PRATIKSHA KAPOOR ensembles a market overview of Sri Lanka after its return to relative political stability has precipitated a rise in overall economy.
Amulti-ethnic and multi-religious society, Sri Lanka is a developing mixed economy based largely on agriculture, services, and light industry and depends heavily on foreign assistance and remittances from workers abroad, primarily in the Middle East. China has become a significant lender for infrastructure projects.
The main ethnic groups are the Sinhalese (predominantly Buddhist) and Tamils (primarily Hindu), Muslims (also called the Sri Lankan Moors). Similarly, Malays and Chinese were also attracted to the island.
Sri Lanka is ranked 21st out of 42 countries in the Asia–Pacific region, and its score is just below the world and regional averages. Agriculture, apparel, and tourism are the main economic sectors.
Sri Lanka is Agriculture accounts for approximately 21 percent of the gross domestic product (GDP), Manufacturing industries account for approximately 19 percent. Chief manufactures include textiles, ceramics, petroleum products, vegetable oils, fertilizers, and cement. The service sector is the largest of the Sri Lanka economy, employing 45 percent of the workforce and contributing roughly 60 percent of GDP. Tourism, banking, finance, and retail trade are the major components of the service sector.
Sri Lanka carved a niche as an international centre for clothing manufacturing despite tough regional competition, with the high-value segment performing particularly well. At the apex body’s annual general meeting, SLAEA Chairman Saif Jafferjee said “With an eye on the target of reaching$8.5 b worth of clothing exports per annum by 2020, Sri Lanka’s apparel manufacturersare backing a national bid to regain preferential trade concessions from the EU.”
“Srilanka has set a target of US$ 10 billion by 2025 and continues to be a strong player not only in rural Sri Lanka but regionally and globally as well. He added that new innovations such as 3D printing, sewing robots and nanotechnology in the global arena could completely change the apparel sector business model, and said that the local industry should expand its efforts to create an ecosystem for such innovation and research.
Sri Lanka has a growing tourism industry. Though it has been off the map for too long for most travelers, since last few years its back with the vibrant colors, diverse cultures, and swaying palm trees of its tropical jewel along with tea plantations and rock fortresses. One of the joys of travel in Sri Lanka is the delicious, spice-rich food. Pigeon Island off Nilaveli beach offers crystal waters, shallow reefs, colourful fish, and is the best for snorkeling. Whales can be seen all along the Sri Lankan coast but Mirissa is the best base for seeing blue whales just a short distance from the shore. Since gaining independence from the British in 1947, Sri Lanka has continued to attract foreign investors and tourists to the island. But with the credit crunch in 2008, tourist figures have dropped as people have less money to spend and companies are unable to expand as rapidly. There are a number of issues that tourism businesses, need to overcome.
Foreign trade is an important segment of the Sri Lankan economy. Major imports include petroleum, consumables, machinery and capital equipment, motor vehicles, and various manufactured goods. Major exports include garments, tea, rubber, coconut products, foodstuffs, gems, and jewelry. Sri Lanka is the largest exporter of black tea in the world and the third largest producer of natural rubber.
Sri Lanka is committed to a free market ideology and has one of the most liberal foreign trade regimes in the world. The transition to a free market economy based on a liberalized trade and exchange rate regime has brought benefits to the Sri Lankan economy.
With no minimum capital required, launching a business takes nine procedures and less than a week. The cost of completing licensing requirements has been reduced, but it still takes more than five months on average.
Labor regulations are rigid, though enforcement can be lax. An extensive system of price controls and subsidies distorts most sectors of the economy.
POPULATION: 20.8 million
GDP (PPP): $136.0 billion
GROWTH: 7.3% growth 6.7% 5-year compound annual growth
FDI INFLOW: $915.6 million