Sri Lanka offers the most friendly business climate in South Asia. According to the Economic Intelligence Unit (EIU) Forecast 1998, Sri Lanka’s business environment ranks 11th in the region, and 42nd in the world.
It is an island situated at the southern tip of India between 6° and 10° north and 80° and 82° east. The country is separated from India by the Palk Straits, 32km wide at its narrowest. Sri Lanka is strategically located at the cross roads of both east and west sea routes and serves as the point of entry to South Asia. Sri Lanka measures 435 km north to south and 224 km east to west, covering a total area of 65,610 square kilometers.The island’s strategic location in the Indian Ocean on the major air and sea routes between Europe and the Far East gives it an advantage as a global logistics hub.
Climate
Sri Lanka has a pleasant tropical climate with two climatic zones — the wet and the dry. Temperatures range from 23-30 degrees Celsius in the lowlands and 10-20 degrees Celsius in the hill country. The average temperature in the country is approximately 27 degrees Celsius.
It is a multiethnic, multireligious country with a diverse and rich culture. The Sinhalese, the majority community, comprise 74.0% of the country’s estimated 18.7 million population. The other ethnic groups that are part of Sri Lanka’s social fabric are the Sri Lankan Tamils, Indian Tamils, Moors and other minorities including Malays and Burghers. Each of these groups has its own identity, customs and traditions.
Languages
The two official languages are Sinhala and Tamil. Sinhala is the language of the majority of the population. Tamil is widely used in the northern and eastern parts of the country. English is widely spoken and understood in the urban centers. It is the language of business and commerce.
Colombo Port
• According to the Lloyds Register the Colombo Port ranks as No. 1 port of South Asia and the 26th in the World.
• Throughput has grown at a compound annual rate of 20.3% over the last seven years.
• Transshipment cargo accounts for 72% of throughput.
• 23 major shipping lines and 7 feeder services operate out of Colombo.
• The Colombo Port is computerized and linked to all major freight stations.
The Hub Port of South Asia offers you:
• An ideal geographical location with minimum deviation from shipping lines.
• Fully equipped berths for late container vessels.
• Excellent feeder network.
• Fast turnaround and round the clock service.
• EDI facilities with two modern container terminals, with state of the art technology and control systems.
• The most competitive rates in the region.
• Multicountry consolidation and entrepot cargo.
• Flexibility to meet customer needs. Work is also in progress to develop and upgrade the port of Galle located in the south and the port of Trincomalee on the north east coast of Sri Lanka.
Bandaranaike International Airport
The BIA is a regional hub of air transportation and is considered to be No. 1 in South Asia.
• Major airlines operate frequent flights from BIA to important cities in Europe, Middle East, Far East, Australia, and the Indian Subcontinent.
• Passenger movement at BIA has increased from 2,234,962 in 1995 to 2,880,387 in 2000, a 29% increase.
• The cargo movements at BIA has increased from 76,312 tons in 1995 to 127,116 tons in 2000, a marked 76% increase.
• The aircraft movement in the same period has increased from 16,543 to 21,058, a 27% increase.
Global Logistics Hub
Sri Lanka will be developed as a major Global Logistics Hub in the South Asian region for trade, investment, communications, and financial services. Known as the Colombo Freeport, it will provide integrated air, sea and road services linked to state of the art distribution parks.
Key Features of Colombo Freeport
• Distribution parks at air and seaports
• Quality physical infrastructure facilities
• Warehousing and administration facilities
• Superior IT/telecom facilities
• Public/private participation
• One-stop service center
• Private sector management
• Attractive incentives for operators and users
Key Activities of Colombo Freeport
• Multicountry consolidation
• Regional distribution
• Transhipment
• Entrepot trading
• Import/export and value addition
The Sri Lankan work force accounts for 35% of the total population. Sri Lanka boasts high levels of education. We have the highest literacy rate in South Asia (92%) and approximately 50% of the students who have completed their higher education are trained in technical and business disciplines. English is widely spoken in the country and is the main language used by the business community. In addition, according to the World Bank Development Indicators 2000, Sri Lanka has the lowest labor cost per worker in manufacturing.
Today, Sri Lanka is ranked as the most liberalized economy in South Asia. Investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100% repatriation of profits.
Total foreign ownership is welcome in almost all areas of the economy, with only a few areas limited or restricted to foreigners.
Sri Lanka Vis-à-Vis the World Quality of Life
Sri Lanka leads the South Asian region in terms of human development indicators, with its high literacy rate of 92% placing it way ahead of other South Asian nations and on par with those of Southeast Asia. Its national health indicators are comparable with those of the developed world.
This is underscored by the relatively high ranking the country has received in terms of GDP p.c. (PPP), which at $3,530 is higher than that of India ($2,358), Pakistan ($1,928) and Bangladesh (US$1,602).
Sri Lanka was placed 89th (Medium Human Development Category) out of 173 countries in the Human Development Indicators constructed in 2002, ahead of China (96th), Vietnam (109th), Indonesia (110th), India (124th), Pakistan (138th) and Bangladesh (145th).
The Human Development Index (HDI) measures a country’s achievements in three areas of human development viz: longevity, knowledge and a decent standard of living. Longevity is measured by life expectancy at birth. A combination of adult literacy and the combined primary, secondary and tertiary gross enrolment ratio is used as a measure of knowledge while GDP per capita (PPP) is used to measure the standard of living.
Business Environment
In the EIU’s country forecast, Sri Lanka’s overall score in the business environment rankings improves from 4.99 for the historical period (1997-2001) to 6.03 for the forecast period (2002-2006). The country’s global ranking improves from 49th to 45th and its regional ranking moves from 14th to 13th in comparison to the historical period.
The higher rankings are indicative of the more attractive investment climate in the country, with Sri Lanka’s score in most of the categories used to evaluate the business environment improving significantly. For instance, Sri Lanka is ranked highly for its liberal approach to foreign investment, with its global and regional rankings moving from 36th to 27th (out of 60 countries) and 8th to 4th (out of 16 countries). From a regional perspective, the country’s main advantages center on its open foreign investment regime, its commitment to private enterprise and competition and its liberalized trading environment (where it is ranked 5th).
Sri Lanka’s free trade zones have been the linchpin of economic development and inflow of foreign direct investment into Sri Lanka. The country’s free trade zones are seen as benchmarks of successful implementation of zone development strategies . Private and public investment programs have been implemented to improve the country’s basic infrastructure facilities. Today, Sri Lanka’s infrastructure ranks as the best available in South Asia. The government is actively encouraging private sector investment in infrastructure on the basis of BOO (Build, Operate and Own) and BOT (Build, Operate and Transfer). Currently there are private investment projects in power, ports, water sanitation, transportation (highways and rail) and IT.
Telecommunications
Development of Sri Lanka’s telecommunications sector is based on private sector investments. Significant aspects of this sector are:
• Operations by multiple public and private telephone service providers, including three basic, four cellular and six payphone services, making the industry one of the most competitive in Asia.
• The number of fixed telephone lines installed increased by 84% between 1997 and 1999 as a result of the entry of two wireless loop operators led by Telia AB of Sweden, Trans Asia Telecom Ltd., of Singapore, Trans Atlantic Telecommunications UK and the privatization of Sri Lanka Telecom Ltd.
• Global telecom giants such as NTT, Ericsson, Telstra, Hutchison Wampoa and Malaysia Telecom are other major operators in the Sri Lankan telecommunications industry.
• Deregulation has resulted in the country’s largest ever privatization initiative, with NTT of Japan purchasing 35% of Sri Lanka Telecom for $225 million.
• The availability of satellite bandwidth through several private operators such as Electroks and Ceycom Global Communications. Power
• The Ceylon Electricity Board (CEB) is the main supplier of electricity to the National Grid.
• Independent Power Producers (IPP) share of total power generation was 8% in 1999.
• The total installed capacity of electricity under both CEB and IPP stood at 1,691 MW in 1999.
Roads
The construction of four major expressways will improve the existing road network. These include the Colombo/Matara, Colombo/Katunayake, and the Colombo/Kandy highways as well as the Colombo outer circular road. Construction work of Colombo/Katunayake expressway has already commenced.
Education
Sri Lanka offers a variety of educational facilities ranging from public and private educational establishments to international schools following British and American curricula. The best secondary schools are of a very high standard. Annually a large number of Sri Lankan students enter top rated universities such as the Ivy League schools in the US, and Oxford and Cambridge in the UK.
Language education in French, German and Japanese is also available through various educational institutions. Sri Lanka has a number of well-equipped public and private hospitals located throughout the country.
