Key Sectors for Investment Promotion
At present, the BOI is looking at attracting investment various sectors such as export oriented manufacturing, export oriented services, tourism and tourism-related projects, infrastructure project, higher education and skill development, agriculture and/or agro processing and fish based Industry development, dairy development, establishment of industrial estates, special economic zones, knowledge and many other sectors.
Legislation governing foreign investments
The principal law applicable to foreign investment is BOI Law No. 4 of 1978 and amendments introduced in 1980, 1983 and 1992 and Regulations made under the Act. The BOI was established in 1978 as the Greater Colombo Economic Commission. In 1992, the Commission was reconstituted as the Board of investment of Sri Lanka.
Depending on the nature of the investment and mode of operation, a number of regulatory and legal requirements such as labour-related laws and land-related laws, may also need to be considered prior to commencement of a business.
Potential Investments in Sri Lanka
Agriculture Sector
Agriculture:
Sri Lanka being an agricultural country, the sector still plays a key role in the economic development of the country. At present, agriculture sector contributes about 10.9 percent to the national GDP. Sri Lanka is a fertile tropical land with full of natural resources that has the potential to cultivation and processing of variety of crops. Around 500 Agriculture graduates, 65 Food Science graduates & 1,000 Agriculture Diploma holders enter into the job market annually. Tea, rubber, coconut products and spices, floriculture and livestock comprises of the main agricultural business in Sri Lanka.
Food and Beverages:
Sri Lankan Food Manufacturers & Suppliers offer processed fruits, vegetables and juices, confectionery and bakery products, processed food, rice and cereals, biscuits, animal feed, and residues of the milling industry while Sri Lankan Beverage Manufacturers & Suppliers (besides tea) export mineral water, bottled drinking water and alcoholic beverages.
Service Sector
Knowledge Services:
The Knowledge Services sector which encompasses IT software development, Knowledge Process Outsourcing / Business Process Outsourcing industry, IT and IT enabled services and IT Training Centers, has tremendous potential to emerge as a key growth sector in Sri Lanka. Given the quality of students, level of English and literacy, and the proximity to India, Sri Lanka is in an ideal position to develop into a high value added IT / KPO services provider. The Industry has set the target of Export revenues of US$ 1 Bn and Employment of 100,000 by 2016 and well on the way to achieving them.
There are over 100 software development operations in Sri Lanka, which cater both independent and captive markets. Sri Lankan companies have been able to develop software products of their own which have earned them international recognition.
Leading software companies include Millennium Information Technology (Pvt.) Ltd, Virtusa(Pvt.) Ltd, Industrial and Financial Services, R & D International (Pvt.) Ltd. (IFS), Metatechno Lanka Company Ltd.,and WSO2 Lanka (Pvt.) Ltd.
The KPO / BPO industry is an emerging sector in Sri Lanka. Since 2000, the KPO / BPO sector has come a long distance, and has been able to attract some of the KPO / BPO giants in the world. Sri Lanka is growing in reputation for niche areas of financial and other related-professional services, transaction processing and document management, and call centre services, thanks to growing accounting graduates pool.
Leading KPO/BPO companies include: HSBC Data Processing Lanka (Pvt.) Ltd., WNS Global Services (Pvt.) Ltd., R R Donnelly Outsource (Pvt.) Ltd, Copal A, mba (Pvt.) Ltd., Hellocorp (Pvt.) Ltd.
IT enabled and IT related services sector requires extensive use of information technology for the provision of services such as server farms, business services, etc. At present, there are nearly 30 companies, which operate under the Board of Investment of Sri Lanka. Dialog Business Services (Pvt.) Ltd, Hayleys Business Solutions (Pvt) Ltd., and Mphasis Ltd. are some of the leading companies in this segment.
In an effort to develop Sri Lanka’s knowledge services, the education industry has been identified as one of the key areas of interest of the Sri Lankan Government. In order to ensure a consistent work force flow to meet the growing employee requirement of the knowledge services industry, IT training has been identified individually and has been given priority. There are around 20 IT Training Centres under the BOI, Sri Lanka Institute of Information Technology (Guarantee) Ltd. (SLIIT), and Asia Pacific Institute of Information Technology Lanka (Pvt.) Ltd. (APIIT).
Telecommunication Sector:
The country has developed its telecommunications industry to a level that is second to none among developing nations. As a result of the pertinent regulatory initiatives, the local telecommunications sector has taken pride in being the prime figure to introduce some of the most latest global telecommunications technologies in the South Asian Region. Sri Lanka has facilitated some of the most advanced technologies in the world such as GSM, 3G, 3.5G and HSPA (High Speed Packet Access) which allows high speed mobile broadband. Sri Lanka is also the first country to introduce Next Generation Networks such as 4G, which would enable the use of WIMAX (Worldwide Interoperability for Microwave Access) and LTE (Long Term Evolution).
Tourism
Tourism Industry in Sri Lanka:
In the 12th century, the explorer Marco Polo wrote that Sri Lanka was the finest island in the whole world. For centuries, it had been a tourism destination, particularly for European travelers. The advantage of Sri Lanka as a tourism destination is threefold. Firstly, it is an authentic tourism destination. Secondly, it is a compact island of 65,610 sq. km. where a tourist can travel the length and breadth of the country within a few days. Thirdly, the diversity of the tourism characteristics is unparalleled. In 2010, the tourism authorities has positioned the country in 8 different distinct characteristics, namely beaches, heritage, wildlife, scenic beauty, mind and body wellness, festivals, sports and adventure and essence55. For instance, the essence of Sri Lanka includes its uniqueness such asits art and culture, spices, tea, gems, handy crafts, etc.
Before 2009, the tourism industry was very unstable, picking up in certain years followed by decline due mainly to the terrorist attacks. Tourist arrivals to the country was fluctuating around 400,000-500,000 for decades. However, after the expulsion of terrorism, tourist arrivals and revenues have grown steadily. The country aims to earn US$2 billion by 2016 by attracting 2.5 million tourists.
According to the Sri Lanka Tourism Development Authority, the number of tourists visiting Sri Lanka has increased drastically. From January to June 2016, nearly a million tourists have entered into Sri Lanka. The main reason for the influx of tourists is the end of the war and the uniqueness and lower costs of travel in Sri Lanka.
In 2015, there were 1.8 million tourists with the reported revenue of US$ 2.8 billion. The government estimates that there will be a further increase in tourist arrivals to Sri Lanka in 2016 - in the range of 2.5 million tourists with an expected revenue of US$ 3.5 billion.
The Board of Investment (BOI), the agency tasked with attracting Foreign Direct Investments (FDI) to Sri Lanka, has been playing a pivotal role in attracting top tier tourism and hotel investors to the country. Companies that have already committed major investments include the premier Asian luxury hotel chains. Furthermore, international hotel brands such as Sheraton brand of Starwood Hotels and Resorts, Marriott International, Hyatt Hotels Corporation, Movenpick Hotels & Resorts Management and Onyx Hospitality Group, have signed management agreements with local hotel companies.
Ranking and Global Recognition:
Sunday Times UK in September 2015, recognized Sri Lanka as the “Destination of the Year for British Tourists&rdquo60;
UNESCO, “Home to 8 World Heritage Sites”
Industrial Sector
Textiles and Garments:
Sri Lanka’s apparel export industry is the most significant and dynamic contributor for Sri Lanka’s economy. The garment industry occupies a pre-eminent position in Sri Lanka, producing high quality garments combined with an industry which is flexible and uniquely capable in servicing leading international brands such as Victoria’s Secret, Gap, Liz Claiborne, Next, Jones New York, Nike, Tommy Hilfiger, Pink, Triumph, Ann Taylor, Speedo, Abercrombie & Fitch, Land’s End, Marks & Spencer, Intimmissimi, etc.
Footwear and Leather Products:
The footwear industry is potential to be a key contributor to Sri Lanka's economy, and already provides high end products to Mark & Spencer, Bata France, H.H. Browns, Clarks, Aerosoles and Nike. A diverse range of shoes including canvas and rubber boots, thongs, sports shoes, and leather shoes are produced, using a variety of raw materials. The footwear industry at present employs about 20,000 people directly and indirectly includes 10 large export companies, 30 medium scale companies and about 3000 small scale manufacturers. Apart from manufacturing processed leather, the leather products industry includes the manufacture of goods such as gloves, wallets, bags, purses etc.
Gems and Jewellery:
Sri Lanka has made its mark in the international market and is known for quality gemstones and creating fine jewellery in a range of unique and exquisite designs. With this reputation, the Sri Lankan gems and jewellery industry is now geared to establish a world-class gems and jewellery hub.
Ceramic and Porcelain:
Sri Lankan porcelain upholds comparatively superior characteristics including a high level of whiteness, high translucency, high scratch resistance and high thermal shock. Sri Lanka exports a wide range of porcelain products such as tableware, glazed wall and floor tiles, and ornamental & utility ware including figurines, decorations, kitchen utensils, bathroom accessories and studio pottery.
Pharmaceutical Industry:
The pharmaceutical market is a fast growing industry in Sri Lanka and worth about Rs.50 Billion. Approximately 70% of that market share is held by the private sector while the remaining market share is held by public sector institutions.
Hub Operations
Sri Lanka aiming at Asian hub Status:
The government has planned to transform Sri Lanka into a strategically important economic center by developing five strategic hubs;
A Knowledge hub
A Commercial hub
A Naval & Maritime hub
An Aviation hub
An Energy hub
Taking the advantages of Sri Lanka’s strategic locaton & resources.
Source: Sri Lanka Export Development Board, Board of Investment of Sri Lanka (BOI)