Sri Lanka economic overview

Its legacy of spice trading was the first in contributing to the nation’s status as a focal maritime hub and an important port and trading post in the ancient world. Increasingly frequented by merchant ships from the Middle East, Persia, Burma, Thailand, Malaysia, Indonesia and other parts of Southeast Asia, Sri Lanka earned a reputation as a front- demonstrated continued buoyancy for the past five years but has also indicated an upward growth. The economy grew at an impressive 6.8% in 2010, with a strong performance in services (8%) industry (8.4%) and agriculture (7%). External analysis confirms the rationale behind this surge; a recent Asian Development Bank ( ADB) report credited this strong growth to bold private sector investment and forward thinking macro-economic policies.

The Service Sector remains the largest component of the GDP. At 59.3% in 2010, the service sector continued its strong expansion fueled primarily by strong growth in hotels, transport and telecommunication, trading, and financial services. The burgeoning sectors of Information Technology, training and software development are considered a key area of growth.

The Industry Sector accounted for 28.6% of GDP with the manufacturing sub sector accounting for a share of 17.3% of the total GDP. The Agriculture Sector accounted for 12% of GDP in 2010. The plantation sector consists of tea, rubber and coconut. In recent years, the tea crop has made significant contributions to export earnings.

Supportive Government Policies: Sri Lanka pioneered South Asia’s economic liberalization over three decades ago. After liberalizing many areas of the economy, the government has embraced strategies and policies that are strongly conducive to international investment. Total foreign ownership is permitted across all areas of the economy. There are 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.

Educated and Adaptable Workforce: Flexible, Skilled, Smart. Sri Lanka’s workforce is a first class competitive resource. Well educated, energetic and with a trainability ratio that is comparable with any investment location around the world, skilled and semi- skilled human resources are readily available at competitive wage rates. English is widely spoken in the country and is the main language used by the business com– munity. In 2009, Sri Lanka’s literacy rate stood at over 90%. The country enjoys the most literate population in South Asia.

Social Infrastructure: The country boasts a life expectancy of 70.3 years

S AT U R D AY

February runner in the ancient world of business. Centuries have passed, yet this standing proves relevant today. Sri Lanka of the 21st Century is a nation offering a plethora of investment opportunities and a promise of success and discovery, strengthened by liberal economic policies and an investor-friendly environment. Here are some compelling reasons why you should make Sri Lanka your next investment destination.

A Strong and Resilient Economy: The Sri Lankan economy has not only for the male and 77.9 years for the female population and an infant mortality rate of 8.5 per 1,000 live births, according to latest figures (2007). Being a firm proponent of international laws and UN’S Labour and Human Rights, Sri Lanka has an edge over its regional competitors because of its stringent adherence to child labour laws and endorsement of gender equality. Several leading corporate entities in the country have also subscribed to the United Nations Global Compact Principles, illustrating the fact that Sri Lankan enterprise goes further than mere legal compliance.

Location and connectivity: Sri Lanka is situated at the crossroads of a major shipping route that connects South Asia, Far East and the Pacific with Europe and the Americas. Sri Lanka is strategically located next to the rapidly growing Indian subcontinent with close proximity to Southeast Asia and the Middle East. The country has strong air connectivity with over 100 weekly flights to India alone. Sri Lanka is connected to the SEA-NE-WE III and IV fiber optic communication backbone with over eleven communication satellites orbiting above the south of the country.

Access to Key Markets: Sri Lanka is the only country with Free Trade Agreements with both India and Pakistan, giving duty free access to over 1.3 billion consumers. The Indo-sri Lanka Free Trade Agreement (ISLFTA) provides strategic access through Sri Lanka for over 4,200 products (at zero duty) to India, which is the world’s second most populous market. The Pakistan – Sri Lanka Free Trade Agreement (PSLF TA) provides strategic access through Sri Lanka for nearly 4,500 products (duty free from 2008) to the Pakistan Market (Population of more than 160 million).

Developed Infrastructure: Private and public investment programmes have been implemented to improve the country’s basic infrastructure facilities. State-of-the art industrial estates have been built and continue to utilize sophisticated facilities, providing superior services. The Port of Colombo is South Asia’s premier transshipment port. Further development of the Colombo Harbour is currently underway with further developments to harbours in Galle and Trincomalee. New Port developments are envisaged for Hambantota, in the South of Sri Lanka.

Improvements to Sri Lanka’s expansive road network and infrastructure are underway through the construction of 4 major expressways.. These expressways link major cities and locations to the capital city of Colombo. The Colombo-galle Expressway is already completed and will be extended to Matara. The others include Colombo-katunayake, and the ColomboKandy highways as well as the Colombo Outer Circular Road. The country’s international airport has undergone extensive development and is now on par with other international airports. Preliminary work for a second international airport has commenced in the southern heartland of Sri Lanka and will serve the needs of burgeoning industries located in the South.

A Vibrant Business Environment: Sri Lanka is ranked as the most liberalized economy in South Asia, with successive governments further enhancing this status. Transparent investment laws are in place and aim to encourage and foster foreign direct investment to the country. Concessions granted for qualifying investment projects under an agreement with the Board of Investment remain valid over the lifetime of the enterprise. Economic growth in Sri Lanka is driven by a dynamic and resilient private sector, with private investment exceeding government investments by over 70%.

Investment Protection and Double Taxation: The safety of your investment is guaranteed by the Constitution of Sri Lanka and bilateral investment protection agreements with 26 countries. Similarly, Sri Lanka also has bilateral Double Tax Relief Agreements with 38 countries.

Quality of Life: A country of numerous facets, Sri Lanka offers a spectrum of experiences, peoples and places that awaits discovery. A cosmopolitan living environment surrounds those who choose to make Colombo their home. Social life is ubiquitous in this city; abundant nightlife, gourmet cuisine, worldclass shopping, theatre, cafes, art and host of star class hotels dot the island, providing abundant entertainment and a number of inimitable experiences. There is a wide selection of comfortable housing in Sri Lanka including luxury condominium apartments that are ideal for expatriates. Over ten reputed international schools follow the curricula of the University of London, University of Cambridge and the International Baccalaureate. Students from these institutions enter lvy League universities in the United States and top ranking places of education in the UK and other countries. With prevailing peace in the country, most return to reestablish their roots.

Seven UNESCO World Heritage sites, a salubrious climate in the central hill country, 250 acres of botanical gardens, 15 Wildlife and Nature reserves and miles of pristine beach, are all beautifully located in concentration within a mere 65,610 square kilometers. The lure of the country’s jungles and mangroves is understandable; Sri Lanka is renowned for its varied biodiversity and remarkably high proportion of endemic fauna and flora. Internationally recognized healthcare institutions market Sri Lanka as a premier destination for health tourism.

INVESTMENT FACILITATION VIA BOARD OF INVESTMENT The Board of Investment is the central facilitation point for investors. The BOI provide assistance and advice along the investment process. The BOI is empowered to grant special concessions to eligible companies – these are designed to meet the strategic economic objectives of the government. The mechanism through which such concessions are granted is the Agreement which modifies exempts and waives identified laws in keeping with the BOI Regulations. These laws include Customs, Exchange Control and Import Control. Foreign investors also have the option of operating under the normal laws of the country. For the purpose of granting approvals and incentives, companies incorporated in Sri Lanka are treated equally - regardless of whether the shareholding is controlled by nationals or non – nationals.

Industrial Zones under BOI: The BOI operates 12 Industrial Zones with all infrastructure facilities provided by the agency. A further 12 new zones, including sectoral ones for IT/BPO, Gem & Jewellery, Textiles and Chemicals are being developed under the PPP model. The Zones provide investors with suitable sites on long term lease terms.

BOI Services: Following are the key services provided by the BOI; Guidance prior to submission of project application. Co-ordination of approvals from other related agencies, where required. Provision of assistance at start-up stage of the project including site selection and clearance, advice on factory building and other technical expertise. Facilitate the procurement of support services such as water, power waste treatment and telecommunications. Provisioning of recommendations to Immigration Authorities for application and issuance of resident visas. Import/export clearance and customs procedure for import of capital goods, raw materials and the export of the product. Assistance for the maintenance of good industrial relations and in the formation and operation of Employee Councils.

BOI Incentives : BOI offers tax holidays ranging from 3 to 15 years and sectors / industries targeted by the Government are as follows: Manufacture / Production of nontraditional goods for export, including deemed export. Apparel, textile, handlooms and local gift industries. Cosmetics industry based on local herbs and medicinal plants. Export oriented services. Export of knowledge based services. Infrastructure projects. Bonding warehouses, cold and dry storage and other logistics based investments. Urban infrastructure and commercial housing. Higher education / Skills Development. IT and IT enable services. Value added strategic projects. Agriculture / Agro Processing /Dairy Development / Fish based industries

Establishment of Industrial Estates, Special Economic Zones, Knowledge Cities. Other advantages the BOI provides investors including duty free imports of raw materials and capital goods for export oriented industries and services.

Remittance of Earnings & Capital Foreign investors are permitted to remit dividends, capital or royalty payments through any commercial bank, as well as the sale proceeds of shares.

Intellectual Property Law : The Code of Intellectual Property Act No. 52 of 2003 embodies legislation relating to copyright, industrial design, patents, trademarks, trade names and unfair competition. Sri Lanka’s Intellectual Property Law, which is based on the WIPO model law for developing countries, has incorpora ted internationally accepted principles and concepts of intellectual property. Law, which is based on the WIPO model law for developing countries, has incorporated internationally accepted principles and concepts of intellectual property.