Mar 21, Colombo: Sri Lanka's Minister of Finance and Mass Media Mangala Samaraweera emphasizing that private investment is the key for economic growth of any country said the Sri Lankan government has focused its attention to create a conducive environment for foreign investment and to further expand the existing investment opportunities.
At a re-investment networking event organized by the Board of Investment on Tuesday, Minister Samaraweera pointed out that Sri Lanka's post war economic growth however, was dominated by a debt funded state driven construction boom.
"This was always going to be an unsustainable growth path and it has contributed to the debt overhang we are grappling with today," he said.
The focus of this government since coming to power has been to improve the investment climate to encourage further expansion of the existing investments and attract new investors, the Minister said.
According to Minister Samaraweera, as a part of this economic reform agenda, a number of measures are being implemented to facilitate private investment. These reforms include the elimination of para- tariffs, opening of a "Single Window" for investment approvals, promotion of identified sectors for investment, the establishment of new export-processing investment zones, and digitization of public services.
The government is in the process of entering into new strategic trade agreements with a significant focus on investment. Along with EU GSP+ facility, Sri Lanka will have duty free market access to India, China, Pakistan, Singapore and Europe. As the FTAs come into effect, investors will have opportunities to link into regional and global value chains, with Sri Lanka as a fulcrum of activity, he explained.
Of equal or more importance to market access is the issue of creating investor confidence, the Minister pointed out. "Sri Lanka's track record in policy stability has not been perfect, but our resolve to consolidate a set of rules based, predictable and consistent policy framework remains pivotal," he said.
Open ended tax holidays have been replaced by targeted capital allowances which directly reward the investment in capital. There are also benefits for investment in R&D and the IT sector, and for investments in the Northern Province. Strategic sectors such as exports, tourism, and IT are taxed at a concessional corporate tax rate of 14%. These incentives are expected to be superior to previous regimes of open ended tax holidays.
He said more facilities and concessions will be given to investors and the private entrepreneurs will be motivated with exclusive packages of concessions. The government has also focused attention to set up new investment processing zones.
The Minister further said that new Income Tax Act that will be effective from the 1st of next month will provide many incentives for investors.