Thursday Aug 21, 2025
Thursday Aug 21, 2025
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From 2004 to 2024, Sri Lanka’s FDI journey has been a mix of bold ambition, uneven execution, and political shifts
When Sri Lanka opened its economy in 1977, the vision was to turn a small island into a nimble hub for global trade. But it’s in the past two decades that the country’s foreign investment story has been most dramatic — and, at times, most controversial.
From the cranes of Colombo to the wind farms of the North, each chapter since 2004 has been marked by big bets, bold champions, and sometimes bitter debates over the price of ambition.
The logistics era: capacity, competition, and controversy
The early 2010s marked Colombo’s leap into the big-ship era. The Colombo International Container Terminals (CICT) — a joint venture between China Merchants Port Holdings and the Sri Lanka Ports Authority (SLPA) — opened in 2013 under a 35-year build-operate-transfer deal. It gave Colombo South Harbour the capacity to handle the world’s largest vessels, cementing the port’s status as South Asia’s top transshipment hub.
Further south, Hambantota Port became the most talked-about infrastructure deal in the nation’s modern history. Conceived under President Mahinda Rajapaksa as a second deep-water port, it struggled to attract traffic. In 2017, amid mounting debt, the unity government led by Ranil Wickremesinghe leased it to China Merchants Port for $ 1.12 billion on a 99-year term. Which perhaps was not a sensible move considering the length of the lease and the extent of land that was incorporated in the lease. For some, it was a lifeline; for others, a warning about debt and sovereignty.
Another key concession was the Colombo West International Terminal (WCT) agreement signed in 2021 — majority owned by India’s Adani Ports & SEZalongside John Keells Holdings and SLPA. This marked the first Indian-led port development in Sri Lanka, signalling a diversification of strategic partners.
Real estate and tourism: concrete signals of confidence
Foreign investment wasn’t just about cranes and containers. In 2014, Hong Kong’s Shangri-La Group opened its Hambantota resort and followed with the One Galle Face mixed-use development in Colombo — a combined $ 800 million commitment. At the time, it was the largest foreign investment in Sri Lanka’s leisure and property sectors, signalling confidence in tourism and urban redevelopment.
The most ambitious urban project, however, is Port City Colombo — a 269-hectare reclamation by China Harbour Engineering Company (CHEC). Launched during Xi Jinping’s 2014 visit, its reclaimed land was completed by 2019.
This project would have been complete well ahead of 2019 if the Yahapalanaya government led by Prime Minister Rani Wickremesinghe did not oppose the continuation of the project. This also caused the Government to pay damages for stalling the project.
In 2021, Parliament created the Colombo Port City Economic Commission (CPCEC), giving the site its own investment regime and signalling the intent to position it as a regional financial and services hub.
Telecoms and digital infrastructure: quiet but consistent capital
While ports and towers dominated headlines, telecoms quietly became Sri Lanka’s largest continuous foreign investment sector. Malaysia’s Dialog Axiata has invested more than $ 3 billion since the mid-2000s, rolling out 3G, 4G, and preparing for 5G networks.
In 2018, Hong Kong’s CK Hutchison merged Hutch with UAE-owned Etisalat Lanka, creating a stronger third mobile player. These moves have given Sri Lanka one of South Asia’s most competitive and affordable telecom markets — a foundation for the country’s growing digital services exports.
Apparel and manufacturing: the steady earners
Even amid megaproject glamour, the quiet workhorses of Sri Lanka’s export economy remain its export processing zones (EPZs). The apparel sector, with significant foreign joint ventures, dominates these zones — particularly Katunayake, Biyagama, and Koggala.
Brands like Brandix and MAS Holdings have used FDI partnerships to move up the value chain, building “green” factories and design capabilities, keeping Sri Lanka’s products competitive even as labour costs rise.
Renewables: the next frontier
In the early 2020s, Sri Lanka began courting large-scale renewable energy projects, aiming to tap wind corridors in the North and solar potential across the island. A flagship initiative was the 2022–2023 partnership agreements with Adani Green Energy for wind power in Mannar and Pooneryn.
These projects reflected a shift from infrastructure-heavy FDI to investments in energy security and climate resilience. They also underscored the importance of clear, bankable contracts to attract long-term private capital into the power sector.
The brains behind the big bets
From mega-projects to measured reform
The numbers show how fragile FDI flows have been. In 2018, inflows topped $ 1.6 billion. By 2023, after the Easter 2019 attacks, COVID-19, and the 2022 debt crisis, they had fallen to $ 730 million.
In 2023, under an IMF Extended Fund Facility, the Government embarked on reforms aimed at stabilising the currency, restructuring state-owned enterprises, and improving the investment climate. The Board of Investment reported early signs of recovery in project approvals, but reaching the regional benchmark of 2–3% of GDP in FDI will require consistent policy delivery.
The road ahead: five watch points
1.Execution at Colombo West International Terminal — on-time delivery and operational performance will set the tone for future port concessions.
2.Anchor tenants at Port City — law firms, BPM providers, and financial services players will test whether the SEZ’s incentives are credible.
3.Transparent renewable energy agreements — essential to unlock the multi-billion-dollar clean energy pipeline.
4.Digital infrastructure scaling — 5G rollout and fibre expansion will determine if Sri Lanka can grow its IT/BPM exports.
5.Policy continuity — perhaps the single biggest determinant of whether investors see Sri Lanka as an opportunity or a risk.
Conclusion
From 2004 to 2024, Sri Lanka’s FDI journey has been a mix of bold ambition, uneven execution, and political shifts. The physical landmarks — from deep-water ports to luxury towers — are visible to all. The less visible but equally vital story is whether the country can now offer investors what they prize most: stability, transparency, and fair returns.
If it can, the next decade could be less about singular megaprojects and more about a steady flow of capital into a diversified, resilient economy.
Sri Lanka’s FDI milestones (2004–2024)
2004–2009
2010–2014
2015–2019
2020–2021
2022–2024
