Bombshell on BOI investors

President Anura Kumara Disanayake 

•  Customs using IMF as guinea pig to make unproven allegation on revenue leakage against BOI to take over trade facilitation functions 
• Officials fail to talk to industry to understand consequences before making commitments to IMF 
• Proposed change comes after Customs were twice prevented by Supreme Court and consecutive Govt.s since 1999 to control BOI operations 
• BOI officials also perplexed
• Sri Lanka further pushed back in export growth, investments and investor confidence and falls behind competing countries

After 25 years of failed lobbying, Sri Lanka Customs (SLC) is using the Government’s two-thirds power and the International Monetary Fund (IMF) program to discreetly creep into an area that was considered much-needed trade facilitation and speed for Board of Investment (BOI) investors on special economic zones.

The Government has dropped a bomb on BOI investors as published in the July 2025 report of the IMF, where Sri Lankan authorities have agreed to transfer functions of import/export clearance from the BOI to SLC by October, citing “possible revenue leakage,” but have failed to publish a report of proof. This was never an area in the original commitments made to the IMF and takes Sri Lanka out of competition for investment compared to major hubs like the United Arab Emirates (UAE), Singapore, Hong Kong, Malaysia, and even other Foreign Direct Investment (FDI) attracting destinations, such as Vietnam and India, who are establishing special economic zones to facilitate global trade.

In Sri Lanka, the BOI trade facilitation systems were introduced more than three decades ago to support investment in special Free Trade Zones and, in the recent past, to establish free port operations following global best practices, special economic zones to provide manufacturers and re-exporters the opportunity to fast-track clearance and export processing to be competitive in global supply chains, and to avoid archived laws that lead to corruption.

While the BOI still operates under the Customs’ ASYCUDA software system and all revenues that are to be collected by BOI investors too are currently collected by the Customs Department, Customs officers are indeed present in zones and ports to overlook any compliance issues, similar to other competing countries. These powers have been granted to them by the law, except for the export/import documentation part and verification at designated locations. However, the Customs still has the right to inspect any BOI cargo if they have credible information and are allowed to do audits to check all documents relating to exports and imports of BOI companies and conduct post audits.

Given this environment, now SLC wants to control the total process, which will have serious ramifications to investors as it is more than clear that trade facilitation is not the objective of the Customs, but a control mindset to delay things, making the gates open for further corruption. Hiding under the banner “possible revenue leakage,” SLC, without focusing on digitalisation or changing the Customs Ordinance in full, where manual processes and human intervention are at every corner to disrupt trade, it is shocking to see that this kind of short-sighted action is taken into consideration by the Government and IMF without any proof or understanding of the ramifications and operations.

Customs delays and corruption have been the cry of the non-BOI importers and exporters, who have clearly pointed out repeatedly for decades the inefficiency of the Department and the corruption linked to it. The Sri Lanka Shippers’ Council had a number of press conferences highlighting the problem in the recent past; the port congestion created from time to time is a classic example of how the Customs uses their power to delay and disrupt supply chains under various excuses and using a 200-year-old ordinance. Knowing this, the Government takes action to paralyse special investor benefits awarded for decades.

It was understood that the investor community had not been consulted by the Government before committing to the new IMF structural reforms. This attempt to take over BOI function by the Customs is well over two-and-a-half-decades old and there were two Supreme Court rulings between the 1999-2003 period barring the Customs from trying to forcefully take over trade facilitation functions from the BOI. 

BOI officials too have expressed serious concern that, at a time where no special concession is given to investors, such policy decisions will only make Sri Lanka an unattractive place to expand or invest anymore. BOI sources confirm that the top management of the BOI had not agreed to any such change to investors, while it is understood that investors have already requested the Government to withdraw this process. 

Other sources indicated a powerful secretary linked to the Customs has given a hearing to the Customs unions and included the change hiding under the IMF reforms banner.