Following the practice of most countries, Sri Lanka also has a list of business activities which restrict foreign investment and require approval by other statutory agencies. The degree of restriction varies across different areas of investment.

A comparative study among other Asian countries shows that our list of restricted activities is relatively small. The government is committed to reducing this list further to broaden opportunities for foreign investors.

Foreign investment is not allowed in the following areas:

Money lending

Pawn broking

Retail trade with a capital investment of less than US $1 million. Retail trade in Franchise/Branded goods would require an investment of only US$ 150,000.

Personal services other than for export or tourism

Coastal fishing

Education of students who are citizens of Sri Lanka and not over 14 years of age
o Award of local educational degrees

 

Some activities are regulated by government agencies which evaluate foreign investment proposals before granting approval. BOI assists potential investors by referring applications to the appropriate agency and approval is usually straightforward. Some activities have limits on foreign investment in equity.

Activities regulated by government agencies include:

Banking*

Non-Deposit taking finance companies

Investment banking

Insurance*

Trading services on the Colombo Stock
Exchange**

International air transportation

Coastal shipping**

Sensitive industries such as military
hardware, dangerous drugs and currency

Energy and power suppty

Branches of foreign companies

Lotteries

Large scale mechanised mining of gems

Mining and primary processing of non-renewable natural resources

* Foreign investment permitted upto 49% of equity.

** Foreign investment permitted upto 40% of equity.

 

Fishing

Supply of water

Mass transportation

Telecommunications

Professional services

Freight forwarding

Travel agencies

Shipping agencies

Foreign investment is allowed with automatic approval up to 100 per cent of equity in all business activities other than those included in this section.

Other than investments in shipping agency services where automatic approval of foreign shareholding is limited to 40% foreign equity is permitted up to 490/0 by the BOI in the areas listed below. Foreign ownership in excess of 490/o will be approved on a case-by-case basis in a consultation with the relevant Ministry.

This list is currently being reviewed with the aim of further simplification.

Export production of goods subject to international quotas

Growing and primary processing of tea, rubber, coconut, rice, cocoa, sugar and spices

Timber based industries using local timber

Source: Board of Investment (BOI) , Sri Lanka