sri lanka: a better investment...

Sri Lanka: A Better Investment Destiny

Mr. U.G. Ratnasiri

Addl. Secretary

Economic Affairs Division

Ministry of National Policies & Economic Affairs

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Contents

• Country profile

• Sri Lanka at a glance

• Why Sri Lanka is a better Place for investment?

• Way forward

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Country Profile• Sri Lanka is a small island country lying in the strategic location of Indian

Ocean.

• It is known as Serendib, Taprobane, the Pearl of the Indian Ocean andCeylon.

• Official name is the Democratic Socialist Republic of Sri Lanka

• The country is renowned for its scenic beauty, harmonious blend ofpeople and rich culture.

• Commercial capital & largest city : Colombo

• Currency : Sri Lankan Rupee

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Sri Lanka at a Glance

Source: Central Bank Report, 2017

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Physical features & climate• Total area : 65,610 sq.km• Land area : 62,705 sq.km• Annual rainfall (average) mm (2017) : 1757 • Elevation : 2,525 metres (8,284 ft.) Highest

Population and vital statistics • Mid-year population (‘000) (2017) : 21,444• Population density (2017) : 342 persons per sq.km• Expectation of Life at Birth (2015) : 75.0 years• Literacy Rate (2016) : 93.1% (female – 92.2%, male – 94.1%)• Human Development Index (2015) : 73 among 188 countries

Economic indicators • Per capita GDP (US $) : 4,065• Major economic activities of GDP : Agriculture - 3.9 , Industry – 3.2, Services - 3.1• Labour force : 8.5 Mn• Unemployment rate (2017) : 4.2%• GDP growth rate : 3.1%• Annual average NCPI Interest rate : 7.7%

Why Sri Lanka is a Better Place for Investment?

• Strong Resilient Economy

• Supportive Government Policies

• Educated & Adaptable Workforce

• Fast Developing Infrastructure

• Social Infrastructure

• Location and Connectivity

• Vibrant Business Environment

• Access to Key Markets

• Investment Protection and Double Taxation

• Quality of Life

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Strong Resilient Economy

• The improved performances in all key sectors of the economy contributedtowards the high economic growth.

National Output (2017)• GDP (Current market price) : USD 87.2 bn• Per Capita GDP : USD 4,065• Real GDP Growth : 3.1%

• With a 56.8% contribution, the services sector remains the largest contributorto the national economy.

GDP Distribution (2017)• Agriculture : 6.9%• Industry : 26.8%• Services : 56.8%• Taxes Less Subsidies on Products : 9.5%

• Development of hubs based on Sri Lanka's strategic location & resources.

• Sri Lanka aims to raise per capita income to USD 5,000 per year.6

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Strong Resilient Economy (contd..)• The strong economic performances in Sri Lanka have lifted country's per capita

income towards middle – income status.

• The “Vision 2025” aims to double exports to USD 20 billion per year.

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Strong Resilient Economy (contd..)

• The National Export Strategy (NES) 2018-2022 focuses on export hub drivenby innovation and investment with good mix of different industries.

• Six focus sectors for innovation and export diversification

IT-BPM

Wellness Tourism

Processed Food and Beverages

Boat Building

Spices and

ConcentratesElectrical and

Electronic Components

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4.739

1.512

873

563

390

372

353

292

279

277

266

256

140

116

110

0 2.000 4.000 6.000

Apparel

Tea

Rubber & Rubber products

Coconut & coconut based…

Food, Feed, Beverages &…

Electrical, Electronic and…

Spices

Petroleum Products

Boat Buiding

Textiles

Diamonds, Gems & Jewellery

Fish

Chemical & Plastic Products

Base Metal Products

Non Metallic Mineral Products

USD Mn.

Sri Lanka’s Exports by product in 2017(Top 15)

Sri Lanka’s Imports by product in 2017(Top 15)

3.218

2.663

1.678

1.499

1.383

1.234

773

724

526

435

0 2.000 4.000

Petroleum Products

Textiles

Machinery & Equipment

Vehicles & Equipment

Electronic & Electrical

Iron & Steel products

Diamond & Precious Stones

Plastic Products

Cement

Pharmaceulticals

USD Mn.

Source: Board of Investment of Sri Lanka


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• United States, United Kingdom, India, Germany, Italy, China and Belgiumamong the Sri Lanka’s top 10 export destinations.

• India, China, Singapore, Japan, United States and Malaysia are some of majorimport origins of Sri Lanka.

Exports by destination - 2017 Imports by origin - 2017


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Export Market Relationship with Turkey

• Turkey and Sri Lanka are working to boost bilateral trade and diversify thebusiness sectors between the two countries.

• The relationship with two countries have a deep history dating back to the 19thcentury and revitalizing of relations is a very recent process.

• Economic relations, starting with a trade volume of $17 million in 1990, reachedtheir highest volume at $188 million in 2010.


2015 2016 2017

181,03

154,27

232,68

USD Mn.

Sources: Sri Lanka Customs/Central Bank of Sri Lanka/Sri Lanka Export Development Board

Exports to Turkey 2015- 2017

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• Ceylon tea is the main item of trade between Turkey and Sri Lanka.

• Sixty-three percent of total exports to Turkey are tea


55,76

42,33

13,33

9,9

6,45

3,86

2,12

0,78

1,96

3,63

95,76

84,15

13,2

8,07

7,02

3,64

2,7

2,34

2,23

2,14

Tea in bulk

Tea Packets

Woven Fabrics

Apparel

Pneumatic & Retreated Rubber Tyres & Tubes

Activated Carbon

Inorganic Chemicals

Tea Bags

Industrial & Surgical Gloves of Rubber

Desiccated Coconut

2017 2016

USD Mn.

Sources: Sri Lanka Customs/Central Bank of Sri Lanka/Sri Lanka Export Development Board

Exports to Turkey by product in 2016-17 (Top 10)

FDI Inflow (2005-2017)


287

604734

889

602516

1066

1338 1391

1616

970

801

1710

0

200

400

600

800

1000

1200

1400

1600

1800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

USD Mn.

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Source: Board of Investment of Sri Lanka (BOI)

• Foreign direct investment (FDI), which includes foreign borrowings of Board ofInvestment (BOI) companies, recorded the highest inflows in history in 2017.

• Major inflows of FDI in 2017 included receipts to Hambantota port and theColombo Port City project.

• China, Hong Kong, India, Malaysia and Singapore were the top five sourcecountries of FDI in 2017.

• The “Vision 2025” aims to increase FDI to USD 5 billion per year and create 01million new jobs.

Supportive Government Policies

• Pioneer of economic liberalization among South Asia

• The government has embraced strategies and policies for conducive internationalinvestment.

• The following transparent investment laws aim to foster foreign directinvestments.

o Total foreign ownershipo No restrictions on repatriation of earnings, fees, capital, and on forex transactions

relating to current account payments.o Safety of foreign investment is guaranteed by the constitution.o Existence of a transparent and sophisticated legal and regulatory framework.o Covering all prerequisite business law enactments.o Bilateral investment protection agreements with 28 countries and double taxation

avoidance agreements with 38 countries.o A founder member of the Multilateral Investment Guarantee Agency (MIGA), an

investment guarantee agency of the World Bank.

• According to the Index of Economic Freedom – 2017, the country has beenranked 110 of 186 countries

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Supportive Government Policies (contd..)

• Incentives to induce high value investment to priority sectors.

• BOI promotes diversification of Sri Lanka's industry and services with special focuson advanced technology and value addition.

• Amendments to the tax system & overall tax regime for all sectors will be lesscomplex and at a lower rate across the economy.

Target Sectors Actively Promoted by Sri Lanka through Board of Investment (BOI)o Export Oriented Manufacturingo Export Oriented Services Tourismo Tourism Related Projectso Infrastructure Projectso Higher Education/Skill Developmento Value Added Strategic Projectso Agriculture (Agro Processing, Fish Based Industry, Dairy)o Establishment of Industrial Estateso Special Economic Zoneso Knowledge Cities

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Educated & Adaptable Workforce

• Labour is the most abundant factor in Sri Lanka and readily available atcompetitive wage rates.

Labour Force ( 2017) – 8.5 MnLabour Force Participation - 54.1%Youth Literacy Rate – 97%

• Sri Lanka possessed the most literate population in South Asia and one of thehighest in the developing world with a literacy rate of 93.1% (92.2% and 94.1%respectively for females and males).

• Extensive investment in public education has produced well educated andenergetic, skilled and semi-skilled human resources .

• Approximately 50% of the students who have completed higher education aretrained in technical and business disciplines.

• English is widely spoken and is the main language used by the businesscommunity. 16

Fast Developing Infrastructure

• The Sri Lankan government has prioritized physical infrastructure developmentas a national priority considering its importance in attracting and facilitationFDI.

Roads Sri Lanka has a well developed transport system, including a road network of

approximately 100,000 km and a rail network of 1,944 km linking colombo withrest of the country.

Katunayake Express Way and Southern Express Way projects which were majorhighway development projects in Sri Lanka have been completed.

Southern Express Way Extension project, Outer Circular Highway and theCentral Express Way Project works are in progress.

In addition, Northern Road Connectivity Project and several bridge constructionprojects are ongoing improving the connectivity throughout the island.

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Ports

Sri Lanka Located at the intersection of major international shipping routes within the world’s busiest maritime transportation lane.

This locational position brings numerous advantages to the country in many ways.

The developing port infrastructure in main three ports; Colombo, Hambantota and the Trincomalee for bringing higher economic benefits

Fast Developing Infrastructure (contd..)

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Airports

Bandaranaike International Airport is the main international airport in Sri Lanka located in western province

Mattala Rajapaksha International Airport is the second international airport, placed in the deep south of the country.


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Telecom

Sri Lankan telecoms market is matured compared neighbouring countries.o Cellular mobile subscription (2017) – 28.2 Mno Fixed access telephone subscription – 2.5 Mn

Mobile penetration has risen from 96% in 2012 to 126% in 2017.

Key development in the sector includes;

• The market movement from 4G towards 5G mobile services• A strong increase in mobile broadband penetration over the past five years• Continuous increase in e-commerce applications


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Export Processing Zones in Sri Lanka

Source: Board of Investment of Sri Lanka (BOI)

• To provide facilitation to investors to operate in a conducive environment BOI Zone model has been implemented by BOI Sri Lanka.

Proposed

Already operating

Social Infrastructure

• Sri Lanka leads the South Asian region in human development indices with itshigh literacy rate and national health indicators.

• The country boasts a life expectancy of 75 years and an infant mortality rate of8.5 per 1,000 live births, which ranked it 92 of 186 countries.

• Sri Lanka is a firm proponent of international laws and UN's rights of labour,children and women.

• The country has an edge over its regional competitors because of its stringentadherence to child labour laws and endorsement of gender equality.

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Location and Connectivity

• Situated at the crossroads of major shipping routes connecting South Asia, FarEast and the Pacific with Europe and the Americas.

• Strategically located next to the fast growing Indian sub-continent with closeproximity to Southeast Asia and the Middle East.

• Strong air connectivity with over 100 weekly flights to India alone.

• Connected to the SEA-ME-WE III and IV (South East Asia – Middle East – WesternEurope) fibre optic communication backbone with over 11 communicationsatellites orbiting above the south of the country.

SEA ROUTES23

Vibrant Business Environment

• Sri Lanka is ranked as the most liberalized economy in south Asia as in 1978the Island adapted open market free economic policies.

• Transparent investment laws aim to foster foreign direct investments.

• Sri Lankan commercial laws are based on British laws and country has a highlyindependent judicial system.

• Sri Lanka has dynamic and resilient private sector, which if necessary can bejoint venture partners for foreign investors and allowed to own 100%ownership of a investment.

• Concessions granted under an agreement with the Board of Investment – forqualifying investment projects - remain valid over the lifetime of theenterprise.

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• Sri Lanka is the only country to have Free Trade Agreements with both India andPakistan, giving duty free access to over 1.3 billion consumers from the island.

• The Indo-Sri Lanka Free Trade Agreement (ISLFTA) provides 100% duty freeaccess from Sri Lanka for over 4,200 products to India, which is the world'ssecond most populous market.

• The Pakistan – Sri Lanka Free Trade Agreement (PSLFTA) provides strategicaccess from Sri Lanka for nearly 4,500 products (duty free from 2008) to thePakistan market.

• In 2018, Sri Lanka signed a FTA with Singapore which covers trade in services,investment, telecommunications, e-commerce, government procurement,intellectual property rights (IPR) and transparency.

• Sri Lanka is good location to gain preferential trade access to two large regionalblocs under the South Asian Free Trade (SAFTA) and the Asia Pacific TradeAgreement (APTA).

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Access to Key Markets

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• China - Sri Lanka Free Trade Agreement (CSFTA) and negotiations are ongoingwith China.

• In addition to trade in goods, the CSFTA also covers trade in services, investment,and economic and technical cooperation.

• Regaining EU GSP Plus allows duty free access to EU Market for over 6,000products.

• To protect local industries against unfair trading practices and unforeseen importsurges, Anti-Dumping and Countervailing Duties Act No. 2 of 2018 and SafeguardMeasures Act No. 3 of 2018 were enacted in March 2018.

• Introduction of a more comprehensive Trade Policy (NTP) with four key elements,namely competitiveness through domestic policy reforms; market access andtrade facilitation; macroeconomic balance, policy and institutional coherence;and the adjustment of firms and people.

• Trade and tariff policies and legal amendments introduced in 2017 focused onfurther rationalising and simplifying the tax regime and promoting fair trade.

Access to Key Markets (Cont..)

Investment Protection and Double Taxation

• Sri Lanka is the one of the safest countries in the world to invest.

• Article 157 of the island's constitution guarantees the safety of investment protection treaties and agreements.

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Bilateral Investment Promotion and Protection Treaties (BITs)

Sri Lanka has entered into 28 BITs to provideprotection to foreign investment within thecountry.

BIT model is developing further to cater thecovering aspects of sustainable developmentprinciples in attracting foreign investments.

Australia, Belgium – Luxembourg, China, Czech Republic, Denmark, Eqypt, Finland,

France, Germany, India, Indonesia, Iran, Italy, Japan, Korea, Kuwait, Malaysia, Netherlands,

Norway, Pakistan, Romania, Singapore, Sweden, Switzerland, Thailand, United

Kingdom, USA, Vietnam

Agreements on Avoidance of Double Taxation

Sri Lanka has entered into Double TaxationAvoidance Agreements with 44 countries toeliminate or mitigate the incidence ofjuridical double taxation and avoidance offiscal evasion in the international trade.

Australia, Bangladesh, Bahrain, Belarus, Belgium, Canada, China, Czech Republic,

Denmark, Finland, France, Germany, Hong Kong, India, Indonesia, Iran, Italy, Japan, Korea,

Kuwait, Luxembourg, Malaysia, Mauritus, Nepal, Netherlands, Norway, Oman, Pakistan, Palestine, Philippines, Poland, Quarter,

Romenia, Russia, Saudi Arabia, Seychells, Singapore, Sweden, Switzerland, Thailand,

U.A.E, Vietnam, USA, UK

• Sri Lanka is truly a great place to live and a great place to work.

o Comfortable housing including luxury condominium apartments

o Internationally recognized healthcare institutions

o Excellent educational institutions with international standards

o World-class recreational sites

• Sri Lanka is ranked 76 position out of 190 countries in WHO’s Health SystemsRanking in 2016.

• Sri Lanka is renowned for its varied biodiversity fauna and flora.

• Seven UNESCO World Heritage sites, a salubrious climate in the central hill country,botanical gardens, 15 Wildlife and Nature reserves and miles of pristine willenhance the quality of living conditions.

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Quality of Life

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• Sri Lanka’s investment policy focus on the realization of SDGs and country’soverall development strategy.

• Key legislations facilitating investments in Sri Lanka are;

Investment Policy of Sri Lanka

Board of Investment Law No. 4 of 1978• Principle law applicable to investments in Sri Lanka• BOI and National Investment Promotion Agency were established under this law

Finance Act No. 12 of 2012 (Hub operations as amended in 2013)• Introduced to promote Sri Lanka as an emerging trading hub and facilitates related

specific trading and services activities

Inland Revenue Act No. 24 of 2017• Simplified the taxation law in Sri Lanka while introducing new incentives regime for

investors. Law provides for a educe rate of 14% for specific sectors

Foreign Exchange Act No. 12 of 2017• Foreign exchange controls have been greatly liberalized and investors are allowed to

directly deals with the banks unless Central Bank approval is specially needed

Land (Restriction on Alienation) Act No.38 of 2014• Permitted lease of a land for foreign investments and outright transfers will only be

permitted when the foreign shareholding is less than 50%• The land lease period is maximum tenure of 99 years

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Types of Investments in Sri Lanka

Proprietorships

A single individual can carry on business under hispersonal name or business name registered in terms ofthe provisions of the Business Names Ordinance

Partnership

Two or more persons can carry on business inpartnership under a business name registered in termsof the provisions of the Business Names Ordinance

Companies

A company has to be incorporate under the CompaniesAct No. 7 of 2007 as a joint venture or a sole ownership

• The Board of Investment of Sri Lanka (BOI) facilitates its investors inproviding information, selecting land and providing guidance for projectapprovals for speedy takeoffs.

Way forward• Sri Lanka is one of best and most competitive business center in South Asian

Region for Investment.

• Competitive strength of regional location, adaptable and educated labourforce, abundance of economic resources, strong macroeconomic environment,political stability, close links with foreign markets, outstanding infrastructureand flexible government policies facilitate great place for investors to visit SriLanka.

• Sri Lanka government’s policy framework “Vision 2025” lay the foundation forcountry to become upper- middle income country by 2025.

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Thank You!

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sri lanka: a better investment...

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