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Viewing cable 09COLOMBO1121, SRI LANKA: 2010 NATIONAL TRADE ESTIMATE REPORT (Resubmit)

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Reference ID Created Released Classification Origin
09COLOMBO1121 2009-12-07 07:51 2011-08-26 00:00 UNCLASSIFIED Embassy Colombo
VZCZCXRO9058
RR RUEHBI RUEHLMC
DE RUEHLM #1121/01 3410751
ZNR UUUUU ZZH
R 070751Z DEC 09
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 0940
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHNE/AMEMBASSY NEW DELHI 3569
RUEHKA/AMEMBASSY DHAKA 2137
RUEHIL/AMEMBASSY ISLAMABAD 9171
RUEHKT/AMEMBASSY KATHMANDU 7416
RUEHKP/AMCONSUL KARACHI 2615
RUEHCG/AMCONSUL CHENNAI 9731
RUEHBI/AMCONSUL MUMBAI 7022
RUEHGV/USMISSION GENEVA 3889
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
UNCLAS SECTION 01 OF 07 COLOMBO 001121 
 
SIPDIS 
 
STATE FOR SCA/INSB, EEB/IFD APRATTIPATI 
STATE PASS USTR FOR VICKY KADER 
TREASURY FOR SUSAN CHUN 
COMMERCE FOR ITA EROL YESIN 
GENEVA PASS USTR 
 
E.O 12958: N/A 
TAGS: ETRD ECON EFIN CE
SUBJECT:  SRI LANKA: 2010 NATIONAL TRADE ESTIMATE REPORT (Resubmit) 
 
REF: SECSTATE 105978 
COLOMBO 1011 
 
1. The following is in response to Ref A's request for information 
on the National Trade Estimate in Sri Lanka.  Ref B includes 
information for the Sanitary and Phytosanitary (SPS) and Standards 
Related Foreign Barriers to trade in Sri Lanka, submitted November 
4, 2009 (and also included here). 
 
TRADE SUMMARY 
 
2. The U.S. goods trade deficit with Sri Lanka was $1.7 billion in 
2008, a decrease of $160 million from $1.8 billion in 2007.  U.S. 
goods exports in 2008 were $283 million, up 24.7 percent from the 
previous year.  Corresponding U.S. imports from Sri Lanka were $2 
billion, down 5.0 percent.  Sri Lanka is currently the 116th largest 
export market for U.S. goods. 
 
3. The stock of U.S. foreign direct investment (FDI) in Sri Lanka 
was $80 million in 2007 (latest data available), up from $69 million 
in 2006. 
 
IMPORT POLICIES 
 
4. Despite an economy open to foreign investment, the pace of reform 
in Sri Lanka has been uneven.  President Rajapaksa's broad economic 
strategy focuses on poverty alleviation and steering investment to 
disadvantaged areas, large scale infrastructure projects, developing 
the small- and medium-sized enterprise sector, promotion of 
agriculture, and expanding the already large civil service. 
 
5. The Trade, Tariff, and Investment Policy Division of the Ministry 
of Finance and Planning is charged with the formulation and 
implementation of policies in these areas.  In addition, the Trade 
and Tariff cluster of the National Council of Economic Development 
(NCED) also examines trade and tariff issues and sends 
recommendations to the Ministry of Finance and Planning.  In July 
2009, the President appointed a Presidential Taxation Committee to 
examine the entire tax system including import tariffs. 
 
IMPORT CHARGES 
 
6. Sri Lanka's main trade policy instrument has been the import 
tariff.  According to the WTO, in 2006, Sri Lanka's average applied 
tariff for nonagricultural goods was 9.2 percent.  Its average bound 
tariff for these goods was 19.6 percent.  However, approximately 70 
percent of Sri Lanka's nonagricultural tariffs are unbound under WTO 
rules and can be increased at any time.  Sri Lanka's average applied 
agricultural tariff in 2006 was 23.8 percent. 
 
7. Currently in Sri Lanka, there are five tariff bands:  0 percent; 
2.5 percent; 6 percent; 15 percent; and 28 percent.  Textiles, 
pharmaceuticals, and medical equipment are duty free.  Basic raw 
materials are generally assessed a 2.5 percent duty.  Semi-processed 
raw material tariffs are 6 percent, while intermediate product 
tariffs are 15 percent.  Most finished product tariffs are 28 
percent.  There are also a number of deviations from the five band 
tariff policy.  Some items are subject to an ad valorem or a 
specific duty, whichever is higher, and there is intermittent use of 
exemptions and waivers.  Footwear, ceramic products, and 
agricultural products carry specific duties. 
 
8. In addition to tariffs, a variety of taxes introduced (see below) 
in the past several years have effectively increased Sri Lanka's tax 
rates on a range of imported items to between 60 and 100 percent of 
the cost, insurance, and freight (CIF) value of the product.  The 
government has imposed these charges on imports primarily to raise 
revenue, to defray the costs of specific government services, or to 
promote local producers.  Most of these charges are revised upwards 
annually.  In addition, the government imposed a new Nation Building 
Tax of 1 percent on imports on February 1, 2009; it was increased to 
3 percent on May 1, 2009.  The frequent changes (mostly upward) of 
these rates have added unpredictability to foreign exporters' and 
local importers' cost calculations.  Affected products from the 
United States include fruits, processed/packaged food, and personal 
 
COLOMBO 00001121  002 OF 007 
 
 
care products. 
 
9. Other charges on imports include: 
 
9A. An Export Development Board (EDB) levy, ranging from 10 percent 
to 35 percent ad valorem on a range of imports identified as 
"nonessential."  Most of the items are subject to specific duties as 
well; for example, shampoo (35 percent or Rs 175 per kg), apparel 
(30 percent or Rs 75 per unit), biscuits (35 percent or Rs 60 per 
kg) and oranges (20 percent or Rs 15 per kg).  Whichever levy is 
higher - percentage versus a flat rate - is applied.  Also, when 
calculating the EDB levy, an imputed profit margin of 10 percent is 
added onto the import price.  In some cases, such as on biscuits, 
chocolates and soap, the tax is charged not on the import price but 
on 65 percent of the maximum retail price. The EDB levy on most 
imports was increased by raising the specific duties (unit rate) in 
November 2008 and in 2009. 
 
9B. An import duty surcharge of 15 percent on all dutiable imports 
(increased from 10 percent as of November 8, 2007). 
 
9C. A Ports and Airports Development Levy of 5 percent on imports 
(increased from 2.5 percent to 3 percent in January 2007; and to 5 
percent from January 1, 2009). 
 
9D. A VAT of 0 percent, 12 percent, or 20 percent.  When calculating 
the VAT, an imputed profit margin of 10 percent (increased from 7 
percent on January 1, 2007) is added on to the import price. 
Locally manufactured products are also subject to VAT but not the 
imputed profit margin.  The new VAT rate of 12 percent was 
introduced on January 1, 2009 replacing the VAT rates of 5 percent 
and 15 percent. 
 
9E. Excise fees on some products such as aerated water, liquor, 
beer, motor vehicles, and cigarettes.  The list of products subject 
to these fees was expanded in 2007 to include certain household 
electrical items.  When calculating the excise fee, an imputed 
profit margin of 15 percent (increased from 10 percent on October 
11, 2007 and from 7 percent on January 1, 2007) is added on to the 
import price.  Locally manufactured products are also subject to 
excise fees. 
 
9F. A Social Responsibility Levy, a surcharge of 1.5 percent 
assessed on the import duty to fund the National Action Plan for 
Children.  This tax was increased from 1 percent as of November 8, 
2007. 
 
9G. A new Nation Building Tax (NBT) on imports was introduced on 
February 1, 2009 at 1 percent.  It was increased to 3 percent on May 
1, 2009. 
 
10. A regional infrastructure fee of 5 percent, 7.5 percent or 10 
percent (based on engine capacity) is imposed on automobiles.  This 
tax, first introduced in January 2007 at a flat rate of 2.5 percent, 
was increased in 2008. 
 
11. Textiles and Apparel: Textiles are free of customs import duty. 
There is an Export Development Board Levy (often referred to as a 
cess) of 50 Rupees (approximately $0.45) per kilogram on imported 
textiles not intended for use by the apparel export industry.  All 
textile imports are subject to a Nation Building Levy of 3%, Ports 
and Airports Tax of 5%, Social Responsibility Levy of 1.5% and a 
Value Added Tax (VAT) of 12%. 
 
12. Currently, apparel imports are subject to a 15 percent import 
duty, a 30 percent or Rs 75 per unit Export Development Board Levy, 
a 12 percent Value Added Tax, a 5 percent Ports and Airports Levy, a 
1.5 percent Social Responsibility Levy and a 3 percent Nation 
Building Tax. 
 
13. In October and November 2008, the Central Bank introduced limits 
on forward contracts for the sale and purchase of foreign exchange, 
prevented prepayments on import bills, and imposed a 100 percent 
deposit requirement on Letters of Credit for the import of 
non-essential items.  In the case of motor vehicle imports, the 
 
COLOMBO 00001121  003 OF 007 
 
 
deposit requirement was 200 percent of the import value.  These 
restrictions were introduced to discourage imports due to a foreign 
exchange shortage and were later lifted. 
 
14. The U.S. Government engaged in bilateral Trade and Investment 
Framework Agreement (TIFA) talks with the government of Sri Lanka in 
October 2009.  In response to U.S. concerns that combined tariffs, 
levies, and taxes greatly exceed Sri Lanka's bound rates for many 
imports, the GSL explained that it had established a Presidential 
Tariff Commission to simplify its tax and tariff structure and to 
bring it into compliance with international agreements.  The United 
States stressed the importance of reducing Sri Lanka's high tariffs 
on agricultural products; opening the Sri Lankan market for U.S. 
agricultural biotechnology products; providing more certainty and 
transparency in Sri Lanka's government procurement, and integrating 
U.S. technical assistance into the government of Sri Lanka's overall 
intellectual property rights enforcement plan.  The Embassy 
continues to follow up and press the Sri Lankan government to take 
action. 
 
IMPORT LICENSING 
 
15. Sri Lanka requires import licenses for over 400 items at the 
6-digit level of the Harmonized Tariff System code, mostly for 
health, environment, and national security reasons.  Importers must 
pay a fee equal to 0.1 percent of the import price to receive an 
import license. 
 
CUSTOMS ADMINISTRATION 
 
16. The government of Sri Lanka implemented the WTO Customs 
Valuation Agreement in January 2003 and follows the transaction 
value method to determine the CIF value.  The scheme has operated 
quite successfully and major companies have not faced problems. 
Customs is also in the process of installing an Electronic Data 
Interchange system to support an automated cargo clearing facility. 
When implemented, this system should improve customs administration 
and facilitate trade. 
 
STANDARDS 
 
17. The Sri Lanka Standards Institution (SLSI) is operating a 
Compulsory Import Inspection Scheme (covering 102 items) per 
regulations framed under the Imports and Exports Control Act, No. 1 
of 1969 as amended by Act No. 28 of 1987.  According to the Imports 
Standardization and Quality Control Regulations of 2006, conformity 
of the imported products to the relevant Sri Lankan Standards is 
monitored.  Samples are drawn from consignments accompanied by a 
quality certificate from an accredited laboratory or manufacturer 
registered with SLSI, which could be subject to testing or random 
check, or if there is a reasonable doubt regarding the quality of 
the consignment. 
 
18. Sri Lanka has introduced new food safety regulations.  According 
to the Adoption of Standards Regulations of 2008 (Ref. No. 1589/34 - 
FEB 2009), 158 SLSI standards were made mandatory starting in 
September 2009 for certain food and beverage products.  (NOTE: Post 
will provide a PDF document containing notification of the 
regulations per request.  END NOTE.)  The SLSI standards range from 
commodities to processed products.  Though these standards did exist 
previously, they were for the most part voluntary.  Some U.S. 
companies are concerned that these newly-mandatory measures do not 
factor in market preferences and could restrict trade.  The Ministry 
of Health, which is the CODEX focal point, plans to notify the WTO 
with regard to this new regulation. 
 
TECHNICAL BARRIERS TO TRADE 
 
19. In January 2007, the Ministry of Health adopted a regulation for 
the import, sale and mandatory labeling of genetically engineered 
(GE) food products, potentially costing U.S. industry as much as $20 
million.  This regulation is moving towards full implementation, 
although some aspects of it are irregularly enforced or not enforced 
at all.  Key problems with the regulation include:  mandatory Sri 
Lankan regulatory approval of foods with 0.05 percent or more of GE 
 
COLOMBO 00001121  004 OF 007 
 
 
content; labeling for products with more than 0.05 percent of GE 
content; and the requirement that shipments of bulk commodities be 
accompanied by documentation certifying that there is no GE content. 
 Sri Lankan importers have raised several concerns about the 
regulation, including that conformity with a 0.05 percent GE content 
labeling threshold would be costly and that mandatory labeling could 
needlessly raise consumer concerns with biotechnology. 
Additionally, importers fear that bureaucratic procedures in 
granting approvals - as well as Sri Lanka's technical inability to 
carry out approvals - may obstruct and limit future imports of GE 
products.  For example, a 2008 U.S. GE corn shipment was cancelled 
due to excessive bureaucratic delays.  This decision has discouraged 
many Sri Lankan importers from attempting to import unprocessed GE 
bulk commodities, as it is understood that their import license 
application will be ignored, delayed or refused. 
 
20. During October 2009 discussions under the United States-Sri 
Lanka Trade and Investment Framework Agreement (TIFA), the United 
States raised concerns regarding Sri Lanka's mandatory labeling 
requirement, noting a lack of scientific justification, and adding 
that the regulation would essentially act as a nontariff barrier. 
Sri Lanka stated that they would follow CODEX Alimentarius 
guidelines pertaining to the labeling of GE foods, and noted that 
CODEX had not yet ruled on this issue.  The United States also 
reminded Sri Lanka of the trade ramifications of their GE policy, 
including the previously mentioned corn shipment as well as a 
rejected November 2008 food aid shipment of rice.  Sri Lankan 
regulators were not persuaded to change their position.  The USG 
will continue to raise the issue. 
 
21. USDA has sent several local scientists and regulators for 
training in biotechnology and biosafety at Michigan State 
University.  The most recent regulator to participate in this 
program is the Director of Biosafety at the Ministry of Environment, 
who is a senior regulator with respect to agricultural 
biotechnology.  He is also the coordinator for the National 
Biosafety framework.  His view of biotechnology was positively 
transformed by the training, and he acknowledged several previous 
personal misconceptions.  USDA and the State Department will 
continue to work with Ministry of Environment officials to affect 
regulatory change. 
 
22. Poultry:  Sri Lanka has banned the importation of U.S. chicken 
meat that is not mechanically deboned.  During the October 2009 
United States-Sri Lanka Trade and Investment Framework Agreement 
(TIFA) meeting, Sri Lanka openly admitted that this measure was in 
place to protect its domestic industry and contended that this was 
permitted under the use of a WTO safeguard mechanism.  The U.S. 
government responded that if this were the case, that safeguard 
should be formally raised within the WTO.  Additionally, Sri Lanka 
had imposed avian influenza bans on all poultry and poultry products 
imported from several U.S. states.  As of October 2009, these bans 
were all removed.  Sri Lanka imposed these bans due to the detection 
of low pathogenicity notifiable avian influenza, an action which is 
not supported by the World Organization for Animal Health (OIE). 
Sri Lanka was reluctant to remove the bans and continues to believe 
that their actions were justified - raising concerns that such 
action may reoccur. 
 
23. Beef:  A ban on U.S. beef imports remains in effect due to the 
detection of bovine spongiform encephalopathy (BSE) in the United 
States in 2003.  This ban is also not supported by the OIE, and Sri 
Lanka is one of five countries in the world to have taken absolutely 
no action to lift any part of their BSE-related U.S. beef ban.  This 
issue was raised during the October 2009 TIFA.  Sri Lanka defended 
their position by incorrectly citing the guidelines and 
recommendations of the OIE's guidelines for meat and poultry. 
 
24. Microbiological Testing of Meat Imports:  In September 2009, Sri 
Lanka started 100% testing of all imported meat products for various 
pathogens.  This policy change was not notified to the WTO. 
Importers have complained that the additional demurrage costs 
associated with the testing are unnecessary, and that government 
testing methods are not sound.  The U.S. Department of Agriculture 
additionally argues that the USDA Food Safety Inspection Service 
 
COLOMBO 00001121  005 OF 007 
 
 
attestation which mandatorily accompanies all meat exports is a 
sufficient assurance of wholesomeness.  During the October 2009 
TIFA, Sri Lanka was asked to provide its regulation on 
microbiological testing, especially as it relates to their testing 
protocol, targeted pathogens, and acceptable pathogen levels.  The 
U.S. government also emphasized the importance of notifying the WTO 
SPS committee of this regulation. 
 
25. Seed Potatoes:  Sri Lanka lifted a ban on imports of seed potato 
from the United States in March 2007, initially instituted due to 
fears that the Colorado Potato Beetle (CPB) could have been 
introduced into Sri Lanka by these imports.  However, Sri Lanka now 
requires a certificate from a plant entomologist stating that the 
CPB does not exist in the potato tuber to accompany the seed potato 
imports.  The United States has pressed for the removal of this 
certificate requirement on the grounds that it was not 
scientifically justified.  In July 2008, Sri Lankan officials 
visited the U.S. potato industry to further review the issue.  It is 
hoped that as a result of this visit, the issue will be resolved and 
a visual inspection at the time of shipment will be considered 
sufficient to address any concerns.  Although this issue may be 
addressed, recent 2008 import permits have included overly 
restrictive virus tolerances and requirements on generations of seed 
potatoes.   There is concern that the generation requirements are 
not being applied to seed potatoes imported from other markets such 
as Europe.   The CPB area freedom certificate, virus tolerances, and 
restrictive generation requirements all need to be addressed before 
the Sri Lankan market can grow into a strong commercial export 
market for U.S. seed potatoes. 
 
GOVERNMENT PROCUREMENT 
 
26. Sri Lanka is not a signatory to the WTO Agreement on Government 
Procurement and has no plans to join it beyond its current observer 
status. 
 
27. Government procurement of goods and services is primarily 
undertaken through a public tender process.  Some tenders are open 
only to registered suppliers.  Procurement is also undertaken 
outside the normal competitive tender process.  Examples of such 
procurement include agreements in 2006 with the government of China 
to build a coal power plant and for two Chinese companies to build a 
new bulk cargo port in Hambantota, and an agreement with India to 
build a coal power plant. 
 
28. The government publicly subscribes to principles of 
international competitive bidding, but charges of corruption and 
unfair awards are common.  In 2006, Sri Lanka published new 
guidelines, as well as a new procurement manual, to improve the 
public procurement process.  However, in early 2008 the government 
disbanded the National Procurement Agency, which it had established 
in 2004, and shifted its functions to a unit in the Ministry of 
Finance.  This move has raised concerns about the government's 
commitment to improve the transparency of procurements.  Despite 
being discussed during the 2009 TIFA talks, the government of Sri 
Lanka has yet to respond to the concerns raised. 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
29. In 2003, Sri Lanka's new intellectual property law - governing 
copyrights, patents, trademarks, and industrial design - came into 
force.  Under the new law, IPR infringement is a criminal offense 
and IPR infringement is subject to both criminal and civil 
jurisdiction.  Sri Lanka also passed a new Computer Crimes Act in 
2007 strengthening Sri Lanka's IPR regime pertaining to software. 
 
30. Notwithstanding the new laws, weak IPR enforcement remains a 
problem.  Piracy levels remain very high for sound recordings and 
software.  According to a study commissioned by the Business 
Software Alliance, as much as 90 percent of personal computers in 
Sri Lanka used pirated software in 2008.  The study estimates retail 
revenue losses of $97 million in 2008 due to software piracy. 
Further, government use of unauthorized software continues to be a 
problem. 
 
 
COLOMBO 00001121  006 OF 007 
 
 
31. Redress through the courts for IPR infringement is often a 
frustrating and time-consuming process.  While police can take 
action against counterfeiting and piracy without complaints by 
rights holders, they rarely do so.  In 2008-2009, the Business 
Software Alliance successfully worked with government authorities to 
increase prosecutions for IPR infringement in the software sector. 
In the apparel sector, right holders have scored some legal 
successes in combating trademark counterfeiting. 
 
32. The Sri Lankan Government's Director of Intellectual Property, 
along with international experts, continues to have IPR legal and 
enforcement training for customs, judicial and police officials. 
The U.S. Embassy, the United States Patent and Trademarks Office, 
the American Chamber of Commerce of Sri Lanka, and the European 
Chamber of Commerce are also working with the government of Sri 
Lanka and the private sector to improve enforcement, provide 
enforcement training, and enhance public awareness.  Sri Lankan 
Customs has created a computer based Customs Trade Mark recordation 
system, although it is yet to be launched. 
 
SERVICES 
 
33. Insurance: Sri Lanka does not allow cross-border supply of 
insurance, with the exception of health and travel insurance.  In 
order to provide all other insurance services to resident Sri 
Lankans, insurance companies must be incorporated in Sri Lanka.  Sri 
Lanka allows 100 percent foreign ownership for locally incorporated 
insurance firms, but branching is not allowed.  Although Sri Lanka's 
insurance regulatory body has the authority to establish minimum and 
maximum premiums for motor, fire and employers liability policies, 
in practice these premiums are not regulated.  In early 2008, the 
Sri Lankan government implemented a new regulation requiring all 
insurance companies to reinsure 20 percent of their insurance 
business with a state-run insurance fund. 
 
34. Telecommunications: Telecommunications, especially mobile 
services, is increasingly competitive and may be the most dynamic 
service industry in Sri Lanka.  The government of Sri Lanka 
maintains a majority share in one of the fixed line carriers, Sri 
Lanka Telecom (SLT), which was previously a wholly owned government 
entity.  All other operators are privately owned. 
 
35. Telecommunications (continued): Due to SLT's past monopoly 
status, it continues to own most of the national fixed line 
telephone infrastructure (including the main switches and the only 
two international cable landing stations) and continues to dominate 
the fixed line sector, affecting the competitiveness of other 
operators in this segment of the market.  The government liberalized 
international telecommunications in 2003 and issued 33 
non-facilities based gateway licenses, ending the SLT monopoly over 
international telephony. 
 
36. Broadcasting: The government imposes taxes on foreign movies, 
programs, and commercials to be shown on television, ranging from Rs 
25,000 (approximately $220) for an imported English-language movie 
to Rs 90,000 (approximately $790) per half hour of a 
foreign-language program dubbed in the local language Sinhala. 
Foreign television commercials are taxed at Rs 500,000 (roughly 
$4,400) per year.  Rates for non-English foreign programming are 
higher.  Government approval is required for all foreign films and 
programs shown on television. 
 
37. Professional Services: There is no formal national policy on 
liberalization of professional services.  In practice, many foreign 
doctors, nurses, engineers, architects, and accountants work in Sri 
Lanka.  Most of them are employed by foreign companies.  Unless the 
government has recognized a foreign national's professional 
qualifications, such professional cannot sign documents presented to 
government institutions or regulatory bodies. 
 
38. Professional Services (continued): The Immigration Department 
grants resident visas for foreign professionals whose services are 
required for projects approved by the government or by companies 
approved by the Board of Investment (BOI).  Non-BOI companies, such 
as banks, can also employ foreign staff; however, in practice the 
 
COLOMBO 00001121  007 OF 007 
 
 
Immigration Department has limited the number of resident visas to 
levels below those desired by companies. 
 
39. Legal Services: Any person, including foreigners, can provide 
legal consultancy services without being licensed to practice law in 
Sri Lanka.  Only Sri Lankan citizens can register in the Supreme 
Court and practice law (i.e., appear in courts) in Sri Lanka. 
 
INVESTMENT BARRIERS 
 
40. While Sri Lanka welcomes foreign investment, there are 
restrictions in a wide range of sectors.  Foreign investment is not 
permitted in the following areas: nonbank 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 reputable international brand names and 
franchises with an initial investment of not less than $150,000); 
coastal fishing; education of students under 14 years of age for 
local examinations; and local degree-awarding university education 
(institutions awarding overseas degrees are permitted). 
 
41. Investment in the following sectors is restricted and subject to 
screening and approval on a case-by-case basis when foreign equity 
exceeds 40 percent: shipping and travel agencies; freight 
forwarding; higher education; mass communications; deep sea fishing; 
timber-based industries using local timber; mining and primary 
processing of nonrenewable national resources; and growing and 
primary processing of tea, rubber, coconut, rice, cocoa, sugar, and 
spices. 
 
42. Foreign investment equity restrictions and government 
regulations also apply to air transportation, coastal shipping, 
lotteries, large-scale mechanized gem mining, and "sensitive" 
industries such as military hardware, illegal narcotics, and 
currency. 
 
43. The BOI offers a range of incentives to both local and foreign 
investors.  To qualify for BOI incentives, investors need to meet 
minimum investment and minimum export requirements.  In general, the 
treatment given to foreign investors is nondiscriminatory.  Even 
with incentives and BOI facilitation, however, foreign investors can 
face difficulties operating in Sri Lanka.  Problems range from 
difficulties in clearing equipment and supplies through customs to 
obtaining land for factories.  The BOI encourages investors to 
locate their factories in BOI-managed industrial processing zones to 
avoid land allocation problems.  Investors locating in industrial 
zones also get access to slightly better infrastructure facilities 
such as improved power reliability, telecommunications, and water 
supply. 
 
44. Information contained in this cable will also be provided to 
requesting offices as a Word document via email.  Questions should 
be directed to EconOff Ken Kero-Mentz at keroka@state.gov.