June 20, Colombo: The government of Sri Lanka is committed to further facilitate the investment climate through a well thought out program for eliminating barriers in the business environment, Sri Lanka's Minister of Finance Mangala Samaraweera said.
Addressing the Sri Lanka Business and Investment Conclave 2018 organized by the Ceylon Chamber of Commerce on Tuesday, Minister Samaraweera said he believes Sri Lanka is poised to be a major source of investment for companies looking to use the island as a base to tap into the fast growing Indian Ocean region and urged the business community to grab the opportunity.
Pointing out that economic stability is an essential condition for a private enterprise led growth model, the Minister explained that with a growing debt stock the government finds it difficult to balance public investment and debt servicing.
"It is in this context that our government has shifted to a private sector, export, and FDI, led model of economic growth. The state will play a key role in smart regulation, setting a robust institutional framework, and targeted interventions to ensure social justice and equity," he said.
The Minister said a crucial element of the investment decision is ensuring a competitive business climate. Ensuring smooth processes in starting up and expanding a business has been a major policy objective of this government, he said.
He highlighted that in 2017, Sri Lanka achieved a primary budget surplus for the first time in many decades. The Inland Revenue Act came into force on April 1st 2018, with the aim of simplifying and rationalizing the tax regime. "This legislation creates a transparent and predictable tax regime, shifting away from ad hoc tax changes that hinder investment," he said.
Minister Samaraweera noted that the business registration process was streamlined and Register of Companies (RoC) now facilitates business registration through a single website allowing company registration within a day.
Investment related incentives have also been reformed with open ended tax holidays being replaced by targeted capital allowances which directly reward the investment in capital, according to the Minister.
Minister Samaraweera said the strategic sectors such as exports, tourism, and IT are taxed at a concessional corporate tax rate of 14%. This transparent and attractive investment incentive package is expected to create a strong stimulus for future investments into Sri Lanka.
"Our objective is to establish a level playing field which will encourage competition and contestation which would be of benefit to consumers and a competitive economy," he said.
According to the Finance Minister, Sri Lanka is in the process of implementing comprehensive unilateral trade liberalization. This includes the rationalization of para-tariffs which add costs to business and consumers. In addition to unilateral trade reforms, the government is in the process of entering into strategic trade agreements with key regional economies.
Noting that Sri Lanka recently signed its very first comprehensive FTA with the Singapore, the Minister said two other comprehensive FTAs are being negotiated with China, India, and other ASEAN nations.
Along with GSP + Sri Lanka will soon have market access to India, China, and Europe, making the country a unique destination for investment. This network of FTAs will enable Sri Lanka to meaningful integrate into regional value chains to drive future trade and economic growth, he emphasized.
He said it is clear that macroeconomic conditions have stabilized setting the stage for investment and economic growth. The government is committed to further facilitation of the investment climate through a well thought out program for eliminating barriers in the business environment. A clear set of comprehensive investment incentives have also been spelled out.
"Sri Lanka is poised to be a major source of investment for companies looking to use Sri Lanka as a base to tap into the fast growing Indian Ocean region. I trust you will grab this opportunity with both hands – and we will support you all the way," he told the business community.