Positive and Negative aspects of Investing in Srilanka

Posted by Ellen Ibbot on April 3rd, 2021

FDI has flourished in Srilanka in the past few years. It has been subjected to a constant rise despite the economic and civil conflicts in the country. However, the UNCTAD’s 2020 World Investment Report has reported a drop in the FDI inflows in the year 2019. The inflow was mostly absorbed into infrastructure of the country. More and more people are engaging in Foreign Direct Investments in Srilanka owing to the profitability and returns the country seems to give back. The growing competition between India and China is positively influencing the Srilankan economy. These two large countries are its prime investors, investing 13% and 18% respectively. There are different ways in which one can invest in the Island country, it can be done through

1. Mergers and acquisitions: these are consolidation of companies by merging the assets of the company. Look at prospective companies to invest in Srilanka and do so by proposing a Merger or Acquisition.
2. Joint Ventures: Joint Ventures with local firms will be a more economical option to invest. It will help you increase the ambit of your business with efficient input about local markets and market trends from the local firms. Since they will have an existing establishment and experience in the same field.
3. Buying Stocks in Srilankan Firms: Buy voting stocks in Srilankan companies to influence the running of their business. Stocks is the most risk-free option available, because Srilanka is a rapidly developing country with flourishing companies.
4. Expand your business to Srilanka: Expanding your business to a foreign country will open up new markets and opportunities for you.

Investing in a foreign country can be a very risky. Hence it is important to spend considerable time studying the market and its trends. Also look into laws of the country and procedure to invest to make your investment more secured and safer.

Among other reasons to invest in Srilanka there are many measures taken by the Srilankan Government to attract FDI. These are

• Creation of tax-free zones
• Reduction of subsidies for few consumer goods
• Strategic location near two rapidly developing economies
• High tourist potential
• High literacy rate among native
• Good quality work force

On the other hand, there are many reasons attached to the Srilankan economy that negate the investment opportunities,

• Political uncertainty brings about economically uncertainty
• Srilanka has unaddressed problems of commutation and transportation
• Lack of infrastructure. Roads and airways do not reach most places in the country. Railways is an outdated mode of transportation in Srilanka.
• Lack of Safety for women

Foreign investment is welcome in almost all of the section of the Srilankan economy, except in a few areas. Investors can enjoy tax benefits and constitutional guarantees on their investments, they are also given the choice of repatriating with 100% of the profits. According to Lloyds, Srilanka is ranked the No.1 port in South Asia and 26^th in the world. It is predicted to become the main trading hub of the region.

Tax Rates for Investment references

Value Added Tax: 8%

Company Tax: 28%