By: Staff Writer
August 02, Colombo (LNW): The Government has unveiled an ambitious strategy to transform Sri Lanka into a regional digital economy powerhouse, but beneath the optimism surrounding its target of generating US$5 billion in digital exports by 2030 lies a more difficult question: can a series of long-promised reforms finally remove the structural barriers that have held the country’s technology sector back for years?
At a national validation workshop on Sri Lanka’s proposed Digital Export Roadmap, Digital Economy Deputy Minister Eng. Eranga Weeraratne and GovTech Sri Lanka Chairman and Presidential Chief Adviser on Digital Economy Dr. Hans Wijayasuriya outlined an extensive package of reforms that would reshape the country’s investment, taxation and regulatory framework. While the announcements signal the Government’s strongest commitment yet to the digital economy, they also highlight how much remains to be done before Sri Lanka can compete with regional technology hubs.
Among the most significant proposals is the establishment of a Government-backed Fund of Funds, expected to be presented to Cabinet within weeks. The initiative aims to strengthen venture capital financing by attracting greater private investment into Sri Lankan startups, an area where entrepreneurs have long complained of limited access to growth capital.
However, financing is only one part of the equation. Officials acknowledged that outdated tax rules have discouraged venture capital investment by creating tax pass-through complications that reduce investor confidence. Dr. Wijayasuriya confirmed that these tax distortions are now being addressed, signalling official recognition that previous policies have made Sri Lanka less attractive than competing jurisdictions.
Equally significant are proposed changes to capital mobility regulations. Under current arrangements, startups receiving foreign investment often face restrictions when deploying those funds overseas to expand into international markets. The proposed reforms would remove those obstacles, allowing Sri Lankan companies to grow globally while retaining their headquarters at home.
That objective reflects another longstanding concern within the technology industry—the steady migration of promising startups to jurisdictions offering more business-friendly regulatory environments. According to Dr. Wijayasuriya, the Government is attempting to tackle the root causes of that trend by creating conditions that encourage companies to establish and retain their headquarters in Sri Lanka rather than relocating abroad.
The Government is also exploring a virtual Special Economic Zone tailored specifically for technology firms. Drawing inspiration from successful models in the United Arab Emirates and Eastern Europe, the proposed framework would allow companies to incorporate and operate virtually with fewer administrative hurdles, reducing compliance costs and accelerating business growth.
Another reform targets public procurement, an area frequently criticised by local technology firms. Existing procurement systems often favour large, established suppliers while smaller innovators struggle to compete. Officials now propose more agile procurement processes that would allow Government institutions to purchase digital solutions from domestic startups, effectively positioning the public sector as an early customer capable of nurturing local innovation.
The broader roadmap also includes incentives for research, intellectual property development and artificial intelligence through the establishment of an Applied AI Institution and an AI Centre of Excellence. Together, these initiatives are intended to create an innovation ecosystem capable of producing globally competitive digital products and services.