Sri Lanka’s decision to centralize trade inspections under Sri Lanka Customs is being portrayed by policymakers as a necessary corrective to systemic weaknesses. But beneath the surface, the reassignment of powers from the Board of Investment raises broader questions about economic governance, institutional balance, and long-term competitiveness.
The government’s rationale rests on three pillars: fiscal accountability, legal consistency, and international obligations. A July 2025 assessment by the International Monetary Fund emphasized revenue mobilization as central to Sri Lanka’s recovery program. As part of that framework, authorities reportedly agreed to vest Customs with full control over goods entering and exiting special economic zones.
Officials argue that overlapping jurisdictions created grey areas ripe for abuse. Allegations of smuggling and the unlawful sale of duty-free inputs into the local market have fueled calls for tighter supervision. From a governance standpoint, consolidating inspection authority under a single statutory body could enhance transparency and reduce opportunities for regulatory arbitrage.
However, the broader economic calculus is more complex. The BOI’s operational model was designed not merely as a regulatory mechanism but as an investor facilitation service. By providing expedited clearance and on-site inspection within zones, it reduced transaction costs and signaled a pro-business environment. The shift to centralized Customs oversight alters that dynamic fundamentally.
Economists warn that reform must balance enforcement with facilitation. If Customs procedures prove slower or more cumbersome, the cost of compliance could rise for exporters already grappling with thin margins and volatile global demand. The apparel sector, heavily reliant on strict shipment deadlines, may be particularly vulnerable.
Infrastructure readiness is another pivotal factor. Customs will need robust digital integration, risk-based inspection systems, and expanded human resources to manage increased volumes. Without such enhancements, congestion at ports and free trade zones could ripple through the economy, affecting foreign exchange earnings and investor sentiment.
Supporters of the reform counter that credible enforcement strengthens investor confidence in the long term. Transparent, uniform procedures can reduce perceptions of favoritism and ensure a level playing field. Moreover, plugging revenue leakages bolsters public finances an essential prerequisite for macroeconomic stability.
The policy’s phased rollout, including a pilot at Katunayake, suggests authorities recognize the operational challenges ahead. The success of that trial period will likely shape investor perceptions and determine whether the transition becomes a model of institutional modernization or a cautionary tale.
Ultimately, the issue transcends administrative reshuffling. It touches on Sri Lanka’s strategic positioning in a competitive Asian manufacturing landscape. The outcome will depend not only on the intent behind the reform but on its execution whether it can harmonize fiscal discipline with the agility demanded by global trade.