Why invest in Sri Lanka?
Regional Trading Hub
Sri Lanka is strategically located at the cross roads of both east and west sea routes and serves as the point of entry to South Asia.
According to the Lloyds Register the Colombo Port ranks as No. 01 port of South Asia and the 26th in the World. Features include;
- Throughput has grown at a compound annual rate of 20.3% over the last seven years.
- Transhipment cargo accounts for 72% of throughput.
- 23 major shipping lines and 7 feeder services operate out of Colombo.
- The Colombo Port is computerized and linked to all major freight stations.
The Colombo Port offers:
- An ideal geographical location with minimum deviation from shipping lines.
- Fully equipped berths for late container vessels.
- Excellent feeder network.
- Fast turnaround and round the clock service.
- EDI facilities with two modern container terminals, with state of the art technology and control systems.
- The most competitive rates in the region.
- Multi country consolidation and entrepot cargo.
- Flexibility to meet customer needs.
Work is also in progress to develop and upgrade the port of Galle located in the south and the port of Trincomalee on the north east coast of Sri Lanka.
Bandaranaike International Airport (BIA)
- The BIA is a regional hub of air transportation and is considered to be # 1 in South Asia.
- Major airlines operate frequent flights from BIA to important cities in Europe, Middle East, Far East, Australia, and the Indian Sub Continent.
- Passenger movement at BIA has increased from 2,234,962 in 1995 to 2,880,387 in 2000, a 29% increase.
- The cargo movements at BIA have increased from 76,312 tonnes in 1995 to 127,116 tonnes in 2000 respectively, a marked 76% increase.
- The aircraft movement in the same period has increased from 16,543 to 21,058, a 27% increase.
Global Logistics Hub
Sri Lanka will be developed as a major Global Logistics Hub in the South Asian region for trade, investment, communications, and financial services. Known as the Colombo Freeport, it will provide integrated air, sea and road services linked to state of the art distribution parks.
Key Features of Colombo Freeport
- Distribution parks at air and seaports
- Quality physical infrastructure facilities
- Warehousing & administration facilities
- Superior IT/telecom facilities
- Public/private participation
- One-stop service centre
- Private sector management
- Attractive incentives for operators and users
Key Activities of Colombo Freeport
- Multi-country consolidation
- Regional distribution
- Entrepot trading
- Import/export and value addition
Sri Lanka, an Open Economy
Today, Sri Lanka is ranked as the most liberalized economy in South Asia. Investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100% repatriation of profits.
Total foreign ownership is welcome in almost all areas of the economy, with only a few areas limited or restricted to foreigners.
The 2004 Index of Economic Freedom published by the Heritage Foundation has ranked Sri Lanka 76th out of 155 developed & developing countries, in terms of its "economic freedom" & the quality of its overall policy environment.
Index of Economic Freedom Rankings – South & South East Asia –2004 (Selected Countries)
Country World Ranking
| Korea, South
| Sri Lanka
Source: 2004 Index of Economic Freedom
The Index, published since 1995, includes a broad spectrum of institutional factors that determine the extent of economic freedom in a country.
The economic variables used to measure the level of economic freedom are grouped into 10 broad categories :-
- Trade policy,
- Fiscal burden of government,
- Government intervention in the economy,
- Monetary policy,
- Capital flows and foreign investment,
- Banking & finance
- Wages and prices
- Property rights,
- Regulation, and
- Informal Market
In the EIU's country forecast, Sri Lanka's overall score in the business environment rankings improves from 4.99 for the historical period (1997-2001) to 6.03 for the forecast period (2002-2006). The country's global ranking improves from 49th to 45th and its regional ranking moves from 14th to 13th in comparison to the historical period.
The higher rankings are indicative of the more attractive investment climate in the country, with Sri Lanka's score in most of the categories used to evaluate the business environment improving significantly. For instance, Sri Lanka is ranked highly for its liberal approach to foreign investment, with its global & regional rankings moving from 36th to 27th (out of 60 countries) and 8th to 4th (out of 16 countries) respectively. From a regional perspective, the country's main advantages centre on its open foreign investment regime, its commitment to private enterprise & competition & its liberalized trading environment (where it is ranked 5th).
Strategic Access to Indian markets
The Indo Lanka Free Trade Agreement clearly demonstrates the political goodwill and commitment between India and Sri Lanka. The agreement creates multiple investment opportunities for local and multinational firms based in Sri Lanka seeking to enter the Indian market. The underlying premise of the agreement is to create a free trade area through the complete or phased elimination of tariffs, which will occur over defined phases.
Highly Literate and Cost Competitive Labour Force
The Sri Lankan work force accounts for 35% of the total population. Sri Lanka boasts high levels of education. We have the highest literacy rate in South Asia (92%) and approximately 50% of the students who have completed their higher education are trained in technical and business disciplines. English is widely spoken in the country and is the main language used by the business community. In addition, according to the World Bank Development Indicators 2000, Sri Lanka has the lowest labour cost per worker in manufacturing.
Attractive and Transparent Laws
When you sign an agreement with the BOI, the specific incentives granted to an eligible company, which may include tax holidays or preferential tax rates, exemptions from customs duty and foreign exchange controls, remain valid for the entire life of the enterprise.
Constitutional Guarantee for Investments
Sri Lanka has an enviable record of political credibility in the international arena. All major political parties are committed to free enterprise and individual freedom.
The government has never defaulted nor requested rescheduling of any of its international obligations. Significantly this protection extends to foreign investors.
Bilateral investment agreements supported by a constitutional guarantee, provides strong protection for foreign investment for Sri Lanka.
The safety of foreign investment is guaranteed through the acceptance by two third majority of Parliament of the Constitutional Guarantee of Investment Protection Agreements. Under article 157 of the country's constitution, the agreement enjoys the force of law and no legislative, executive or administrative action can be taken to contravene the provisions of a bilateral investment agreement otherwise than in the interests of national security.
Bilateral investment agreements are valid for 10 years, and are extended automatically unless terminated by either party. If the agreement is terminated investments already made are protected for another 10 years.
A clause in the Sri Lankan constitution ensures the sanctity of the agreements. These agreements provide the following:
- Protection against nationalisation.
- Prompt and adequate compensation if required.
- Free remittance of earnings, capital and business fees.
- Settlement of disputes under the International Convention for the Settlement of Investment Disputes (ICSID).
Bilateral Investment Protection Agreements exist between Sri Lanka and the following countries: Belgium/ Luxembourg, Canada, China, Denmark, Egypt, Finland, France, Germany, Iran, India, Italy, Indonesia, Japan, The Republic of Korea, Luxembourg, Malaysia, The Netherlands, Norway, Pakistan, Romania, Singapore, Sweden, Switzerland, Thailand, the United Kingdom and the United States of America.
Sri Lanka is also a founder member of the Multilateral Investment Guarantee Agency (MIGA). This provides further safeguards against expropriation and non-commercial risk. Investors may also refer disputes for arbitration under the rules of the International Chamber of Commerce.
Property Insurance can be obtained in foreign currency through domestic or foreign insurers.
Private and public investment programmes have been implemented to improve the country's basic infrastructure facilities. Today, Sri Lanka's infrastructure ranks as the best available in South Asia. The government is actively encouraging private sector investment in infrastructure on the basis of BOO (Build, Operate and Own) and BOT (Build, Operate and Transfer). Currently there are private investment projects in power, ports, water sanitation, transportation (highways and rail) and IT.
Development of Sri Lanka's telecommunications sector is based on private sector investments. Significant aspects of this sector are:
- Operations by multiple public and private telephone service providers, including three basic, four cellular and six payphone services, making the industry one of the most competitive in Asia.
- The number of fixed telephone lines installed increased by 84% between 1997 and 1999 as a result of the entry of two wireless loop operators led by Telia AB of Sweden, Trans Asia Telecom Ltd., of Singapore, Trans Atlantic Telecommunications UK and the privatisation of Sri Lanka Telecom Ltd.
- Global telecom giants such as NTT, Ericsson, Telstra, Hutchison Wampoa and Malaysia Telecom are other major operators in the Sri Lankan telecommunications industry.
- Deregulation has resulted in the country's largest ever privatisation initiative, with NTT of Japan purchasing 35% of Sri Lanka Telecom for US$ 225 million.
- The availability of satellite bandwidth through several private operators such as Electroks and Ceycom Global Communications.
||Installed Capacity (MW)
||Units Generated (GWh)
||Price per Unit (Industrial) LKR
|Ceylon Electricity Board
4.60 - 9.00
The construction of 4 major expressways will improve the existing road network. These include the Colombo/Matara, Colombo/Katunayake, and the Colombo/Kandy highways as well as the Colombo outer circular road. Construction work of Colombo/Katunayake expressway has already commenced.
Quality of Life
Sri Lanka leads the South Asian region in terms of human development indicators, with its high literacy rate of 91% placing it way ahead of other South Asian nations & on par with those of South East Asia. Its national health indicators are comparable with those of the developed world.
This is underscored by the relatively high ranking the country has received in terms of GDP p.c. (PPP), which at US$3,530 is higher than that of India (US$ 2,358), Pakistan (US$ 1,928) & Bangladesh (US$ 1,602).
The Human Development Index (HDI) measures a country's achievements in three areas of human development viz: longevity, knowledge & a decent standard of living. Longevity is measured by life expectancy at birth. A combination of adult literacy & the combined primary, secondary & tertiary gross enrolment ratio is used as a measure of knowledge while GDP per capita (PPP) is used to measure the standard of living.
The Human Development Index of some selected countries
Sri Lanka was placed 89th (Medium Human Development Category) out of 173 countries in the Human Development Indicators constructed in 2002, ahead of China (96th), Vietnam (109th), Indonesia (110th), India (124th), Pakistan (138th) & Bangladesh (145th).
||GDP Per Capita(PPP US$) 2000
||Life Expectancy at Birth(Years) 2000
||Adult Literacy Rate (%) 2000
Sri Lanka offers a variety of educational facilities ranging from public and private educational establishments to international schools following British and American curricula. The best secondary schools are of a very high standard. Annually a large number of Sri Lankan students enter top rated universities such as the Ivy League schools in the US, and Oxford and Cambridge in the UK.
Language education in French, German and Japanese is also available through various educational institutions.
Sri Lanka has a number of well-equipped public and private hospitals located throughout the country
A wide range of housing and accommodation is available, to suit different lifestyles.
Sri Lanka offers a wide variety of entertainment from its theatre and movies to the nightclubs and casinos, which are located throughout the capital city, Colombo. Numerous restaurants, cafes and pubs offer a range of both western and eastern cuisines.
Sri Lanka being a multi-religious, multi-ethnic country, has a number of public holidays
The Tourism Act No 38 of 2005 came into effect in October 2007. With the circulation of the new Tourism act, the Sri Lanka Tourist Board Act No 10 of 1966, which was in effect for the past 41 years, was replaced.
In terms of the provisions contained in the new act, the Tourism Development Fund was legally constituted, with 2 main sources remitting finances to the fund. By way of 1/3 of the Airport Tax collections and 1% of the Turnover of all Sri Lanka Tourist Board registered establishments. The Act provided for the setting up of the Sri Lanka Tourism Development Authority, thereby replacing the Sri Lanka Tourist Board.
Marketing and promotion is handled by the Tourism Promotion Bureau. Tourism HRD functions and the Hotels School operations are undertaken by the Sri Lanka Institute of Tourism & Hotel Management. The Sri Lanka Convention Bureau was also restructured as a statutory body like other Institutions to be managed by an independent Board of Management.
The objectives of the Sri Lanka Tourism Development Authority as specified in the Sri Lanka Tourism Act No.38 of 2005 is as follows;
- Develop Sri Lanka as a tourist and travel destination both in Sri Lanka and abroad.
- Advise the Minister in charge of the subject Tourism on matters relating to travel and the tourism industry, within the policy formulated by Cabinet of Ministers, in relation to this sector;
- Provide guidance to the Sri Lanka Tourism Promotion Bureau to develop, promote and market Sri Lanka as a tourist and travel destination both in Sri Lanka and abroad;
- Provide guidance to the Sri Lanka Institute of Tourism and Hotel Management to undertake human resource training and development activities;
- Work towards the enhancement of the tourism and travel sectors in order to secure a contribution for the expansion and development of the Sri Lanka economy;
- Develop and promote adequate, attractive and efficient tourist services, inclusive of the hospitality industry in a sustainable manner;
- License and accredit tourist enterprises in order to develop, enforce and maintain locally and internationally accepted standards in relation to the tourism industry and other related industries;
- Encourage persons or bodies of persons in the private sector to participate in the promotion of the tourism industry and the promotional and training activities connected with such industry;
- Do all such other acts as may be necessary or conducive to the attainment of all or any of the above objectives.
The new Tourism Boards set up under the new Tourism Act are
The Sri Lanka Tourism Development Authority
The Sri Lanka Tourism Promotion Bureau
The Sri Lanka Institute of Tourism and Hotel Management
The Sri Lanka Convention Bureau
Other features include;
Tourism Development Fund
Tourism Advisory Committee
Commissioner for Tourism Administration
Tourist Police Division
Courtesy: Sri Lanka Tourism Development Authority