Sri Lanka’s Investment Policy

August 10, 2010 at 6:29 pm

Foreign ownership is welcome in almost all sectors of the economy, except a few regulated areas. Investors are permitted to repatriate 100% their profits and exempted from most of the exchange control regulations. They can also enjoy preferential tax benefits and constitutional guarantees on their investment.

Sri Lanka: A Regional Trading Hub

Being strategically located at the cross roads of east-west sea routes and serving as an entry point to the vast Indian market, Sri Lanka is well poised to become the trading hub in the region. According to the Lloyds Register, the Port of Colombo ranks the no. 1 port in South Asia and 26th in the world. While 23 major shipping lines and 7 feeder services operate out of Colombo, the port is computerized and linked to all major freight stations.

A number of major airlines operate flights from Bandaranaike International Airport (BIA), Colombo to many important cities in Europe, Middle-East, Australia and Indian sub continent. The national carrier, Sri Lankan airlines now covers about 50 destinations in 28 countries.

Strategic location with sea and air connectivity, high literacy rate, well educated and easily trainable workforce, market-friendly and transparent government policies, improved infrastructure, high quality education and healthcare facilities have made Sri Lanka an ideal location for foreign investors.

Preferential Access to Foreign Markets:

The Free Trade Agreements (FTAs) Sri Lanka has singed with India and Pakistan provide duty-free access to a very large number of products exported from Sri Lanka to the respective markets. For instance, Sri Lanka can now export over 4,000 product lines to the vast Indian market at zero-duty.

In addition, the South Asian Free Trade Area (SAFTA), which groups Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka enables entrepreneurs, who set up businesses in Sri Lanka to export their products to all the respective markets either duty free or at a reduced rate of duty.

Being a beneficiary country under the Generalized System of Preferences (GSP), Sri Lanka can also enjoy a wide range of duty concessions in many countries including major markets such as EU, USA, Japan, Australia, Canada, Switzerland, Norway, New Zealand, and Russia.

Sri Lanka, the only beneficiary in the whole of South Asia under the “GSP Plus” scheme of the EU, can now export well over 7,000 products to the vast European market at zero-duty.

U.S. Investments in Sri Lanka

The history of the US investment in Sri Lanka dates back to the 1960s, when the US companies sought to access new markets for their products such as pharmaceuticals, chemicals and batteries. In the backdrop of the market-based economic reforms introduced by Sri Lanka in the late 1970s and pursued by all successive governments to-date, trade and investment relations between the two countries have achieved a substantial growth over last three decades.

By the end of 2005, the number of US companies operating in Sri Lanka had reach as high as 85. These companies, approved under both Section 16 and 17 of the BOI Law, had brought in nearly US$ 500 million. The US ranks the second largest investor, providing employment opportunities for over 21,000 people.

Today, the US investments in Sri Lanka spread across a very wide range of manufacturing and service industries. The main areas on the manufacturing front include food/agro-processing, animal feed mills, pharmaceuticals, ceramic tiles, garment accessories, integrated textile plants, lingerie, essential oils, computer parts, garments, telecommunication systems, electronics and electrical power systems, chemical products and batteries. Meanwhile, service-oriented activities cover financial services, power generation, the blending and marketing of lubricants, pay phones and telecommunication services, hotel management, trading activities, insurance, logistics operators, courier services, training institutes and computer software development. Appended below are some of the selected US investments currently operating in Sri Lanka.

Apparel & Textiles: The Limited / Mast Industries, Smart Shirts (Kellwood International), Sunbird International, Time Garments, Star Garments (Playknit Group), KABS, Sportif Lanka (Pvt) Ltd

Pharmaceuticals : Pfizer, Warner Lambert

Essential oils : Asco Flavours & Fragrances

Electronic parts : Tandon Associates

Labels : Paxar

Dry batteries : Union Carbide

Computer parts: Haiser Computers

Fast food : McDonald’s, KFC, Pizza Hut

Cold rooms : Tess Agro (Pvt.) Ltd.

Pay phones : World Quest Networks / Intellicall

Logistics : AEI

Software Development: e-Runway, Mobinetix

Advertising : J Walter Thompson

Leasing : LOLC

Retail Trading : 3M Worldwide

Credit Rating : Duff & Phelps

Power Generation : AES Kelanitissa

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