Saturday Sep 13, 2025
Saturday Sep 13, 2025
Saturday, 13 September 2025 00:35 - - {{hitsCtrl.values.hits}}
The Free Trade Zone Manufacturers’ Association (FTZMA) has submitted its proposals for the 2026 National Budget to President Anura Kumara Disanayake, focusing on foreign currency contribution-linked incentives, value addition, trade facilitation, stability for exporters, and diversification to reduce tariff risks.
The proposals were presented at the Presidential Secretariat during a pre-Budget meeting with apparel sector stakeholders.
The FTZMA noted that Sri Lanka’s export competitiveness faces heightened risks following the US Executive Order in April 2025 that imposed a universal 10% tariff, later adjusted with country-specific rates.
Sri Lanka’s tariff rate was initially set at 44% and later reduced to 20% from 7 August. Court challenges are ongoing, creating policy uncertainty.
The US remains Sri Lanka’s single largest market, accounting for $ 2.91 billion in exports in 2024. Fitch Ratings has projected weaker US consumption in 2026 due to tariff-driven inflation, underlining the need for urgent market diversification.
The association highlighted opportunities in the UK through DCTS liberalisation (effective 2026), continued EU GSP+ access until 2027, preferential quotas under the India-Sri Lanka Free Trade Agreement, acceleration of the 2024 Thailand FTA, and export growth in GCC/UAE markets. Services exports like IT-BPM, maritime, and tourism, were cited as tariff-proof areas for expansion.
Its key proposals are as follows:
Net Foreign Currency Contribution (NFCC) Incentives: A new tax code is proposed linking tax rates to foreign currency contribution ratios: exporters with NFCC of 50% or higher would be taxed at 12%, those between 30–49% at 18%, and others at the standard rate. The FTZMA also proposed earning-linked rebates of 2–5% on incremental NFCC, super-deductions of 150–200% for R&D, certifications, and sustainability upgrades.
Export transformation facility: A financing and support mechanism to promote higher-value production, and SME integration, with concessional loans, risk-sharing, 50% matching grants for branding and IP, tax credits for supplier development, and EXIM-style credit and FX hedging for SMEs.
Trade facilitation: Measures to guarantee speed and certainty include a “BOI-in-a-Week” approval process, 24/7 green-channel export corridors, VAT refunds within 30 days with interest, risk-based e-refunds, and a single-window digital platform linking all relevant agencies.
Stability for BOI Section 17 enterprises: The Association called for reaffirmation of Section 17 protections, no retrospective changes in taxes or duties, duty-free access to inputs and capital goods, and guarantees on profit repatriation. Bonus incentives such as reinvestment allowances and tax credits for capacity upgrades and higher-value production were proposed.
Diversification and market expansion: Incentives for adopting UK DCTS liberalisation, EU compliance support, fast-tracking quotas under ISFTA, roadmap implementation for the Thailand FTA, logistics investments in GCC/UAE, and expanded support for IT-BPM and maritime services.
Cross-cutting reforms: The proposals include guaranteed VAT refunds with statutory timelines and interest, predictable energy pricing, logistics improvements through digitisation and green corridors, transition to transparent rules-based incentive frameworks, and the development of plug-and-play industrial clusters with full infrastructure support.
The FTZMA said these measures would maximise net foreign currency earnings, strengthen value addition and local linkages, ensure efficiency in trade facilitation, protect existing BOI operations, and diversify Sri Lanka’s export markets.
President Disanayake expressed appreciation for the proposals, noting they reflect the sector’s operational experience. He instructed Ministry of Finance officials to review them in detail and develop an action plan with immediate steps and follow-up discussions, the association said.
