Sri Lanka’s FDI Challenges: Policy Stability Key to Unlocking Big-Ticket Investments, Says Standard Chartered CEO Bingumal Thewarathanthri

• Says small-scale FDI pipeline looks promising, but the country needs big-ticket $ 400-500 m deals for real impact
• Opines frequent policy changes deter long-term investors and hinder FDI growth
• State policy stability is essential to improve ease of doing business ranking and boost FDIs
• Asserts stable investment laws, land regulations and tax structures are crucial for investor confidence 
• Claims successive governments focused too much on the development of the framework for Colombo Port City instead of investor appeal 

Sri Lanka’s foreign direct investment (FDI) landscape continues to face a significant shortfall in large-scale investments, despite encouraging small-ticket inflows, according to Standard Chartered Sri Lanka CEO, Bingumal Thewarathanthri. Speaking at the bank’s Annual Global Research Briefing, he noted that while the country has attracted a pipeline of smaller FDIs averaging around $20 million—often led by local investors—the economy urgently needs transformative deals in the $400–500 million range to drive substantial growth.

Weak Big-Ticket FDI: A Persistent Challenge

Thewarathanthri highlighted that Sri Lanka’s FDI inflows over the past two decades had totalled approximately $20 billion, with only a few major deals standing out. These include the $1 billion Hambantota Port investment in 2017 and the Shangri-La Colombo project in 2012, during which Sri Lanka’s Ease of Doing Business (EoDB) ranking improved to 83. However, such large-scale projects remain rare. According to Central Bank of Sri Lanka (CBSL) data, FDI inflows in 2023 stagnated at modest levels, reflecting investor caution amid ongoing economic uncertainties.

Policy Instability Deters Long-Term Investors

A recurring theme in Thewarathanthri’s analysis was Sri Lanka’s lack of policy consistency. He noted that frequent changes to investment laws, land regulations, and tax structures—often aligned with political cycles—have eroded investor confidence. “Policy stability is essential to improve Sri Lanka’s Ease of Doing Business ranking, which has lagged in recent years,” he stressed. CBSL reports have similarly underscored the need for structural reforms to enhance Sri Lanka’s investment climate, aligning with global best practices.

Learning from Vietnam’s Success

Drawing parallels with Vietnam, which has attracted record FDI through decades of policy predictability, Thewarathanthri argued that Sri Lanka’s ad hoc regulatory shifts have left investors skeptical. Vietnam’s FDI-driven growth model, built on stable frameworks, contrasts sharply with Sri Lanka’s struggles to retain long-term commitments.

Infrastructure and Land Accessibility Hurdles

Beyond policy, Thewarathanthri identified land accessibility, capital availability, and infrastructure readiness as persistent barriers. He criticized successive governments for prioritizing the framework of projects like Colombo Port City over tangible investor incentives. “Years were spent developing Port City’s legal structure, but its appeal to investors remains under-realized,” he said, pointing to delays in operationalizing the project.

The Path Forward: Stability and Strategic Focus

The CEO urged Sri Lanka to adopt a long-term economic policy framework insulated from election cycles. “Short-term shifts deter the big-ticket FDIs needed for sustainable growth,” he asserted. CBSL’s recent emphasis on improving investor-friendly reforms—such as simplifying business registration and enhancing transparency—echoes this call for stability.

Conclusion

Sri Lanka’s FDI trajectory hinges on addressing systemic challenges. While small-scale investments signal cautious optimism, attracting transformative projects requires policy coherence, infrastructure upgrades, and a focus on investor needs over bureaucratic frameworks. As Thewarathanthri concluded, “Once stability is achieved, everything else will follow.” For a nation navigating post-crisis recovery, the message is clear: consistency is not just a goal—it’s an economic imperative.

References: Central Bank of Sri Lanka (www.cbsl.lk) reports on FDI trends, Ease of Doing Business reforms, and Colombo Port City development.

By Admin, Niroshana De Silva. You can reach him on prminds@gmail.com