Verified Facts
Doing business in Sri Lanka can be relatively straightforward, with the country offering a range of investment opportunities and a strategic location in the heart of the Indian Ocean, but it also presents some challenges, including a complex bureaucracy and corruption.
Quick Facts
Business Environment
Sri Lanka has a mixed business environment, with a government that is generally supportive of foreign investment, but also a complex bureaucracy that can hinder business operations. The country has made significant progress in recent years in improving its business climate, with a range of reforms aimed at simplifying procedures and reducing corruption. However, more needs to be done to address the remaining challenges, including a lack of transparency and accountability in government decision-making. The country's strategic location, with access to major shipping lanes, and its highly literate and skilled workforce, make it an attractive location for foreign investors.
The government has established a range of institutions to support business, including the Board of Investment, which provides a range of incentives and services to investors. However, the country's bureaucracy can be slow and cumbersome, and corruption remains a significant problem. The government has taken steps to address these issues, including the introduction of a new anti-corruption law and the establishment of a specialized anti-corruption agency.
Sri Lanka's business environment is also influenced by its cultural and social context. The country has a highly developed social safety net, with a range of programs aimed at reducing poverty and improving living standards. However, the country also faces significant social and economic challenges, including a large informal sector and a shortage of skilled workers.
Starting a Business
Starting a business in Sri Lanka involves several steps, which are outlined in the table below.
| Step | Requirement | Time | Cost (USD) |
|---|---|---|---|
| 1 | Register with the Department of Registrar of Companies | 2-3 days | $100 |
| 2 | Obtain a Tax Identification Number (TIN) | 1 day | $0 |
| 3 | Register with the Inland Revenue Department | 1 day | $0 |
| 4 | Obtain a Value Added Tax (VAT) registration | 2-3 days | $50 |
| 5 | Register with the Central Bank of Sri Lanka | 2-3 days | $100 |
| 6 | Obtain a business license | 2-3 days | $200 |
| 7 | Register with the Labor Department | 1 day | $0 |
Investment Opportunities
Sri Lanka offers a range of investment opportunities, particularly in the following sectors.
| Sector | Opportunity | Growth Potential | Notes |
|---|---|---|---|
| Tourism | Development of tourist infrastructure, including hotels and resorts | High | Sri Lanka's tourism industry has significant growth potential, with a range of attractions, including its beautiful beaches, ancient cities, and wildlife reserves. |
| IT and BPO | Establishment of IT and BPO companies, including call centers and software development | Medium | Sri Lanka has a highly developed IT sector, with a range of companies already operating in the country. |
| Agriculture | Development of agricultural products, including tea, rubber, and spices | Medium | Sri Lanka is a significant producer of agricultural products, including tea, rubber, and spices, and there are opportunities for investment in this sector. |
| Manufacturing | Establishment of manufacturing companies, including textiles and apparel | Medium | Sri Lanka has a well-developed manufacturing sector, with a range of companies already operating in the country. |
| Renewable Energy | Development of renewable energy projects, including wind and solar power | High | Sri Lanka has significant potential for renewable energy, particularly wind and solar power, and the government is actively promoting investment in this sector. |
Foreign Direct Investment
- Sri Lanka has seen a significant increase in foreign direct investment (FDI) in recent years, with a range of countries, including China, India, and the United States, investing in the country.
- The main investing countries in Sri Lanka are China, India, and the United Kingdom.
- The government offers a range of incentives to investors, including tax holidays and investment allowances.
- However, there are some restricted sectors, including defense and telecommunications, where foreign investment is subject to certain restrictions.
- The country is also a member of a range of regional trade agreements, including the South Asian Free Trade Area (SAFTA) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).
Legal & Regulatory Framework
- Sri Lanka has a well-developed legal and regulatory framework, with a range of laws and regulations governing business operations.
- The country has a Company Law, which governs the establishment and operation of companies, and a Securities and Exchange Commission, which regulates the securities market.
- The country also has a range of labor laws, which govern employment relationships, and a dispute resolution framework, which provides for the resolution of commercial disputes.
- The government has also established a National Intellectual Property Office, which is responsible for protecting intellectual property rights.
- The country is also a member of a range of international organizations, including the World Trade Organization (WTO) and the International Labor Organization (ILO).
Challenges & Risks
- Sri Lanka faces a range of challenges and risks, including a complex bureaucracy and corruption.
- The country also faces significant political risk, with a history of political instability and conflict.
- The country's infrastructure is also a challenge, with a range of problems, including traffic congestion and power outages.
- The country is also vulnerable to natural disasters, including floods and droughts.
- The country's currency can also be volatile, with a range of factors, including economic instability and political risk, affecting its value.
Free Zones & Incentives
- Sri Lanka has a range of special economic zones, including the Katunayake Export Processing Zone and the Biyagama Export Processing Zone, which offer a range of incentives to investors.
- The government also offers a range of tax incentives, including tax holidays and investment allowances, to investors.
- The country has also established a range of investment promotion agencies, including the Board of Investment, which provides a range of services to investors.
- The government has also introduced a range of other incentives, including subsidies and grants, to support business operations.