Sri Lanka Economy

Sri Lanka’s social indicators are among the best in the South Asian region. The country has achieved near universal literacy and, perhaps more remarkably, girls are on par with boys. Over the last two decades, substantial steps have been taken to diversify the economy, and open it up to trade. The Government’s 10-year development plan envisages the key role in promoting economic growth, with a focus on harnessing resources to the less developed regions. Key policy documents advocate infrastructure development and livelihood support in rural areas.

Sri Lanka: Economic Indicators, 2004–2008

	Economic Indicator	2004	2005	2006	2007	2008
	Per capita GDP, at Market Price ($)	1,062	1,241	1,421	1,634	2,014
	GDP growth (% change per year)	5.4	6.2	7.7	6.8	6.0
	CPI (% change per year)	9.0	11.0	10.0	15.8	22.6
	Unemployment Rate (%)	8.3	7.7	6.5	6.0	5.2
	Fiscal Balance (% of GDP)	-7.9	-8.4	-8.0	-7.7	-6.8
	Export Growth (% change per year)	12.2	10.2	8.5	11.0	6.5
	Import Growth (% change per year)	19.9	10.8	15.7	10.2	24.0
	Current account Balance (% of GDP)	3.1	-2.7	-5.3	-4.5	-7.1
	External Debt (% of GNI)	54.2	46.7	41.7	43.9	…

CPI = Consumer Price Index, GDP = Gross Domestic Product GNI = Gross National Income. Sources: ADB. 2009. Asian Development Outlook 2009. Manila. ADB staff estimates. World Bank. 2009. World Development Indicators Online.

Directions for the Future

The core of the Government’s 10-year development plan, the 'Mahinda Chinthana' is primarily focused on rural development through investment in large-scale infrastructure and improving and windening the associated knowledge base of the economy.

Education

Sri Lanka’s educational achievements are substantial. Increasing attention is being paid to line up educational courses with technological advances to meet and digital know-how.

A New Beginning

The dramatic end of civil war in Sri Lanka marks a new beginning for its people and a chance to rebuild the nation's economy. President Mahinda Rajapakse announced that Sri Lanka has been "liberated from terrorism," and said it was the first time in 30 years that the entire country has been unified.

The Sri Lankan government is rebuilding the infrastructure, social facilities and government offices across the northern regions which were long controlled by the Tamil Tigers. The redevelopment blueprint may be modeled after the one in Eastern Sri Lanka, in which the government had begun construction on a series of projects after the military, expelled the Tigers from its former stronghold in the East.

Sri Lanka's long coastline is one of its precious resources. Sandy beaches in the South and the Southwest such as Hikkaduwa, as well as Arugam Bay and other beaches in the East and South East, attracts surfers from around the world. Some believe Sri Lanka could become the Thailand of South Asia for tourists.

Sri Lanka – Global Destination for Growth and Progress

With its decision to move away from closed economic policies as far back as 1977, Sri Lanka is the first country to introduce free-market reforms in the whole of South Asian region. Today, Sri Lanka is now one of the most liberalized economy in South Asia.

Investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100% repatriation of profits. Total foreign ownership is welcome in almost all areas of the economy, with only a few areas limited or restricted to foreigners.

Coupled with the market-friendly economic environment is the strategic location of the island and an easy access to the vast and fast growing Indian market. These together with highly literare and efficient work force and better living conditions, Sri Lanka is the place for winning destination not only in South Asia but also in the entire Asian and Middle Eastern regions.

In terms of economic success Sri Lanka is vastly unexploited by the international business community. With the elimination of terrorism from the Island the northern and eastern provinces of the country alone offers a range of investment opportunities, fully supported by the government. These include large scale infrastructure projects such as construction of roads, bridges, power generation plants, ports, air ports, townships, hotels & recreational centers and telecommunication facilities.

Manufacturing and service sectors too offer a host of opportunities for foreign investors. Agriculture & agro processing, ceramics, rubber products, electronic & electrical items, gems & jewelry, IT & BPO operations, education, tourism & leisure, just to name a few.

Investments in Sri Lanka are protected by the country’s constitution itself. In addition, Sri Lanka has signed investment protection agreements with over 20 countries including the US and many developed economies such as Germany, the UK, France, Japan, Australia, Canada, Singapore and large emerging economies like China and India. Sri Lanka has also signed agreements with many of these countries for avoidance of double taxation.

The list of attractions do not end there. The Free Trade Agreement with India provides duty free access to over 4,000 product lines exported from Sri Lanka, while Pakistan – Sri Lanka Free Trade Agreement grants duty free access to an equally large number of products. Meanwhile, the “GSP Plus” facility granted by the European Union allows Sri Lanka to export as many as 7,200 products to the vast European market completely duty free. Sri Lanka is the only “GSP Plus” beneficiary in the whole of South Asia.

The above are a few of he many reasons why global industrial giants are now reaching Sri Lanka for their next stage of investment and business activities.