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RUEHLMC/MILLENNIUM CHALLENGE CORP

UNCLAS SECTION 01 OF 25 COLOMBO 000082 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA AND SCA/INS 
 
STATE PLEASE PASS USTR 
 
MCC FOR S GROFF, D NASSIRY AND E BURKE 
 
E.O 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB OPIC PGOV USTR CE
SUBJECT: INVESTMENT CLIMATE STATEMENT, 2007 - SRI LANKA 
 
REF: 2006 State 178303 
 
COLOMBO 00000082  001.2 OF 025 
 
 
¶1.  Per reftel, below is the investment climate 
statement for Sri Lanka for 2007. 
 
[Begin text:] 
INVESTMENT CLIMATE STATEMENT-SRI LANKA 
JANUARY 2007 
 
OPENNESS TO FOREIGN INVESTMENT 
 
--Unpredictability Impedes Investment 
 
Sri Lanka's intractable civil war, erratic policy 
environment, and cumbersome bureaucracy make it an 
unpredictable investment destination.  However, compared 
to other South Asian countries, Sri Lanka is relatively 
open to foreign investment.  It offers a relatively open 
financial system, moderately good infrastructure, and 
generally capable workers.  Some U.S. and other foreign 
investors have realized worthwhile returns on investment 
in Sri Lanka; others have tried and come away 
frustrated. 
 
Sri Lanka is a lower-middle income developing nation 
with a gross domestic product of about $27.4 billion in 
¶2006.  This translates into a per capita income of 
$1,375.  Sri Lanka's gross domestic product (GDP) grew 
by an estimated 7% in 2006.  Growth was led by 
telecommunications, ports, construction and agriculture. 
This rapid growth rate came at the cost of double digit 
inflation and the depreciation of the Sri Lankan Rupee, 
which together eroded domestic purchasing power. 
Despite the resumption of civil war in 2006, the 
government predicts GDP growth of 7.5% and single-digit 
inflation in 2007. 
 
The Sri Lankan economy is remarkable for its resilience. 
Although suffering a brutal civil war that began in 
1983, Sri Lanka has seen GDP growth average around 4.5% 
in the last ten years.  Following a ceasefire in 2002 
and subsequent economic reforms, the economy grew by 
about 5.7% in 2003-2004.  Even the December 2004 Indian 
Ocean tsunami -- which killed 32,000 people, displaced 
443,000, and caused an estimated $1 billion in damage -- 
failed to dent GDP growth, which was 6% in 2005; this 
was due in part to the damage having been offset by 
reconstruction. 
Sri Lanka is a stable parliamentary democracy.  In 1978, 
it shifted away from a socialist orientation and opened 
to foreign investment.  However, changes in government 
have often been accompanied by reversals in economic 
policy.  Of the two major parties, the more pro-business 
United National Party has been in opposition in recent 
years.  When it last held power, from 2002 to 2004, it 
pursued privatization and regulatory reform welcomed by 
domestic and foreign investors.  Currently, the ruling 
Sri Lanka Freedom Party has a more statist economic 
approach, guided by President Rajapaksa?s 2005 election 
manifesto Mahinda Chintana ("Mahinda?s Thoughts"). 
Mahinda Chintana seeks to reduce poverty by steering 
investment to disadvantaged areas; developing small and 
medium enterprises; promoting agriculture; and expanding 
the already enormous civil service.  The Rajapaksa 
government has halted most privatization and advocates 
permanent state control of what it deems ?strategic? 
enterprises such as state-owned banks, airports, and 
electrical utilities.  The government has increased 
direct and indirect taxation to fund increased 
government expenditure. 
Sri Lanka?s Board of Investment (BOI) is authorized to 
manage a number of export processing zones which feature 
business-friendly regulations and improved 
infrastructure for foreign investors.  BOI incentives 
are attractive and real, but the BOI is not the "one 
 
COLOMBO 00000082  002.2 OF 025 
 
 
stop shop" it aspires to be.  Sri Lanka's large, 
inefficient, and dated bureaucracy often works at cross- 
purposes with BOI authorities and commitments. 
Additionally, major investments in Sri Lanka, such as 
infrastructure projects, require approval from the full 
cabinet, a process which is not transparent and which 
can politicize even the most needed investments. 
Registration of foreign company branch offices in Sri 
Lanka can be cumbersome as well. 
 
The 23-year ethnic conflict between the U.S.-designated 
terrorist organization Liberation Tigers of Tamil Eelam 
(LTTE) and the Government of Sri Lanka has been a 
serious impediment to foreign investment.  A Norwegian- 
brokered ceasefire between the LTTE and the government, 
in effect since February 23, 2002, broke down in 2006. 
Resolution of the conflict appears unlikely in the near 
future. 
 
Other impediments to investment in Sri Lanka are 
workers' declining English language skills, inflexible 
labor laws, overburdened infrastructure, and its 
unreliable court system.  Sri Lanka boasts a 90% 
literacy rate in the local Sinhala and Tamil languages, 
but English, which was once widely spoken, is now far 
less prevalent.  Sri Lanka's labor laws include many 
model protections, but can make it nearly impossible for 
companies to lay off workers even when market conditions 
fully warrant doing so.  Sri Lanka has not invested in 
infrastructure to keep pace with its growth.  Its roads 
are narrow and congested.  Its electricity supply is 
generally reliable but can fail to meet peak demand in 
years of low rainfall.  Delays in commissioning new 
power plants could make installed power inadequate to 
meet demand within five years.  Sri Lanka's courts 
cannot be relied upon to uphold the sanctity of 
contracts.  The courts are not practical for resolving 
disputes or obtaining remediation, because their 
procedures make it possible for one side in a dispute to 
prolong cases indefinitely. Aggrieved investors 
(especially those dealing with the government of Sri 
Lanka on projects) have frequently pursued out-of-court 
settlements, in hopes of speedier resolution. 
--Major Sectors 
The service sector is the largest component of GDP at 
56%.  In 2005-6, the service sector continued its strong 
expansion, fueled primarily by strong growth in 
telecommunications, ports, trading and financial 
services. Public administration and defense expenditures 
have increased in 2006 and are set to grow further in 
¶2007.  There also is a growing information technology 
sector, especially information technology training and 
software development and exports.  Sri Lanka has seen 
some investment in the business process outsourcing 
(BPO) sector, which currently employs about 4,000 people 
and has potential to grow further.  While beach resorts 
have rebuilt after the tsunami, tourism remains well 
below potential due to worldwide media coverage of 
resumed ethnic conflict. 
Manufacturing accounts for about 16% of GDP. The 
textile, apparel, and leather products sector is the 
largest, accounting for 40% of total industrial output. 
The second-largest industrial sector, at 22% of total 
manufacturing output, is food, beverages, and tobacco. 
The third-largest industrial sector is chemical, 
petroleum, rubber, and plastic products. The 
construction sector accounts for 7% of GDP and has 
posted strong growth rates in 2005-6, largely due to 
demand for tsunami reconstruction projects.  Mining and 
quarrying account for 2% of GDP. 
Agriculture has lost its relative importance to the Sri 
Lankan economy in recent decades.  It employs 33% of the 
working population, but accounts for only 17% of GDP. 
Rice, the staple cereal, is cultivated extensively. The 
plantation sector consists of tea, rubber, and coconut; 
 
COLOMBO 00000082  003.2 OF 025 
 
 
in recent years, the tea crop has made significant 
contributions to export earnings, and increasing global 
demand for natural rubber augers well for that sector. 
--Trade 
According to preliminary data for 2006, Sri Lanka?s 
exports (mainly apparel, tea, rubber, gems and jewelry) 
were $7 billion and imports (mainly oil, textiles, food, 
and machinery) were $10.5 billion.  Garment exports face 
increased competition following the 2005 expiration of 
the worldwide Multifiber Arrangement.  The tea industry 
is challenged by a shortage of plantation labor and by 
growing competition. 
Exports to the United States, Sri Lanka's most important 
market, were $2.1 billion in 2005, or 32.8% of total 
exports. For many years, the United States has been Sri 
Lanka's biggest market for garments, taking almost 60% 
of total garment exports.  India is Sri Lanka's largest 
supplier, with exports of $1.8 billion in 2005. The 
United States exported approximately $160 million to Sri 
Lanka in 2005 (plus about $20 million of tsunami related 
exports), consisting primarily of industrial machinery, 
as well as medical instruments, pharmaceuticals and 
specialized fabrics and textiles for the garment 
industry. 
--Board of Investment 
 
The Board of Investment (BOI) (www.boi.lk), an 
autonomous statutory agency, is the primary government 
authority responsible for investment, with a focus on 
foreign investment.  The BOI acts as a facilitator for 
investment.  It is intended to provide "one-stop" 
service for foreign investors, with duties including 
approving projects, granting incentives, and arranging 
services such as water, power, waste treatment and 
telecommunications.  The BOI is relatively effective in 
assisting investors who want to establish operations 
within its industrial processing zones; it is less 
effective in facilitating and service large investments 
outside these zones.  It also assists people in 
obtaining resident visas for expatriate personnel and 
facilitates import and export clearances.  The Public- 
Private Partnership Unit, a new division of BOI, has 
responsibility for coordinating all public-private 
infrastructure projects. 
 
Generally, the treatment given to foreign investors is 
non-discriminatory.  In fact, some local companies have 
complained that they are discriminated against, as 
qualifying foreign investors can benefit from a wide 
range of advantages.  Even with incentives and BOI 
facilitation, foreign investors face difficulties 
operating in Sri Lanka.  Problems range from difficulty 
clearing equipment and supplies through customs speedily 
to difficulty obtaining a factory site.  Legal 
challenges to environmentally sensitive projects have 
been burdensome, even when objections are unfounded. 
Slow and indecisive application of bureaucratic 
requirements has also obstructed investment.  Several 
high profile and needed infrastructure projects have 
dried up in the past two years, as investors tired of 
waiting for approval and action.  In part to avoid these 
delays, and to overcome land allocation problems, the 
BOI encourages investors to locate their operations in 
BOI-established industrial processing zones.  Investors 
locating in industrial zones also get access to 
relatively better infrastructure facilities such as 
reliable power, telecommunication and water supplies. 
 
--Laws Affecting Investment 
 
The principal law governing foreign investment is Law 
No. 4, created in 1978 (known as the BOI Act), as 
amended in 1980, 1983 and 1992, along with 
implementation regulations established under the Act. 
The BOI Act provides for two types of investment 
 
COLOMBO 00000082  004.2 OF 025 
 
 
approvals.  Under section 17 of the Act, the BOI is 
empowered to grant concessions (see details below) to 
companies satisfying certain eligibility criteria on 
minimum investment, exports and in some cases 
employment.  Investment approval under Section 16 of the 
act permits entry for foreign investment to operate 
under the "normal" laws of the country and applies to 
investments that do not satisfy eligibility criteria for 
BOI incentives.  Other laws affecting foreign investment 
are the Securities and Exchange Commission Act of 1987 
as amended in 1991 and 2003, and the Takeovers and 
Mergers Code of 1995 revised in 2003.  The Companies Act 
of 1982 will soon be replaced by a new Companies Act, 
which has been passed by Parliament and awaits 
certification by the Speaker.  Various labor laws and 
regulations affect investors also.  See sections below. 
 
--Foreign Equity Shares by Sector 
 
The government allows 100% foreign investment in the 
following services:  banking, finance, insurance, stock- 
brokering, construction of residential buildings and 
roads, supply of water, mass transportation, 
telecommunications, energy production and distribution, 
professional services, and the establishment of liaison 
offices or local branches of foreign companies.  These 
services are regulated and subject to approval by 
various government agencies.  The screening mechanism is 
non-discriminatory and, for the most part, routine. 
 
Investment in other sectors is restricted and subject to 
screening and approval on a case-by-case basis when 
foreign equity exceeds 49%.  The affected sectors are: 
shipping and travel agencies; freight forwarding; 
fishing; timber-based industries; growing and primary 
processing of tea, rubber, coconut, rice, cocoa, sugar 
and spices; and the production for export of goods 
subject to international quota.  Foreign investment 
restrictions and government regulations also apply to 
international air transport; coastal shipping; 
lotteries; large-scale mechanized gem mining; and 
sensitive industries such as military hardware, 
dangerous drugs and currency. 
 
Foreign investment is not permitted in the following 
businesses:  non-bank money lending; pawn-brokering; 
retail trade with a capital investment of less than $1 
million (with one notable exception: the BOI permits 
retail and wholesale trading by reputed international 
brand names and franchises with an initial investment of 
not less than $150,000); coastal fishing; and the 
awarding of local university degrees.  Foreign degree 
courses can be offered in Sri Lanka by affiliating with 
foreign universities.  However, there is no scheme to 
monitor the quality assurance or accreditation of the 
foreign courses offered in Sri Lanka. 
 
--Privatization Halted 
 
The current Government has halted most privatization. 
Government treatment of foreign investors in past 
privatization processes has been largely non- 
discriminatory.  In 2003, however, the government sold 
part of the retail operations of state-owned Ceylon 
Petroleum Corporation to Indian Oil Corporation without 
a formal tender process. 
 
Labor unions in state-owned enterprises are often 
opposed to privatization and restructuring and seem 
particularly averse to foreign ownership.  In the past, 
this made the privatization of government entities 
problematic for new foreign owners. 
 
CONVERSION AND TRANSFER POLICIES 
 
 
COLOMBO 00000082  005.2 OF 025 
 
 
In accordance with its Article VIII obligations as a 
member of the International Monetary Fund 
(http://www.imf.org/external/pubs/ft/aa/aa08. htm), Sri 
Lanka has liberalized exchange controls on current 
account transactions.  However, in October 2006, the 
Central Bank imposed controls on foreign exchange 
transactions by requiring importers to keep a 50% 
deposit on letters of credit on non-essential imports. 
The requirement affected over 40 categories of consumer 
items including confectionary, liquor, personal care 
products, footwear and tableware and seemed designed to 
mitigate downward pressure on the Sri Lankan Rupee. 
 
There are no surrender requirements on export receipts, 
but exporters need to repatriate export proceeds within 
120 days to settle export credit facilities.  Other 
export proceeds can be retained abroad.  Currently, 
contracts for forward bookings of foreign exchange are 
permitted for a maximum period of 360 days for the 
purposes of payments in trade and 720 days for the 
repayment of loans. 
There are no barriers, legal or otherwise, to the 
expeditious remitting of corporate profits and dividends 
for foreign enterprises doing business in Sri Lanka. 
Remittance of business fees (management fees, royalties 
and licensing fees) is also freely permitted for 
companies with majority foreign investment approved 
under Section 17 of the BOI Act.  Other companies 
require Central Bank approval.  Repatriation of funds 
for debt service and capital gains of companies exempted 
by the BOI from exchange control regulations is 
permitted.  Other foreign companies remitting funds for 
debt service and capital gains require Central Bank 
approval. 
The average delay period for remitting investment 
returns such as dividends, return of capital, interest 
and principal on private foreign debt, lease payments, 
royalties and management fees through normal, legal 
channels is in the range of 1 to 4 weeks. All stock 
market investments can be remitted without prior 
approval of the Central Bank through a special bank 
account.  Investment returns can be remitted in any 
convertible currency at the legal market rate. 
While controls on capital account (investment) 
transactions usually prohibit foreigners from investing 
in Sri Lankan debt and fixed income securities, the 
government has recently allowed limited access to 
foreigners to invest in government rupee bonds.  The 
Central Bank?s dollar denominated bond issues in the 
local market are also open to foreign investors.  Local 
companies require Central Bank approval to invest 
abroad.  The process of granting approval for such 
investments was streamlined in 2002, resulting in a 
substantial increase in approvals. 
 
EXPROPRIATION AND COMPENSATION 
 
Since economic liberalization policies began in 1978, 
the Sri Lankan Government has not expropriated a foreign 
investment.  The last expropriation dispute was resolved 
in 1998. 
 
DISPUTE SETTLEMENT 
 
--Legal System 
 
Sri Lanka's legal system reflects diverse cultural 
influences. Criminal law is fundamentally British. 
Basic civil law is Roman-Dutch.  Laws pertaining to 
marriage, divorce, and inheritance are communal.  Sri 
Lankan commercial law is almost entirely statutory.  The 
law was codified before independence in 1948 and 
reflects the letter and spirit of British law of that 
era.  Its amendments have, by and large, kept pace with 
subsequent legal changes in the U.K.  Several important 
 
COLOMBO 00000082  006.2 OF 025 
 
 
legislative enactments regulate commercial matters:  the 
Board of Investment Law, the Intellectual Property Act, 
the Companies Act, the Securities and Exchange 
Commission Act, the Banking Act, the Industrial 
Promotion Act and Consumer Affairs Authority Act.  Most 
of these laws were revised recently. 
 
Sri Lanka?s court system consists of the Supreme Court, 
the Court of Appeal, Provincial High Courts and the 
Courts of First Instance viz. district courts (with 
general civil jurisdiction) and magistrate courts (with 
criminal jurisdiction).  The provincial high courts have 
original, appellate and reversionary criminal 
jurisdiction.  The Court of Appeal sits as the 
intermediate appellate court with a limited right of 
appeal to the Supreme Court.  The Supreme Court 
exercises final appellate jurisdiction for all criminal 
and civil cases. 
 
All commercial matters exceeding the value of Rs 3 
million (approximately $28,000) fall within the 
jurisdiction of the Commercial High Court of Colombo. 
There are also a number of tribunals which exercise 
judicial functions, such as the Labor Tribunals to hear 
cases brought by workers against their employers. Until 
recently, the court system was largely free from 
government interference.  There are allegations that the 
judiciary is sometimes subject to political influence, 
but this has not been evident in commercial litigation 
so far.  Litigation can be slow and unproductive, 
though.  Monetary judgments are usually made in local 
currency.  Procedures exist for enforcing foreign 
judgments. 
 
--Bankruptcy Laws 
 
The Companies Act and the Insolvency Ordinance provide 
for dissolution of insolvent companies, but there is no 
mechanism to facilitate the re-organization of 
financially-troubled companies.  Other laws make it 
difficult to keep a struggling company solvent.  The 
Termination of Employment of Workmen Act, for example, 
prohibits employers from dismissing workers even on the 
grounds of inefficiency.  The Termination Act was 
recently revised to facilitate downsizing.  Under the 
revised act, a compensation formula for laid-off workers 
has been published.  But employers have protested that 
it is excessive compared to similar formulae in the 
Asian region, with terms in Sri Lanka about twice as 
generous as the East Asian average.  (Please see section 
on ?Labor? for details.) 
 
In the absence of proper bankruptcy laws, extra-judicial 
powers granted by law to financial institutions protect 
the rights of creditors.  When a company cannot meet the 
demands of a creditor for a sum exceeding Rs 50,000, the 
creditor may petition for company to be dissolved by the 
court.  Lenders are also able to enforce financial 
contracts through powers that allow them to foreclose on 
loan collateral without the intervention of courts. 
Recently, however, the government brought in legislation 
to exclude loans below Rs 5 million ($467,000) from the 
application of the law.  Additionally, a recent judgment 
ruled that these powers would not apply with respect to 
collateral provided by guarantors to a loan.  These two 
moves have weakened creditors? rights.  Financial 
institutions also face other legal challenges as 
defaulters obtain restraining orders on frivolous 
grounds due to technical defects in the recovery laws. 
Also, for default cases filed in courts, the judicial 
process is extremely slow. 
 
The Companies Act and the new Companies Bill do not 
provide for the revival of struggling companies. 
However, the courts take a fairly liberal attitude 
 
COLOMBO 00000082  007.2 OF 025 
 
 
towards any restructuring plans that may be of benefit 
to the company. 
 
--Investment Protection 
 
In principle, foreign investments are guaranteed 
protection by the Constitution of Sri Lanka.  The 
government has entered into 24 investment protection 
agreements with foreign governments (including the 
United States) and is a founding member of the 
Multilateral Investment Guarantee Agency (MIGA) of the 
World Bank.  Under Article 157 of the Constitution of 
Sri Lanka, investment protection agreements enjoy the 
force of law and no legislative, executive or 
administrative action can be taken to contravene them. 
The government has ratified the Convention on Settlement 
of Investment Disputes, which provides the mechanism and 
facilities for international arbitration through the 
World Bank?s International Center for the Settlement of 
Investment Disputes (ICSID). 
 
The U.S.-Sri Lanka Bilateral Investment Treaty (BIT) was 
ratified by both governments in 1993 
(http://www.state.gov/ 
Documents/organization/43588.pdf). 
 
--Arbitration 
 
The Arbitration Act of 1995 gives recognition to the New 
York Convention on recognition and enforcement of 
foreign arbitral awards.  Arbitral awards made abroad 
are now enforceable in Sri Lanka.  Similarly, awards 
made in Sri Lanka are enforceable abroad.  A center for 
arbitration known as the Institute for the Development 
of Commercial Law and Practice (ICLP) 
(www.iclparbitrationcentre.com) has been established in 
Colombo for the expeditious, economical, and private 
settlement of commercial disputes.  However, the ICLP 
appears unlikely to become involved in disputes 
involving the Sri Lankan Government, which is often a 
party to disputes involving foreign investors. 
 
Sri Lanka's first commercial mediation center was 
established in 2000 and became operational in mid 2001. 
Commercial mediation is conducted under the Commercial 
Mediation Act.  Interest in mediation is still low. 
 
The Labor Department has a process involving labor 
tribunals for settling industrial disputes with laborers 
or unions, and arbitration is required when attempts to 
reconcile industrial disputes fail.  The Labor 
Commissioner typically becomes involved in labor- 
management mediation.  Other senior officials, including 
the Labor Minister, and the President, have intervened 
in particularly difficult cases. 
 
The government record in handling investment disputes is 
problematic.  Disputes often become politicized, causing 
the government to put political interests ahead of its 
respect for the sanctity of contracts.  For example, in 
2006, Indian Oil Corporation's petroleum retailing 
subsidiary in Sri Lanka temporarily closed its 
operations when the government failed to honor its 
commitment to reimburse the company for fuel sold at the 
government-controlled price. 
 
--Investment Disputes Involving U.S. Companies 
 
U.S. companies have experienced problems with payment of 
valid contracts; implementation of agreements with the 
government; and inexplicable failure to secure 
contracts, despite demonstrated superior performance, 
high value, and competitive bids. 
 
A U.S. power company producing electricity in Colombo 
 
COLOMBO 00000082  008.2 OF 025 
 
 
has been unable to obtain payment since 2004 for power 
that it produced under a temporary, more costly, 
operating mode following a fire in its plant.  The 
company had intended to suspend operations to conduct 
repairs following the fire, but agreed to the 
government's request that it keep producing power even 
at a higher cost.  However, the government has withheld 
payment on the basis of a questionable Attorney General 
finding that the higher than usual electricity price was 
imposed on the government "under duress." 
 
In 2000, the Sri Lankan Supreme Court effectively 
blocked an investment agreement between the Government 
of Sri Lanka and a U.S. mining company.  Although the 
agreement was already initialed and approved by the Sri 
Lankan cabinet, work on the project had not yet begun. 
A group of citizens filed a fundamental rights case 
under a Sri Lankan law that allows any person to seek 
Supreme Court protection if a government or 
administrative act impedes their rights.  In this case, 
the plaintiffs alleged that their rights would be 
violated if the project was implemented, and the court 
upheld their complaint.  Without any technical argument, 
a partial bench of three judges ruled that the project 
could not proceed before completion of a new series of 
comprehensive and expensive studies, some of which 
appeared to be technically impractical.  The Supreme 
Court decision has never been reversed. 
 
In another case, a U.S. firm with a substantial 
investment in an export manufacturing company has faced 
lengthy delays in a court case over a large insurance 
claim.  The company instituted legal action in June 1999 
and court proceedings are ongoing.  The company withdrew 
its operations from Sri Lanka in 2004. 
 
PERFORMANCE REQUIREMENTS AND INCENTIVES 
 
--Performance Requirements 
 
The Board of Investment specifies certain minimum 
investment amounts for both local and foreign investors 
to qualify for incentives.  Firms enjoying preferential 
incentives in the manufacturing sector in most cases are 
required to export 80% of production, while those in the 
service sector must export at least 70% of production. 
Sri Lanka complies with WTO Trade Related Investment 
Measures (TRIMS) obligations. 
 
Sri Lanka encourages foreign investment in information 
technology, electronics assembly, light engineering, 
automobile parts and accessories manufacturing, 
industrial and information technology parks, rubber 
based industries, information and communication 
services, tourism and leisure related activities, 
agriculture and agro processing, port-related services, 
regional operating headquarters, and infrastructure 
projects.  Foreign investors are generally not expected 
to reduce their equity over time, nor are they expected 
to transfer technology within a specified period of 
time, except for build-own-transfer or other such 
projects in which the terms are specified within 
pertinent contracts. 
 
In some BOI-approved enterprises, businesses are 
required to maintain certain levels of employment to 
enjoy incentives.  In addition, privatization agreements 
generally prohibit new owners from dismissing workers, 
although the owners are free to offer voluntary 
retirement packages to reduce their workforce.  Some 
foreign investors have received political pressure to 
hire workers from a particular constituency or a given 
list, but have successfully resisted such pressure with 
no apparent adverse effects. 
 
 
COLOMBO 00000082  009.2 OF 025 
 
 
Foreign investors who remit at least $250,000 can 
qualify for a one-year resident visa, which can be 
renewed.  Employment of foreign personnel is permitted 
when there is a demonstrated shortage of qualified local 
labor.  Technical and managerial personnel are in short 
supply, and this shortage is likely to continue in the 
near future.  Foreign employees attached to BOI-approved 
companies usually receive preferential tax treatment for 
an initial period and do not experience significant 
problems in obtaining work or residence permits. 
 
--Investment Incentives 
 
The Board of Investment (www.boi.lk) has various 
incentives, with such investments typically requiring 
prior approval by various ministries: 
 
Incentive Program I: 
 
Qualifying industries: 
-Non-traditional manufacturing exports and companies 
supplying to exporting companies.  Minimum investment of 
$500,000(a); 
-Export oriented services.  Minimum investment of 
$500,000; 
-Manufacture of industrial tools and/or machinery. 
Minimum investment of $500,000; 
-Small-scale infrastructure.  Minimum investment of 
$500,000; 
-Research and development.  Minimum investment of 
$100,000; 
-Agriculture and agro processing industries.  Minimum 
investment of $150,000; 
-Export trading houses of rural sector.  Minimum 
investment of $150,000 
 
Incentives:  The above industries qualify for a five- 
year tax holiday initially.  A preferential tax of 10% 
in the 6th and 7th years follows the tax holiday for 
some industries.  In addition, some of these industries 
qualify for duty-free imports (generally, during the 
life of the project for export-oriented projects, and 
during the project implementation period for others). 
Exporting companies and export-oriented services will be 
exempted from exchange control regulations.  They will 
also qualify for free repatriation of profits and 
dividends and free transferability of shares.  A two- 
year tax holiday is available for investments with an 
investment less than $500,000.  A recently introduced 
Economic Service Charge (ESC) at 0.25% of income applies 
to BOI-approved companies with tax holidays.  The tax 
applies even to existing companies -- there is no 
grandfather clause. ESC will apply to BOI approved 
manufacturing companies from the fourth year of 
operation. 
 
Incentive Program II: 
 
Qualifying Industries: 
-Information technology (IT) or information technology 
enabled services.  Minimum investment of $150,000. 
Minimum employment levels apply; 
-Information technology training institutes.  Minimum 
number of students applies; 
-Business Process Outsourcing (BPO).  Minimum investment 
of $150,000.  Minimum employment levels apply; 
-Regional operating headquarters providing the following 
services to related businesses outside Sri Lanka: 
administration, business planning, sourcing raw 
materials, research and Development, technical support, 
financial and treasury management, marketing and sales 
promotion.  Minimum investment of $250,000. 
 
Incentives:  IT services, IT training institutes, and 
BPO firms will qualify for tax holidays of 5-12 years 
 
COLOMBO 00000082  010.2 OF 025 
 
 
provided they meet minimum employment and student 
levels.  Otherwise, a preferential tax of 10% will apply 
for 2 years.  Regional operating headquarters will 
qualify for a tax holiday of 3 years.  A preferential 
tax of 10% will apply in the 4th and 5th years.  From 
the 6th year onwards, a preferential tax of 15% will 
apply.  In addition, capital goods will be exempted from 
import duty for above investments.  A recently 
introduced Economic Service Charge at 0.25% of income 
applies to BOI- approved companies enjoying tax 
holidays, from the fourth year of operation.  The new 
tax applies even to those companies already operating in 
Sri Lanka. 
 
Incentives for Regional Development: 
 
The BOI has launched a new incentive program to promote 
regional development with the aim of establishing 300 
new factories or service companies (such as hotels, 
hospitals, or training institutes) in the regions 
outside the capital Colombo.  The incentives include 2- 
10 year tax holidays depending on the location and 
number of employees, with investments located in the 
most difficult areas eligible for a 10-year tax holiday. 
In addition, imports of machinery and equipment would be 
exempted from both customs duty and the value-added tax. 
A minimum investment of approximately $280,000 is 
required. 
 
Incentives for Infrastructure Development: 
 
Companies acquiring existing companies in petroleum, 
power generation, transmission, development of highways, 
seaports, airports, railways, water services, public 
transport, agriculture and agro processing and other 
infrastructure projects approved by the BOI will qualify 
for tax holidays ranging from 5 to 8 years depending on 
the magnitude of investment.  A preferential tax of 15% 
will follow after the tax holiday period.  These 
companies will also qualify for duty free imports of 
capital goods.  A minimum investment of $12.5 million is 
required. 
 
Large-scale new infrastructure projects in power 
generation, transmission and distribution; development 
of highways, seaports, airports, public transport and 
water services; establishment of industrial parks, and 
other infrastructure projects approved by the BOI will 
qualify for tax holidays ranging from 6 to 12 years 
depending on the size of the investment.  A preferential 
tax of 15% will follow the tax holiday.  They will also 
qualify for duty free imports of capital goods.  A 
minimum investment of $12.5 million is required. 
 
Incentives for Other Investments: 
 
-Industrial estates.  Minimum investment of $500,000 to 
$10 million; tax holidays ranging from 3 to 15 years; 
-Textile fabric manufacturing, processing.  Minimum 
investment of $500,000 to $10 million; tax holidays 
ranging from 5 to 15 years. 
 
For further information on investment incentives and 
other investment-related issues, potential investors are 
encouraged to contact the Board of Investment directly. 
 The BOI can be found at www.boi.lk, or reached via e- 
mail at info@boi.lk.  The BOI has introduced an investor 
matchmaking service via the BOI website.  Information 
regarding this service can be found at 
www.boi.lk/partnership. 
 
--Trade Agreements Enhance Market Access to South Asia 
and Europe 
 
A preferential trade agreement, the Indo-Lanka Free 
 
COLOMBO 00000082  011.2 OF 025 
 
 
Trade Agreement (ILFTA) (www.doc.gov.lk) between Sri 
Lanka and India, is now in effect.  Under this 
agreement, most products manufactured in Sri Lanka with 
at least 35% domestic value addition (if raw materials 
are imported from India, domestic value addition 
required is only 25%), qualify for duty free entry to 
the Indian market.  Tariff concessions for Sri Lankan 
products include zero tariffs on 4,150 items; 50 to 75% 
reduction for tea and garments under quota; 25% 
reduction for 528 textile items; and no reduction for 
429 items on India's "negative list."  Discussions are 
underway to reduce the negative lists of both countries. 
The two countries are also discussing services sector 
liberalization, under a proposed Comprehensive Economic 
Partnership Agreement (CEPA).  Other areas potentially 
covered by the CEPA are investment and economic 
cooperation.  Because production constitutes a portion 
of value addition, ILFTA and the proposed CEPA enables 
foreign firms operating in Sri Lanka to gain 
preferential entry into the Indian market. 
 
Some U.S. companies currently avail themselves of the 
ILFTA by adding at least 35% value in Sri Lanka and 
getting import duties into India reduced from as much as 
15% to as little as zero.   The American Chamber of 
Commerce in Sri Lanka, in a study on the ILFTA, 
identified agro processing, food preparation, tea, 
rubber products, coconut products, spices, furniture, 
ceramic and confectionary as having growth potential in 
India.  The study also found vehicles and vehicle parts, 
aircraft parts and motorcycles to be possible attractive 
sectors for U.S. manufacturers under the Indo-Lanka 
Agreement. 
 
Sri Lanka's Board of Investment promotes the following 
product sectors under ILFTA: confectionary and cocoa 
products, rubber products, plastics, footwear, ceramics, 
jewelry, machinery and mechanical appliances, 
electronics and electrical products, automobiles and 
spare parts, medical instruments, furniture, and doors. 
 
 
The 2005 Sri Lanka-Pakistan Free Trade Agreement 
(SLPKFTA) (www.doc.gov.lk) provides Sri Lanka with duty- 
free entry into Pakistan for 206 items.  Pakistan?s 
negative list contains 541 items with no duty 
concessions.  Pakistan will phase out tariffs on the 
balance of approximately 4,000 items over a 3 year 
period, meaning Pakistan would offer duty free entry to 
almost all Sri Lankan exports by June 2008.  Sri Lanka's 
Board of Investment promotes the following product 
sectors under SLPKFTA: rubber products, ceramics, 
machinery and mechanical appliances, electronics and 
electrical appliances, medical instruments, and 
automobiles and spare parts. 
 
Sri Lanka and six other South Asian nations belonging to 
the South Asian Association for Regional Cooperation 
(SAARC) agreed in 2004 to establish a South Asian Free 
Trade Area (SAFTA) (http://www.saarc-sec.org/main.php), 
which began operation on July 1, 2006.  SAFTA offers 
regionalized tariff reductions for imports from member 
countries.  Stated goals of SAARC members under SAFTA 
are to reduce duties for imports from member countries 
to between zero and 5% over a period of 7-10 years. 
These agreements help make Sri Lanka a gateway to South 
Asia for foreign investors. 
 
Sri Lankan exports to the European Union (EU) are also 
duty free under the ?GSP-Plus? incentive agreement, 
which came into force on July 1, 2005.  Under this 
program, 7,200 Sri Lankan products meeting rules-of- 
origin criteria can enter the EU duty free. 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
 
COLOMBO 00000082  012.2 OF 025 
 
 
 
Private entities are free to establish, acquire, and 
dispose of interests in business enterprises.  Private 
enterprises enjoy benefits similar to those granted to 
public enterprises, and there are no known limitations 
to access to markets, credit, or licenses.  Foreign 
ownership is allowed in most sectors.  Private land 
ownership is limited to fifty acres per person.  The 
government owns about 80% of the land in Sri Lanka, 
including the land housing most tea, rubber, and coconut 
plantations.  The government has leased most of these 
plantations to the private sector on 50-year terms. 
Although state land for industrial use is usually 
allotted on a 50-year lease, 99-year leases may also be 
approved on a case-by-case basis, depending on the 
nature of the project. 
 
While foreign investors can purchase land from private 
sellers, the government has imposed a 100% tax on land 
transfers to foreigners.  For this purpose, Sri Lanka 
has defined foreign investment to involve as little as 
25% foreign ownership ? a definition that can be 
particularly difficult for companies listed on the 
Colombo Stock Exchange since on any particular day, 
their ownership characteristics may vary.  Apartments 
above the third floor of condominium buildings, land for 
the development of large housing schemes, hospitals and 
hotels with a minimum investment of $10 million, 
exporting companies with a minimum investment of $1 
million, and large infrastructure projects with a 
minimum investment of $50 million are exempted from the 
tax.  Regulations regarding these exceptions have been 
published in Gazette No 1386/18 dated March 30, 2005. 
 
PROTECTION OF PROPERTY RIGHTS 
 
--Property Rights 
 
Secured interests in property are recognized and 
enforced.  The legal system is nondiscriminatory and 
protects and facilitates acquisition and disposition of 
property rights by foreigners, although it has recently 
become subject to political influence. A fairly reliable 
registration system exists for recording private 
property including land, buildings and mortgages. 
However, there have been problems due to fraud and 
forged documents.  The Government has begun to address 
these issues under a World Bank-sponsored judicial 
reforms project. 
 
--Intellectual Property Rights Protection 
 
Sri Lanka is a party to major intellectual property 
agreements including the Berne Convention for the 
Protection of Literary and Artistic Works, the Paris 
Convention for the Protection of Industrial Property, 
the Madrid Agreement for the Repression of False or 
Deceptive Indication of Source on Goods, the Nairobi 
Treaty, the Patent Co-operation Treaty, the Universal 
Copyright Convention, and the Convention establishing 
the World Intellectual Property Organization (WIPO). 
Sri Lanka and the United States in 1991 signed a 
Bilateral Agreement for the Protection of Intellectual 
Property Rights.  Sri Lanka is also a party to the Trade 
Related Intellectual Property Rights (TRIPS) agreement 
in the World Trade Organization.  Sri Lanka has not 
acceded to the WIPO Performances and Phonograms Treaty 
(WPPT); the WIPO Copyright Treaty (WCT); or the WTO 
Information Technology Agreement. 
 
In November 2003, a new intellectual property law came 
into force that was intended to meet both U.S.-Sri Lanka 
bilateral IPR agreement and TRIPS obligations to a great 
extent.  The law governs copyrights and related rights, 
industrial designs, patents, trademarks and service 
 
COLOMBO 00000082  013.2 OF 025 
 
 
marks, trade names, layout designs of integrated 
circuits, geographical indications, unfair competition, 
databases, computer programs, and undisclosed 
information.  All trademarks, designs, industrial 
designs and patents must be registered with the Director 
General of Intellectual Property.  Sri Lanka recently 
introduced regulations to regulate the commercial use of 
local creations. 
 
Infringement of intellectual property rights (IPR) is a 
punishable offense under the law.  Intellectual property 
rights come under both criminal and civil jurisdiction. 
Recourse available to owners includes injunctive relief, 
seizure and destruction of infringing goods and plates 
or implements used for the making of infringing copies, 
and prohibition of imports and exports.  Penalties for 
the first offence include a prison sentence of 6 months 
or a fine of up to $5,000.  Penalties can be doubled for 
a second offense.  Aggrieved parties can seek redress 
for any IPR violations through the courts, though this 
can be a frustrating and time-consuming process. 
 
Sri Lanka enforced its IPR laws sporadically between 
2004 and 2006.  The Police occasionally raided 
counterfeit CD/VCD stores as well as counterfeit garment 
sellers in 2005 and 2006.  Several offenders have been 
charged or convicted by courts.  But the minimal damages 
and suspended sentences imposed suggest that the court 
system still fails to recognize the significance of 
intellectual property rights. 
 
Counterfeit goods continue to be widely available in Sri 
Lanka.  Local agents of well-known U.S. and other 
international companies representing recording, 
software, movie, clothing and consumer product 
industries continue to complain that lack of IPR 
protection is damaging their businesses.  Piracy of 
sound recordings and software is widespread, making it 
difficult for the legitimate industries to protect their 
market and realize their potential in Sri Lanka. 
Software companies complain of the lack of IPR 
enforcement within government institutions and even some 
larger corporations, including several banks.  An IPR 
working group of adversely affected industries, led by 
the American Chamber of Commerce of Sri Lanka, is 
working to pursue more aggressive enforcement and 
enhance public awareness. 
 
--Patents, Copyrights and Trademarks 
 
Patents are valid for 20 years from the date of 
application but must be renewed annually. 
Patents are granted for inventions, with the following 
exceptions: discoveries, scientific theories and 
mathematical methods, plant or animal varieties (other 
than micro biological processes) and essential 
biological processes for the production of plants and 
animals (other than non-biological and microbiological 
processes), business rules and methods, methods of 
treatment by surgery or therapy, and diagnostic methods 
practiced on a human or animal body.  The law also 
permits compulsory licensing and parallel imports of 
pharmaceutical products.  Compulsory licensing will 
allow the government to grant licenses to manufacture 
certain patented drugs, overruling patent licenses in a 
national emergency.  The parallel imports will allow the 
import of a branded drug from an alternative source. 
 
Copyrights are not registered.  A work is protected 
automatically by operation of law.  Original literary, 
artistic, and scientific works including computer 
programs and databases are protected under the new law. 
There are enforcement limitations applying to 
copyrights, including software. 
 
 
COLOMBO 00000082  014.2 OF 025 
 
 
Sri Lanka recognizes both trademarks and service marks. 
The exclusive right to a mark is acquired by 
registration.  A mark may consist of words, slogans, 
designs, etc.  Protection also is available to well 
known marks not registered in Sri Lanka.  Registered 
trademarks are valid for ten years and renewable.  The 
law also recognizes both certification marks and 
collective marks. 
 
TRANSPARENCY OF REGULATORY SYSTEM 
 
The Board of Investment strives to inform potential 
investors about laws and regulations that may affect 
operations in Sri Lanka.  Laws are in place pertaining 
to tax, labor and labor standards, exchange controls, 
customs, environmental norms, and building and 
construction standards.  However, some of the laws and 
regulations are difficult to access. 
 
Foreign and domestic investors often complain that the 
regulatory system is unpredictable due to outdated 
regulations, rigid administrative procedures, and 
excessive leeway for bureaucratic discretion.  Effective 
enforcement mechanisms are sometimes lacking, and 
coordination problems between the BOI and relevant line 
agencies frequently emerge.  Lethargy and indifference 
on the part of mid- and lower-level public servants 
compound transparency problems.  Lack of sufficient 
technical capacity within the government to review 
financial proposals for private infrastructure projects 
also creates problems during tendering.  An example of 
weakness in regulations occurred in mid-2006, when 
police and government agencies closed two satellite 
television broadcasting stations for not possessing 
required licenses.  The two stations remained closed for 
over five months, before various government agencies 
reauthorized their operations. 
 
In late 2005, the Government awarded several key 
infrastructure projects to Chinese companies, outside 
the tender process.  They include a 300 megawatt coal 
power project and a fuel bunkering project.  In 
addition, the Government has promised oil exploration 
rights to India and China outside the tender process. 
 
Although many foreign investors, including U.S. firms, 
have had positive experiences in Sri Lanka, some have 
encountered significant problems with government 
practices and regulations.  Some multinational firms 
have experienced extensive unexplained delays in trying 
to reach agreement on investment projects.  Others have 
had contracts arbitrarily canceled without compensation, 
even though the Sri Lankan Cabinet had approved those 
contracts. 
 
Proposed laws and regulations are generally made 
available for public comment.  However, occasionally 
they are published without public discussion. 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
 
--Availability of Financial Resources 
 
Retained profits finance about 70% of private 
investment, with short term borrowing financing a 
further 20% of investment.  The stock market and 
corporate securities market have not been significantly 
used to raise capital.  Foreign direct investment (FDI) 
finances about 4% of overall investment.  Foreign 
investors are allowed to access credit on the local 
market.  They are also free to raise foreign currency 
loans. 
 
The state consumes over 50% of the country's domestic 
financial resources and has a virtual monopoly on the 
 
COLOMBO 00000082  015.3 OF 025 
 
 
management and use of long-term savings in the country. 
This inhibits the free flow of financial resources to 
product and factor markets.  For 2007, the government?s 
net borrowing from the local market is forecast to be Rs 
156 billion ($1.4 billion).  The Central Bank is 
currently maintaining negative real interest rates, 
which have contributed to increased lending and domestic 
investment as well as inflation.  Towards the end of 
2006, the government attempted several measures to curb 
credit expansion including margin requirements for 
import of non-essential goods. 
 
--Credit Instruments 
 
Commercial banks and two development finance 
institutions, the National Development Bank (NDB) and 
the Development Finance Corporation of Ceylon Bank 
(DFCC), are the principal source of bank finance.  Bank 
loans are the most widely used credit instrument for the 
private sector.  Financial institutions also raise 
syndicated bank loans to fund large-scale investment 
projects undertaken by the private sector. 
 
The domestic debt market in Sri Lanka is still at a 
nascent stage.  The first credit rating agency in Sri 
Lanka was Fitch Rating Lanka (www.fitchratings.lk), 
which opened an office in Colombo in 1999.  Fitch 
Ratings Lanka is joint venture between Fitch Ratings 
Inc, International Finance Corporation, (IFC), Central 
Bank of Sri Lanka, and several leading local financial 
institutions.  Credit ratings are now mandatory for all 
deposit-taking institutions and for all varieties of 
debt instruments and have helped numerous Sri Lankan 
companies raise funds through debt markets. 
 
Sri Lanka received its first sovereign credit ratings in 
December 2005, with a ?BB-minus? from Fitch Ratings and 
a ?B-Plus? from Standard and Poor?s.  These sub- 
investment grade ratings reflect the high level of 
government indebtedness and weak revenue mobilization, 
together with political and security concerns.  The two 
agencies changed their rating outlook, but not the 
ratings, from stable to negative in April 2006 following 
escalating violence.  Consequently, the Government has 
delayed plans to borrow from the international markets 
and instead continued to borrow domestically. 
 
--Accounting Standards 
 
There is an active and fairly competent accounting 
profession, based on the British model.  The source of 
accounting standards is the Institute of Chartered 
Accountants of Sri Lanka (ICASL), and standards are 
constantly updated to reflect current international 
accounting and audit standards adopted by the 
International Accounting Standards Board (IASB).  Due to 
the lack of an adequate enforcement mechanism, however, 
problems with the quality and reliability of financial 
statements still exist. 
 
Sri Lankan accounting standards are applicable for all 
banks, stock exchange listed companies and all other 
large and medium-sized companies in Sri Lanka.  Accounts 
of such business enterprises are required to be audited 
by professionally qualified auditors holding ICASL 
membership.  ICASL has published accounting standards 
for small companies as well.  The Accounting Standards 
and Monitoring Board (ASMB) is responsible for 
monitoring compliance with Sri Lankan accounting and 
auditing standards.  British professional accounting 
bodies are quite active in Sri Lanka.  The Chartered 
Institute of Management Accountants (CIMA), a leading 
professional accounting body based in the UK and spread 
over the Commonwealth, has its largest overseas presence 
in Sri Lanka. 
 
COLOMBO 00000082  016.2 OF 025 
 
 
 
--Securities and Exchange Commission 
 
The Securities and Exchange Commission (SEC) regulates 
the securities market in Sri Lanka.  The SEC law was 
revised in 2003, enhancing the SEC's coverage and 
investigative powers.  The SEC now covers stock 
exchanges, unit trusts, stock brokers, listed public 
companies, margin traders, underwriters, investment 
managers, credit rating agencies and securities 
depositories. 
 
Foreign investors can purchase up to 100% of equity in 
Sri Lankan companies in numerous permitted sectors.  In 
order to facilitate portfolio investments, country funds 
and regional funds may obtain Ministry of Finance 
approval to invest in Sri Lanka's stock market.  These 
funds make transactions through share investment 
external Rupee accounts maintained in commercial banks. 
 
--Colombo Stock Exchange 
 
The Colombo Stock Exchange (CSE), while small by "big 
emerging market" standards, is one of the most 
technologically sophisticated in the region.  The CSE 
has fully automated trading, clearing and settlement 
systems.  The CSE has a rolling settlement period of 
five days for buyers and six days for sellers.  Fifteen 
local and foreign joint venture brokers currently 
operate at the CSE.  Foreign stockbrokers are permitted 
to hold up to 100% equity in stock brokerage firms 
operating at the CSE.  The SEC has a settlement 
guarantee fund with an initial capital of Rs 100 million 
($93,000), which aims to guarantee the settlement of 
trades between clearing members of the exchange. 
 
There are 242 companies listed on the stock exchange 
with the top ten positions by market capitalization held 
by banks and food and beverage companies.  The CSE has 
become one of the best performing markets in the region. 
The market gained 28% in 2005 and 42% in 2006.  While 
the market is sensitive to the security situation, 
strong corporate performance and negative real interest 
rates encourage stock purchases in an environment with 
few other attractive opportunities. 
 
Stock market development, though progressing, has been 
slowed by the long term impact of the civil war on 
investor confidence.  Other issues include lack of 
liquidity and limited market size.  Improvements are 
also needed in corporate governance, accountability, and 
public disclosure.  The Accounting and Auditing 
Standards Monitoring Board, the Ceylon Chamber of 
Commerce, the Colombo Stock Exchange, and professional 
accounting bodies are taking initiatives in these areas. 
 
Acquisition of companies through mergers and 
acquisitions is governed by the Takeovers and Mergers 
Code of 1995 made under the Securities and Exchange 
Commission of Sri Lanka Act.  This law applies only to 
companies listed on the Colombo Stock Exchange.  It is 
modeled on the lines of the London City Code on 
Takeovers and Mergers.  Acquisition of more than a 30% 
stake of a listed company requires the buyer to make an 
offer to all other shareholders.  The articles of 
association of a few listed companies restrict foreign 
equity to certain levels. 
 
--Banking System 
 
Sri Lanka has a fairly well diversified banking system. 
There are 23 commercial banks ? eleven local and twelve 
foreign.  In addition, there are thirteen local 
specialized banks.  Citibank NA is the only U.S. bank 
operating in Sri Lanka and has expanded its operations 
 
COLOMBO 00000082  017.2 OF 025 
 
 
recently.  ICICI Bank of India is the newest foreign 
bank in Sri Lanka and commenced operations in January 
¶2006.  In 2001-2003, Mashreq Bank, American Express 
Bank, Nova Scotia Bank and ABN Amro Bank all sold their 
banking operations in Colombo to existing banks.  Sri 
Lanka experienced its first bank failure in December 
2002 when the Central Bank took action to revoke the 
license of a small licensed specialized bank as it 
approached insolvency.  There was no fallout for other 
banks from this incident.  Two other small troubled 
banks were restructured under Central Bank guidance. 
 
The Central Bank is responsible for supervision of all 
banking institutions. It has driven improvements in 
banking regulations, provisioning, and public disclosure 
of banking sector performance.  Since 2004, credit 
ratings have been mandatory for all banks operating in 
Sri Lanka.  In 2006, the Central Bank introduced higher 
capital requirements for commercial banks to further 
stabilize the banking system, promote consolidation, and 
facilitate entry of larger banks.  Nevertheless, the 
Central Bank still suffers from lack of autonomous 
authority, especially with regard to the large state 
owned banks. 
 
Sri Lanka has enacted laws to deal with money laundering 
and terrorist financing.  The Bank Supervision 
Department of the Central Bank supervises and examines 
financial institutions for compliance with anti-money 
laundering and terrorist financing regulations.  A 
Financial Intelligence Unit (FIU) was created in 2006 
and has authority to establish requirements and issue 
instructions to banks regarding these anti-money 
laundering and terrorist financing regulations. 
 
State Owned Banks 
 
Total assets of commercial banks stood at Rs 1,412 
billion ($13.1 billion) as of December 31, 2005.  The 
two state-owned commercial banks, Bank of Ceylon and 
People?s Bank, with assets of Rs 266 billion ($2.5 
billion) and Rs 224 billion ($2.1 billion) respectively 
in 2004, still dominate banking, accounting for about 
45% of all assets. 
 
The two state banks are inefficient and have accumulated 
extensive bad debt.  However, as these banks are 
implicitly guaranteed by the state, their problems have 
not harmed the credibility of the rest of the banking 
system.  Progress has been made in restructuring the two 
banks ? their nonperforming loan ratios have declined 
from 18% in 2003 to 8% in June 2006, while provisioning 
and profitability have improved.  Capital adequacy 
ratios have also improved.  However, fast credit growth 
(especially to the state owned Ceylon Electricity Board 
and the Ceylon Petroleum Corporation) is once again 
raising concerns about credit quality. 
 
Private Commercial Banks and Foreign Banks 
 
Private commercial banks and foreign banks operating in 
Sri Lanka generally follow more prudent credit policies 
and, as a group, are in better financial shape.  The 
average rate of non performing loans to total loans in 
domestic private banks was 8.5% and in foreign banks was 
2.0% in 2005.  According to the World Bank, the banks 
continue to make high provisions for the nonperforming 
loans and risk management of the banks has significantly 
improved.  Foreign banks tend to make provisions in line 
with international best practices, as most foreign bank 
branches are subject to host country supervision in 
addition to that of the Central Bank of Sri Lanka. 
There are concerns regarding credit acceleration in the 
housing sector and high spreads which are almost double 
those in other countries in the region. 
 
COLOMBO 00000082  018.2 OF 025 
 
 
Capital Adequacy 
 
Sri Lanka adopted capital adequacy standards set by the 
Basel Committee on banking regulations and supervisory 
practices in 1993.  The minimum capital adequacy ratio 
required by the Central Bank is 5% for core capital 
(Tier I) and 10% for risk weighted assets (Tier I and 
Tier II).    The Central Bank has decided to adopt Basel 
II standards for all banks in 2008. 
 
Risk based capital adequacy at domestic private banks 
was 10.9% and foreign banks was 20.4% in 2005.  The Bank 
of Ceylon?s capital adequacy ratio has increased to 12 
percent.  People?s Bank currently does not meet capital 
adequacy requirements, but it has a Ministry of Finance 
guarantee for funds required to meet its obligations. 
The Asian Development Bank plans to provide a capital 
infusion to enable the bank to meet its minimum capital 
requirements. 
 
POLITICAL VIOLENCE 
 
In 2006, fighting between the ethnic separatist 
Liberation Tigers of Tamil Eelam (LTTE) and the Sri 
Lankan military intensified in northern and eastern Sri 
Lanka; other parts of the country, including Colombo, 
suffered sporadic terrorist attacks.  In August 2006 
suspected LTTE snipers shot and killed the deputy chief 
of the government Peace Secretariat, a Tamil, at his 
Colombo residence.  In November 2006 a Sri Lanka Navy 
bus was struck by an LTTE truck bomb, killing 100 
soldiers ? the highest number of casualties in a single 
incident since the beginning of the cease-fire in 2002. 
Direct military engagement in Jaffna and in the east has 
also been troubling.  The government and the LTTE met in 
Geneva in February and October 2006 to discuss ways to 
strengthen cease-fire implementation, but neither round 
of talks bore fruit. 
 
Prior to 2006, LTTE terrorist activities had declined 
after the LTTE and the government signed a formal open- 
ended Cease-Fire Agreement in February 2002.  Between 
2002 and 2005, there was a marked improvement in the 
business climate due to the relatively peaceful 
atmosphere prevailing in the country. 
 
In 1997, the United States designated the LTTE as a 
Foreign Terrorist Organization (FTO).  During two 
decades of war, tourists and foreign business 
representatives have not been terrorist targets, but 
they have been injured in attacks on other targets.  In 
2001, the LTTE attacked Colombo's international airport 
and destroyed commercial and military aircraft.  Several 
military personnel were killed in the attack, airport 
employees were injured, and Sri Lankan civilians were 
caught in the crossfire.  Sri Lankan Airlines, jointly 
owned by the Government of Sri Lanka and Emirates 
Airlines of Dubai, lost several commercial aircraft in 
the attack.  The LTTE prior to 2001 attacked several 
foreign-flagged commercial ships in the waters off the 
north and east of the country.  In response to these 
attacks, insurers imposed war risk insurance surcharges 
on aircraft and ships using Sri Lankan seaports and 
airports.  These surcharges have been lifted since the 
cease-fire went into effect.  The LTTE has also in the 
past bombed Colombo?s financial and business districts, 
causing numerous casualties and extensive damage to 
property. 
 
CORRUPTION 
 
Sri Lanka has generally adequate laws and regulations to 
combat corruption, but they are unevenly enforced.  U.S. 
firms identify corruption as a constraint on foreign 
investment, but, by and large, it is not a major threat 
 
COLOMBO 00000082  019.2 OF 025 
 
 
to operating in Sri Lanka ? at least once a contract has 
been won.  Corruption appears to have the greatest 
effect on investors in large projects and on those 
pursuing government procurement contracts. 
 
There is a consensus that corruption is increasing in 
Sri Lanka.  Both the Transparency International 
Corruption Perception and the World Bank's Control of 
Corruption indices for Sri Lanka show a decline in 
recent years. The World Bank Control of Corruption Index 
has shown a decline from -0.17 in 2004 to -0.31 in 2005. 
Transparency International's Corruption Perception Index 
shows a decline from 67th place in 2004 to 84th in the 
2006 ranking. During the 2006 USAID Democracy and 
Governance assessment, anecdotal evidence from the 
private sector indicated that the percentage of a public 
sector contract paid in bribes has nearly tripled. 
According to Transparency International, corruption is 
perceived as most pervasive in political appointments to 
government institutions and in government procurement 
awards, as well as in high frequency/low value 
transactions.  The police force and the judiciary are 
perceived to be the most corrupt public institutions. 
Corruption is also a persistent problem in customs 
clearance and enables wide smuggling of certain consumer 
items, to the detriment of legitimate manufacturers and 
importers. 
 
Sri Lanka ratified the UN Anti-corruption Convention in 
¶2004.  Sri Lanka has signed but not ratified the UN 
Convention against Transnational Organized Crime.  Sri 
Lanka became a signatory to the OECD-ADB Anti-Corruption 
Regional Plan in May 2006. 
 
--Bribery Commission is Not Effective. 
 
The Bribery Commission is the main body responsible for 
investigating allegations of bribery and corruption. 
The function of the Commission, under Act No 19 of 1994, 
is to investigate allegations brought to its attention 
and to institute proceedings against responsible 
individuals in the appropriate court.  The law states 
that a public official?s offer or acceptance of a bribe 
constitutes a criminal offense and carries a maximum 
sentence of seven years imprisonment and a fine at the 
discretion of the courts.  A bribe by a local company to 
a foreign official is not covered by the Bribery Act. 
 
Several other government entities try to address 
corruption, the most important being the Auditor 
General's Department and the National Procurement 
Agency.  However, there is a confusion of mandates and 
these institutions frequently interpret their mandates 
narrowly, inhibiting their effectiveness. 
 
Few Sri Lankans have been found guilty of corruption in 
recent years.  Although highly publicized, efforts to 
investigate bribery and corruption have failed, damaging 
public confidence in such processes.  While corruption 
charges have been leveled against politicians and top 
officials in charge of key government corporations, none 
of the accused has been convicted. 
 
BILATERAL INVESTMENT AGREEMENTS 
 
The Government of Sri Lanka has signed investment 
protection agreements with the United States (which came 
into force in May 1993) and with the following 
countries: 
 
¶1.  Belgium 
¶2.  People?s Republic of China 
¶3.  Denmark 
¶4.  Egypt 
¶5.  Finland 
 
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¶6.  France 
¶7.  Germany 
¶8.  Indonesia 
¶9.  India 
¶10. Iran 
¶11. Italy 
¶12. Japan 
¶13. Korea 
¶14. Luxembourg 
¶15. Malaysia 
¶16. Netherlands 
¶17. Norway 
¶18. Romania 
¶19. Singapore 
¶20. Sweden 
¶21. Switzerland 
¶22. Thailand 
¶23. United Kingdom 
 
--Taxation 
 
A bilateral treaty between Sri Lanka and the United 
States to avoid double taxation was ratified and entered 
into force on June 12, 2004. 
 
Foreign investors not qualifying for Board of Investment 
incentives such as tax and exchange control exemptions 
or concessions are liable to pay taxes on corporate 
profits, dividends, and remittances of profits.  They 
are also liable to pay a Value Added Tax on goods and 
services.  The government has also imposed a tax of 0.1% 
on debits to any current or savings account maintained 
at any bank in Sri Lanka.  Debits made to accounts of 
government and international organizations are excluded. 
Accounts maintained at Foreign Currency Banking Units, 
accounts maintained for stock exchange transactions 
(SIERA), and resident and non-resident foreign currency 
accounts are exempted from the tax.  The Embassy 
encourages prospective U.S. investors to contact an 
international auditing firm operating in Sri Lanka to 
assess their tax liability. 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
The United States and Sri Lanka concluded in 1966 (and 
renewed in 1993) an agreement that allows the Overseas 
Private Investment Corporation (OPIC) to provide 
investment insurance guarantees for U.S. investors. 
OPIC currently provides coverage to banking and power 
sector investments in Sri Lanka.  Sri Lanka's membership 
in the Multilateral Investment Guarantee Agency (MIGA) 
offers the opportunity for insurance against 
non-commercial risks. 
 
The U.S. Embassy and other U.S. Government institutions 
spend over $25 million annually in Sri Lanka.  This 
amount can potentially be utilized by OPIC to honor an 
inconvertibility claim; however, no such claims have 
been made to date in Sri Lanka.  The Embassy purchases 
local currency at the financial rate. 
 
LABOR 
 
--Labor Force 
Sri Lanka's labor force is literate (particularly in 
local languages) and trainable, although weak in certain 
technical skills and the English language.  The average 
worker has eight years of schooling. Two thirds of the 
labor force is male. 
The unemployment rate has declined in recent years to 
around 6.7%.  The rate of unemployment among women and 
high school and college graduates, however, has been 
proportionally higher than the rate for less-educated 
workers.  Youth and entry-level unemployment and 
underemployment remain a problem.  A significant 
 
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proportion of unemployed people seek "white collar" 
jobs.  However, most sectors seeking employees offer 
manual or semi-skilled jobs or require technical or 
professional skills such as management, marketing, 
information technology, accountancy and finance, and 
English language proficiency.  The construction, 
plantation and apparel industries have reported 
shortages of workers.  Some investors have faced 
problems in finding sufficient employees with the 
requisite skills. 
 
The government has initiated educational reforms it 
hopes will lead to better preparation of students and 
better matches between graduates and jobs.  More 
computer, accounting and business skills training 
programs and English language programs are becoming 
available.  But the demand for these skills still 
outpaces supply. 
 
--Migrant Workers Abroad 
 
There are an estimated 970,000 Sri Lankan workers 
abroad.  Remittances from migrant workers, at around $2 
billion, are one of Sri Lanka?s largest sources of 
foreign exchange.  The majority of this labor force is 
unskilled (housemaids and factory laborers) and located 
primarily in the Middle East, but Sri Lanka is also 
losing many of its technically and professionally 
qualified workers to more lucrative jobs abroad. 
 
--Wages and Holidays 
 
Labor is available at relatively low cost, though it is 
priced higher than in some other South Asian countries. 
Productivity lags behind other countries in Asia. 
Child labor is prohibited and is virtually nonexistent 
in the organized sector, although child labor occurs in 
informal sectors.  The minimum legal age for employment 
is set at 14.  Most permanent full-time workers are 
covered by laws pertaining to maximum hours of work, 
minimum wage, leave, the right of association, and 
safety and health standards. 
 
There is widespread belief that Sri Lanka?s labor laws 
and its numerous official holidays dampen productivity. 
The full moon day of each month (sacred in the Buddhist 
faith), if it falls on a weekday, is a paid holiday. 
There are also eight other public holidays.  The public 
sector and banks enjoy additional holidays.  These 
statutory holidays are in addition to 21 days of 
annual/casual leave and approximately 21 days of sick 
leave (the number of days for sick leave is at the 
discretion of the management).  Further, female 
employees are entitled to 84 days fully paid maternity 
leave for the first two pregnancies.    Female workers 
are permitted 60 hours of overtime work per month. 
 
The Government continues to interfere with private 
sector wage setting.  In October 2005, the Government 
through an act of Parliament took steps to mandate a 
wage increase (of approximately Rs 1,000 per month) to 
private sector workers.  The private sector is concerned 
about such interference in wage setting, which could 
damage competitiveness in certain sectors. 
 
--Termination Laws 
 
The Termination of Employment of Workmen Act (TEA) makes 
it difficult to fire or lay off workers who have been 
employed more than six months for any reason other than 
serious, well-documented disciplinary problems. 
Disputes over dismissals can be brought to a labor 
tribunal administered by the Ministry of Justice.  The 
labor tribunals have large backlogs of unresolved cases. 
Certain labor disputes founded upon fundamental rights 
 
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(allegations of termination/transfers based upon 
discrimination, etc.) can be brought directly to the 
Supreme Court. 
 
The government has introduced a standard compensation 
formula under the TEA which is expected to facilitate 
termination.  An unemployment benefit scheme is yet to 
be formulated.  Recent amendments to the Industrial 
Disputes Act (IDA) include labor dispute resolution 
rules to expedite the dispute process. 
 
The compensation formula takes into account the number 
of years of service and offers 2.5 months salary as 
compensation for 1 year of service, 12.5 months salary 
for 5 years of service; 38 months for 20 years and up to 
a maximum of 48 months salary for 34 years service. 
This assumes that the government will approve such a 
termination, which frequently is not the case.  The 
proposed unemployment benefit insurance scheme to 
provide an additional payment has not yet come into 
effect.  According to a recent IMF report, Sri Lanka?s 
firing cost for 20 years of service, at 38 months, is 
among the highest in Asia compared with Pakistan and 
Nepal?s 22.5 months, India?s 19.6 months, Malaysia?s 
18.5 months, China?s 13.2 months and Bangladesh?s 11.7 
months.  Under the new arrangements, the Labor 
Commissioner?s approval or the affected employee?s 
consent is required to fire workers.  Employers complain 
that the package is excessive, especially compared to 
international norms.  They have also pointed out that 
higher compensation could adversely affect companies 
requiring restructuring, and discourage investment. 
 
--Trade Unions 
 
More than 20% of the 7.5 million-strong work force is 
unionized, but union membership is declining.  There are 
more than 1,650 registered trade unions (many of which 
have 50 or fewer members), and 19 federations.  About 
15% of labor in the industry and service sector is 
unionized.  Most of the major trade unions are 
affiliated with political parties, creating a highly 
politicized labor environment.  Several trade unions 
with affiliations to major political parties have formed 
themselves into an organized group, the National 
Association for Trade Union Research and Education 
(NATURE), to promote education and training among trade 
unionists.  Labor in free trade zone enterprises tends 
to be represented by non-union worker councils. 
 
Unions have complained that the Board of Investment and 
some employers, especially in the BOI-run export 
processing zones, prohibit union access and do not 
register unions on a timely basis.  Employers allege 
that the JVP, a Marxist political party opposed to 
private enterprise, could provoke labor to strike under 
the pretense of trade union activity.  Due to the JVP?s 
violent past, employers are generally not in favor of it 
or its trade union arm, the Inter-Company Trade Union. 
 
In BOI enterprises, including those in the export 
processing zones, worker councils composed of employees 
generally engage in labor and management negotiations. 
These worker councils have functioned well in some 
companies in providing for worker welfare.  The BOI has 
requested that companies recognize trade unions and 
accept the right to collective bargaining.  According to 
the BOI, where both a recognized trade union with 
bargaining power and a non-union worker council exist in 
an enterprise, the trade union will represent the 
employees in collective bargaining. 
 
The International Labor Organization's (ILO) Freedom of 
Association Committee has observed that Sri Lankan trade 
unions and employee councils can co-exist, but advises 
 
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that there should not be any discrimination against 
those employees choosing to join a union.  The right of 
employee councils to engage in collective bargaining has 
been held as valid by the ILO.  The ILO has, however, 
noted weaknesses in rules governing operation of 
employee councils and low prevalence of collective 
bargaining agreements and requested that the Government 
address these issues. 
 
In response to these observations, the BOI revised its 
labor manual in March 2004, requesting that companies 
located in export processing zones allow union access to 
zones and provide official time off to union members to 
attend meetings.  Along with this revision, the BOI also 
issued new guidelines for the formation and operation of 
employee councils, giving powers to employee councils to 
negotiate binding collective agreements. 
 
In 2002, the American Federation of Labor and Congress 
of Industrial Organizations (AFL-CIO) submitted a 
petition to the United States Trade Representative 
seeking suspension of Generalized System of Preferences 
(GSP) benefits for Sri Lanka due to labor rights 
violations in some factories in the export processing 
zones.  USTR did not act on this petition.  A Sri Lanka 
trade union made a similar case with the European Union 
(EU) when Sri Lanka applied for benefits under the 
special incentive arrangements of the GSP.  After an 
audit, the EU, in January 2004, granted significant 
benefits to Sri Lanka under EU GSP in recognition of the 
country?s efforts to implement core labor standards. 
The EU, however, urged improvements in freedom of 
association. 
 
Key public sector entities such as the Ceylon 
Electricity Board and the Sri Lanka Ports Authority also 
have large unions which have protested anticipated moves 
towards privatization or restructuring.  In July 2006, 
the Supreme Court broke a port slowdown which had 
disrupted shipping through the Colombo Port for over a 
week.  The Brussels based International Textile and 
Garment Workers Federation (ITGWF) lodged a complaint 
with the ILO on this ruling. 
 
--Collective Bargaining 
 
Collective bargaining is not yet popular.  While more 
than half of the Employers? Federation of Ceylon?s 
(EFC?s) 435-strong membership is unionized, currently 
only about 50 of these companies (including a number of 
foreign-owned firms) have collective agreements and use 
them to conduct negotiations on their behalf.  Civil 
servants other than officers in the police, armed 
forces, and prison service, also have a right to strike. 
 
--Labor-Management Relations 
 
Formerly confrontational labor-management relations have 
improved in the last few years as employers have worked 
harder to motivate and care for workers.  Work stoppages 
and strikes in the private sector are on the decline. 
While labor-management relations vary from organization 
to organization, managers who emphasize communication 
with workers and offer training opportunities generally 
experience fewer difficulties.  U.S. investors in Sri 
Lanka (including U.S. garment buyers) generally promote 
good labor management relations and labor conditions 
that exceed local standards. 
 
--ILO conventions 
 
Sri Lanka is a member of the International Labor 
Organization (ILO) and has ratified 39 international 
labor conventions.  The labor laws of Sri Lanka are laid 
out in almost 50 different statutes.  The Ministry of 
 
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Labor has published a Labor Code, consolidating 
important labor legislation.  Sri Lanka has ratified all 
eight of the core labor conventions included in the 1998 
ILO Declaration on Fundamental Principles and Rights at 
Work.  ILO Convention 138 on minimum age for admission 
to employment and Convention 182 on worst forms of child 
labor were ratified during 2000-2001.  Sri Lanka 
ratified ILO convention 105 on Forced Labor in 2003. 
The ILO, EFC and the AFL-CIO-sponsored American Center 
for International Labor Solidarity are working to 
improve awareness of core labor standards.  The ILO also 
promotes its Decent Work Agenda program in Sri Lanka. 
 
FOREIGN TRADE ZONES/FREE PORTS 
 
Sri Lanka has 10 free trade zones, also called export- 
processing zones, administered by the BOI.  The oldest, 
the Katunayake and Biyagama Zones, located north of 
Colombo near the Bandaranaike International Airport, are 
fully occupied.  The third zone is located at Koggala on 
the southern coast.  Several new mini export-processing 
zones were opened in the provinces during the last few 
years.  There are nearly 200 foreign export processing 
enterprises operating in these zones.  There are also 
two industrial parks that have both export-oriented and 
non-export oriented factories.  They are located in 
Pallekelle, near Kandy in central Sri Lanka, and in 
Seethawaka in Avissawela about 60 kilometers from 
Colombo. 
 
In the past, firms preferred to locate their factories 
near Colombo harbor or airport to reduce transport time 
and cost.  However, excessive concentration of 
industries around Colombo has caused heavy traffic, 
higher real estate prices, environmental pollution, and 
scarcity of labor.  The BOI now encourages export- 
oriented factories to set up in newly developed 
industrial zones farther from Colombo.  However, Sri 
Lanka's poor roads make these outlying zones less 
appealing. 
 
FOREIGN DIRECT INVESTMENT STATISTICS 
 
--Investment Trends 
 
From 1998-2001, foreign direct investment (FDI) flows to 
Sri Lanka averaged only about $150 million per year 
(excluding privatization receipts).  Since the 2002 
ceasefire improved investor confidence, annual FDI flows 
have averaged about $200 million.  2006 FDI is expected 
to total about $400 million, centered on 
telecommunications and construction. 
 
--U.S. Investments 
 
Total cumulative U.S. investment in Sri Lanka is 
estimated to be in the range of $200 million.  Major 
U.S. investors include:  Energizer Battery, Mast 
Industries, Smart Shirts (a subsidiary of Kellwood 
Industries), Chevron, Citibank, Caterpillar, 3M, 
Cargill, Coca Cola, Tandon Corporation, Paxar 
Corporation, Pepsi Co, Sportif, Worldquest, Fitch IBCR, 
AES Corporation, American International Group (AIG), 
American Premium Water, Virtusa, Avery Denison, North 
Sails, Amsafe Bridport, and RR Donnelly (through Office 
Tiger).  In addition, IBM, Lanier, NCR, GTE, Motorola, 
Procter & Gamble, Liz Claiborne, Tommy Hilfiger, J.C. 
Penney, the Gap, Sun Microsystems, Microsoft, Bates 
Strategic Alliance, McCann-Erickson, Pricewaterhouse 
Coopers, Ernst and Young, and KPMG all have branches, 
affiliated offices or local 
distributors/representatives.  Kentucky Fried Chicken, 
Pizza Hut, Federal Express, UPS, and McDonald?s are 
represented in Sri Lanka through franchises.  Numerous 
other American brands and products are represented by 
 
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local agents. 
 
--Non-U.S. Investments 
 
Leading sources of foreign direct investment in Sri 
Lanka are Singapore, the United Kingdom, Japan, South 
Korea, Hong Kong, Australia and Malaysia.  Major non- 
U.S. investors include: Unilever, Nestle, British 
American Tobacco Company, Mitsui, Pacific Dunlop/Ansell, 
Prima, FDK, Telekom Malaysia Bhd, S.P. Tao and HSBC. 
Leading U.S. and foreign investors that have acquired 
significant stakes in privatized companies include 
Chevron, Norsk Hydro of Norway, Hanjung Steel of Korea, 
Nippon Telephone and Telegraph, Mitsubishi Corporation 
and C. Itoh (A.K.A. Itochu) of Japan, Emirates Airlines 
of United Arab Emirates, Shell Oil of the UK, P&O 
Netherlands, and the Indian Oil Corporation. 
 
Web Resources: 
 
Board of Investment of Sri Lanka:  www.boi.lk 
 
Article VIII obligations of the International Monetary 
Fund:  www.imf.org/external/pubs/ft/aa/aa08.htm 
 
U.S.-Sri Lanka Bilateral Investment Treaty: 
www.state.gov/documents/ organization/43588.pdf 
 
Institute for the Development of Commercial Law and 
Practice:  www.iclparbitrationcentre.com 
 
Indo-Lanka Free Trade Agreement:  www.doc.gov.lk 
 
South Asian Free Trade Area:  www.saarc-sec.org/main.php 
 
Fitch Ratings Lanka:  www.fitchratings.lk 
 
Development Assistance Database:  www.dad.tafren.gov.lk 
 
[End text] 
 
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