By: Staff Writer
May 18, Colombo (LNW): In a renewed push to attract much-needed Foreign Direct Investment (FDI), Sri Lanka’s Board of Investment (BOI) Chairman Arjuna Herath this week led a strategic meeting with ambassadors and diplomatic representatives from Sri Lanka’s foreign missions.
The gathering, steered by BOI’s Director-General of Human Resources and Mission Development, Sumith Dissanayake, focused on aligning diplomatic efforts with the nation’s ambitious economic goals.
Herath emphasized the importance of targeted global marketing and smart incentive frameworks to position Sri Lanka as an appealing investment hub. He urged the ambassadors to leverage their international networks to promote opportunities and forge strategic partnerships that could revitalize the island’s economic landscape.
Despite these proactive steps, Sri Lanka’s journey to attracting $5 billion in FDI by 2025 is riddled with challenges. The nation’s investment climate has long suffered from policy inconsistency, political uncertainty, and economic volatility—factors that dampen investor sentiment. According to the U.S. Department of State, frequent changes in investment regulations, especially around election periods, contribute to a “wait-and-see” mindset among foreign investors.
Adding to investor hesitancy is the country’s limited infrastructure and reliance on foreign borrowing, which exposes the economy to external shocks. Inconsistent reserve levels and a complex regulatory environment further compound the problem.
The World Bank and other multilateral agencies have consistently highlighted the need for deep structural reforms to make Sri Lanka more investment-friendly, calling for better policy coherence, reduced red tape, and greater legal predictability.
Although Sri Lanka has historically attracted up to $2.37 billion in FDI, current inflows remain modest. Investment as a percentage of GDP stood at 22.9% as of September 2024. However, there have been bright spots.
Foreign portfolio investments saw a notable increase of $146 million during the same period, signaling investor interest—albeit in more liquid, short-term instruments rather than long-term development projects.
The government is aware of the stakes. With mounting fiscal pressures and the need for sustainable economic recovery, attracting FDI has become a top national priority. Reform agendas are being rolled out, but implementation remains slow due to bureaucratic inertia and political distractions, particularly in the lead-up to national elections.
Experts suggest that unless Sri Lanka can provide a stable, predictable, and investor-friendly climate—with clear legal frameworks and improved infrastructure—the $5 billion target may remain out of reach. The recent diplomatic outreach, while encouraging, must be matched by tangible policy action on the ground to transform intent into investment.
As Sri Lanka stands at a crossroads, the coming months will be critical in determining whether the nation can truly become a regional investment magnet—or miss yet another opportunity.
