Democratic Socialist Republic of Sri Lanka, is an island country in South Asia, located in the Indian Ocean to the southwest of the Bay of Bengal and to the southeast of the Arabian Sea.
It is separated from the Indian subcontinent by the Gulf of Mannar and the Palk Strait. The legislative capital, Sri Jayawardenepura Kotte, is a suburb of the commercial capital and largest city, Colombo.
Tourism in Sri Lanka
Tourism in Sri Lanka is growing rapidly. For centuries, Sri Lanka has been a popular place of attraction for foreign travelers. The Chinese traveler Fa-Hien visited Sri Lanka as early as the 4th century, and in the twelfth century, Italian explorer Marco Polo claimed Sri Lanka to be the “best island of its size in the world”.
Population of Sri Lanka
- The current population of Sri Lanka is 20,964,513 as of Wednesday, September 12, 2018, based on the latest United Nations estimates.
- The population density in Sri Lanka is 334 per Km2 (865 people per mi2).
- 19.6 % of the population is urban (4,095,751 people in 2018)
Economy of Sri Lanka
With an economy worth $93.45 billion $298.310 billion PPP and a per capita GDP of about $4,310, $13,480 PPP as of 2018 Sri Lanka has mostly had strong growth rates in recent years.
Sri Lanka is a developing economy based largely on agriculture, services, and light industry. Agriculture accounts for approximately 21 percent of the gross domestic product (GDP) and employs 38 percent of the workforce.
Agricultural output is divided between cash crops from plantation agriculture and food crops from subsistence agriculture. Cash crops—namely tea, rubber, and coconuts—are largely grown on plantations. Rice is the principal food crop and the main livelihood for over 70 percent of Sri Lanka’s rural population.
Manufacturing industries account for approximately 19 percent of the gross domestic product and employ about 17 percent of the workforce. Chief manufactures include textiles, ceramics, petroleum products, vegetable oils, fertilizers, and cement. The service sector is the largest of the Sri Lanka economy, employing 45 percent of the workforce and contributing roughly 60 percent of GDP. Tourism, banking, finance, and retail trade are the major components of the service sector.
The country is endowed with many natural resources. It has an equatorial climate with a high average rainfall. The land is fertile and suitable for growing a variety of crops, and one-third of the land is arable. Rivers cascading from the central hill country provide energy to generate hydropower, the major source of electricity in Sri Lanka.
The country also has rich fishing resources. Sri Lanka’s mineral resources include titanium ore, graphite, kaolin, and gemstones. It also has large deposits of unexploited iron ore.
Foreign trade is an important segment of the Sri Lankan economy. Major imports include petroleum, consumables, machinery and capital equipment, motor vehicles, and various manufactured goods. Major exports include garments, tea, rubber, coconut products, foodstuffs, gems, and jewelry. Sri Lanka is the largest exporter of black tea in the world and the third largest producer of natural rubber. A variety of gemstones, for which Sri Lanka is world famous, are also exported. Significant quantities of high-grade graphite, for which Sri Lanka is a world leader, are also exported.
The industrialized countries taken together as a group accounted for 75 percent of Sri Lanka’s total exports in 1999 and the United States is the largest single buyer of Sri Lanka’s exports, with 39 percent in 1999. Other major export markets are the United Kingdom, Germany, Japan, Russia (tea), China (rubber), India, and the Middle East. In terms of imports, Japan is the single largest exporter to Sri Lanka. Motor vehicles, spare parts, and woven fabrics are the major items imported from Japan. India is the second largest exporter, followed by Singapore, South Korea, Taiwan, the United Kingdom, and the United States.
Sri Lanka is a mixed economy, in which both the private sector and the state sector engage in the production process. Foreign investments are encouraged and several free zones have been established. The country’s banking system is well developed, so that both foreign and local banks function in the economy. Sri Lanka is committed to a free market ideology and has one of the most liberal foreign trade regimes in the world.
This contrasts greatly to what the Sri Lankan economy looked like during the first 3 decades after the country gained independence from Great Britain in 1948. The economy that evolved in Sri Lanka under British rule was predominantly oriented towards agriculture, with plantation agriculture being the major contributor to the nation’s growth.
The 3 plantation crops—tea, rubber, and coconuts—accounted for 30 percent of the gross domestic product in 1948 and the bulk of the output was exported. Manufacturing was an insignificant activity in the economy. Banking and commerce were, for the most part, only used to support plantation agriculture. Nearly all foreign exchange earnings were derived from the plantations. The country depended on imports for nearly three-fourths of its food requirements and almost all of its manufactured goods.
Investment
STRONG RESILIENT ECONOMY
- Peaceful domestic environment, favorable government policies
- The improved performances in all key sectors of the economy
- The service sector has a 56.8% contribution;
- The government has planned to transform Sri Lanka into a strategically important economic center by developing five strategic hubs; a knowledge hub, a commercial hub, a naval & maritime hub, an aviation hub, and an energy hub, taking the advantage of Sri Lanka’s strategic location & resources.
SUPPORTIVE GOVERNMENT POLICIES
- Sri Lanka pioneered South Asia’s economic liberalization over three decades ago. Liberalizing many areas of the economy, the government has embraced strategies and policies that are more than conducive for international investment.
- The following transparent investment laws aim to foster foreign direct investments.
- Total foreign ownership is permitted across almost all areas of the economy.
- No restrictions on repatriation of earnings, fees, capital, and on forex transactions relating to current account payments.
- Safety of foreign investment is guaranteed by the constitution.
- Existence of a transparent and sophisticated legal and regulatory framework. Covering all prerequisite business law enactments.
- Bilateral investment protection agreements with 28 countries and double taxation avoidance agreements with 38 countries.
- Sri Lanka is a founder member of the Multilateral Investment Guarantee Agency (MIGA), an investment guarantee agency of the World Bank. This provides a safeguard against expropriation and non-commercial risks.
EDUCATED AND ADAPTABLE WORKFORCE
- Sri Lanka possesses the most literate population in South Asia and one of the highest in the developing world with a literacy rate of 92.2%
- Extensive investment in public education has produced a workforce that is not only competent but intelligent, trainable and comfortable with high tech production and services.
- Approximately 50% of the students who have completed higher education are trained in technical and business disciplines.
- English is widely spoken and is the main language used by the business community.
- Well educated and energetic, skilled and semi-skilled human resources are readily available at competitive wage rates.
Location and Connectivity
- Sri Lanka is situated at the crossroads of major shipping routes connecting South Asia, Far East and the Pacific with Europe and the Americas.
- It is strategically located next to the fast growing Indian sub-continent with close proximity to Southeast Asia and the Middle East. The country has strong air connectivity with over 100 weekly flights to India alone.
- The country is connected to the SEA-ME-WE III and IV (South East Asia – Middle East – Western Europe) fiber optic communication backbone with over 11 communication satellites orbiting above the south of the country.
KEY SECTORS OF INVESTMENT
- Tourism and Leisure
- Agriculture
- Export Manufacturing
- Export Services
- Apparel Industry
- Infrastructure
- Knowledge Services
- Utilities
- Education
TAX
Imposition of Income Tax
Income tax shall be payable for each year of assessment by –
(a) a person who has taxable income for that year; or
(b) a person who receives a final withholding payment during that year.
Income Tax Rates
Individual
Taxable income of Resident or non-resident individual for a year of assessment commencing form 1st April 2018 shall be taxed as follows,
- First Rs. 600,000 – 4%
- Next Rs. 600,000 – 8%
- Next Rs. 600,000 – 12%
- Next Rs. 600,000 – 16%
- Next Rs. 600,000 – 20%
- Balance – 24%
Company
Taxable income of a Company for a year of assessment commencing form 1st April 2018 shall be taxed as follows subject to conditions specified,
- Small and Medium Enterprises – 14%
- Export of goods and services – 14%
- Agriculture Business – 14%
- Education Services – 14%
- Promotion of Tourism – 14%
- Information Technology Services – 14%
- Betting and Gaming, Liquor and Tobacco – 14%
- Others – 28%