaper where the embers of xenophobia are periodically fanned by various parties, but only rarely by liberal-thinking PhD economists. I was motivated to write up my side of the argument in my column in LBO.LK. Though the immediate subject was a container terminal, the issue was foreign investment. And some of the examples came from telecom. The arguments, of course, are of relevance beyond ports.

Will the terminal be less efficient because China Merchant Holdings owns 85 percent of the shares? No. There is no economic basis for placing limits on foreign ownership. Sri Lanka has no limits on foreign ownership of telecom operators; India has. By most measures, Sri Lanka’s telecom sector performs better. Knowledgeable people in India are working hard to lift the illogical foreign ownership limits that are starving these infrastructure industries of essential capital resources.

1 Comment