The Board of Investment of Sri Lanka (BOI) shall function as the apex agency of the government of Sri Lanka identifying and promoting and facilitating foreign direct investment by providing services to investors transparently and efficiently (www.winne.com).Its main objective is to attract Foreign Direct Investment and also domestic investment. The BOI assists investors at all stages of the process, from the application stage to the commercial operation.
The Sri Lankan government offers a wide range of investors. In that process, BOI performs a vital role as it is the foremost authority which carries out the key activities relevant to those offers. Therefore, it is essential to relevant to those offers. Therefore, it is essential to recognize the history of formation of BOI, Act of BOI and functions carrying out by them to acquire a better perceptive on the organization. This chapter is mainly concerned on that aspect to elaborate those details
3.2 The structure and the involvement of BOI
The BOI is well structured to function as central facilitation point for investors. It operates as an autonomous statutory body that is directly responsible to the president of Sri Lanka. It has a board of directors who are drawn from the private and public sectors and assisted by a ministerial committee on investment promotion.
The BOI is the one and only statutory body responsible for promoting and facilitating investment in Sri Lanka. Today there are investors from over 25 countries operating under the purview of the BOI with interest ranging from electronics, electrical products, textiles, garments, fishing and other marine industries, minerals extraction, infrastructure development, contributing to our national development.
The BOI operates as the one shop to the investors which provides valuable advice and assistance at every stage of the investment process by providing infrastructure like telecommunication, electricity, water facilities, assisting in site selection, advice on factory building and environmental aspects, assisting in import/export clearances and recommending visas for emigrant employees and investors(constructor,2003)
3.3 The role of BOI
Focusing on investments is the utmost and main activity which is successfully performed by BOI. It is utmost important to evaluate the benefits and significance which the country obtains fundamentally for its economical and social development. Several impacts are capitalized when the role of BOI is observed, on the progression of country.
Driving the economy towards a newly industrialized country
Generating Employment for local labour force
Growth prospects for Sri Lanka
Removing obstacles to Development
Building materials supply and technology transfer
Assisting in policy formulation
Assisting Development appraisal by creating a reliable database
3.4Implementation procedure for BOI
3.4.1 Site selection
Export Processing Zones or Industrial Zones:-If the investor wants to locate a project within one of the BOI administered Export Processing Zones (EPZ), he or she will be referred to the respective Director of the Zone or Zone Manager.
The EPZs have provisions for the supply of potable water conforming to World Health Organization standards, a common wastewater treatment plant, and electricity supply and telecommunication facilities.
Outside the Zones:-Enterprises intending to locate outside the EPZs should contact the Project Implementation Division. This Division is able to provide quick and detailed information
3.4.2 Site approval
Site locations are approved by the Engineering Approvals Department. The relevant guidelines and recommendations pertaining to site approval are included in the formal letter of site approval issued by the Director of Engineering Approvals to the investors.
3.4.3 Environment protection license
Environmental Protection Licenses (EPL) is issued by the Environment Department, according to the type of project. These licenses should be obtained prior to the start of operations. The relevant inspection and license fees will be levied by the BOI. A guide on environmental norms together with other information is made available to the investor prior to the submission of applications.
3.4.4 Building plan approval
The Engineering Approvals Department grants building plan approval. In order to obtain such approval, enterprises should submit blueprints of architectural, layout and service plans, which are certified by a chartered architect/engineer
All factory buildings constructed in Sri Lanka must conform to the Factories Ordinance, especially those requirements regarding health, sanitation, welfare and safety of workers. The BOI's General Guidelines for Factory Buildings can be obtained from the Promotion Department.
Application received
2006
2007
2008*
New
449
521
432
Expansions
47
70
30
Total
496
591
462
Table: 3. Application received
(Source: www.boi.lk)
Approvals
2006
2007
2008*
Number of projected Approved New
305
564
416
Expansions
38
73
34
Total
343
637
450
Table: 3. Application Approvals
(Source: www.boi.lk)
Agreement signed
2006
2007
2008*
Number of projected Approved New
220
254
213
Expansions
25
44
25
Total
245
298
238
Table: 3. Application signed
(Source: www.boi.lk)
3.4.5 Purchase of construction materials
Companies approved under Section 17 of the BOI Act are entitled to purchase duty-exempt building materials for the purpose of plant/factory construction. Duty exempt materials must be first approved by the Appraisal Department and certified by the Engineering Department.
3.4.6 Purchase of capital equipment and raw materials
In order to obtain duty free approval, each enterprise must submit a detailed list of project related capital equipment, spare parts and raw materials required for operational purposes to the Appraisal Department
3.4.7 Import of project related goods and export of finished goods
The Investor Services Department will liaise and assist the investor in the clearance of goods for both import and export.
Import(Mn)
2006
2007
2008
Total (Rs)
327175
383014
400453
Total (Us$)
3149
3463
3698
Raw material (Rs.)
257,222
291,526
301,279
Capital Goods(Rs.)
65281
86436
94091
Other Materials(Rs.)
4672
5052
5083
Average : US$
103.9
110.6
108.3
Table: 3. Import
(Source: www.boi.lk)
Export
2006
2007
2008
(Rs.Mn.)
488548
571052
575819
(US$.Mn)
4702
5163
5317
Table: 3. Export
(Source: www.boi.lk)
3.4.8 Utilities and telecommunications
Investors locating outside the Export Processing Zones may make a formal request to the Project Implementation Department to acquire infrastructure facilities such as electricity, water and telecommunications. The provision of infrastructure facilities within a Zone is the responsibility of the Zone Manager
3.4.9 Visas and work permits
Organizations intending to employ expatriate personnel must obtain a letter of recommendation from the Appraisal Department. This letter must then be submitted to the Department of Immigration and Emigration to obtain necessary visas and work permits. Visas can be renewed on the recommendation of the Appraisal Department. It is important to note that investors should arrive in Sri Lanka using an entry visa and not by a visit/tourist/business visa.
3.5 Money transaction method with BOI approved project
3.5.1 Letter of credit
In simple terms, a letter of credit is a bank undertaking of payment separate from the sales or other contracts on which it is based. It is a way of reducing the payment risks associated with the movement of goods. Expressed more fully, it is a written undertaking by a bank (issuing bank) given to the seller (beneficiary) at the request, and in accordance with the buyer's (applicant) instructions to effect payment - that is by making a payment, or by accepting or negotiating bills of exchange (drafts) - up to a stated amount, against stipulated documents and within a prescribed time limit.
So far a description has been provided of the basic types of letters of credit used to cover the shipment of goods. In addition to these basic types, there are various specialized formats which meet particular sets of circumstances.
Red Clause Letter of Credit
Transferable Letter of Credit
Back-to-Back Letter of Credit
Deferred Payment Letter of Credit
3.5.2 Use a letter of credit
The need for a letter of credit is a consideration in the course of negotiations between the buyer and seller when the important matter of method of payment is being discussed. Payment can be made in several different ways: by the buyer remitting cash with his order; by open account whereby the buyer remits payment at an agreed time after receiving the goods; or by documentary collection through a bank in which case the buyer pays the collecting bank for account of the seller in exchange for shipping documents which would include, in most cases, the document of title to the goods. In the aforementioned methods of payment, the seller relies entirely on the willingness and ability of the buyer to effect payment.
When the seller has doubts about the credit-worthiness of the buyer and wishes to ensure prompt payment, the seller can insist that the sales contract provides for payment by irrevocable letter of credit. Furthermore, if the bank issuing the letter of credit (issuing bank) is unknown to the seller or if the seller is shipping to a foreign country and is uncertain of the issuing bank's ability to honour its obligation, the seller can, with the approval of the issuing bank, request its own bank - or a bank of international repute such as Scotia bank -to assume the risk of the issuing bank by confirming the letter of credit.
3.6 Steps in an import letter of credit transaction
3.6 .1 Sales contract
The sales contract is the formal agreement between the buyer and seller specifying the terms of sale that both parties have agreed upon. The contract should include: a description of the goods; the amount; the unit price; the terms of delivery; the time allowed for shipment and presentation of documents; the currency; and the method of payment.
3.6 .2 Application and agreement
The bank's letter of credit application and agreement forms, when executed, constitute a payment and reimbursement contract between the issuing bank and its customer. It is also the customer's instruction to the issuing bank. The letter of credit must be issued exactly in accordance with the customer's instructions; therefore, it is important that the application be completed fully and accurately, so as to avoid the inconvenience of having to have the letter of credit amended. The agreement constitutes an undertaking by the customer to reimburse the issuing bank for drawings paid in accordance with the terms of the letter of credit, and normally takes the form of an authorization to debit the customer's account.
3.6 .3 Issuance of the letter of credit
The issuing bank prepares the letter of credit as specified in the application and forwards it by teletransmission or airmail to the advising bank, (a branch or correspondent of the issuing bank). The issuing bank instructs the advising bank as to whether or not to add its confirmation, as per their customer's instructions.
3.6 .4 Advising
The advising bank forwards the letter of credit to the beneficiary (seller) stating that no commitment is conveyed on its part. However, if the advising bank has been asked to confirm the letter of credit and agrees to do so, it will incorporate a clause undertaking to honor the beneficiary's drafts, provided the documents evidence that all terms and conditions of the letter of credit have been complied with.
Figure: 3. Import
(Source: www.scotiabank.com)
3.7Step in an export letter of credit transaction
3.7.1 Shipment of goods
Upon receiving the letter of credit, the beneficiary should examine it carefully and be satisfied that all the terms and conditions can be complied with. If this is not possible, the beneficiary should request the applicant to arrange an amendment to the letter of credit. Once completely satisfied, the beneficiary will then be in a position to assemble and ship the goods
3.7.2Presentation of documents by beneficiary
The beneficiary prepares an invoice in the number of copies required, with the description of goods shown exactly as stipulated in the letter of credit. The beneficiary obtains the bill of lading and/or other transport documents from the carrier and prepares and/or obtains all other documents required by the letter of credit. These are attached to the draft, drawn on the bank indicated and at the term stipulated in the letter of credit, and are presented to the advising/confirming/negotiating bank.
3.7.3 Sending documents to the issuing bank
The advising/confirming/negotiating bank checks the documents presented by the seller against the letter of credit. If the documents meet the requirements of the letter of credit, that bank will send them to the issuing bank, claiming reimbursement and paying the seller.
3.7.4 Delivering documents to the applicant
The issuing bank will also check the documents for compliance and then deliver them to the applicant either against payment or as an undertaking to pay on maturity of the drawing under the letter of credit.
Figure: 3. Export
(Source: www.scotiabank.com)
3.8 Payment procedure
3.8.1 Payment
On presentation of the documents called for under the letter of credit, provided they are in compliance with its terms, the advising/negotiating bank, in the case of an unconfirmed letter of credit, may pay/negotiate the draft.
In the case of a confirmed letter of credit, the confirming bank is obliged to honour the drawing without recourse to the beneficiary.
3.8.2 Reimbursement
The advising/confirming/negotiating bank will claim reimbursement from the issuing bank.
3.8.3 Settlement
On receipt of conforming documents, the issuing bank will also be responsible for checking documents and will charge the applicant's account under the terms of the letter of credit application and agreement forms, effecting reimbursement to the negotiating bank.
3.9 Summary
The BOI had been in existence since 1978, and it was established as the greater Colombo Economic commission, (GCEC). After 14 years of existences, in 1992, the commission was reconstituted as the BOI. Its principal activity is to function as a center factitious point for investors. The objective is to enable foreign investors who are interested in doing business in Sri Lanka, to facilitate them in every way in establishing an investment. It is to act as a one-stop shop most of the time. Basically foreign investors could come here, find out everything about the opportunities for investment, and more importantly, the facilities and incentives for the foreign investment.
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CHAPTER FOUR
4.0 RESEARCH METHODOLOGY
4.1 Introduction
Proper data collection and advance methods to analyze data are very important to achieve a tone worthy outcome in a research. The previous chapters analyze and synthesize the literature on material procurement in the construction industry and BOI procedure and then move to reach methodology. This chapter describes the research process of this study. The research process includes research design, sampling technique, data collection and data analysis techniques. Surveys are selected to identify the significant impediments for the effective delivery of materials in BOI project in the construction industry.
4.2 Research design
Research design is the plan for getting from the research question to the conclusion. It deals with the logic if scientific inquiry, a strategy for testing hypothesis or in interpretive work, for the research in order to achieve a successful completion. Identified and analysis reason and causes of delaying in delivery of materials in project with specific reference to BOI approved project and finally to develop model for effective delivery of materials in BOI projects in the construction industry. Therefore it is decided used in Sri Lankan construction industry and to identify the under BOI approved projects which were completed project and on-going project to determine implication of delaying in delivery of materials of BOI project. According to the nature of the study and comparing similar researches it was decided to go for surveys with questioner survey and few structured interviews to develop a model for effective delivery of materials.
4.3 Research strategy and technique
A server design was a systematic method of collecting primary data based on a sample. Survey provided a relatively quick and efficient method of assessing information about the population. The main weakness of a survey is that it often did not demonstrate causality. Surveys were sometimes criticized as a 'soft option' among research designs. But this could be overcome by selecting the option for exact research purposes.
The purpose of survey was captured the main characteristics of the population at any instant. Since the research in an empirical nature rather than theoretical and to analyze the problem in a broad way due to the involvement of number of stake holders in the studies, survey is selected as the best strategy rather than want for a case study or any other strategies.
Survey
Questionnaire
Interview
Closed
Open
The Figure 4.1 shows and explains the techniques under survey research strategy. Since this study aimed to identify the significant impediments to develop a guideline for delivery of material in BOI project in a quantitative manner, the outcome of research technique should be easy to analyze, quantify, and compare. So the survey would be close ended and answers fit in to a standardized format. Therefore, initially questionnaire survey was selected as appropriate technique to carry out the research study. But in order to study and understand the context in advance and to classify results, few structured interviews would be among selected expertise in the research area.
Figure: 4. : Techniques of survey approach
4.4 Data collection and analysis
As mentioned above, the modes of data collection would be through questionnaires and interviews. Data collection steps would as follows.
4.4 .1 Data collection
The research conducted a pilot survey and a detailed survey to collect data from the construction industry in Sri Lanka.
Pilot survey
The main objective of the pilot survey was to validate and prepare the detailed questionnaire in a consistent manner to achieve objectives successfully. Through the pilot survey more performance indicators would be identified and could get a good support to introduce the conceptual BSC. Furthermore, pilot survey helped to prepare the detailed questionnaire which will be used in the detailed survey.
Questioner survey
This detailed questionnaire survey will be the most important part of this data collection. The detailed questionnaire survey would be conducted to refine the conceptual BSC and identify key Performance indicators under each perspective. Questionnaire has been prepared with the guidance of pilot survey and distributed among practitioner.
Project
Ongoing Project
Finished Project
Samples
10 respond out of 12
10 respond out of 12
Table: 4. Number of respondents in questionnaire Survey
Sampling
Sampling can be defined as the method of selecting a representative sample from a population. But selecting most appropriate sample for the study is quite difficult (Tan 2002). In case of this research, sampling will be done using the information collected by the pilot survey.
Figure: 4. Number of respondents in questionnaire Survey
The population of the research was consisted with 2 samples and equal numbers of participants from each sample were used to collect the required data through the questionnaire survey.
Structured interviews
The key person was selected from the BOI project involving parties, such as Client, contractor Consultant, Supplier and BOI. All of these parties interviews based on developed the suitable model for BOI approved project.
Number of interview person
Client
One
Contractor
One
Consultant
One
BOI
Three(different department)
Supplier
One
Table: 4. Number of interview person
4.4 .2 Data analysis techniques
The questionnaires would be used liker scale (0 to represent less important and 5 to represent most important) and the results received by the survey would be analyzed using Ms Excel.
Mean Weighted Rating
A mean weighted rating for each factor is computed to deliver an indication of the importance level, usage level and future implementing probability to give the interpretations of each factor. The same tool has been used by the (Wijerathne, 2008)
Where,
Vi - Rating of each Performance indicator
Fi - Frequency of Responses
n - Total number of responses
Relative Importance Index
Questionnaire data was analyzed by using the Relative Importance Index method. Thus a ranking is expected relatively to the importance of such roles and skills here Relative Important Index (RII) was used as the tool for the analysis. Relative Important Index (RII) was be used as the tool for the analysis. The same tool has been used by the Nkado (2001), Jhonson A.J.J (2000), Jeyamathan (2005), etc. for the analysis of their structured questionnaires to prepare list of skills and roles according to the rank obtained by the each and every role and skill.
Relative Importance Index = Σ (Vi. Fi) x 100
A.n
Where,
Vi - Rating of each Performance indicator
A - The highest weighting
n - Total number of responses
Fi - Frequency of Responses
4.5 Summary
This chapter discussed the methodology and the design of this particular research. The survey method figured out as the best research approach for the research and questionnaire survey is considered as the best method to collect data from the construction industry practitioners.
Questionnaire distribution
Select survey target
Questionnaire design
Identified background and elements which served as foundation for questionnaire design
Sources of Information
Journal papers
Conference papers
Books
Literature Review
Objectives of research
Interviews
Discussion and conclusion
Analyze findings
Figure: 4. : Research Process
