Category: Daily Financial Times

Sri Lanka’s stalled privatisation of State-owned enterprises, rigid labour laws and restrictions on foreign participation continue to weigh on investment prospects, the US State Department said in its 2025 Investment Climate Statement.

The report noted that 527 State-owned enterprises, including 55 designated as strategic, remain a major burden on public finances.

‘The previous Government initiated a program aimed at comprehensive SOE reform, including potential privatisation of several major entities. However, the current Administration suspended these privatisation efforts upon taking office,’ the report noted.

‘It has instead announced alternative restructuring approaches focused on improving management practices, reducing operational costs, and enhancing efficiency within the existing state ownership structure,’ it added.

‘The stalled privatisation of deficit-ridden State-owned enterprises, notably the Ceylon Electricity Board, hinders development of cost-effective energy supplies crucial for industrial operations. Foreign investors consistently report high transaction costs, unpredictable policies, and opaque procurement procedures’.

At the same time, the report pointed to continuing strengths. Sri Lanka permits 100% foreign ownership in most sectors, with constitutional guarantees for investment protection and unrestricted repatriation of earnings, fees, and capital.

The Colombo Stock Exchange recorded $ 66.5 million in net foreign inflows in 2024 and mobilised $ 568 million in capital. Worker remittances climbed to a record $ 6.58 billion, pushing reserves to $ 6.1 billion by year end.

Export Processing Zones continue to attract investment, while new initiatives such as the pharmaceutical manufacturing zone in Hambantota and the Colombo Port City are expected to expand opportunities.

The Economic Transformation Act, which was intended to abolish the Board of Investment and replace it with five specialised agencies, has not been implemented, leaving approvals fragmented and slow.

‘Other key impediments include unnecessary regulations, legal uncertainty, and poor bureaucratic responsiveness,’ the report noted.

The Government’s decision to impose new taxes on service export firms while granting exemptions for Port City projects has reinforced perceptions of uneven treatment. Corruption in procurement persists despite legislation passed in 2023.

Labour market conditions were also identified as a critical risk. ‘Rigid dismissal rules make restructuring costly, while emigration has intensified shortages in IT, apparel, tourism and engineering,’ the report said.

It added that ‘the garment industry reports turnover rates of 40%’ and that ‘weak social protections and limited coverage for informal workers contribute further to labour market inflexibility.’

Although GDP growth of 5% in 2024 exceeded expectations and the Administration’s commitment to the IMF’s four-year, $ 3 billion program provided reassurance, foreign direct investment remains limited.

Most deals are in the $3-5 million range, concentrated in tourism, ICT, renewable energy, manufacturing, and real estate.

The report noted the Government’s commitment to finalise Sinopec’s $ 3.7 billion oil refinery in Hambantota, the largest FDI project to date if successful, but confidence was dented when Adani Green Energy exited a $ 400 million wind farm after the Government sought to renegotiate an awarded contract.

Restrictions on land and ownership were also flagged. Foreign companies with more than 50% equity are generally barred from purchasing land, with only narrow exceptions.

Caps of 40% apply across sectors such as agriculture, natural resources, shipping and education, while retail under $ 5 million, pawn broking and coastal fishing are entirely prohibited.

The report concluded that Sri Lanka’s outlook for investment rests on its ability to convert stability into reforms that reduce state dominance, simplify approvals and enforce transparency.

‘Without progress in governance, trade facilitation and labour flexibility, the Government’s $ 5 billion FDI target for 2025 will remain difficult to achieve,’ it said.

DFCC Bank PLC yesterday said that its Colombo Stock Exchange-listed Green Bond has also been listed on the India International Exchange.

The bank said that this was the third overseas listing with previous listings on the Luxembourg Stock Exchange and National Stock Exchange International Exchange India. DFCC Bank is the first foreign corporate entity to list a Bond on the India International Exchange.

The trading and settlement of the Green Bond will continue to be through the CSE and in LKR and will not be traded on the India International Exchange, the bank said.

The Ministry of Health and Mass Media, with financial support from the Asian Development Bank (ADB) and the Health System Enhancement Project (HSEP), received seven double cabs worth Rs. 22 million.

Trinity College beat Royal College 1/0 at the Under 20 Annual Hockey Big Match played at the Astro Turf Colombo 7 recently. This encounter was played for J C Corea Challenge Shield.

Winning goal was scored by Arkam Rifas of Trinity College. Tevin Liyanage of Trinity College won the Best Player award. The Under 16 match was won by Royal 4/1. This encounter was played for Paul Jeyarajah trophy.

Aitken Spence Travels once again demonstrated its industry leadership by winning South Asia’s Best Inbound Travel Agent and Best Cruise Travel Agent for the third consecutive year at the 9th annual South Asian Travel Awards (SATA), held recently at a glittering gala in Colombo, Sri Lanka.

In addition, SATA honoured the late Chairman, Deshamanya D.H.S. (Harry) Jayawardena, with the prestigious ‘Faces of South Asia’ recognition award for his invaluable contribution to Sri Lanka’s tourism and hospitality industry.

Aitken Spence PLC Chairperson Stasshani Jayawardena added, ‘These awards highlight Aitken Spence Travels’ growing influence not just in Sri Lanka but in the region as well. With our continued support and commitment, Travels is well positioned to set new benchmarks, drive innovation, and expand its global footprint while showcasing Sri Lanka as a world class destination. I look forward to seeing its leadership inspire progress not just locally, but across the region.’ Aitken Spence Travels Managing Director Nalin Jayasundera, said, ‘Securing these top awards of Best Inbound Travel Agent and Best Cruise Operator once again reaffirms Aitken Spence Travels’ unparalleled market leader position and now as South Asia’s best. I dedicate these wins to our devoted and committed teams, who constantly go beyond expectations to craft and deliver unforgettable travel experiences to our valued travellers. We will continue to innovate in brining and showcasing the best possible experiences of destination Sri Lanka and raise industry benchmarks as the market leader.’

This year’s awards were endorsed by more than 18 leading tourism organisations and boards, including the Sri Lanka Tourism Promotion Bureau (SLTPB) and the Travel Agents Association of India (TAAI), underscoring SATA’s industry-wide credibility and relevance.

Looking ahead, Aitken Spence Travels remains steadfast in its commitment to shaping the future of Sri Lanka’s tourism with sustainability at its core. By nurturing partnerships, investing in people, and driving innovation, the company is determined to grow responsibly, preserving the island’s rich natural and cultural heritage while creating meaningful opportunities for future generations. As Sri Lanka strengthens its position on the global tourism map, Aitken Spence Travels is proud to lead the way with purpose, resilience, and a vision for a more sustainable tomorrow.

The Bar Association of Sri Lanka (BASL) has written to the Inspector General of Police to clarify the position on lawyers’ car passes, following recent public debate on the issue.

In its letter, the Association said that attempts to invalidate or remove the passes on the basis of a Gazette Notification would be unlawful, since the order does not extend to the use of BASL-issued vehicle passes.

The Association argued that the passes, displayed on windscreens, do not contravene the Motor Traffic Act.

The BASL expressed confidence that the existing system of issuing passes would continue unchanged, emphasising their role in day-to-day legal practice and security arrangements.

It noted that the passes allow attorneys-at-law to be identified when entering courts, tribunals and other institutions linked to the administration of justice, and are also used by law enforcement as verification that a vehicle belongs to a lawyer.

The Association highlighted that it has issued these annual passes since 1997, making it a 28-year practice. In the aftermath of the Easter Sunday attacks in 2019, an additional identification mechanism was introduced for vehicles at the request of security authorities, underscoring the importance of the system as a safeguard.

‘We are surprised to see such reports. You would no doubt appreciate the requirement for a lawyers’ car pass, and we are confident that no steps will be taken to alter the present status quo,’ the Association said in the letter, signed by BASL President Rajeev Amarasuriya and Secretary Chathura Galhena.