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Investment focus 


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With an eye on Foreign Direct Investment (FDI), the Government has decided to reactivate an Act which gives concessions, including tax exemptions, for 25 years for what it describes as ‘Strategic Development projects of national interest’, the Cabinet.

It was reported over the weekend that the proposal is aimed at attracting foreign investments which could generate jobs and provide export markets to local products. Attracting foreigners for tourism and setting up of assembling plants are also being considered.

The Strategic Development Projects Act (SDPA) was enacted in 2008 by the then Mahinda Rajapaksa Government, and amended in 2013, but the UNF government in 2016 put the Act on hold.

This is a positive step as Sri Lanka is in dire need of more investment and exports to drive growth and put the economy on a better footing. Wider reforms are also crucial to this process. 

Despite repeated and prolonged efforts, Sri Lanka has only advanced one notch in the latest Ease of Doing Business rankings compiled by the World Bank, inching forward from 100th in 2018 to the 99th position in the latest edition. Advancing up this index has long been a goal of successive governments, with the former administration aiming to reach about 70th place by 2020. 

In contrast, India, which was placed 63rd in the Doing Business rankings, is the highest ranked economy in South Asia, followed by Bhutan (89) and Nepal (94). The region’s lowest ranked economies are Bangladesh (168) and Afghanistan (173). Other economies in the region and their rankings are Sri Lanka (99), Pakistan (108), and the Maldives (147).

India, with four reforms, is among the top 10 improvers for the third consecutive year. Another top reformer, Pakistan, with six reforms, improved the most in the region during the past year, moving forward 28 places. India was ranked in 77th position last year while Nepal, which was ranked 110th, managed to move past Sri Lanka to 94th position. Bangladesh was at 176th position and has advanced eight places. 

Unfortunately, Sri Lanka finds itself among half of the South Asian region’s economies that failed to carry out any reforms in the past year. Afghanistan, Sri Lanka, Bhutan and the Maldives did not make any regulatory changes. Sri Lanka, along with its neighbours, continues to underperform generally in enforcing contracts and registering property. A company needs around 108 days to register a transfer of property in South Asia, more than four times the OECD high-income average of 24 days. Resolving a commercial dispute takes around three years, almost twice as long as among OECD high-income economies.

Overall, the governments of 115 economies around the world launched 294 reforms over the past year to make doing business easier for their domestic private sector, paving the way for more jobs, expanded commercial activity and higher incomes for many, according to the World Bank Group’s Doing Business 2020 study. Sri Lanka, hamstrung by political uncertainty and institutional lethargy, is facing the danger of being left behind in the race to become a more competitive economy. 

Despite its social welfare indicators being on par with East Asian countries, when it comes to economic competitiveness, Sri Lanka stays true to its South Asian roots. Sri Lanka is not the only country regionally to have troublesome politics and face terror disasters. Its neighbours deal with many of these challenges and more but there is still an effort to push through at least some reforms to improve their rank. 

The index has also been affected by the US-China trade war, with reforms being lower than previous years. But it is clear that key countries, including India, China and Singapore, continue to battle for better rankings and Sri Lanka is in danger of being outperformed in its own backyard.

It is therefore important for the administration of President Gotabhaya Rajapaksa to also focus on how to turn this situation around and what policies can be implemented to ensure Sri Lanka does better. Transparency on investments is also important to ensure public interest.


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