By: Staff Writer
January 29, Colombo (LNW): Board of Investment (BOI) Chairman Arjuna Herath’s latest remarks mark a notable departure from the institution’s traditional investment narrative, signalling a strategic recalibration shaped by Sri Lanka’s constrained fiscal reality.
Speaking at the Nations Trust Bank Investment Forum, Herath argued that Sri Lanka cannot compete with regional peers through aggressive tax holidays and fiscal concessions, instead calling for competitiveness built on lower costs, policy certainty and institutional efficiency. This framing contrasts sharply with earlier BOI messaging, which placed incentives—both fiscal and regulatory at the centre of its investment attraction strategy.
Historically, the BOI positioned itself as a gatekeeper of concessions. Instruments such as tax holidays, duty waivers and bespoke exemptions under the Strategic Development Project (SDP) Act were promoted as essential tools to offset Sri Lanka’s structural weaknesses. Herath himself has previously acknowledged the role of incentive frameworks in attracting flagship investments, even while defending their discretionary use as “necessary flexibility.”
In his latest remarks, however, Herath openly conceded that the SDP Act lacked consistency and was applied arbitrarily an unusually candid admission from the head of an institution long criticised for opacity. The shift suggests an effort to distance the BOI from a model increasingly viewed as unsustainable and vulnerable to policy reversals.
The contradiction is further underscored by the BOI’s announcement this week that Sri Lanka crossed the $1 billion FDI mark in 2025. While the figure is framed as evidence of recovery and institutional reform, Herath simultaneously warned that inflows remain far below what is required for sustained growth. This dual messaging celebration paired with caution highlights the tension between optics and economic reality.
Data from the Lanka Impact Investing Network sharpens that contrast. Sri Lanka’s investment needs far exceed current inflows, with annual requirements of up to $10 billion to meet development goals, alongside major gaps in infrastructure, climate finance and women-led enterprises. Against this backdrop, the BOI’s achievement appears less a breakthrough and more a baseline.
Another shift lies in Herath’s renewed emphasis on cost competitiveness, particularly energy pricing. Previously, power tariffs were treated as a long-term structural issue beyond the BOI’s remit. Now, Herath is explicitly linking tariff reductions supported by cheaper renewables to the investment case, signalling a broader, cross-ministerial approach.
Yet the pivot is not without risk. While policy certainty and legal protections are repeatedly promised through a proposed Investment Protection Act and a review of the Economic Transformation Act Sri Lanka’s recent history is littered with abrupt reversals. Investors may view the new rhetoric with caution until reforms are enacted, not merely announced.
Ultimately, Herath’s latest statements suggest a BOI attempting to reinvent itself: from concession broker to investment facilitator. Whether this shift reflects genuine institutional transformation or a rhetorical adjustment to fiscal constraints remains an open question.
