Trade and Investment
Sri Lanka’s Trade Policy
 Sri Lanka trade policy envisages closer integration of trade promotion in the national development framework by further rationalization of trade and tariff policies, facilitation of a fair trading environment and encouragement of investment.
Sri Lanka is committed to pursue an outward oriented trade regime following the principle of the WTO, with a view to enhancing overseas market access for its products and achieving greater integration into the world economy. Towards achieving the desired objectives, Sri Lanka continues to simplify her tariff structure and encourage foreign direct investment into the country for infrastructure development and expanding the output while generating employment opportunities.  
As founding member of GATT and WTO, the Government has taken number of steps towards trade liberalization. The strategy followed was, firstly in the global context, by reducing the tariff on imports from all the countries and secondly, in the regional context, by entering into regional free trade agreements. The policy adopted was to expose domestic industries to compete with imports at appropriate tariff protection levels with the intention of further trade liberalization in the future. Tariff levels are decided not only to encourage efficiency through competition but also to provide low price benefits available to the consumers. Currently, Sri Lanka has 6818 tariff lines at the eight digits level. Over 96% of tariff lines are ad valorem, levied on the c.i.f value of imports. Currently Sri Lanka has a four-band tariff structure with 25%, 15%, 7.5% and 0%. Except for few items, in general, raw material for local industries are kept at low duty rates, while rates for finished products at higher and intermediate products in between.  
Sri Lanka also actively engages in negotiations at regional and bilateral levels while maintaining her multilateral commitments and obligations. At multilateral level, Sri Lanka remains committed to a fair, equitable, transparent and progressively liberalized multilateral trading system, with due consideration given to the needs of all developing countries. Sri Lanka actively participates in the negotiations on the Doha Development Agenda (DDA), particularly in areas such as agriculture, NAMA, TRIPS, and Trade Facilitation.
At regional level Sri Lanka is a member of the South Asian Free Trade Area (SAFTA), South Asian Preferential Trade Agreement and the Asia- Pacific Trade Agreement (APTA). Sri Lanka is a founding member of Bay of Bengal Initiative for Multi- Sectoral Technical and Economic Cooperation ( BIMSTEC) and Indian Ocean Rim Association (IORA). Sri Lanka is also a member of Global System of Trade Preferences (GSTP).
Bilaterally, Sri Lanka has entered into FTAs with India in 1998 ( Indo – Sri Lanka Free Trade Agreement- ISFTA) and with Pakistan in 2002 ( Pakistan – Sri Lanka Free Trade Agreement - PSFTA)
 
Overview of the International Trade in Sri Lanka – 2014
                                  The total value of exports in 2014 was reported as US$ million 11,044.38 which is an increase of 10.3 percent compared to 2013 which represented as US$ million 10,009.45 export value. The total value of exports has shown continuous increase during last three years and recorded the highest value in 2014. The USA is the largest buyer of Sri Lankan products in 2014, which has a share of 25 percent of total export value followed by UK, India, Italy and Germany. These above five export destinations covered 50 percent of total value of exports in 2014. The major export products to the world have reported as Apparel (HS 61 and 62),which is the main foreign exchange earner covers the 52.3 percent of total export value and followed by Tea (0902), Retreaded or used pneumatic tyres of rubber (401290),    Petroleum oils (2710), New pneumatic tyres of rubber (4011).
 
The total value of import was US$ million 19,245.71 in 2014 which has 12.6 percent increase compared to 2013. While in 2013 it shows a 4.4 percent increase compared to 2012. The major supplier of Sri Lanka is India which covered the 21 percent of total import value followed by China, U.A.E, Singapore, and Japan. While Petroleum oils and oils obtained from bituminous (270900), Gas oil/ Diesel (27101940), Petrol (27101220), Petroleum oils and oils obtained from bituminous minerals, other than crude (271019), Iron and Steel (72 and 73) are the major five products imported to Sri Lanka.
 
Balance of Trade
               Balance of Trade  in Sri Lanka has recorded an average of US$ Million - 5,530.32 in the period from 2005 to 2014, which reached a low value of US$ Million -9,685.39 in 2011 and extended to high value of US$ Million -2,149.39 in 2005. However, in 2014 the trade deficit has recorded to US$ Million -8,201.33.  During last ten years the trade deficit has fluctuated due to rise and fall of imports and exports values of Sri Lanka.        Bilateral trades with the USA, UK, Italy, Belgium, and Turkey are the first five countries which has positive balance of trade while China, UAE, Singapore, and Japan showed a negative balance of trade (major five countries) in 2014.

 
  Table 1: The growth of Export and Import values
 

Year

2012

2013

2014

Change % 2012/2013

Change % 2013/2014

Total Exports (US$ Mn)

9,180.59

10,009.41

11,044.38

9.03

10.34

Total Imports  (US$ Mn)      

17,888.64

17,949.74

19,245.71

0.34

7.22

Balance of Trade

-8,708.05

-7,940.33

-8201.33

-8.82

3.29

Source - Department of Commerce

South Africa’s Trade with Sri Lanka

South Africa is the leading trading partner for Sri Lanka in the Southern African region. Total trade between the two countries has not shown a regular pattern and has been fluctuating over the past years. Total trade between the two countries in 2014 amounted to US $ 54.76 million.  The balance of trade has been in favour of Sri Lanka in the years of 2010 , 2012 and 2014.

Table 2: Sri Lanka’s Imports, Exports and Balance of Trade with South Africa.                                                                                                              

Year

Imports

Export

Total Trade

Balance of Trade

2008

24.25

16.19

40.44

-8.06

2009

17.62

15.60

33.22

-2.02

2010

17.90

20.83

38.73

2.93

2011

35.86

29.63

65.49

-6.23

2012

22.65

25.89

48.54

3.24

2013

35.69

30.99

66.68

               -4.70

2014

21.63

33.16

54.76

11.53

2015(Jan- Jun)

9.91

16.76

26.67

6.85

(Value in Million US $)                                                                 Source: Sri Lanka Customs

 

Sri Lanka’s Exports to South Africa

Total exports from Sri Lanka to South Africa has increased from 16.19 US $ Mn in 2008 to 33.16 US $ Mn in 2014. Tea, Retreated or used pneumatic tyres of rubber , Apparel, Natural rubber, New pneumatic tyres, of rubber,  Raw bristle fibre of coconut (coir), Activated carbon; activated natural mineral products, Gloves, mittens & mitts, Parts suitable for use solely or principally with the apparatus of heading 85.35 have been the main export items from Sri Lanka to South Africa during the 2009-2014 periods.

 
Table – 3: Sri Lanka’s Exports to South Africa (2009-2014) 

HSCO

Description

2009

2010

2011

2012

2013

2014

0902

Tea

3.48

4.48

5.70

7.11

9.36

7.33

4012

Retreated or used pneumatic tyres of rubber

3.15

4.98

6.80

5.44

5.54

5.91

61 & 62

Apparel

2.07

2.52

2.92

3.52

4.19

5.51

4001

Natural rubber

1.48

3.48

6.29

2.36

3.20

3.00

4011

New pneumatic tyres, of rubber

0.22

0.53

0.75

1.16

1.02

0.61

5305

Raw bristle fibre of coconut (coir)

0.65

0.82

1.02

1.31

1.01

1.22

3802

Activated carbon; activated natural mineral products

0.09

0.19

0.21

0.60

0.87

2.92

4015

Gloves, mittens & mitts

0.42

0.43

0.86

0.71

0.80

0.64

8538

Parts suitable for use solely or principally with the apparatus of heading 85.35

0.54

0.23

0.41

0.29

0.64

0.78

2824

Lead oxides; red lead & orange lead

0.07

0.32

0.25

0.24

0.43

0.62

2001

Veg-Cucumbers & gerkins

0.34

0.28

0.33

0.29

0.37

0.35

0801

Coconuts, cashew nuts, fresh or dried

0.42

0.44

1.25

0.51

0.36

0.55

6911

Tableware, kitchenware, other household articles of porcelain or china

0.24

0.23

0.79

0.35

0.30

0.33

(Value in Million US $)                                                                  Source: Sri Lanka Customs

 
Sri Lanka’s Imports from South Africa

Sri Lanka’s imports from South Africa have not shown regular pattern during the past few years. In 2011, import value accounted for US $ 35.86 million, which is the highest value registered during past six years. Total value of imports in 2014, which amounted to 21.63US $ Mn, has recorded a decrease compared to 2013.

 

In 2013 coal , briquettes, ovoids & similar solid fuels manufactured from coal is the main imported item but in the last four years Beverages / spirits has been the biggest import item during the past years followed by Citrus fruit, fresh or dried , Grapes, fresh or dried , Stoppers, caps and lids; other than crown corks , Wood and articles of wood charcoal ,  Organic chemicals are the other import products from South Africa to Sri Lanka

 Table – 4: Sri Lanka’s Imports from South Africa -2009 to2013
 

HSCO

Description

2009

2010

2011

2012

2013

2701

Coal, briquettes, ovoids & similar solid fuels manufactured from coal

0.90

0.00

0.00

0.00

19.06

22

Beverages, spirits and vinegar

6.58

4.34

8.70

7.82

4.51

0805

Citrus fruit, fresh or dried

0.26

0.52

0.41

1.44

1.98

0806

Grapes, fresh or dried

0.20

0.34

0.68

1.33

1.30

8309.90

Stoppers, caps and lids; other than crown corks;

0.77

1.07

1.11

1.31

1.26

44

Wood and articles of wood; wood charcoal

1.62

1.04

0.96

1.06

0.96

29

Organic chemicals

0.07

0.09

0.06

0.16

0.80

8607.19

Bogies,, bissel-bogies, axles & whells; other, including parts

0.19

0.85

0.00

0.60

0.66

0808

Apples, Pears & quinces, fresh

0.30

0.11

0.33

0.26

0.62

38

Miscellaneous chemical products

0.08

0.15

0.17

0.23

0.60

1108

Starches; Inulin

0.26

0.43

0.86

0.28

0.38

72 & 73

Iron or steel & its articles

1.61

2.79

12.38

4.59

0.37

1005

Maize

0.16

0.21

0.27

0.29

0.33

39

Plastics and articles thereof

0.16

0.10

0.13

0.16

0.33

12

Oil seeds and oleaginous fruits; miscellaneous grains, seeds and fruit; industri

0.07

0.33

0.19

0.23

0.33

32

Tanning or dyeing extracts

0.16

0.19

0.14

0.09

0.22

1512.19

Sunflower seed or safflower oil & fraction thereof; other than crude oil

0.08

0.18

0.28

0.28

0.13

8523

Magnetic media

0.81

0.02

0.42

0.00

0.10

(Value in Million US $)                                                   Source: Sri Lanka Customs


Sri Lanka’s Major Export Items to South Africa
Rubber and Rubber products
Ceylon Tea
Clothing and apparel
Retreated or used tyres
Activated carbon
Desiccated coconuts
Tableware, kitchenware
Raw coconut coir
Vegetables/fruit/nuts & other edible parts of plants
Imports
The value of Sri Lanka’s total imports from South Africa in 2011 was registered at US $ 35.87 million, while US $ 17.77 million was reordered in 2010. Over the last two years imports have recorded a significant increase with over 100%. The major import items are, spirits/wine, fruits, maize, Iron and steel, paper and paper board.
Sri Lanka’s Major Import Items from South Africa
Wines & Spirits
Iron or steel & its' articles
Asbestos
Polypropylene
Articles of paper pulp, paper & paperboard
Mineral fuels & oils, waxes
Grapes (fresh)
Apples
Manganese dioxide
Boilers & machinery & parts
Organic chemicals
Maize(corn) starch
Investment
The economic strategy of the Government is to encourage private sector to play a leading role in all economic activities. Therefore, special emphasis has been placed on creating a business climate conducive to private investment.

The Board of Investment (BOI) of Sri Lanka is the main foreign investment agency. It is a special independent and statutory body and empowered by laws to grant special concessions by varying, modifying or exempting an enterprise from their application of laws relating to Inland Revenue, customs and exchange controls, thus enabling to grant a variety of incentives to investors. Foreign investments are guaranteed protection by the Constitution of Sri Lanka. Since 1992, the entire island has been declared an Export Processing Zone. Today, Sri Lanka's infrastructure ranks as the best in South Asia. The government is actively encouraging private sector investment in infrastructure on the basis of BOO (Build, Operate and Own) and BOT (Build, Operate and Transfer). Currently there are private investment projects in power, telecommunication, construction industry, hotels, ports, water sanitation, transportation (highways and rail) and IT.
Why Invest in Sri Lanka
Sri Lanka invites Foreign Direct Investment for the island wide development projects mainly in the North and Eastern Provinces with the political and economic stability of the country After establishment of peace, the government has created conducive business environment for foreign investors.
Solid Infrastructure

  Most developed telecommunication infrastructure facilities in South Asia based on private sector investments.
 The construction of four major expressways will improve the existing road network. These include the Colombo/Matara, Colombo/Katunayake, and the Colombo/Kandy highways as well as the Colombo outer circular road.
Colombo - Hub Fort of South Asia
According to the Lloyds Register the Colombo Port ranks as No. 01 port of South Asia and the 26th in the World.
Hambantota Port - Hambantota port is in place in the Southern region of Sri Lanka and new developments/ industries are taking place.
Bandaranaike International Airport (BIA)
The BIA is a regional hub of air transportation and is considered to be # 1 in South Asia.
Highly literate and cost competitive labour force
The Sri Lankan work force accounts for 35% of the total population. Sri Lanka boasts high levels of education. We have the highest literacy rate in South Asia (92%) and approximately 50% of the students who have completed their higher education are trained in technical and business disciplines. English is widely spoken in the country and is the main language used by the business community.
Open Economy
Today, Sri Lanka is ranked as the most liberalized economy in South Asia. Investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100% repatriation of profits.
High Quality of life
Sri Lanka leads the South Asian region in terms of human development indicators, with its high literacy rate of 91% placing it way ahead of other South Asian nations & on par with those of south East Asia. Its national health indicators are comparable with those of the developed world.
Transparent laws
The safety of foreign investment is guaranteed through the enactment by two third majority of Parliament of the Constitutional Guarantee of Investment Protection Agreements. Under article 157 of the country's constitution, the agreement enjoys the force of law and no legislative, executive or administrative action can be taken to contravene the provisions of a bilateral investment agreement otherwise than in the interests of national security.

Areas for which Sri Lanka welcomes FDI :

for all necessary information on investing in Sri Lanka :please visit website of the Board of Investment of Sri Lanka - http://www.investsrilanka.com/

 
Step by Step Guide to doing Business in Sri Lanka http://www.cbsl.gov.lk/pics_n_docs/01_home/docs/dbsl.pdf

 
For more information you are most welcome to contact Commercial Division - trade@srilanka.co.za













































































































































































































































































































































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