Sri Lanka

Sri Lanka has been a key trading hub in the Indian Ocean since ancient times and its star is once again on the rise. Known for its stunning beaches, an abundance of UNESCO World Heritage sites and the perfect cup of tea, the country’s popularity as a tourist hot spot has soared in recent years.

 

Welcome to Sri Lanka

Along with a burgeoning tourist trade, Sri Lanka has a growing exports industry, which includes textile and garments, tea, rubber and spices. This island nation’s geographic location makes it a strategically important location for global trading routes. The country provides universal access to primary education and has made great strides in recent years in achieving gender parity in general education, helping to pave the way for a bright future.

HSBC Sri Lanka was established in 1892 and has a proud history of more than 125 years in the country. The bank serves customers through three global businesses: Commercial Banking, Global Banking and Markets, and Wealth and Personal Banking.

As the largest international bank in the country, HSBC provides a comprehensive range of cross-border and financial services to suit both personal and business needs. Our funding capability combined with the strength of the HSBC network gives us the edge in funding large scale projects.

Whether you’re moving to the region, working in the area, or purely investing or doing business in Sri Lanka, HSBC can deliver a world-class banking experience supported by in-depth local market expertise.

I look forward to seeing you here!

Mark Prothero CEO, HSBC Sri Lanka and Maldives

24, Sir Baron Jayathilaka Mawatha, Colombo 1, Sri Lanka

Essentials

Population
21.7 million1
Size
65,610 sq km1
Main languages
Sinhala, Tamil and English
Commercial capital city
Colombo
Administrative capital city
Sri Jayawardenapura Kotte
Other major cities
Kandy, Galle, Jaffna, Moratuwa, Negombo, Pita Kotte, Hambantota
Currency
Sri Lankan Rupee
Dialling code
+94
GDP
USD84 billion, USD3,852 Per Capita (2019)2
Top exports
Knit or crochet clothing, tea, spices including pepper and cinnamon, rubber and related products, ships and boats, gems, precious metals, electrical machinery, fish, other chemical goods3
Top imports
Mineral fuels including oil, vehicles, machinery including computers, electrical machinery, knit or crochet fabric, cotton, plastics, iron, steel, ships, boats, paper3
Unemployment rate
4.8%4
Corporation tax
28%5
Typical office hours
8.30am – 4.30pm Monday to Friday; banks: 9am – 3pm Monday to Friday
Time zone
UTC +5:30
Emergency numbers
110 (medical emergency and fire brigade), 118/119 (police), 011- 2421052 (tourist police), and 1919 (government information centre)

1 World Population Review, 2020
2 World Bank Group, 2019
3 World’s Top Exports, 2019
4 Sri Lankan Government, 2020
5 PwC, 2020

Sri Lanka: A rising economic star

  • Bouncing back

    Positioned as a key trading hub in the Indian Ocean for over 1,000 years, the tear-drop shaped island south of India has one of the strongest economies in Southeast Asia. A Democratic Socialist Republic, it boasts a low unemployment rate, and the economy is topped up by remittances from overseas workers. It has bounced back after some troubled times, with growing tourism. A sign of upbeat economic feelings, 15,000 acres of land at Sri Lanka’s Hambantota International Port has been earmarked for development of various industries.

  • New port city

    After receiving USD1.4 billion in Foreign Direct Investment (FDI) from China, Port City (Colombo), situated on major shipping lanes in the Indian Ocean, saw its land reclamation phase completed by the end of 2019. It will become a hub for global trade, and with assistance from Sri Lanka’s National Agency for Public Private Partnerships, there are calls for investor proposals to build a hospital, international school, convention centre and hotel at the port.

  • Culture fest and travel

    Featuring a wealth of historical and cultural sights, Sri Lanka is a beautiful country with much to see. Transportation between these sights is slightly difficult, as trains and buses can be outdated and run slowly or on a delayed timetable. Ground transportation is necessary, as domestic flights are few and far between, but there is an abundance of taxis, hire cars with drivers and tuk-tuks.

  • Population changes

    Population growth rates have been on a steady decline due to decreasing birth rates, but the total population does continue to increase. Two universities feature in the Times Higher Education World University Rankings – University of Peradeniya is the highest ranked in Sri Lanka at 401-500. Of total expenditure in Sri Lanka, 14.5% is on education, and there is an 18.97% rate of enrolment in higher education.

  • Strong economy

    The civil war ended in 2009, and Sri Lanka has been working hard to turn around its fortunes. The economy grew at an average rate of 5.8% between 2010 and 2017, transitioning to a manufacturing and services-oriented economy. With that, poverty decreased from 15.3% in 2006 to 4.1% in 2016.

Country profile

Famous for its stunning location in the Indian Ocean, Sri Lanka is more than just a burgeoning tourist destination.

Sri Lanka’s recovery from its 30-year civil war has led to a boom in reconstruction. With its highly-educated population, rule of law, strong relationships with the UK and free trade agreements with India, Pakistan and Singapore, the island is a gateway for those seeking to do business in the region. Moving away from a predominantly rural economy, Sri Lanka has seen growth in service industries and manufacturing. Its position on the Maritime Silk Road makes it a key point on the Chinese Belt and Road Initiative (BRI) with a Sino–Sri Lankan free trade agreement under negotiation.

Ranked

# 99

for ease of doing business (in a survey of 190 measured economies by The World Bank)

Sri Lanka is the world’s fourth largest tea producer, and it is where the quintessentially British Lipton Tea was first founded back in the 1880s. Tea has remained a key export product ever since.

Tourism is one of the country’s main sectors, with growth in both international and domestic tourists, attracted by Sri Lanka’s stunning beaches and ancient heritage. The country’s agriculture is focused on tea, coconuts and rubber. Sri Lanka is one of the world’s leading suppliers of brown fibre from coconuts and ranked thirteenth amongst global rubber producers in 2017.

Read on to discover more about the dos and don’ts of doing business in Sri Lanka and how trading in or with the country could help boost the future growth of your business.

5 reasons to do business in Sri Lanka

  1. South Asian hub
    Sri Lanka’s geographic location makes it a logistical hub for the South Asian region and it ranks above the regional average for ease of doing business.
  2. Growing middle class
    The transition to a more urban economy has led to a decline in extreme poverty and a middle income population growing faster than anywhere else in the region.
  3. Highly educated population
    There are high levels of education in the country. Youth literacy levels are the highest in South Asia and a large proportion of students study at university level.
  4. Strong rule of law
    Due to the country’s legacy, Sri Lanka’s legislative system is built on the English rule of law.
  5. Growing tourist industry
    Revenues from tourism are contributing to a modestly growing economy and creating new employment opportunities.

5 key challenges

  1. 1

    Variable tax rates

    While corporation tax currently stands at a standard rate of 28%, tax rates of 14% and 40% also apply to profits from specific businesses. Nation Building Tax (NBT) was abolished with effect from December 2019 and the Economic Service Charge (ESC) was abolished with effect from January 2020.2

  2. 2

    High import duties

    High and flexible import tariffs, as well as the application of other import taxes such as VAT, can increase costs for suppliers. Additionally, in early 2020, import restrictions were placed on items including flour, sugar and liquor. Changes to import duties are used as the main trade policy lever by the Sri Lankan Government.3

  3. 3

    Climate change

    Following the 2004 tsunami that claimed thousands of lives, as well the impact of severe drought and seasonal flooding, action on climate resilience is a key focus for the Sri Lankan economy.

  4. 4

    Corruption

    Corruption levels remain high across the region, with Sri Lanka no exception. There has been little improvement in this in recent years

  5. 5

    Political instability

    Recent unrest – including the failed attempt to overthrow the Government in 2018, the Easter 2019 terrorist attack, and the election of new President Gotabaya Rajapaksa in November 2019 – has led to some political tension in the country.

1World Bank Group, 2019

2PwC, 2019

3Export.gov, 2019