The State must keep time, too

The scaling back of Port City tax concessions after investors had committed did more damage than any single failed project, because it showed that even our flagship stability zone could alter its own terms 

•  Sri Lanka’s stability will not become growth, nor its recovery investment, until the clock that governs citizens also governs the State

Every Sri Lankan knows the feeling. A tax return is due by a fixed date, and a day’s delay brings a penalty. An appeal must be lodged within a set number of days, or the right to it is lost. A licence lapses at midnight; a renewal fee is surcharged the morning after. The citizen and the business live by the calendar, and the law enforces it without sentiment. 

Now consider the other side of the counter. An application for an approval is submitted, and then nothing. There is no date by which the State must answer, no consequence if it does not, and frequently no one who can say where the file is. The citizen is on the clock; the State is not. That asymmetry is not a minor administrative irritation. It is, I would argue, one of the principal reasons Sri Lanka’s hard-won economic recovery has not yet turned into the investment the country needs.

A recovery that has not yet become investment

Let us give credit where it is due. Foreign direct investment (FDI) reached approximately $1.06 billion in 2025, the first time inflows have crossed the billion-dollar mark, and a rise of roughly 72% on 2024. Revenue collection has been restored. The Public Debt Management Act, No. 33 of 2024, has placed debt reporting on a transparent statutory footing. Our position on the corruption perceptions ranking improved from 121st to 107th in a single year. These are real achievements, and they belong to the country, not to any one party.

Yet the numbers that matter most remain stubborn. FDI is still close to 1% of GDP. The 2025 target of $ 5 billion was met at about one fifth. Most individual transactions sit in the $ 3 to 5 million range. And South Asian FDI as a whole grew by 35% in 2025, which means we are riding a regional tide rather than outperforming our neighbours. The sovereign rating stands at CCC+. 

The clock runs against the recipient, never against the State 

Consider what the mid-sized investor, the person who actually makes up most of our transactions, encounters on arrival. To open an Inward Investment Account (IIA), through which capital must legally enter the country, original physical documents must be couriered or hand-delivered from abroad. There is no uniform procedure across licensed banks, with each institution applying its own internal processes. More importantly, the Central Bank has not published prescribed guidelines setting out the mandatory disclosures required from investors or specifying maximum processing timelines. Consequently, while the investor is bound by strict compliance requirements, neither the banks nor the regulator is subject to a corresponding standard of procedural certainty or timeliness. Unless the Central Bank addresses these gaps by introducing uniform procedures, clear disclosure requirements and prescribed processing timelines, the framework remains deficient in both prudence and substance.

The expatriate work authorisation process is starker still. A foreign hire needs a sponsoring body recommendation, then an entry visa, then conversion to a residence visa after arrival. If that person leaves the country within the one-month entry visa window, the process starts again. The applicant has a month. The three agencies involved have no deadline at all. The time limits have caused significant difficulties in both attracting and maintaining Foreign Direct Investment (FDI). I can think of no better illustration of a system that measures the citizen’s time precisely and the State’s time not at all.

The same pattern runs through the courts. A litigant who misses a prescribed period may lose a case before it is heard. Meanwhile 1.13 million cases are pending across 293 courts. The rules of procedure are strict with the party and silent on the delay. Contract enforcement is now slow enough that every investor prices it into every deal, and we pay that premium, whether or not we ever see the dispute.

No approval in our investment framework carries a legislated deadline. The Board of Investment (BOI) functions as a nominal single window, while real decision-making authority is spread across several ministries, the Central Environmental Authority, the water and electricity boards and local authorities. Investors report approaching municipal councils and ministries separately for a single project. Each agency is entitled to take its time; none is obliged to explain it. When everyone holds a veto and no one holds a deadline, delay is not a failure of the system. It is the system. Sri Lanka’s continued rhetoric on investment facilitation must be translated into urgent legislative and administrative action; otherwise, it will remain mere rhetoric.

Why this matters more than incentives

We have spent decades debating tax holidays and concessions. But the marginal investor in Sri Lanka is not a multinational deciding between continents; it is a firm placing a few million dollars and borrowing against a construction schedule. For an investor, an approval that may take three months or eighteen months is not merely an inconvenience; it is an unfinanceable risk. Predictability of process matters more than the generosity of the incentive, just as, in labour law, predictability of cost matters more than the level of cost. That is precisely why the absence of prescribed timelines in any of our guidelines or handbooks cannot be justified: the framework must provide foreign investors with a predictable timeframe within which approvals will be processed.

There is also a question of fairness that goes beyond economics. A State that demands punctuality from its people while exempting itself teaches a corrosive lesson: that rules are for the governed, not for those who govern. Investors notice that. So do our own professionals: skilled workers now account for 76.5% of departures for foreign employment. We are losing the very educated workforce we advertise.

From stability to growth: why investors are the test

Sri Lanka has spent the years since the crisis doing the hard and necessary work of stabilisation: restoring revenue, restructuring debt and rebuilding the credibility of our public finances. Stability, however, is a floor, not a destination. The task now is to convert it into growth, and growth on the scale we need cannot be financed by the State alone. With the sovereign rating at CCC+, commercial borrowing markets remain effectively closed to us. Domestic savings are rebuilding slowly. Foreign direct investment is therefore not one option among many; it is the principal source of the capital, technology and market access that will determine whether the recovery becomes durable.

FDI also has a quality that borrowed money does not. It does not have to be repaid on a fixed schedule, it brings skills and export markets with it, and it creates the jobs that may persuade our professionals to build their careers at home. As heavy debt service resumes in 2028, a country that has diversified its sources of capital will face those repayments from strength. A country that has not will be tempted back into the same cycle that brought us to crisis.

The Government must give greater credence to attracting foreign direct investment, improving Sri Lanka’s competitiveness as an investment destination and establishing a predictable, prudent and investor-friendly tax policy. Revenue mobilisation is important, but it cannot be the sole measure of economic success. 

This is precisely why the timeliness of the State matters so much. Investors do not compare Sri Lanka with its own past; they compare it with Thailand, Vietnam, and Malaysia, each competing for the same capital. Those jurisdictions offer investors something we too often do not: certainty about how long the State will take to say yes or no. Every month an approval sits unanswered is a month of financing costs, a delayed construction start and, increasingly, a decision to invest elsewhere. Investors can price risk; what they cannot price is silence.

The ambition is achievable. A credible path would lift FDI from about $ 1.06 billion today to $ 2.5 billion by 2028 and $ 4 billion by 2030, raising it from roughly 1% of GDP towards 3%. Those targets will not be met by promotional roadshows or fresh incentive packages. They will be met by making Sri Lanka the place where a project approved on a given date starts on a predictable one. Tellingly, the median time from application to construction start is not even measured today. What a government does not measure, it cannot manage, and what it cannot manage, investors will not trust.

Our natural advantages are real: a location on the main east-west shipping lanes, an extraordinary tourism endowment and a literate population that could make us a regional centre for higher education. But advantages that cannot be unlocked on time are advantages in name only. A State that answers promptly is the bridge between stability and growth.

Unless we are able to address the existing tax structure, Sri Lanka may no longer be a cost-competitive destination when labour costs are considered alongside the prevailing tax burden. Countries such as India and Bangladesh benefit from relatively lower labour costs, partly due to their large labour force and population. Consequently, when both taxation and labour costs are taken into account, Sri Lanka may no longer offer a significant cost advantage.

Put the State on the clock

The remedy is neither complicated nor expensive, and most of it requires no new Act of Parliament.

First, gazette maximum determination periods for every category of investment approval, and attach a rule of deemed approval: if an agency fails to respond within the period, the application is approved unless refused in writing with reasons. A published timeline without consequence is an aspiration. Deemed approval turns it into a commitment. This can be done by regulation under existing investment law within six months.

Second, the Central Bank should direct licensed banks to accept a single standard document set, certified digital submissions and electronic verification for the IIA, with a published maximum processing time. It is the cheapest reform available, and it sits at the very first step of the investor’s journey.

Third, consolidate expatriate work authorisation into a single permit issued through the BOI Visa Management System and accepted by the Department of Immigration and Emigration, extend the conversion window to six months, and permit conversion after travel. If the citizen’s window is to be generous, let it at least be as generous as the State’s.

Fourth, assign every approved project a named senior officer with authority to convene the agencies involved and a duty to report delays each month. Accountability needs a name, not merely an institution.

Fifth, publish a live project tracker showing every approved project above a defined threshold, its approval date, its current stage, the responsible agency and the reason for any delay. It will be uncomfortable for a quarter. After that it will be self-correcting, because no agency wishes to be named as the cause of delay.

Sixth, complete the Single Window for Investment, for which the Finance Ministry has already called proposals, and make it genuine: one interface and one status tracker covering BOI registration, incorporation, tax registration, environmental clearance, local authority approval and utility connections. A portal that merely forwards applications into the same silences would be worse than none.

And in the courts, fund the instrument we already have. The Mediation in Civil and Commercial Disputes Act, No. 13 of 2026, in force since 30 June, makes mediated settlements binding and enforceable and allows judges to refer suitable matters to mediation. International experience suggests settlement rates of 65 to 70%. What is missing is capacity and funding, not law, together with published disposal-time targets for labour tribunals and commercial mediation.

Beyond the next election

Timelines alone will not suffice if the rules themselves can change mid-stream. The scaling back of Port City tax concessions after investors had committed did more damage than any single failed project, because it showed that even our flagship stability zone could alter its own terms. A Cabinet policy statement grandfathering agreed terms, written into the standard BOI agreement, would cost nothing. Neither would a cross-party investment compact committing the principal parties to leave the core framework intact for at least ten years. FDI decisions run on twenty- to thirty-year horizons; ours have rarely survived a change of government.

This is not a partisan argument. On this question, there should be no sides. Much of the work has already been done: the labour law consolidation has been drafted and agreed at committee, the mediation law is in force, and the single window is in procurement. The scarce resource is not analysis. It is the will to bind the State to the same discipline it has always required of its citizens.

A country that respects its people’s time will find that investors respect it too. Let us put the State on the clock.

(The author is a President’s Counsel and a former Cabinet Minister)