ABOUT SRI LANKA

 Amongst all the countries in the South Asian region, Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka, is a vibrant island nation located in the Indian Ocean. Known for its rich history, diverse culture, and stunning natural beauty, Sri Lanka has faced significant challenges, including a prolonged civil conflict and a recent economic crisis. However, the country is actively engaged in recovery efforts and aims to foster a resilient and diversified economy. Sri Jayawardenepura Kotte serves as the legislative capital, while Colombo functions as the commercial and judicial capital and is also the largest city. According to the World Bank, Sri Lanka is currently classified as a Lower-Middle Income Economy, having experienced a reclassification due to the recent economic downturn, but is working towards regaining its previous status.

The currency of Sri Lanka is the Sri Lankan Rupee (LKR). As of today’s exchange rates (June 2025), 1 Indian Rupee is approximately 3.49 Sri Lankan Rupees. The population of Sri Lanka is estimated at approximately 23.1 million in 2024. As an island nation, Sri Lanka does not share land borders with any country. However, it has significant maritime borders with India to the northwest and the Maldives to the southwest. The official languages are Sinhala and Tamil. English is widely used for official and commercial purposes and is spoken by many in urban areas and among the educated populace, serving as a link language. The majority of the Sri Lankan population practices Buddhism, with significant minorities practicing Hinduism, Islam, and Christianity. Major international airports include Bandaranaike International Airport (CMB) near Colombo and Mattala Rajapaksa International Airport (HRI) in the south. Sri Lanka is strategically located on key international shipping routes, and its main commercial seaports, such as Colombo Port (one of the busiest in South Asia), Hambantota Port, Galle Port, and Trincomalee Port, are crucial for its trade and logistics aspirations.

The standard corporate income tax rate in Sri Lanka is generally 30%. However, concessions and lower rates (e.g., 14% or 18%) may apply to certain sectors or Board of Investment (BOI) approved projects. Sri Lanka actively seeks foreign direct investment (FDI) and offers a range of incentives to attract investors, particularly for export-oriented projects and those in priority sectors. The Board of Investment of Sri Lanka (BOI) is the primary agency responsible for facilitating and approving foreign investments. Incentives can include:

• Tax holidays or reduced tax rates: For projects meeting specific investment thresholds or operating in designated zones (e.g., Export Processing Zones or special economic zones).
• Duty exemptions: On imported machinery, equipment, and raw materials for BOI-approved projects.
• 100% Foreign Ownership: Generally permitted in most sectors, particularly for export-oriented industries, though some restrictions or requirements for local partnerships might apply in sensitive sectors.
• Guaranteed repatriation of profits: No restrictions on the repatriation of capital and profits.
• Constitutional guarantees: Investment protection is guaranteed by the Constitution. Opesh Group of companies will be helping you in completing the Due Diligence process which includes financial planning, registration process, business options, and if required, even helping you find a rental property for your office.

Establishing a business in Sri Lanka involves navigating a set of laws and regulations, primarily under the Companies Act. Foreign investors can form various company types, including Private Limited Companies (Pvt Ltd), Public Limited Companies (PLC), or establish Branch Offices. A Private Limited Company is a common choice, and generally, 100% foreign ownership is allowed in many sectors, making it an attractive option for foreign investors.

In case an investor is planning to establish a Private Limited Company (Pvt Ltd) or a corporate business setup in Sri Lanka, Opesh Group will be helping you in taking the right decision for setting up your business in Sri Lanka and we will also guide you on how to follow the procedure while formulating your company in Sri Lanka.

Types of Business which can be started in Sri Lanka:

• Tourism & Hospitality: As the sector recovers, there are vast opportunities in eco-tourism, cultural tourism, luxury resorts, boutique hotels, and adventure tourism.
• Information Technology (IT) & Business Process Outsourcing (BPO) / Knowledge Process Outsourcing (KPO): A skilled and relatively cost-effective workforce, coupled with government incentives, makes this a promising sector for software development, IT services, and back-office operations.
• Export-Oriented Manufacturing: Strong potential in textiles and apparel (a major export), rubber-based products, ceramics, food processing, light engineering, and electronics assembly.
• Agriculture & Agro-processing: Opportunities in value-added products from traditional crops like tea, spices (cinnamon, pepper, cloves), and fruits, as well as modern farming techniques for food security.
• Logistics & Port Services: Leveraging its strategic location on major East-West shipping lanes, investment in port infrastructure, warehousing, and logistics hubs.
• Renewable Energy: Significant potential in solar, wind, and mini-hydro power to reduce reliance on fossil fuels and meet growing energy demands.
• Infrastructure Development: Opportunities in public-private partnerships for roads, railways, urban development, and other essential infrastructure.

Advantages of Starting Business in Sri Lanka:

• Strategic Location: Positioned along major international shipping routes, acting as a gateway to South Asia, Southeast Asia, and the Middle East.
• Growing Economy (Post-Crisis Recovery): Demonstrating resilience and recovery with significant growth potential, supported by IMF programs and international aid.
• Educated and Adaptable Workforce: High literacy rate and a talent pool, especially in technical and professional fields.
• Investor-Friendly Policies: Pro-FDI policies by the Board of Investment (BOI), offering competitive incentives, and largely permitting 100% foreign ownership.
• Access to Markets: Preferential trade agreements (e.g., FTA with India and Pakistan) and potential for wider market access.
• High Quality of Life: Diverse natural beauty, cultural richness, and a relatively safe environment.

Imports & Exports: Sri Lanka’s trade balance has historically been a challenge, but efforts are underway to boost exports and diversify its trade basket.

Major items which are exported from Sri Lanka:

• Textiles and Apparel (dominant export)
• Tea (Ceylon Tea)
• Rubber and Rubber Products
• Spices (Cinnamon, Pepper)
• Coconut and Coconut-based Products
• Gems and Jewelry
• Fish and Seafood Products
• IT and BPO Services

Major items which are imported in Sri Lanka:

• Mineral Fuels (Petroleum, Coal)
• Machinery and Equipment
• Electrical and Electronic Equipment
• Textile Fabrics and Yarn
• Foodstuffs (e.g., rice, sugar, dairy products)
• Vehicles
• Chemical Products
• Iron and Steel

Major items traded between Sri Lanka and India (as of June 2025): India is one of Sri Lanka’s largest trading partners, benefiting from the Indo-Sri Lanka Free Trade Agreement (ISFTA).

• Exports from Sri Lanka to India: Primarily include Tea, Spices, Apparel, Rubber products, Vegetable fats and oils, and some electrical machinery.
• Imports in Sri Lanka from India: Predominantly consist of Refined Petroleum Products, Pharmaceuticals, Cotton, Machinery and Equipment, Vehicles and parts, Iron and Steel products, and Foodstuffs (e.g., Basmati rice, sugar).

Manufacturing: Manufacturing is a significant contributor to Sri Lanka’s economy, with a strong focus on export-oriented industries.

• Apparel & Textiles: Sri Lanka is a global leader in ethical apparel manufacturing, producing for major international brands.
• Rubber Products: Manufacturing of industrial and consumer rubber products, leveraging local rubber plantations.
• Tea Processing: Value addition to Ceylon Tea, including packaging, blending, and specialty teas.
• Food & Beverages: Processing of local agricultural produce, confectioneries, and beverages.
• Ceramics & Porcelain: High-quality ceramics and porcelain ware for domestic and export markets.
• Light Engineering: Production of various light engineering goods, including electronics assembly. The government aims to attract investment in advanced manufacturing and value-added production.

Mining: Sri Lanka’s mining sector is relatively small compared to its other industries but holds unique resources.

• Graphite: Sri Lanka is known for its high-quality vein graphite, considered among the purest in the world.

• Mineral Sands: Deposits of ilmenite, rutile, and zircon, primarily for export.

• Gemstones: Famous for precious and semi-precious gemstones, including sapphires, rubies, and cat’s eyes.

• Limestone: Used in the cement industry.

• Phosphate Rock: For fertilizer production. The sector offers niche opportunities, particularly in value-added processing of minerals and gemstones.

• GDP = $98.96 billion (nominal, 2024 est. IMF)

• GDP Growth = 5.0% (2024 est., World Bank); 2.4% (2025 forecast, IMF)

• Ease of doing business rank = The World Bank’s ‘Doing Business’ report has been discontinued. In its last edition (2020), Sri Lanka ranked 99th out of 190 economies. While the country faced significant economic headwinds recently, the government is actively working on reforms to improve the business environment and attract investment.

• GDP per Capita = $4,320 (nominal, 2024 est. IMF)

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