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U.S. Department of State 
Sri Lanka Country Commercial Guide 
Office of the Coordinator for Business Affairs 
 
 
 
                    Sri Lanka Commercial Guide - 1995 
 
 
Chapter I     Executive Summary 
Chapter II    Economic Trends and Outlook 
Chapter III   Political Environment 
Chapter IV    Marketing U.S. Products and Services 
Chapter V     Leading Sectors for U.S. Exports and Investment 
Chapter VI    Trade Regulations and Standards 
Chapter VII   Investment Climate 
Chapter VIII  Trade and Project Financing 
Chapter IX    Business Travel 
Appendices 
Appendix A    Country Data 
Appendix B    Domestic Economy 
Appendix C    Trade 
Appendix D    Investment Statistics 
Appendix E    U.S. and Country Contacts 
Appendix F    Market Research 
Appendix G    Trade Event Schedule 
 
 
Chapter I 
 
Executive Summary 
 
The Sri Lankan economy grew by a respectable 5.6 percent in 1994.  
However, the prospects for 1995 are clouded by the ongoing conflict 
between government forces and Tamil rebels, and by lingering doubts 
about the government's management of the economy.  Dilapidated and 
inadequate infrastructure is another long-term constraint on growth.  
The state-owned sector of the economy is large, although the government 
has ambitious plans to privatize many parastatal companies in 1995 and 
1996. The private manufacturing sector has been the engine of economic 
growth for many years, registering growth of 11 percent in 1994. 
 
Sri Lanka has made major strides since the early 1980s in creating a 
favorable environment for the private sector.  Private property 
(including intellectual property) is protected, the banking system is 
increasingly sophisticated, commercial and company law is codified, and 
there are no restrictions on the expeditious remitting of profits.  The 
government actively encourages foreign investment by offering 
preferential tariff and tax treatment to investors in key industries, 
e.g., nontraditional export industries.  The government also supports 
private infrastructure, particularly through build-own-operate (BOO) and 
build-own-transfer (BOT) schemes.  However, lengthy and not-fully-
transparent tender procedures have delayed implementation of BOO/BOT 
projects. 
 
The U.S. is Sri Lanka's largest trading partner, with the trade balance 
heavily in Sri Lanka's favor.  Exports to the U.S. totaled $1,115 
million in 1994, of which garments were more than 75 percent.  Imports 
were $197 million, almost half of which was wheat.  More than 200 U.S. 
companies are represented in Sri Lanka, and business links with the U.S. 
continue to increase.  Leading trade prospects for U.S. exporters and 
investors include telecommunications, medical equipment, computers and 
information technology, power generation, and agricultural and food 
products. 
 
While it is easier to trade and invest in Sri Lanka than in many other 
developing countries, roadblocks to doing business do exist.  These 
include delays in government tendering, high import tariffs, poor 
infrastructure, and concerns about the ethnic insurgency.  Judicial 
redress in trade disputes can also be slow. 
 
Country commercial guides are available on the National Trade Data Bank 
on CD-ROM or through the Internet.  Please contact STAT-USA at 1-800-
STAT-USA for more information.  To locate CCGS via Internet, please use 
the following world wide wed address: WWW.STAT-USA.GOV.  CCGS can be 
ordered in hard copy or in diskette from the National Technical 
Information Service (NTIS) at 1-800-553-NTIS. 
 
 
Chapter II 
 
Economic Trends And Outlook 
 
Major Trends and Outlook 
 
The Sri Lankan economy grew 5.6 percent in 1994, down from 6.9 percent 
in 1993.  Growth is being driven by the private sector, thanks largely 
to reforms undertaken since 1987 and a burgeoning export industry.  
However, the outlook for 1995 is not quite as good as the last two 
years.  Although the government is predicting growth of 6 percent, many 
private economists are less optimistic and expect growth of around 4.5 
to 5.5 percent. 
 
Ethnic conflict has plagued Sri Lanka since 1983.  Peace talks between 
the government and Tamil insurgents broke down in April 1995, resulting 
in renewed civil conflict.  Military activity remains largely limited to 
the north and east, although assassinations of political and military 
leaders and terrorist bombings have brought the war to the south as 
well.  The impact of the war is muted in the major industrial and urban 
areas, and the conflict has not prevented heavy inflows of foreign 
investment in recent years. 
 
The government's hesitancy in the face of violent strikes at the end of 
1994, and its limited implementation of pro-business policy statements, 
have clouded the future economic outlook.  New foreign direct investment 
in the first half of 1995 has been subdued.  New domestic construction 
contracts are drying up, and previously planned projects are being 
scaled back. 
 
To its credit, the government (which came to power in elections in the 
last half of 1994) plans to continue the privatization of inefficient 
public enterprises.  It also has made strong statements against labor 
violence, which has largely subsided, and has adopted a tighter budget 
to contain an unexpectedly large deficit inherited from the previous 
government.  Foreign firms are being sought out to address the country's 
industrial and infrastructure needs, and the underlying strength of the 
private sector bodes well in the medium to longer term. 
 
Major Sectors 
 
The economy grew by 5.6 per cent in 1994, underpinned by 9.1 percent 
manufacturing  growth.  The agricultural sector, which accounts for 20.4 
percent of GDP, grew by 3.3 percent.  The services sector, which 
accounts for 50 percent of GDP, grew by 5.2 percent. 
 
The following table presents percentage changes in real sectoral output 
over the preceding year: 
 
Sector                       1993              1994 
 
Agriculture, forestry 
and fishing                  4.9                 3      .3 
Mining and quarrying        11.9                 6      .0 
Manufacturing               10.5                 9      .1 
Construction                 6.5                 6      .0 
Services                     6.3                 5      .2 
GDP                          6.9                 5      .6 
 
Agriculture:  Rice, tea and coconut production reached record levels in 
1994.  Production of rice, Sri Lanka's staple cereal, increased by 4.7 
percent to 2.68 million metric tons.  Tea production at 242 million kgs 
was also the highest on record and grew by 4.4 percent.  Sri Lanka 
maintained her position as the world's largest tea exporter.  Favorable 
weather, improved management under private management companies, and 
lagged effects of increased fertilizer use in 1993 helped boost tea 
production.  However, the government-owned plantations are still largely 
unprofitable.  Coconut production increased by 21 percent, largely due 
to favorable weather. 
 
Industry:  Industrial output, which grew by 14 percent in 1993, recorded 
a slower growth of 9 percent in 1994. In line with the trend of the past 
several years, all of this growth came from the private sector.  Public 
sector industry, which accounts for a ninth of total industrial 
production, recorded a decline of 5 percent.  The textiles and garments 
sector, which grew by 31 percent in 1992 and 17 percent in 1993, grew by 
only 6 percent in 1994.  Expansion in industrial output was fairly 
broad-based as shown by the following table: 
 
Industrial sector             Growth rate 
 
Basic metal                       33 percent 
Wood                              16 percent 
Paper                             14 percent 
Fabricated metal                  14 percent 
Non metallic minerals             13 percent 
Chemicals, petroleum, rubber, 
 and plastics                     11 percent 
Food, beverages and tobacco        8 percent 
 
 
Services:  The service sector, which accounts for one half of GDP, 
recorded a 5.2 percent increase in 1994.  The financial sector was 
particularly robust, growing by 9.5 percent.  Public utilities grew by 
9.9 percent.  Wholesale and retail trade was up 6.4 percent, primarily 
due to the expansion in import and export trade.  Tourist arrivals 
increased by 3.9 percent to  407,500, the highest ever. 
 
Government Role in the Economy 
 
Sri Lanka has made major strides since the early 1980s in creating a 
favorable environment for the private sector.  The government has 
deregulated most sectors, eliminated most price controls and quotas, 
liberalized the issuance of import licenses, terminated export taxes, 
and privatized many state-owned companies.  It actively promotes inward 
foreign investment in most fields.  Sri Lanka attained full current 
account convertibility in March 1994, when it accepted the obligations 
under Article VIII of the IMF Articles of Agreement. 
 
Although there is a thriving private sector, government still remains a 
significant economic factor.  All infrastructure (ports, roads, phones, 
rail and electricity) is owned by the government, as are the two largest 
commercial banks, a large insurance company, the national airline, the 
shipping line, and many other companies.  The government still controls 
the price of bread, petroleum, and electricity.  In addition, bread, 
wheat flour, and fertilizer are heavily subsidized.  Although the 
government has stressed the importance of transparency and 
accountability in government operations, government procedures, 
especially with regard to tenders for major projects and supplies, are 
still obscure, and lengthy delays are common. 
 
The public sector employs almost a quarter of the total work force.  In 
1994 public sector employment, which includes government and semi-
government sectors, increased by 2 percent to 1.32 million workers.  
Government sector employment increased by 3.5 percent due to the 
recruitment of doctors, nurses and clerical workers.  In the semi-
government sector, which includes public sector corporations and state 
banks, employment rose a marginal 1 percent. 
 
Budgetary performance:  Unplanned spending increases and tax exemptions 
granted by the former government on the eve of two major national 
elections caused the budget deficit to explode to 10 percent of GDP in 
1994, well over the 6.8 percent target. 
 
The 1995 budget is designed to redress the significant policy slippages 
which occurred in 1994.  The centerpiece of the budget is the reduction 
of the fiscal deficit to 7.5 percent of GDP.  In nominal terms, revenue 
is to be raised 26 percent while current expenditure growth is to be 
contained at 5 percent.  Most government-owned manufacturing and trading 
enterprises are earmarked for privatization.  Plantations are to be 
privatized as well, and private infrastructure is to be promoted.  Major 
structural reforms in the 1995 budget include a tariff reform program 
which lowers the highest nominal tariff band from 45 percent to 35 
percent.  The turnover tax system will be replaced with the less 
distortionary value-added tax (VAT) system. 
 
The following table presents government fiscal operations as a 
percentage of GDP.  1994 figures are provisional and 1995 figures are 
projections: 
 
Government Accounts 
 
                              1993               1994               1995 
 
Revenue                       19.7               19.0               20.8 
Expenditure and net lending   28.1               29.0               28.3 
Defense                        4.2                4.4                4.4 
Deficit before grants          8.4               10.0                7.5 
Domestic Finance(net)          4.9                6.5                3.4 
Foreign grants and loans       3.6                3.4                4.2 
 
Balance of Payments 
 
The current account deficit nearly doubled in 1994, growing to $767 
million from the 1993 figure of $386 million.  The trade deficit 
expanded by 37 percent to $1,571 million.  The services balance was 
positive, but smaller than in 1993.  Private remittances, mainly from 
Sri Lankan workers in the middle east, rose, causing the transfer 
account surplus to increase by 9 percent to $790 million.  Net capital 
account inflows were up 14.6 percent, thanks entirely to increased 
private borrowings. Disturbingly, direct foreign investment declined by 
16 percent to $158 million in 1994.  Portfolio investment dropped 
substantially by 60 percent to $27 million.  Net private inflows of loan 
funds, however, increased considerably from $330 million in 1993 to $578 
million in 1994.  Net credit to the government dropped by 20 percent to 
$406 million.  Gross external assets increased by 23 percent to $2,614 
million at end of 1994.  External assets were sufficient to finance 5.5 
months of merchandise imports projected for 1995. 
 
Merchandise exports increased by 12 percent in 1994, down from 16.4 
percent in 1993.  Growth in industrial exports slowed to 13.5 percent 
from 18.0 percent in 1993.  Industrial exports accounted for 73.6 
percent of total exports.  Garment exports at $1.5 billion accounted for 
almost half of gross export earnings, and recorded a growth of 9.8 
percent.  Following last year's trend, other non-textile exports grew by 
a strong 21 percent.  Earnings from agricultural exports increased by 7 
percent, due in large part to favorable weather. 
 
Rising demand caused the import bill to rise by 19.1 percent in 1994, 
compared with an increase of 14.5 percent in 1993.  Eighty percent of 
the increase in imports was for intermediate and capital goods, and only 
20 percent for consumption goods. Investment goods recorded the 
strongest growth (30 percent) to $1,366 million.  Two airbus planes 
costing $228 million were included in this category.  Excluding this 
extraordinary item investment goods reflect a more modest 19 percent 
increase. Overall, intermediate goods grew by 14 percent.  Textiles 
remained the largest single import item, growing by 20 percent and 
accounting for nearly 22 percent of total imports. Fertilizer & chemical 
imports increased by 22 percent and 11 percent respectively.  Consumer 
goods increased by 16 percent. The food import bill rose 10 percent.  In 
the non-food consumer goods category, high growth rates were recorded 
for motor cars and motor bikes, pharmaceuticals, and radio receivers and 
televisions. 
 
The following table presents major imports and exports for 1994, in 
millions of dollars. 
 
1994 Exports                                     1994 Imports 
 
Textiles and apparel   1550                  Textiles             1038 
Tea                     424                  Machinery and equip.  559 
Minor Agricul. prod.    129                  Transport equipment   454 
Petroleum                80                  Petroleum             296 
Gems                     79                  Building material     241 
Coconut                  76                  Sugar                 180 
Rubber                   72                  Chemicals             121 
Other                   798                  Other                1887 
 
Total                  3208                  Total                4776 
 
The United States and Japan are Sri Lanka's largest market and supplier 
respectively.  In 1994, the United States was the destination for 35 
percent of Sri Lanka's exports, most of them garments.  Imports from 
Japan increased by 16 percent to $527 million.  However, her share of 
the Sri Lankan market eroded slightly from 11.3 percent to 11.0 percent.  
India maintained her position as the second largest supplier accounting 
for 8.5 percent of the Sri Lankan market.  Other leading suppliers were 
Hong Kong, South Korea, Taiwan, United Kingdom and Singapore. 
 
Imports from the U.S. were $197 million.  Wheat at $84 million accounted 
for 44 percent of these imports.  Exclusive of wheat, imports from the 
U.S. were up a strong 18 percent. Machinery ($22 million), electrical 
machinery and equipment ($27 million), textile products($23 million) and  
aircraft parts ($10 million) constituted the bulk of these imports. 
 
The year 1994 was a good year for tourism.  Tourist arrivals increased 4 
percent to 407,500, the highest ever, surpassing for the first time the 
peak level achieved in 1982 before the onset of the ethnic conflict. 
 
In 1994, Sri Lanka received over $500 million in foreign assistance, 
equivalent to approximately 4.5 percent of GDP. Japan ($182 million), 
the Asian Development Bank ($87 million), the World Bank ($71 million), 
and the U.S. ($70 million) were the largest sources of assistance.  
Donors have pledged about $850 million in 1995. 
 
Debt service payments recorded a 7 percent increase from $500 million to 
$533 million.  Much of this increase was due to larger interest 
payments.  As exports and service receipts grew the debt service ratio 
dropped further from 13.8 percent in 1993 to 13 percent in 1994.  When 
private transfers are factored in, the debt service ratio declined 
further to 11 percent.  Sri Lanka's national external debt (private and 
public) at end of 1994 was estimated at $8,883 million. 
 
The rupee depreciated marginally by 0.8 percent against the U.S. dollar 
in 1994.  The rupee depreciated at a higher rate against other major 
currencies.  The real exchange rate depreciated by 3.2 percent. 
 
Infrastructure 
 
There is a great need to improve infrastructure, particularly roads, 
telecommunications and power.  The government supports private 
infrastructure, particularly through build-own-operate(BOO) and build-
own-transfer(BOT) schemes. 
 
Sri Lanka is served by one international airport located near Colombo 
and three commercial ports, the largest and most commonly used being the 
port of Colombo.  A new fully equipped container berth added to the 
Colombo port early this year is expected to improve port facilities.  
The government is seeking to develop the southern port of Galle as well.  
Road transportation accounts for 80 percent of inland transportation.  
The road network is old and poorly maintained. 
Sri Lanka's total installed electricity capacity of 1386 megawatts(MW) 
consists of 1136 MW of hydropower and 250 MW of thermal power.  
Electricity demand is growing at around 10 percent a year.  As no new 
generation capacity has been added in the past five years, there are 
concerns of power shortages as early as 1996, particularly in the event 
of drought.  Sri Lanka hopes to add 220 MW in hydro power and 560 MW in 
thermal power between now and 2001. 
 
Telecommunication services have been expanded and modernized recently by 
replacing outdated equipment with digital switching systems and fibre 
optic and microwave cable systems.  Despite these improvements basic 
telecommunication services are inadequate to meet the rising demand.  
Presently, demand for new telephone lines is over 200,000, which is high 
compared to the present capacity of 183,000 subscribers.  Ongoing 
projects will add 85,000 lines by end of 1995.  Demand in the next five 
years is estimated to be over 600,000. 
 
 
Chapter III 
 
Political Environment 
 
 
Nature of the Bilateral Relationship with the United States 
 
The U.S. and Sri Lanka enjoy a friendly relationship.  The Government of 
Sri Lanka is currently fighting Liberation Tigers of Tamil Eelam (LTTE) 
insurgents, who seek to create a separate state in the North and East 
provinces.  The U.S. Government supports the territorial integrity of 
Sri Lanka and has called for a peaceful resolution of the conflict which 
protects the interests and dignity of all communities.  In that vein, 
the U.S. welcomed the considerable efforts of the Government of Sri 
Lanka, beginning in October, 1994, to engage the LTTE in negotiation of 
a political settlement to the conflict.  Equally, the U.S. Government 
has condemned the decision of the LTTE to break off talks in April, 
1995, and resume its efforts to advance its political agenda through 
force of arms and terrorist tactics. 
 
Major Political Issues Affecting the Business Climate 
 
The most serious issue affecting the investment climate is the 
insurgency.  This insurgency has its roots in long-standing ethnic 
tensions between the majority Sinhalese (70 percent) and minority Tamil 
(18 percent) communities, and has brought direct armed conflict to the 
island's northern and eastern provinces and has led to terrorist attacks 
in the south.  The increased tempo of military activity means that non-
defense spending will be further constrained in 1995.  Increases in the 
government's defense levy may also have an impact on the overall 
business climate. 
 
Political System, Schedule for Elections and Orientation of Major 
Political Parties 
 
Sri Lanka has been a functioning democracy since gaining independence in 
1948.  It has a strong executive presidency and a unicameral parliament.  
Legislative drafting is generally handled by the executive.  However, 
constitutional reform packages under active consideration could lead to 
broader powers for parliament and the prime minister.  Power in almost 
all spheres of public life rests with the center, but proposals to 
devolve considerable power to smaller units of regional or local 
government are also under review. 
 
Local government elections may be held late in 1995, but no firm date 
has been set and the polls may be deferred. 
 
The Sri Lanka Freedom Party (SLFP) is the dominant partner in the 
governing People's Alliance (PA) coalition which came to power through 
parliamentary and presidential elections in late 1994.  The SLFP has 
moved away from its socialist roots and now endorses free-market 
policies and a strong private sector.  It  pursues a vigorous non-
aligned foreign policy, emphasizing Sri Lanka's relations with India and 
southeast asian neighbors, while also maintaining strong trade relations 
with the West. 
 
The United National Party (UNP) is the leading opposition party. During 
its seventeen years in office, the UNP was a strong advocate of an open 
economy and was instrumental in building closer economic relations with 
the West.  Like the SLFP, the UNP remained non-aligned diplomatically. 
 
Chapter IV 
 
Marketing U.S. Products And Services 
 
Distribution and Sales Channels 
 
International trade is centered in Colombo, with more than 90 percent of 
all imports and exports passing through the Port of Colombo.  While 
there are many medium to small importers, 20 to 30 relatively large 
firms handle the bulk of the international traffic.  Only a few 
importers have branches or distribution networks elsewhere in the 
country;  most simply wholesale direct to regional distributors or to 
retailers.  The government's role in trade and distribution is minimal, 
except in the case of the food sector.  Inland transport is dominated by 
independent truckers. 
 
Use of Agents/Distributors; Finding a Partner 
 
Most foreign firms select their local agents on the basis of financial 
stability.  Sales on a commission basis are common.  As the largest 
trading houses represent many foreign principals, medium and smaller 
firms often make better representatives.  If products require stocking 
or servicing, however, large firms are better.  Commissions paid to 
agents range from 5 percent to 20 percent depending on sales volume and 
the product price.  Agency relationships can be terminated for 
inefficiency, misappropriation, or incapacity to fulfill contractual 
obligations. 
 
Franchising 
 
Franchising is not as common as agent/distributorships.  The few U.S. 
franchises include Coca-Cola, Pepsi, and Pizza Hut. 
 
Direct Marketing 
 
Direct marketing usually takes place when the product is sold on a one-
time or irregular basis.  Recruiting an agent is crucial to winning 
government tenders. 
 
Joint Ventures/Licensing 
 
Joint ventures have become popular in recent years, particularly in 
export-oriented projects.  Joint ventures are eligible for the same 
preferences and tax benefits as domestic companies.  There are no 
restrictions on foreign ownership, except for certain specified sectors. 
 
Steps to Establishing an Office 
 
A foreign company may transact business in Sri Lanka through a branch or 
a representative office.  Before it can establish and transact business, 
the branch must be registered as a foreign company under Sri Lanka's 
Companies Act.  The Registrar of Companies is the authority.  The branch 
must file the statutory company documents (annual accounts, returns to 
be filed) as well as copies of accounting statements compiled under the 
company's country of origin.  There is also legal provision for a 
company to be registered as an off-shore company, in order to carry on 
business outside Sri Lanka. 
 
Advertising and Trade Promotion 
 
Advertising is becoming increasingly important as new TV channels and 
radio stations are opened.  Newspapers, radio and television all accept 
commercial advertising.  There are several English language newspapers, 
as well as dailies in Sinhala and Tamil.  Both the state and the private 
sector run radio and TV stations.  Trade exhibitions and fairs are 
limited. 
 
Major Newspapers 
 
English: Daily News, The Island, Sunday Observer, Sunday Island, Sunday 
Times, Sunday Leader 
Sinhala: Dinamina, Silumina, Divayina, Lankadeepa 
Tamil: Thinakaran, Virakesari 
 
Selling to the Government 
 
Most government purchases are made by public tenders, which are usually 
advertised in the local media.  Tender procedures are not-fully-
transparent and delays are common.  Local agents are often the key to 
winning these tenders. 
 
Protecting Your Product from IPR Infringement 
 
All trademarks, designs, and patents must be registered with the 
Registry of Patents and Trademarks.  Sri Lanka has signed a bilateral 
agreement with the U.S. to protect intellectual property rights and is a 
signatory to the Paris and Berne Conventions.  Registered trademarks are 
valid for 10 years, patents for 15 years, and industrial designs for 5 
years. 
 
Need for a Local Attorney 
 
The Embassy's Consular section maintains a list of attorneys in Sri 
Lanka, a copy of which may be obtained on request. 
 
 
Chapter V 
 
Leading Sectors For U.S. Exports And Investment 
 
 
Best Prospects for Agricultural Products 
 
Sri Lanka has been an excellent, consistent market for U.S wheat.  
Exports were $84 million in 1994.  With a combination of sizable PL-480 
and EEP programs, the U.S. supplied 99 percent of Sri Lanka's wheat in 
1994.  Continuity of PL-480 and EEP programs are crucial to maintain the 
U.S. market share.  The fresh fruit and frozen food markets in Sri Lanka 
have developed in recent years to around 2 million dollars, opening 
avenues for U.S. suppliers.  Australia is America's major competitor in 
food products. 
 
Best Prospects for Non Agricultural Products 
 
(a) Telecommunications Equipment 
Rank of sector: 1 
Name of sector: Telecommunications equipment 
ITA industry code: TEL 
 
                            1994               1995            1996 
                                                         (in $ millions) 
Total market size             29                 40              58 
Local Production               0                  0               0 
Total Exports                  0                  0               0 
Total Imports                 29                 40              58 
Imports from the U.S.          2                 NA              NA 
 
Note: The above statistics are unofficial estimates 
 
The Government of Sri Lanka (GSL) is in the process of expanding its 
telecommunications network.  The country is expected to have at least 
340,000 telephone lines by the end of 1996 (from the current 183,000).  
In the last three years  U.S. companies have sold major earth satellite 
stations and international switches to Sri Lanka Telecom.  As the 
network expands, business and consumer interest in related 
telecommunications equipment, including more sophisticated information 
and data transfer technology, is increasing.  Japan, U.K., Malaysia, 
Germany, South Korea, Finland, and France are America's main competitors 
in this market. 
 
(b) Medical Equipment 
Rank of sector: 2 
Name of sector: Medical equipment 
ITA industry code: MED 
 
                            1994              1995              1996 
                                                         (in $ millions) 
 
Total market size             40                44                 0 
Local Production               0                 0                 0 
Total Exports                  0                 0                 0 
Total Imports                 40                44                 48 
Imports from the U.S.          2                NA                 NA 
 
Note: The above statistics are unofficial estimates 
 
Sri Lanka is dependent on imports for all of its requirements of medical 
equipment.  The medical equipment market in Sri Lanka is estimated to be 
around $40 million a year.  Private hospitals are doing well and 
expanding.  There are plans to build two large hospitals with foreign 
collaboration.  Diagnostic equipment, operating theater equipment, 
intensive-care equipment, and clinical analyzers and hematology 
equipment offer the best sales prospects for U.S. firms.  U.S. share in 
the market is limited to around 5 percent currently. 
 
(c) Textile Fabrics 
Rank of sector: 3 
Name of sector: Textile Fabrics 
ITA industry code: TXF 
 
                          1994                 1995             1996 
                                                         (in $ millions) 
 
Total market size        1,025                 1,100           1,160 
Local Production           150                   165             180 
Total Exports               NA                    NA              NA 
Total Imports              873                   935             980 
Imports from the U.S.       20                    23              25 
 
Note: The above statistics are unofficial estimates 
 
Apparel manufacturing is Sri Lanka's most important industry.  In 1994 
this market generated more than $1.5 billion in Sri Lankan export sales 
(nearly 50 percent of total exports), of which the U.S. imported more 
than half.  Sri Lanka currently imports over $870 million worth of 
fabric annually, of which only about $20 million is from the U.S.  
Demand for high-quality fabric used for export apparel will remain high.  
Hong Kong, South Korea, Taiwan, and India are the main suppliers of 
textiles to Sri Lanka. 
 
(d) Aircraft parts 
Rank of sector: 4 
Name of sector: Aircraft Parts 
ITA industry code: AIR 
                                 1994          1995          1996 
                                                        (in $ millions) 
 
Total market size                  74            78            82 
Total Exports                       0             0             0 
Total Imports                      74            78            82 
Imports from the U.S.              42            NA            NA 
 
Note: The above statistics are unofficial estimates 
 
This sector continues to be one of the largest for U.S. exports to Sri 
Lanka.  Air Lanka, Sri Lanka's national carrier, has several U.S. 
aircraft (Lockheed Tri-Stars) and the Sri Lanka Air Force has several 
helicopters which require spare parts. 
 
(e) Cotton 
Rank of sector: 5 
Name of sector: Raw Cotton 
ITA industry code: YRN 
 
                          1994              1995              1996 
                                                         (in $ millions) 
 
Total market size           35                38                42 
Local Production             1                 1                 1 
Total Exports                0                 0                 0 
Total Imports               34                37                41 
Imports from the U.S.        5                NA                NA 
 
Note: The above statistics are unofficial estimates 
 
Sri Lanka is currently expanding domestic textile production.  Expansion 
of the Sri Lankan textile industry is resulting in an increased demand 
for cotton.  U.S. sales of cotton increased from a little over $1 
million in 1993 to nearly $5 million in 1994, about 15 percent of Sri 
Lanka's total cotton imports. 
 
(f) Textile Machinery 
Rank of sector: 6 
Name of sector: Textile Machinery 
ITA industry code: TXM 
 
                             1994             1995          1996 
                                                         (in $ millions) 
 
Total market size              36               39           41 
Local Production                0                0            0 
Total Exports                   0                0            0 
Total Imports                  36               39           41 
Imports from the U.S.           1               NA           NA 
 
Note: The above statistics are unofficial estimates 
 
Sri Lanka is currently expanding domestic textile production, thereby 
creating opportunities for U.S. equipment.  Sri Lankan garment 
manufacturers are increasingly using computer-assisted pattern design 
and cutting and sewing technology, in which the U.S. has a competitive 
advantage. 
 
(g) Computers 
Rank of sector: 7 
Name of sector: Computers and Computer Peripherals 
ITA industry code: CPT 
 
                             1994            1995            1996 
                                                       (in $ millions) 
 
Total market size              19              20              21 
Local Production                0               0               0 
Total Exports                   0               0               0 
Total Imports                  19              20              21 
Imports from the U.S.           4              NA              NA 
 
Note: The above statistics are unofficial estimates 
 
Information processing in Sri Lanka has become increasingly widespread 
and sophisticated.  In recent years computer hardware and software sales 
have increased rapidly. 
 
Several U.S. companies are already present in this market.  The most 
promising subsectors within this sector are personal computers and 
printers. 
 
(h) Power and Energy 
Rank of sector: 8 
Name of sector: Electrical Power Systems and Energy 
     Conservation Technology 
ITA industry code: ELP 
 
Electricity demand is growing at 10 percent per year and production is 
hard-pressed to satisfy demand.  The government hopes to add an 
additional 780MW of generating capacity between now and 2001 at an 
estimated cost of $1.8 billion.  The sector is open for foreign 
participation.  Substantial opportunities exist for U.S. firms to supply 
combined cycle, conventional oil, and coal-fired plants.  Given excess 
demand and rising energy prices, there are also opportunities for the 
sale of conservation technology. 
 
(i) Pollution Control Equipment 
Rank of sector: 9 
Name of Sector: Pollution Control Technology 
ITA  industry code: POL 
 
Urbanization and industrialization present challenges to Sri Lanka's 
environment.  The U.S. is distinguished in pollution prevention and 
control technology and should capitalize on these markets, focusing on 
solid waste removal, recycling, treatment and disposal technology.  
United States-Asia Environmental Partnership (US-AEP) will set up an 
office in Sri Lanka soon to focus on this sector. 
 
Investment Opportunities 
 
The following sectors and products have the greatest potential for 
expanded U.S. investment: 
 
Infrastructure:  The government has initiated plans for the construction 
of infrastructure on a build-own-operate or a build-operate-transfer 
(BOO/BOT) basis.  Plans include power production ($1.8 billion), rail 
and road development ($300 million), port expansion ($150 million), port 
development ($750 million), water supply and sanitation ($40 million), 
and waste management ($20 million). 
 
Privatization:  The Sri Lankan government has undertaken a major 
privatization program.  Current plans include divesting state-owned 
plantations to private companies on fifty-year leases, and privatization 
of several medium and small manufacturing and trading enterprises.  
Restructuring of the national air line Air Lanka with private sector 
participation is also planned. 
 
The Government of the United States acknowledges the contribution that 
outward foreign direct investment makes to the U.S. economy.  U.S. 
foreign direct investment is increasingly viewed as a complement or even 
a necessary component of trade.  For example, roughly 60 percent of U.S. 
exports are sold by American firms that have operations abroad. 
Recognizing the benefits that U.S. outward investment brings to the U.S. 
economy, the Government of the United States undertakes initiatives, 
such as Overseas Private Investment Corporation (OPIC) programs, 
investment treaty negotiations and business facilitation programs, that 
support investors. 
 
Chapter VI 
 
Trade Regulations and Standards 
 
Tariff and Non-Tariff Barriers 
 
Sri Lanka has a three-band import tariff schedule based on the 
harmonized system of classification.  The three bands are 10, 20, and 35 
percent.  Most consumer goods, agricultural products, chemicals and 
other intermediate goods manufactured locally are subject to a 35-
percent tariff.  With a few exceptions, raw materials and machinery and 
equipment are subject to a 10-percent tariff.  Parts and components used 
in local industry are subject to a 20-percent tariff.  Motor vehicles, 
tobacco, cigarettes and liquor do not come under the three-band rate 
structure.  Motor vehicle duties vary between 50 and 100 percent.  
Imports for most export-oriented industries are either entered duty free 
or entitled to duty rebates. 
 
Other taxes include a 4.5 percent defense levy, a three-tiered turnover 
tax, and an excise tax on selected consumer and non-essential goods.  A 
10 percent export-development cess (surcharge) is applicable on the few 
items with an import duty of 45 percent or more.  All taxes except for 
this cess are also charged on locally manufactured goods.  The 
government has announced that it will adopt a value-added tax (VAT) 
system in October 1995, which is likely to replace most of these taxes. 
 
Customs Valuations 
 
Most of the import duty rates are ad valorem, calculated on the CIF 
value.  However, the turnover tax and the defense levy on imports are 
determined after the CIF value plus import duties has been marked up by 
an additional 25 percent to reflect the approximate retail price. 
 
Import Licenses and Import Controls 
 
Over the years the government has liberalized most license controls.  
Wheat is still controlled.  Only a few other items remain under license 
control, mostly for health and national security reasons.  The import of 
drugs to the country is subject to the approval of the Drugs and 
Cosmetic Devices Committee of the Ministry of Health.  Similarly, the 
import of firearms and ammunition except for use by the armed forces and 
police is subject to the approval of the Ministry of Public 
Administration.  There are restrictions on the import of toxic and 
hazardous chemicals and pesticides. 
 
Import/Export Documentation 
 
Most trade is conducted on the basis of letters of credit (LC). An LC is 
required for imports over $7,500.  Most LC's are valid for 180 days 
under documents against payment terms.  Documents against acceptance 
terms (DA) may be used for the import of raw materials for export 
processing.  Under DA terms the supplier is expected to give credit for 
a maximum of ninety days. 
 
Labeling and Marking Requirements 
 
All labeling of packages should be in large bold lettering in indelible 
ink or paint.  For container cargo, the weight, center of gravity, and 
sling or grab points may be marked to help careful handling.  Goods 
shipped to Sri Lanka should be well packed in order to withstand heat, 
humidity, rough handling and pilferage.  Shipping marks should show 
consignee order number and port of entry.  Shipments by air cargo 
require the same documentation as those arriving by sea. 
 
Standards 
 
The Sri Lanka Standards Institute sets product standards.  There are 
over 1200 standards relating to manufactured products, agricultural 
commodities, industrial raw materials, and production processes.  A few 
of them are mandatory.  Sri Lanka has already adopted ISO 9000 series 
standards (ISO 9000 to ISO 9004) on quality management and assurance and 
ISO 10011 standards on quality management audit.  The rest of the 
standards in the ISO 9000 family are being studied. 
 
Chapter VII 
 
Investment Climate 
 
Openness to Foreign Investment 
 
The Board of Investment (BOI) is the primary government authority 
responsible for foreign investment.  Foreign participation can be up to 
100 percent of equity in Sri Lankan companies in most sectors.  BOI, a 
member of the World Export Processing Zones Association, is moving close 
to providing 'one-stop' service for foreign investors, including 
approval of projects, licenses, establishing tax incentives, and 
assistance in procurement.  The export sector, tourism and 
infrastructure projects such as telecommunications, transport, housing 
and hospital projects enjoy preferential treatment. 
 
The BOI gives automatic approval for most foreign investments. 
Investment in restricted sectors is subject to screening where foreign 
equity is to exceed 40 percent.  The restricted sectors include: 
shipping and travel agencies; freight forwarding; professional services; 
education; mass communication; telecommunications; supply of water; 
mining; deep sea fishing; timber-based industries; tea, rubber, and 
coconut industries. 
 
Branch or liaison offices of companies in certain sectors also have 
various restrictions on foreign equity that are determined by 
appropriate regulatory authorities.  The screening mechanism for the 
most part is routine and non-discriminatory. These sectors are: banking; 
finance; insurance; air transport; coastal shipping; military hardware 
and munitions manufacturing; production of poisons, narcotics, drugs, or 
hazardous or carcinogenic materials; production and distribution of 
energy and power; large-scale mechanized mining; and lotteries. 
 
Foreign investment is not permitted in the following businesses:  non-
bank money lending; pawnbroking; retail trade with a capital investment 
of less than $1 million; personal services other than for the export or 
tourism sectors; and coastal fishing. 
 
The BOI is empowered to offer special incentives for firms involved in: 
 
    (a) the manufacture and export of non traditional products 
        and services, 
    (b) the manufacture and supply of fabric and other 
        accessories for the garment industry, and 
    (c) the development and export of computer 
        software (minimum investment $250,000) 
 
These incentives include: 
 
- Preferential tax at 15 percent per annum for a period of twenty years. 
- Duty free imports of plant, machinery, raw material and other project 
  related goods as approved by the BOI. 
- Exemption from turnover tax and excise duty for imports of export 
  companies. 
- 15 percent income tax on emoluments of expatriate employees during the 
  first three years. 
- No restriction on repatriation of dividends, profits etc. 
- Free transferability of shares. 
 
BOI also offers other incentive programs including: 
 
- A tax holiday of five years for the growing and processing of 
  agricultural products. For the export sector a preferential tax at 
  15 percent per annum for a period of fifteen years will follow the 
  tax holiday. 
- A preferential tax at 15 percent per annum for large infrastructure 
  projects (minimum investment $25 million) for   a period of fifteen 
  years. 
- A preferential tax at 15 percent for a period of fifteen years for the 
  construction and operation of resort hotels (minimum investment 
  $250,000). 
- A preferential tax at 15 percent for a period of seven years for 
  hospitals, warehouses etc., with a minimum investment of $2.5 million, 
  and for housing projects with a minimum investment of $1 million. 
 
Conversion and Transfer Policies 
 
Sri Lanka has no exchange controls on current account transactions.  
There are no barriers, legal or otherwise, to the expeditious remitting 
of corporate profits and dividends for foreign enterprises doing 
business in Sri Lanka.  Remittances of business fees (management fees, 
royalties, and licensing fees) are also freely permitted as well as 
funds for debt service, capital gains, etc.  In addition, all stock 
market investments can be remitted without prior approval of the Central 
Bank.  Investment returns can be remitted in any convertible currency at 
the legal market rate.  Some controls exist on capital account 
(investment) transactions. 
 
Approximately $7.5 million is used annually by the U. S. Embassy and 
other U.S. government institutions in Sri Lanka which can be used to pay 
an inconvertibility claim by OPIC.  The Embassy purchases local currency 
at the financial rate.  The currency is expected to depreciate by no 
more than 10 percent over the next year. 
 
Expropriation and Compensation 
 
Since economic liberalization policies began in 1978, the Sri Lankan 
government has not expropriated a foreign investment.  Investors in the 
EPZs have the right to arbitration under the International Center for 
the Settlement of Investment Disputes. 
 
Dispute Settlement 
 
Foreign investments are guaranteed protection by the constitution of Sri 
Lanka.  The government has entered into 18 investment protection 
agreements with foreign governments (including the United States) and is 
a founding member of the Multilateral Investment Guarantee Agency (MIGA) 
of the World Bank.  The government has ratified the provisions of the 
Convention on Settlement of Investment Disputes, which provides the 
mechanism and facilities for international arbitration through the 
International Center for the Settlement of Investment Disputes of the 
World Bank (ICSID).  The U.S.-Sri Lanka Bilateral Investment Treaty 
(BIT) was ratified by both governments in early 1993. 
 
The U.S. government maintains that Sri Lanka's policy of not conferring 
national treatment on U.S. companies in the freight-forwarding industry 
is a violation of the BIT.  The two governments are currently consulting 
to resolve this issue.  Another investment dispute, dating from the 
early 1980s and relating to a joint venture between a U.S. company and a 
Sri Lankan parastatal company, is also under bilateral discussion. 
Sri Lankan commercial law is almost entirely statutory.  The law was 
codified before independence in 1948, and reflects the letter and spirit 
of British law of that era.  It has, by and large, been amended to keep 
pace with subsequent legal changes in the U.K.  The court system is free 
from government interference.  Procedures exist for enforcing foreign 
judgments.  Several important legislative enactments regulate commercial 
matters:  the Board of Investment Law, the Code of Intellectual Property 
Law, the Companies Act, the Securities Council Act, the Banking Act and 
the Industrial Promotion Act. The Companies Act provides for the winding 
up of insolvent companies.  Secured interests in property are recognized 
and enforced.  A reliable registration system exists for recording 
property.  Litigation can be very time consuming, but legislation passed 
in 1995 provides for judicial enforcement of arbitral awards. 
 
Political Violence 
 
Sri Lanka has been plagued by ethnic conflict since 1983. The fighting 
centers in northern and eastern Sri Lanka, but other parts of the 
country have been the scene of sporadic terrorist attacks.  Tourists and 
businesses have not been terrorist targets. 
 
Performance Requirements/Incentives 
 
Foreign investment is encouraged in enterprises which involve extensive 
use of foreign capital or sophisticated technology.  With few 
exceptions, foreign investors are not expected to reduce their equity 
over time or to transfer technology within a specified period of time. 
 
Firms enjoying preferential incentives in the manufacturing sector are 
usually required to export 90 percent of production. Firms engaged in 
the export of computer software should export at least 70 percent of 
production.  Such firms also are expected to perform according to a 
mutually agreed program.  Maintaining a certain level of employment is a 
condition in some enterprises, especially in the garment industry. 
 
Right to Private Ownership and Establishment 
 
Private entities are free to establish, acquire and dispose of interests 
in business enterprises.  Foreign ownership is allowed in most of the 
sectors.  However, private land ownership is limited to twenty hectares 
per person.  About 80 percent of the land in Sri Lanka is owned by the 
government, including most tea, rubber and coconut plantations. 
 
Protection of Property Rights 
 
Intellectual property is protected through the Intellectual Property Act 
of 1979 which governs copyrights, industrial designs, patents, 
trademarks, trade names and unfair competition.  All trademarks, 
designs, and patents must be registered with the government's Registry 
of Patents and Trademarks. 
 
Infringement of intellectual property is a punishable offense under the 
law.  Intellectual property rights come under both criminal and civil 
jurisdiction.  Relief available to owners includes injunctive relief, 
seizure and destruction of infringing goods, and prohibition of 
importation. 
 
Sri Lanka is a party to major intellectual property agreements including 
the Berne Convention for the protection of literary and artistic works, 
the Paris Convention for the protection of industrial property, the 
Madrid agreement for the repression of false or deceptive indication of 
source on goods, the Nairobi treaty, the Patent Co-operation treaty, the 
Universal Copyright convention and the convention establishing the World 
Intellectual Property Organization (WIPO). 
 
Sri Lanka's intellectual property law is based on the WIPO model law for 
developing countries.  Sri Lanka and the U.S. have signed a bilateral 
agreement for the protection of intellectual property rights.  Sri Lanka 
is in the process of revising its intellectual property law to conform 
to these agreements. 
 
Patents are granted for inventions, with the following exceptions:  
discoveries, scientific theories and mathematical methods, plant or 
animal varieties or essentially biological processes for the production 
of plants and animals, other than microbiological processes and the 
products of such processes, business rules and methods, methods of 
treatment by surgery or therapy, and diagnostic methods practiced on 
human or animal body.  A patent is valid for fifteen years from the date 
of grant, but must be renewed annually. 
 
Copyrights are not registered.  A work is protected automatically by 
operation of law.  Original literary, artistic, and scientific works are 
protected.  At present, copyright protection is not extended to computer 
programs, databases, and semi conductor lay out designs.  However, under 
the U.S.-Sri Lanka bilateral agreement, U.S. software producers receive 
copyright protection in Sri Lanka. 
 
Sri Lanka recognizes both trade marks and service marks.  The exclusive 
right to a mark is acquired by registration.  A mark may consist of 
words, slogans, designs etc.  Protection also is available to well known 
marks not registered in Sri Lanka.  Registered trademarks are valid for 
ten years. 
 
Trade secrets are not protected under the current law.  Provision for 
trade secrets will be introduced in the proposed amendments to the law. 
 
Efficient Capital Markets and Portfolio Investment 
 
Commercial banks are the principal source of finance. Traditionally bank 
loans were the most widely used credit instrument for the private 
sector.  However, leading private sector companies have recently started 
to raise capital through other credit instruments like corporate bonds 
and commercial paper.  Rights issues are becoming popular among 
companies listed in the stock exchange for raising capital. 
 
There is an active and relatively competent accounting profession, based 
on the British model.  The source of accounting standards is the 
Institute of Chartered Accountants of Sri Lanka (ICASL) and standards 
are constantly updated to reflect current international accounting and 
audit standards.  Due to a lack of an adequate enforcement mechanism, 
however, problems with the quality and reliability of financial 
statements exist. 
 
Accounting standards are not mandated by law, other than for publicly 
quoted companies.  Furthermore, auditors' opinions are not mandatory 
even for statements of publicly quoted companies. The World Bank has 
accordingly stressed the need for further improvements.  USAID has 
provided technical and institutional assistance in this area.  Moves are 
now underway to provide a mechanism for the enforcement of accounting 
standards, which will include penalties for non-compliance. 
 
The Securities and Exchange Commission regulates the securities market 
in Sri Lanka.  Foreign investors can freely purchase up to 100 percent 
of equity in Sri Lankan companies in permitted sectors.  In order to 
facilitate portfolio investments, country funds and regional funds are 
also allowed to invest in Sri Lanka's stock market; such funds must gain 
approval to operate in Sri Lanka.  These funds make transactions through 
Share Investment External Rupee Accounts maintained in commercial banks. 
 
The Colombo Stock Exchange (CSE), while small by big emerging market 
standards, is one of the most efficient in the region.  It has a fully 
computerized clearing and settlement system.  The CSE is now in the 
process of automating trading, with the goal of moving to screen based 
trading by September 1995.  Fifteen local and foreign joint venture 
brokers currently operate at the CSE. 
 
Bilateral Investment Agreements 
 
The Government of Sri Lanka has signed investment protection agreements 
with the United States (signed in May 1993) and the following countries: 
 
Belgium 
Peoples Republic of China 
Denmark 
France 
Germany 
Italy 
Japan 
Korea 
Luxembourg 
Malaysia 
The Netherlands 
Norway 
Romania 
Singapore 
Sweden 
Switzerland 
United Kingdom (Extended to Hong Kong) 
 
OPIC and Other Investment Insurance Programs 
 
The U.S. and Sri Lanka concluded an agreement in 1966 (and renewed in 
1993) that allows the Overseas Private Investment Corporation (OPIC) to 
provide investment insurance guarantees for U.S. investors.  OPIC 
currently insures banking, manufacturing and service investments in Sri 
Lanka. Sri Lanka's membership in the Multilateral Investment Guarantee 
Agency (MIGA) offers additional safeguards against non-commercial risks. 
 
Labor 
 
Sri Lanka's labor force is literate and well-educated, although weak in 
technical skills.  Two-thirds of the labor force is male and one-third 
is female.  The unemployment rate, according to the Department of Census 
and Statistics, is around 13 percent with an estimated 840,000 people 
out of work (excluding the north and east).  There is a shortage of 
technical and managerial personnel.  Foreign personnel are permitted 
when there is a demonstrated shortage of qualified local labor.  Labor 
is available at a relative low cost. 
 
Most permanent full-time workers are covered by laws pertaining to 
minimum hours of work, minimum wage, leave, the right of association, 
and safety and health standards.  Sri Lanka has ratified 29 
international labor conventions. 
 
Free Trade Zones 
 
Sri Lanka has three free trade zones called export processing zones.  
There are over 140 foreign export processing enterprises operating in 
the zones.  Present government policies now permit foreign investors to 
establish factories in almost any part of the country and still enjoy 
preferential treatment. 
 
Capital Outflow Policy 
 
Sri Lanka does not encourage investment in other countries.  Exchange 
controls on capital outflows exist and are enforced by the Central Bank. 
 
 
Chapter VIII 
 
Trade and Project Financing 
 
Banking System 
 
The banking system includes the Central Bank of Sri Lanka, two large 
state-owned commercial banks, four private domestic commercial banks, 
seventeen foreign banks, a national savings bank, twelve regional rural 
development banks, two development finance institutions, a mortgage bank 
and four merchant banks. There are two American banks among the foreign 
commercial banks in Sri Lanka.  The Central Bank has recently approved 
three new Sri Lankan commercial banks.  The domestic commercial banks 
operate a wide network of branches throughout the island.  All 
commercial banks operate foreign currency banking units (FCBU), and 
conduct off-shore business and finance projects approved by BOI.  All 
Sri Lankan commercial banks have correspondent relationships with U.S. 
banks. 
 
Foreign Exchange Controls Affecting Trading 
 
There are no foreign exchange controls affecting active trading.  Sri 
Lanka removed all exchange control restrictions on current account 
transactions effective March 15, 1994. 
 
General Financing Availability 
 
Commercial banks provide term loans and working capital loans for 
importers.  High interest costs (running over 18 percent) are a fact of 
life faced by the local business community, but foreign investors and 
BOI-approved local firms can raise finances through dollar interest 
rates.  Two local development banks provide development financing and 
equity. 
 
Most foreign owned firms must have foreign sources of financing for 
fixed and working capital requirements.  Foreign majority joint ventures 
are not allowed automatic access to local credit markets.  Such firms 
must get approval from the Central Bank on a case-by-case basis. 
 
Project Financing Available and Types of Projects Supported 
 
Funds provided through multi-lateral agencies have been the major source 
of term lending.  The Asian Development Bank and the World Bank are the 
major sources of project financing. 
 
Existing World Bank IDA loans: 
- $60 million available during 1994 -1998 for private sector enterprises 
engaged in productive operations and services. 
 
Proposed IDA loans: 
- $15 million to promote alternative energy supplies 
- $50 million for private infrastructure development 
- $45 million for road development 
- $85 million for environmental policy and investment 
- $38 million for environmental improvement 
 
Existing ADB loans: 
- $75 million to finance foreign currency investments of private 
enterprises in the manufacturing, services and tourism sectors. 
- $50 million for road development 
 
Proposed ADB loans: 
- $60 million for the plantations 
- $80 million for power system expansion 
 
 
Chapter IX 
 
Business Travel 
 
Business Customs 
 
The business language is English.  Business cards are a necessity.  
Courtesy is highly valued in Sri Lanka, and personal politeness plays a 
major role in clinching deals.  While punctuality is not as highly 
prized as in the United States, most appointments and other commitments 
are scrupulously observed. 
 
Visas 
 
U.S. tourists can enter Sri Lanka without a visa and will be entitled to 
remain for a maximum period of ninety days without any payment.  U.S. 
nationals coming for business purposes are entitled to entry for a 
maximum period of thirty days on arrival.  Extensions can be obtained 
from the Office of the Controller of Immigration and Emigration, Chaitya 
Road, Colombo 1.  Phone: 436353; Fax: 437040.  Any period in excess of 
three months incurs a temporary residence tax of Rs 2,500 (about $50).  
Under no circumstance will a foreigner who enters Sri Lanka on a tourist 
visa be permitted to change the status of the visa.  Visitors may apply 
for Sri Lankan visas at the Sri Lankan Embassy in Washington, D.C., Sri 
Lanka's mission to the United Nations in New York, and Honorary 
consulates in Chicago, Los Angeles and New Orleans. 
 
The Sri Lankan Government has introduced a resident guest scheme under 
which investors who remit a minimum of $150,000 and professionals whose 
expertise is not readily available here are entitled to receive resident 
visas for five years.  The implementing agency for this scheme is the 
BOI. 
 
There is no restriction on the import of foreign currencies.  Amounts 
exceeding $10,000 must be declared on arrival and those which are not 
used in Sri Lanka may be exported on departure.  Currency conversion 
must only be done at authorized banks, dealers and money changers.  Most 
leading hotels provide currency conversion facilities. 
 
Holidays 
 
Sri Lankan holidays are connected with the country's four religions:  
Buddhism, Hinduism, Islam and Christianity.  Dates change from year to 
year.  Holidays with fixed dates include independence day (February 4), 
National Heroes Day (May 22), Christmas (December 25).  Each full moon 
is marked by a Poya Day holiday. 
 
The following is a list of holidays for 1996. 
 
January   05    Duruthu Poya 
January   15    Thai Pongal 
February  04    National Day 
February  04    Navam Poya 
February  17    Maha Sivarathri 
February  21    Ramazan Festival 
March     04    Medin Poya 
April     03    Bak Poya 
April     05    Good Friday 
April     12    Day Prior to Sinhala and Tamil New Year 
April     13    Sinhala and Tamil New Year 
April     29    Hadji Festival 
May       01    May Day 
May       03    Vesak Poya 
May       04    Day Following Vesak Poya 
May       22    National Heros Day 
June      01    Poson Poya 
June      30    Special Bank Holiday 
July      29    Holy Prophet's Birthday 
July      30    Esala Poya 
August    28    Nikini Poya 
September 26    Binara Poya 
September 26    Bandaranaike Commemoration Day 
October   26    Vap Poya 
November  10    Deepavali Festival 
November  24    Il Poya 
December  24    Unduvap Poya 
December  25    Christmas 
December  31    Special Bank Holiday 
 
Business Infrastructure 
 
With over 25,000 kilometers of paved road, all parts of the island are 
accessible.  Radio operated taxi cabs and motorized trishaws are freely 
available.  International direct dialing is available and cellular 
telephones have become increasingly popular.  International mail and 
speedy courier services are also available.  Several five-star hotels 
provide accommodations for business travelers in Colombo.  Housing 
facilities for expatriates are satisfactory.  Several luxury  apartment 
blocks now under construction will further improve housing facilities.  
Health care facilities in the country are reasonable, and have been 
earmarked by the government for further development.  Several well-
stocked supermarkets are located in Colombo. 
 
 
Appendices 
 
 
Appendix A - Country Data 
 
- Population: 17,865,000 
- Population growth rate (percent): 1.4 
- Religions: Buddhism, Hinduism, Christianity, Islam 
- Government system: President and Parliament 
- Languages: Sinhala, Tamil and English 
- Work week: Monday to Friday 
 
Appendix B - Domestic Economy 
 
 
--------------------------------------------------------------- 
                                  1994        1995        1996 
                                   Proj.        Est. 
--------------------------------------------------------------- 
Domestic Economy (in $ millions, except where noted) 
 
- GDP(a)                        11,711      13,200      14,900 
- GDP growth rate                  5.6         5.0         6.0 
- GDP per capita($)                654         700         745 
- Government spending(% of GDP)   29.0        28.3        28.0 
- Inflation                        8.4         8.0        10.0 
- Unemployment                    13.1        13.0        13.0 
- Foreign exchange reserves      2,614       2,700       2,825 
- Average exchange rate 
       (Rs. per $)               49.42       51.90       54.50 
- Foreign debt                   8,880       9,000       9,150 
- Debt service ratio              11.0        11.0        11.0 
- U.S. economic assistance(b)     70.5        22.2        28.0 
 
    (a) at current market prices 
    (b) includes PL480 assistance 
 
Appendix C - Trade 
 
(in $ millions, except where noted) 
 
- Total exports                       3,208   3,550  3,950 
- Total imports                       4,779   5,300  5,950 
- U.S. imports from Sri Lanka         1,115   1,190  1,275 
- U.S. exports to Sri Lanka             197     210    240 
- U.S share of Sri Lanka's imports(%)     4       4      4 
 
Imports of manufactured goods 
- Total (from world)                  3,178   3,525  3,950 
- From U.S.                             103     115    135 
- U.S. share of manufactured imports(%) 3.2     3.3    3.4 
 
Imports of agricultural goods 
- Total (from world)                    772     850    900 
- From U.S.                              90      95    105 
- U.S. share of agricultural imports(%)  12      12    12 
 
Trade balance with three leading partners in 1994 
    United States of America             +917 
    Japan                                -362 
    India                                -380 
 
Principal U.S. exports in 1994 (top 5 by 4 digit tariff item) 
1. 1001 Wheat                                     84 
2. 8411 Turbojets/engines for civil air craft     30 
3. 8525 Communication equipment                   12 
4. 8803 Parts of air craft and helicopters         9 
5. 5906 Rubberized textile fabrics                 5 
 
Principal U.S. imports in 1994 (top 5 by 4 digit tariff item) 
1. 6204 Women's garments                          31 
2. 6206 Women's/girls blouses                     15 
3. 6205 Men's shirts                               9 
4. 6201 Men's anoraks                              9 
5. 6203 Men's trousers/shorts                      8 
 
Sources:  Central Bank, U.S. Department of Commerce, Sri Lanka Customs 
and Embassy estimates 
 
Appendix D: Investment statistics 
 
Estimated total foreign investment by sector 
(in $ millions) 
                             Total          Annual Inflow         Total 
                           end 1992         1993    1994        end 1994 
 
Food & beverage               9               2      4             15 
Textiles/apparel,leather     156             28     20            204 
Chemicals, rubber and plast. 114             13      7            134 
Non met. mineral products     22              2      3             27 
Fabricated metal, machinery   51              1      -             52 
Other manufactured            73             38      -            111 
Services                     126            105     125           356 
Unclassified                 118             -       -            118 
 
Total                        669            189     158         1,017 
 
Sources: Board of Investment, Central Bank, Finance Ministry, and 
Embassy estimates 
 
Estimated total foreign investment by country 
(in $ millions) 
 
             Total       Annual Inflow     Total 
            end 1992      1993    1994    end 1994 
 
South Korea     121        27       NA         NA 
Australia        81        10       NA         NA 
Sri Lanka        69        76       NA         NA 
Hong Kong        49        11       NA         NA 
Singapore        75         8       NA         NA 
Japan            NA         8       NA         NA 
USA              NA         5       NA         NA 
United Kingdom   NA         3       NA         NA 
India            NA         3       NA         NA 
Other/ 
   unclassified  NA        38       NA         NA 
 
Total           661       189      158      1,017 
 
NA: not available 
Sources: Board of Investment, Central Bank, Finance Ministry, and 
Embassy estimates 
 
Major Foreign Investors: 
 
Major U.S. investors include:  Eveready Battery, Smart Shirts (a 
subsidiary of Kellwood Industries), Citibank, American Express Bank, and 
CPC International.  More recent investments from the U.S. are Caltex, 
Cargill Inc., and Intellical.  The major non-U.S. investors include: 
Unilevers, Nestle's, British American Tobacco Company, Mitsui, Pacific 
Dunlop/Ansell, Prima, FDK and S.P. Tao.  Leading foreign investors which 
have acquired stakes in private companies include Norsk Hydro of Norway, 
Kabool Spinning and Textile of Korea, Mitsubishi Corporation of Japan, 
C. Itoh of Japan, Tongyang Nylon Co of Korea and Tawakkal Group of 
Pakistan. 
 
Appendix E - U.S. and Country Contacts 
 
Government Agencies 
 
Board of Investment of Sri Lanka (BOI) 
A. de Vass Gunawardene, Director General 
P.O.Box 1768, Colombo 1. 
Phone: 94-1-422407 
Fax: 94-1-447995 
 
Department of Commerce 
N.R. Meemaduma, Director 
"Rakshana Mandiraya" Vauxhall Street, Colombo 2 
Phone: 94-1- 430068 or 329733 
Fax: 94-1-430233 
 
Ministry of Finance 
A.S. Jayawardena, Secretary 
Galle Face Secretariat, Colombo 1 
Phone: 94-1-431761 
Fax: 94-1-433349 
 
Central Bank of Sri Lanka 
H.B. Disanayake, Governor 
Janadhipathi Mawatha, Colombo 1 
Phone: 94-1-421191 
Fax: 94-1-440353 
 
Ministry of Foreign Affairs 
R.C.A. Vandergert, Secretary 
Republic Building, Colombo 1 
Phone: 94-1-325371 
Fax: 94-1-446091 
 
Department of Immigration & Emigration 
J.A. Ariyasena, Controller of Immigration 
Chaithiya Road, Colombo 1 
Phone: 94-1-436354 
Fax: 94-1-437040 
 
Department of Inland Revenue 
Mrs N.D. Ramachandran, Commissioner General 
Sir Chittampalam A. Gardiner Mawatha, Colombo 2 
Phone: 94-1-421241 
Fax: 94-1-430816 
 
Sri Lanka Customs 
P. Weerasekera, Director General 
Custom House, Times Building 
Bristol Street, Colombo 1 
Phone: 94-1-436354 
Fax: 94-1-446364 
 
Ministry of Post & Telecommunication 
O.C. Jayawardene, Secretary 
C.T.O. Building, Lotus Road, Colombo 1 
Phone: 94-1-422591...422593 
Fax: 94-1-541531 
 
Ministry of Irrigation, Power and Energy 
Jaliya Medagama, Secretary 
500 T.B. Jayah Mawatha, Colombo 10 
Phone: 94-1-687491/687492 
Fax: 94-1-422066 
 
Ministry of Industrial Development 
W. Jayamaha, Addl Secretary (Textiles) 
375 "Vilasitha Niwasa" Havelock Road, Colombo 6 
Phone: 94-1-508032...508034 
Fax: 94-1-503211 
 
Securities and Exchange Commission of Sri Lanka 
A. R. Wikramanayake, Director General 
73 W A D Ramanayake Mawatha, Colombo 2 
Phone: 94-1-438250 
 
Secretariat for Infrastructure Development and Investment 
Prathap Ramanujam, Director General 
87 Horton Place, Colombo 7 
Phone: 94-1-696947 
Fax: 94-1-696952 
 
Leading Trade Associations/Chambers of Commerce 
 
American Chamber of Commerce of Sri Lanka 
Steve Brittain, President 
Colombo Hilton Hotel, Lotus Road, Colombo 1. 
Phone: 94-1-544644 
Fax:94-1-544657 
 
Ceylon Chamber of Commerce 
C. Jayasuriya, Secretary General 
50 Nawam Mawatha, Colombo 2 
Phone: 94-1- 421745...421747 
Fax: 94-1-449352 
 
National Chamber of Commerce, 
A. Savanadasa, General Secretary 
450 D.R. Wijewardene Mawatha, Colombo 10 
Phone: 94-1-325271 
Fax: 94-1-445409 
 
Colombo Stock Exchange 
Ajith Jayaratne, Chairman 
2nd Floor Mackinnons Building, York Street, Colombo 1 
Phone: 94-1-446581 
Fax: 94-1-445279 
 
Market Research Firms 
 
Agro Skills Ltd 
S. Kumaraswamy, Director 
77/1 Isipathana Mawatha, Colombo 5 
Phone: 94-1-584124 
Fax: 94-1-584124 
 
Resource Organization and Management Intl Ltd 
Malwila Dissanayake, President & CEO 
1 6th Lane, Galle Road, Colombo 3. 
Phone: 94-1-575233 
Fax: 94-1-575233 
 
Teams (Pvt) Ltd 
Wimal Gunawardhena, Chairman/Managing Director 
P.O. Box 262, Colombo 
Phone: 94-1-686429 
Fax: 94-1-686947 
 
Lanka Market Research Bureau Ltd 
Shaheen Cader, Project Director 
3rd Floor, 228 Galle Road, Colombo 4. 
Phone: 94-1-500525 
Fax: 94-1-500437 
 
Lanka Asia Management Systems Co (Pvt) Ltd 
C. Mahendran, Managing Director 
Hotel Lanka Oberoi, Suite 340, 77 Steuart Place Col 3 
Phone: 94-1-437437 or 421171 
Fax: 94-1-437437 ext 341 
 
Major Commercial Banks 
 
American Express Bank Ltd  
45 Janadhipathi Mawatha, Colombo 1 
Phone: 94-1-431288/9, 323366 
Fax: 94-1-448295 
 
ANZ Grindlays Bank Ltd   
37 York Street, Colombo 1 
Phone:94-1-446150/7, 432286/8 
Fax: 94-1-446158 
 
Bank of Ceylon 
4 Bank of Ceylon Mawatha, Colombo 1 
Phone: 94-1-446790, 544333 
Fax: 94-1-445798 
 
Commercial Bank 
21 Bristol Street, Colombo 1 
Phone:94-1-447516, 430420 
Fax: 94-1-449889 
 
Citibank N.A. 
67 Dharmapala Mawatha, Colombo 7 
Phone:94-1-449061 
Fax: 94-1-445487 
 
Hatton National Bank 
10 R.A. de Mel Mawatha, Colombo 3 
Phone: 94-1-421885, 430908 
Fax: 94-1-446312 
 
Hongkong & Shanghai Banking Corporations Ltd 
24 Sir Baron Jayatilaka Mawatha, Colombo 1 
Phone: 94-1-325435/8, 446591/9 
Fax:94-1-438585 
 
Peoples Bank 
75 Sir Chittampalam A. Gardiner Mawatha, Colombo 2 
Phone: 94-1-324188, 326429 
Fax:94-1-447671 
 
Standard Chartered Bank 
17 Janadhipathi Mawatha, Colombo 1 
Phone: 94-1-326671/4, 433302 
Fax: 94-1-432522 
 
Seylan Bank Ltd. 
33 Sir Baron Jayatilleke Mawatha, Colombo 1 
Phone: 94-1-437901/7, 446517 
Fax: 94-1-433072 
 
Sampath Bank 
55 D.R. Wijewardana Mawatha, Colombo 10 
Phone: 94-1-448291, 434431 
Fax: 94-1-434217 
 
Multilateral Development Bank Offices 
 
World Bank 
Roberto Bentjerodt, Resident Representative 
D.F.C.C. Building (1st Floor) 
73/5 Galle Road, Colombo 3 
Phone: 94-1-421840/448070 
Fax: 94-1-440357 
 
Multilateral Development Bank Office 
Brenda Ebeling, Director 
14th and Constitution Avenue, NW, 
Washington D.C. 20007 
Phone: 202-482-3399 
Fax: 202-482-5179 
 
U.S. Embassy Trade Personnel 
 
Economic/Commercial Section 
Nicholas H. Riegg, Economic/Commercial Counselor 
U.S. Embassy, 210 Galle Road, Colombo 3 
Phone: 94-1-448007 
Fax: 94-1-437345 
 
Economic/Commercial Section 
Bruce Neuling, Commercial Attache 
U.S. Embassy, 210 Galle Road, Colombo 3 
Tel: 94-1-448007 
Fax: 94-1-437345 
 
U.S. Agency for International Development (USAID) 
Jon Lindborg, Chief, Office of Private Sector Dev. & Housing 
U.S.A.I.D. 356 Galle Road, Colombo 3 
Phone: 94-1-574333 
Fax: 94-1-574264 
 
United States Asia Environment Partnership 
M. Tiruchelvam, Office of Agriculture and Natural Resources 
U.S.A.I.D. 356 Galle Road, Colombo 3 
Phone: 94-1-574333 
Fax: 94-1-574264 
 
Washington Based USG Country Contacts 
 
Department of State 
Daniel Lawton, Sri Lanka Desk 
Department of State, Washington D.C. 20520 
Phone: 202-647-2351 
Fax: 202-647-30001 
 
Department of Commerce 
John Simmons, Office of South Asia 
Department of Commerce, Room 2029B HCHB, Washington D.C. 20230 
Phone: 202-482-2954 
Fax: 202-482-5330 
 
Agency for International Development 
James Van Den Bos, Sri Lanka Desk 
Agency for International Development, Washington D.C. 20523 
Phone: 202-647-9630 
Fax: 202-647-7368 
 
Appendix F - Market Research 
 
List of Available Market Research 
 
The following is a list of available and upcoming Industry Sector 
Analysis (ISA) and International Market Insight (IMI) reports. 
 
ISAs 
 
   Power sector analysis (upcoming) 
 
   Textile industry/market (1996) 
 
IMIs 
 
   Medical equipment market (March 1995) 
 
   Food processing and packaging equipment (1996) 
 
   Hotel and restaurant equipment (1996) 
 
List of USDA/FAS Commodity and Market reports 
 
   Grains report for 1995 
 
   Market for packaged consumer-ready foods (upcoming) 
 
   Market for fresh fruits and vegetables (upcoming) 
 
   The structure of the Sri Lankan food retailing industry (upcoming) 
 
Appendix G - Trade Event Schedule 
 
The Embassy and the American Chamber of Commerce of Sri Lanka (AMCHAM) 
will jointly organize the second American Trade fair to be held on 
October 31-November 3, 1995. 
 
The Embassy will assist AMCHAM in organizing at least two seminars in 
1996.  The Embassy plans to hold one or two catalog shows in 1994, 
depending on the availability and suitability of shows passing through 
the region. 
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