By: Staff Writer
January 30, Colombo (LNW): Sri Lanka is implementing reforms to expedite foreign direct investment (FDI) approvals and reassess existing free trade agreements (FTAs) to stimulate economic growth.
While these measures aim to support economic recovery, experts stress the importance of proper safeguards, transparency, and strategic negotiations to maximize benefits while mitigating potential risks. Senior officials emphasize the urgency of completing these reforms swiftly to prevent delays and their repercussions.
In July 2022, the Ministry of Technology and Investment Promotion simplified the FDI approval process by reducing the application form from 14 pages to a single page and introducing a digital system that enables approvals within 24 hours, provided all requirements are met.
This initiative aims to eliminate bureaucratic hurdles and accelerate investment decisions.Building on these efforts, the government established a new agency in November 2022 to oversee investment promotion and external trade, consolidating functions previously handled by entities such as the Board of Investment (BOI), Export Development Board (EDB), and Sri Lanka Export Credit Insurance Corporation (SLECIC).
The objective is to streamline investment approvals within four to five days through a unified platform.
President Anura Kumara Dissanayake has directed a review of Sri Lanka’s existing FTAs with India, Pakistan, Singapore, and Thailand.
Additionally, the country is exploring membership in the Regional Comprehensive Economic Partnership (RCEP) and resuming negotiations with China to expand its FTA with India.
After a five-year pause, Sri Lanka and India resumed talks on the Economic and Technology Cooperation Agreement (ETCA) in October 2023.
The 12th round of discussions covered trade in goods and services, rules of origin, customs procedures, and other key areas, reflecting a shared commitment to enhancing economic ties.
To further improve the investment climate, President Dissanayake has announced that the BOI will reduce its average response time for investment applications from 80 days to just two weeks. Currently, investors require approvals from 82 state agencies, a process that takes over 2.5 years.
For instance, environmental approvals alone involve 11 agencies and take approximately 269 days. The government plans to cut this down to 82 days, while additional clearances from eight other agencies, which currently take 184 days, will be reduced to 102 days.
The government is also prioritizing a review of past FTAs before signing new agreements. Dissanayake emphasized the need to evaluate the effectiveness of the existing FTA with India and assess its benefits, challenges, and missed opportunities before proceeding with new trade deals.
These reforms are expected to attract investment, stimulate job creation, and improve investor confidence by reducing bureaucratic delays. Expanding FTAs could enhance trade opportunities, offering Sri Lanka better market access and stronger economic partnerships.
However, potential risks remain. Rapid investment approvals could result in inadequate scrutiny, leading to environmental and labor concerns. Poorly negotiated FTAs might increase imports of cheap foreign goods, negatively affecting local industries and worsening the trade deficit.
Furthermore, national security risks could arise if critical infrastructure falls under foreign control, and public backlash may emerge if citizens perceive that these policies favor foreign investors over local businesses.
Overall, Sri Lanka’s efforts to expedite FDI and review trade agreements are crucial for economic recovery. However, careful planning and execution are essential to ensure sustainable and inclusive growth.
