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UPDATED: 08 Feb 2008 GMT
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Letters and Speeches

Ambassador Blake's Address at the OTC Conference Breakfast, Regarding Sri Lanka Exploring New Offshore Oil and Gas Opportunities

Good morning.  I am here in Houston today to voice my support for Sri Lanka's offshore oil development; to describe the general economic and political environment in Sri Lanka, and to tell you about the strong relationship between the United States and Sri Lanka.  I will also tell you about the security situation, which I think you will agree is of less concern than in many areas in which you operate.

U.S.-Sri Lanka Relationship

Ladies and Gentlemen, relations between the United States and Sri Lanka are very good. The United States and Sri Lanka have been friends for more than 50 years.  

I meet with President Mahinda Rajapaksa and members of his cabinet on a regular basis.  I have met numerous times with my friend, Minister Fowzie, to discuss offshore oil development, among other topics.  Additionally, my staff maintains productive and warm relations within the ministries relevant to your endeavors.

America is a committed partner in Sri Lanka’s development. U.S. assistance has totaled more than $1.6 billion since Sri Lanka’s independence in 1948, including $134 million to help Sri Lanka recover from the tsunami that struck in 2004. 

Additionally, the US Trade and Development Agency, the US Department of Commerce, and our Minerals Management Service have all assisted or are assisting Sri Lanka to develop its offshore oil and gas reserves in accordance with international standards. 

I am no oil expert.  But I understand from US government experts that Sri Lanka's offshore resources may be substantial.  And if prospects in Sri Lanka brought you in for this 8am breakfast meeting, I am all the more confident that the experts are right!  So let me give you my perspective on the investment and operating environment in Sri Lanka.

Investment and operating environment

Positives:

Sri Lanka has a vibrant, diversified market economy.  It competes with the best, in a variety of business sectors.

Many people still think of Ceylon, an old name for Sri Lanka, when they speak about the world's best teas.  But Sri Lanka is not just an agricultural economy anymore.  Its high-end garment production and information technology services are established and growing components of an economy that grew by over 7 percent last year.

If you look at your clothing labels, many of you wearing globally recognized brands, such as Polo, Ralph Lauren, Nike or Victoria's Secret, will find your clothing was made in Sri Lanka.  These and other leading brands have chosen Sri Lankan suppliers to make their most cutting-edge, high-tech products -- including items like Olympic swimsuits, and sails for America's Cup yachts.  I know the Sri Lankan garment industry's leaders and I can tell you that they are astute, talented, and committed to excellence.  They are competing, successfully (in a cutthroat market), and are thriving.

Stock exchanges in the United States use software developed in Sri Lanka.  While the world thinks especially of India for Business Process Outsourcing, an increasing number of companies look to Sri Lanka to provide very sophisticated accounting, legal, and computer programming services.

Indeed, the Chartered Institute of Management Accountants, UK, one of the world's largest professional accounting bodies, has its second largest contingent in Sri Lanka.  In addition to working on their own shores, Sri Lankan accountants and analysts are running numbers for international companies in Australia, New Zealand, the UK and the Middle East in banking, industry, and other services.  Everywhere I go, I meet Sri Lankans who provide significant academic or commercial contributions internationally.

For you potential investors, I want to assure you that Sri Lanka has a reputation for high quality employees.  It is proud of its high literacy rates.  While it does not have a work force experienced in oil production techniques, you will find many bright candidates quick to learn, and dedicated to their work.

Sri Lanka seeks investment in many industries and services.  It particularly wants to see development of offshore petrochemical resources.  It offers tax incentives and duty-free importation of equipment required for the installation of offshore rigs.  The US Trade and Development Agency has assisted Sri Lanka in formulating some of its initial plans for utilizing its offshore resources, and is providing another grant to help draft Sri Lanka's regulatory structure governing offshore oil and gas production, environmental standards, and safety.

Should you wish to invest in Sri Lanka for exploration or any ancillary services for your offshore work, you will most likely work with Sri Lanka's Board of Investment.  The BOI offers incentives for businesses setting up in Sri Lanka.  My Embassy in Colombo enjoys close and good contacts with the BOI and stands ready to work with any interested U.S. company to help guide you through this process.

Concerns:

Ladies and gentlemen, an important part of my job as Ambassador to Sri Lanka is not only to tell you about opportunities, but also to work with our friends in the Sri Lankan government to address the challenges that American companies face in Sri Lanka.  We have outlined these in our Country Commercial Guide which you can find online on the State Department's web site (www.state.gov). They include the following:

Contract sanctity is not always honored, and contractual obligations, including payments, are sometimes delayed or abrogated.  The World Bank's International Finance Corp ranks Sri Lanka 90th out of 175 countries on contract enforcement.  In part, this is because Sri Lanka's legal system can be subject to lengthy delays, making recourse to the courts difficult.

Bureaucracy entangles many a good venture in Sri Lanka.  The World Bank ranks Sri Lanka 89th on overall ease of doing business.  Should you decide to seek the opportunity to develop Sri Lanka's offshore resources, you will need to consult with, and gain approvals from, a number of ministries and government bodies.  Although most of your work will be offshore, and therefore might involve fewer approvals, auxiliary services onshore could expose you to additional requirements.

Sri Lanka has over 50 Ministries, so it is at times unclear which office has responsibility for a particular issue.  When issues become controversial, we sometimes find ministries passing the buck among one another, making it difficult to resolve problems.

I fully expect that Minister Fowzie and Director General de Silva will endeavor to minimize such impediments in developing Sri Lanka's offshore oil resources.

On a more positive note, the risk that Sri Lanka would expropriate your investments is quite low.  While some significant contractual disputes remain between US companies and Sri Lanka, no current disputes revolve around any government takings.

I've given you a list of concerns, as well as many positive attributes of doing business in Sri Lanka.  On balance, I think you will find that Sri Lanka is a country you can do business in.

Security concerns for Americans and foreigners in general:

To conclude, I want to say a word about the security situation in Sri Lanka. 

Travel for Americans to Sri Lanka generally is safe, provided they avoid the conflict areas in the North and East, which are far removed from the commercial operations of foreign businesses.  The United States has designated the Liberation Tigers of Tamil Eelam as a foreign terrorist organization.  However, the LTTE has been very careful not to target American citizens or American companies.  Since your activities would take place far offshore or in Colombo, I don't anticipate that the conflict will pose a threat to your endeavors.  The Embassy does warn U.S. citizens against traveling or living in the North and East of the country, but that is because of the higher level of fighting in those areas, not because Americans are targeted.  Having served previously in Algeria, Nigeria and other countries with significant security problems, I know that the oil and gas industry has extensive experience operating in countries where security is a challenge. 

In contrast to many areas where you work, you will find Sri Lanka to be a delightful place to visit and conduct business.  While we should keep our eyes out for danger anywhere in the world, your employees might prefer Sri Lanka over many alternative locations you offer. 

In conclusion, I encourage you to take a serious look at the opportunities in Sri Lanka's offshore oil and gas resources.  I and my staff at the Embassy stand ready both to assist you in further understanding Sri Lanka and its potential for your companies, and in working with you should you decide to invest. 

Thank you.