Economic Overview

2. Supportive Government Policies

Sri Lanka pioneered South Asia’s economic liberalization over three decades ago. Liberalizing many areas of the economy, the government has embraced strategies and policies that are more than conducive for international investment. In fact the policy environment is undoubtedly, compelling.

The following transparent investment laws aim to foster foreign direct investments.

  • Total foreign ownership is permitted across almost all areas of the economy.
  • No restrictions on repatriation of earnings, fees, capital, and on forex transactions relating to current account payments.
  • Safety of foreign investment is guaranteed by the constitution.
  • Existence of a transparent and sophisticated legal and regulatory framework. Covering all prerequisite business law enactments.
  • Bilateral investment protection agreements with 27 countries and double taxation avoidance agreements with
    38 countries.

Sri Lanka is a founder member of the Multilateral Investment Guarantee Agency (MIGA), an investment guarantee agency of the World Bank. This provides a safeguard against expropriation and non-commercial risks.

Index of Economic Freedom measures the pro-business policy environment of a country. According to the Index of Economic Freedom – 2012, the country has been ranked 97 of 179 countries and

Index of World Economic Freedom Rankings -2011
Country World Ranking
Singapore 2
Korea, South 31
Malaysia 53
Thailand 60
Sri Lanka 97
Philippines 107
Indonesia 115
Pakistan 122
India 123
Bangladesh 130
China 138
Vietnam 136

Source : 2012 Index of Economic Freedom

In line with the government's policy, efforts are intensified to attract investments to target sectors in which Sri Lanka has strong foundation for growth as well as areas where it is nationally important to develop. By offering incentives to induce high value investment to priority sectors, the BOI promotes diversification of Sri Lanka’s industry and services with special focus on advanced technology and value addition. The government has made necessary amendments to the tax system of the country that the overall tax regime for all sectors will be less complex and at a lower rate across the economy.

Target Sectors Actively Promoted by Sri Lanka through Board of Investment (BOI)

  1. Export Oriented Manufacturing
  2. Export Oriented Services
  3. Tourism, Tourism Related Projects
  4. Infrastructure Projects
  5. Higher Education/Skill Development
  6. Value Added Strategic Projects
  7. Agriculture (Agro Processing, Fish Based Industry, Dairy)
  8. Establishment of Industrial Estates, Special Economic Zones, Knowledge Cities.