Foreign direct investment allows corporations and individuals to own controlling stakes of businesses in different countries. The main objective of such a setting is to provide benefits to all the parties. The investor makes profits without relocating to the country they have invested in while the country’s economy benefits from the investment. This mutually beneficial agreement is done in many countries across continents, Sri Lanka is one of them. Now, our main topic the 10 major attractive sectors to foreign investment in Sri Lanka is below:
Below the 10 major attractive sectors to Foreign Direct Investment Sri Lanka or 10 Reasons of Sri Lanka that attract Foreign Direct Investment:
The construction industry in Sri Lanka has seen a steady growth over the years and is showing signs of continuous growth. This industry is a major contributor to total economic growth. From developments of residential houses to the construction of different infrastructural facilities, the industry brings the highest percentage of economic growth. Better regulations protecting both local and international investors could be the main factor behind this growth
- Tourism and travel
With many tourist attractions for locals and foreigner, this industry has enough room for more investment. Tourists need accommodation facilities and the ability to move to different locations. From the amazing islands and beaches to the exotic wildlife in the mountains, investing in the tourism and travel industry is one of the best to invest in. The location of Sri Lanka makes it an ideal for travelers to stop by ensuring no shortage of tourists.
- Real estate
The more the population of a country grows the more people need places to stay. The real estate sector is very important since it covers one of the basic needs, housing. The demand for residential buildings is always high in different countries across the world and Sri Lanka is no exception. By investing in this sector, you can help solve residents’ problem by providing affordable housing for different lifestyles.
As technology continues to advance, more room is created for better technological devices that make people’s lives easier and better. This universal need is a great investment opportunity for those eyeing the Sri Lanka market since it has a high demand in this sector. Other than starting or registering a company, professionals in information and communication technology industry can also opt to offer services through employment. This industry is one of the most diverse sectors in the region.
- Financial institutions
People always need a place to keep their money and earn interest. Financial institutions offer these services and a place for people to find financial relief when they need money urgently through borrowing. The need for these institutions in rural and urban areas as well as their diversification creates the required market for the business to thrive.
Whether you’re looking to invest as a small trader or make a big investment, this sector is one of the best. The country has seen growth in the health provider industry by raising more awareness and creating more demand for better medical services and products. Other than starting a pharmaceutical company, you can become a distributor of pharmaceutical products.
Due to its location, Sri Lanka is one of the best places for docking ships. The impending construction of ports as part of its hub expansion presents a great business investment opportunity in the shipping sector. You can also opt to invest in the shipments instead of the construction.
- Food manufacturing
While the agricultural sector focuses on producing raw materials, the food industry focuses on processing food. The country has food exports for products like processed vegetables, cereal and bakery among others thereby being a good investment area.
Other than agricultural products, the country takes pride in being a big exporter in textiles. You can start your own textile company or invest in the ones that already exist by offering better equipment, technology and everything else they need. This competitive sector has enough room for improvement giving it the potential of continuous growth.
Many agricultural products that the country exports together with the local consumption makes the agricultural sector a good place to invest. Those with interest in agricultural products can make good profit return from dealing with some of the country’s major exports such as coconut and tobacco. This provides a safer business venture since you can still profit from the local markets if the external one fails.
FDI in Sri Lanka
Like other countries, Sri Lanka has its fair share of challenges that tend to scare off foreign investors. The unpredictability of the economy coupled with the government’s inefficiency in implementing laws and regulations that protect the investors have been cited as some of those challenges. However, the government has put in the right measures to ensure businesses in the private sector run smoothly and investments are protected.
FDI has seen an increase of up to $710 million, which is the current standing. Compare to the decline by $300 million in 2016, the number is higher and shows promise of more increase. This, together with the government’s dedication to concentrate on making the FDI sector better creates a better environment for foreign investments.
Corporate tax rate
Although profits from different businesses may be taxed differently depending on the amount, the corporate tax is fixed at 28%. The profits taxes range from 10% to 40%. The country has set penalties for withholding taxes on dividends at 10% while that of royalties is set at 20%. Failure to file tax returns at the stipulated time may also attract penalties.
Local Vs Foreign Investment ratio in Sri Lanka
Despite its location and many appealing factors that make it a good investment hub, Sri Lanka still needs to do more to attract foreign investors. Currently, the foreign direct investment in the country very low compared to its neighboring counterparts producing only 2% of the country’s GDP. This shows that the difference between local investment and foreign is too big creating a bigger ratio difference.
Sri Lanka has many advantages such as natural resources, rich culture, great workforce and a strategic location, which make it a good place to operate a business. The state of its economy that was a major concern for some investors has also shown steady increase recently. As the government continues to do its part in making property and business ownership easier, foreigners are encouraged to invest.