Saturday Feb 01, 2025
Saturday Feb 01, 2025
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| Board of Investment Chairman Arjuna Herath - Pic by Upul Abayasekara |
By Charumini de Silva
In a startling revelation, the Board of Investment (BOI) Chairman Arjuna Herath this week confirmed Sri Lanka has never achieved a $ 2 billion foreign direct investment (FDI) and has historically failed to achieve inflows equivalent to even 2% of the GDP.
Speaking at the final panel discussion of the Sri Lanka Economic Summit on Wednesday organised by the Ceylon Chamber of Commerce, he said the best the country has done was $ 1.7 billion recorded in 2018, which accounted for 1.8% of GDP at the time.
“Sri Lanka has never achieved a $ 2 billion FDI. The best we did was $ 1.7 billion in 2018. We have an exception in 2019 of $ 2.372 billion because of the conversion of debt at Hambantota port into equity. We also have never achieved a 2% of GDP, the $ 1.7 billion was only 1.8% of GDP,” he disclosed.
Noting that Sri Lanka’s economy might have expanded to about $ 84-85 billion in 2024, Herath implied that for the country to meet the commonly accepted benchmark of FDI inflows equalling at least 2% of GDP, it would need to attract at least $ 1.7 billion in FDI annually.
He explained that the struggle to attract consistent FDI is rooted in a lack of long-term strategic planning. “The key issue is that we have been opportunistic rather than strategic in how we approach FDIs,” he added.
Herath said the country has often focused on attracting individual investors or high-profile transactions, than building sustainable, long-term investment strategy.
“We have never positioned ourselves in a way that consistently attracts investors. FDIs have fluctuated widely, sometimes dropping to $ 600 million and sometimes to $ 1.1 billion — but we have never been able to achieve a sustainable level of FDIs into the country,” he stated.
With Sri Lanka under an IMF-backed economic reform program, he said incentives are not a journey that the BOI is going to travel through.
He pointed out that incentives alone are not the only solution and the country must look for alternatives. “We do not need to rely on incentives. Instead we must focus on creating an environment that naturally attracts investment. We cannot afford to wait for investors to come to us. We need to create conditions that make Sri Lanka an unavoidable choice for investment,” Herath stressed.
For Sri Lanka to become a compelling investment destination; Herath outlined three critical pillars — market access, supply chain stability, and skilled labour.
Stating that the domestic market of 22 million people is too small to be a primary draw for investors, he suggested that Sri Lanka must leverage trade agreements to broaden access to regional and global markets.
“One of the key priorities is expanding trade agreements,” he said, highlighting recent moves to activate the Sri Lanka-Thailand Free Trade Agreement (FTA), Sri Lanka-Singapore FTA and resume negotiation on the Economic and Technology Cooperation Agreement (ETCA) between Sri Lanka and India.
He opined that a major barrier to attracting FDI has been supply chain constraints, which have forced local companies to set up operations abroad. “Why are Sri Lankan coconut-based manufacturing firms moving to Indonesia? Why are the apparel sector companies moving to Kenya and the African continent? The simple answer is lack of reliable supply,” Herath said.
He said to address this, BOI is now working on industry-specific zones to improve backward integration. “We have set up a dedicated apparel and textile zone in Eravur and are looking to attract at least five major companies this year. Similarly, the pharmaceutical industry has been identified as a priority sector with the creation of a dedicated manufacturing zone,” he remarked.
Beyond market access and supply chain issues, he revealed there is shortage of skilled labour which also hindered investments.
“We lack talent in key industries like light engineering and technology. Investors have shown interest in setting up technical and vocational training institutions here and are actively pushing that,” the BOI Chief said.
He said the skills gap has even prevented the country from entering lucrative sectors such as solar panel manufacturing, despite its push for renewable energy. “The reason we do not manufacture solar panels locally is not just about infrastructure—it is about skills,” he admitted.
Although Sri Lanka’s location has long been touted as a major advantage, he said successive Governments have failed to convert this into a logistic and trade hub. However, he stressed that BOI is taking concrete steps to change this.
“The Sri Lanka Ports Authority (SLPA) has announced three logistics hubs within Colombo port with one investor already secured. Two more will follow,” he confirmed.
Additionally, he said the Government is prioritising public-private-partnerships (PPPs) to drive logistics infrastructure, including better rail and road connectivity between industrial zones and ports.
