International business report for Sri Lanka country

Name: Ritik Singh

Roll no: 0122097
PGDM (Marketing)

Executive Summary

Sri Lanka is a small island nation located in South Asia. The country has a rich history and
culture, dating back to the 6th century BC. Sri Lanka is home to a diverse population of over 22
million people, representing a variety of ethnic and religious groups.

The country has been through a period of significant economic growth in recent years. However,
Sri Lanka is still facing a number of challenges, including:
High levels of poverty and inequality: Despite recent economic growth, poverty remains a
significant problem in Sri Lanka. The country has a high level of income inequality, with a small
number of wealthy individuals controlling a large share of the country's wealth.
Political instability: Sri Lanka has a history of political instability. The country has been through a
number of coups and civil wars in recent decades. The current government is facing a number
of challenges, including a lack of public trust and a weak economy.
Corruption: Corruption is a major problem in Sri Lanka. The country is ranked 101st out of 180
countries on Transparency International's Corruption Perception Index. Corruption undermines
the rule of law and makes it difficult to do business in Sri Lanka.
Environmental degradation: Sri Lanka is facing a number of environmental challenges, including
deforestation, water pollution, and air pollution. These challenges are exacerbated by climate
change.
Despite these challenges, Sri Lanka is a country with great potential. The country has a well-
educated workforce and a strong tourism industry. Sri Lanka is also home to a number of
natural resources, such as tea, rubber, and gemstones.

The government is working to address the country's challenges. The government has
implemented a number of reforms aimed at reducing poverty, improving governance, and
combating corruption. The government is also working to address environmental challenges.

Swot analysis of Sri Lanka

Strengths:

1) Strategic location: Sri Lanka is located at the crossroads of major shipping routes in the
Indian Ocean, making it a key hub for trade and commerce. This gives Sri Lanka a
significant advantage in terms of trade and investment.
2) Abundant natural resources: Sri Lanka is rich in natural resources, including tea, rubber,
coconut, and spices. It also has a diverse landscape, including beaches, mountains, and
 rainforests. This abundance of natural resources provides Sri Lanka with a strong
foundation for economic development.
3) Educated workforce: Sri Lanka has a high literacy rate and a well-educated workforce.
This is a valuable asset for any country, as it allows for the development of new
industries and the adoption of new technologies.
4) Growing tourism industry: Sri Lanka's tourism industry is growing rapidly, thanks to its
stunning scenery, rich culture, and friendly people. This is a positive development, as
tourism can generate revenue and create jobs.

Weaknesses
1) High debt levels: Sri Lanka has a high level of debt, which makes it vulnerable to
economic shocks. This is a major challenge for Sri Lanka, as it limits the government's
ability to invest in infrastructure and social programs.
2) Political instability: Sri Lanka has a history of political instability, which can deter
investment and economic growth. This is another major challenge for Sri Lanka, as it
makes it difficult to implement long-term economic policies.
3) Infrastructure deficit: Sri Lanka's infrastructure is underdeveloped, which can constrain
economic development. This includes roads, bridges, ports, and power grids. A lack of
adequate infrastructure can make it difficult to transport goods and people, and can also
discourage businesses from investing in Sri Lanka.
4) Corruption: Corruption is a problem in Sri Lanka, which can hinder economic growth and
development. Corruption can lead to waste and inefficiency in government spending,
and can also create an uneven playing field for businesses.

Opportunities
1) Growing global economy: The growing global economy presents opportunities for Sri
Lanka to export its goods and services. Sri Lanka can capitalize on this opportunity by
investing in export-oriented industries and by developing its trade infrastructure.
2) Expanding trade with China and India: Sri Lanka is expanding its trade with China and
India, which are two of the world's fastest-growing economies. This is a positive
development for Sri Lanka, as it can lead to increased exports and investment.
3) Development of new technologies: New technologies can help Sri Lanka to improve its
productivity and competitiveness. For example, Sri Lanka can invest in renewable
energy technologies to reduce its dependence on imported oil. It can also invest in
information and communication technologies to improve its efficiency and transparency.
4) Investment in infrastructure: Investment in infrastructure can help to boost economic
growth and development in Sri Lanka. This includes investing in roads, bridges, ports,
and power grids. Improved infrastructure can make it easier to transport goods and
people, and can also attract more investment.

Threats
1) Climate change: Sri Lanka is vulnerable to climate change, which could have a negative
impact on its agriculture, tourism, and coastal communities. Sri Lanka can mitigate this
threat by investing in adaptation measures such as drought-resistant crops and
seawalls.
 2) Rising sea levels: Rising sea levels could inundate coastal areas in Sri Lanka, displacing
people and damaging infrastructure. Sri Lanka can mitigate this threat by relocating
coastal communities to higher ground and by building seawalls.
3) Natural disasters: Sri Lanka is prone to natural disasters such as floods, droughts, and
landslides. Sri Lanka can mitigate this threat by developing early warning systems and
by building disaster-resistant infrastructure.
4) Global economic recession: A global economic recession could reduce demand for Sri
Lanka's exports and tourism, harming its economy. Sri Lanka can mitigate this threat by
diversifying its economy and by reducing its reliance on exports.

PESTLE analysis of Sri Lanka

Political factors

1) Political instability: Sri Lanka has a history of political instability, which can deter
investment and economic growth. The country has been through a civil war, and there
have been ongoing political crises in recent years. This instability can make it difficult for
businesses to plan for the future and can discourage foreign investment.
2) Corruption: Corruption is a problem in Sri Lanka, which can hinder economic growth and
development. Corruption can lead to waste and inefficiency in government spending,
and can also create an uneven playing field for businesses.
3) Government policies: Government policies can have a significant impact on the business
environment and the economy. For example, the government's tax policies, trade
policies, and labor policies can all affect businesses.
4) International relations: Sri Lanka's international relations can also affect its economy. For
example, good relations with major trading partners can boost trade and investment.
However, poor relations with other countries can lead to trade sanctions and other
economic penalties.

Economic factors

1) Economic growth: Sri Lanka's economic growth rate has been slowing in recent years.
This is a concern, as it could lead to rising unemployment and poverty. The country has
been facing a number of economic challenges, including high debt levels, a large
informal sector, and a lack of investment in infrastructure.
2) Inflation: Inflation is a problem in Sri Lanka, which can erode the purchasing power of
consumers and businesses. High inflation can make it difficult for businesses to plan for
the future and can reduce consumer spending.
3) Interest rates: Interest rates can have a significant impact on investment and economic
growth. Higher interest rates can make it more expensive for businesses to borrow
money, which can discourage investment.
4) Foreign exchange rates: Foreign exchange rates can affect the competitiveness of Sri
Lankan exports and the cost of imports. A weaker Sri Lankan rupee can make Sri
Lankan exports more competitive, but it can also make imports more expensive.
Social factors

1) Population growth: Sri Lanka's population is growing rapidly. This could put a strain on
resources and services, such as education, healthcare, and housing.
2) Aging population: Sri Lanka's population is also aging. This could lead to a shortage of
workers and a higher burden on the social welfare system.
3) Education: Sri Lanka has a high literacy rate and a well-educated workforce. This is a
valuable asset for the economy, as it allows for the development of new industries and
the adoption of new technologies.
4) Income inequality: Income inequality is a problem in Sri Lanka. This could lead to social
unrest and political instability.

Technological factors

1) Access to technology: Sri Lanka has limited access to technology. This could hinder the
development of new industries and the adoption of new technologies.
2) Investment in research and development: Investment in research and development is
low in Sri Lanka. This could limit the country's ability to develop new products and
services.
3) Government support for innovation: The Sri Lankan government provides limited support
for innovation. This could make it difficult for businesses to invest in new technologies
and to develop new products and services.

Environmental factors

1) Climate change: Sri Lanka is vulnerable to climate change, which could have a negative
impact on its agriculture, tourism, and coastal communities. The country is already
experiencing rising sea levels, more extreme weather events, and changes in rainfall
patterns.
2) Natural disasters: Sri Lanka is also prone to natural disasters such as floods, droughts,
and landslides. These disasters can cause significant damage to infrastructure and
crops , and can lead to loss of life and economic hardship.
3) Pollution: Pollution is a problem in Sri Lanka, which could have a negative impact on
public health and the environment. Air pollution from vehicle emissions and industrial
activity is a major concern, as is water pollution from sewage and agricultural runoff.

Legal factors

1) Regulatory environment: The Sri Lankan regulatory environment can be complex and
unpredictable. This could make it difficult for businesses to operate and could deter
investment.
2) Rule of law: The rule of law is weak in Sri Lanka. This could lead to corruption and could
make it difficult for businesses to enforce contracts.
3) Intellectual property protection: Intellectual property protection is weak in Sri Lanka. This
could discourage businesses from investing in research and development.

ranking

Ease of Doing Business in Sri Lanka

The Ease of doing business index ranks countries against each other based on how the
regulatory environment is conducive to business operation stronger protections of property
rights.
Sri Lanka is ranked 99 among 190 economies in the ease of doing business, according to
the latest World Bank annual ratings. The rank of Sri Lanka improved to 99 in 2019 from 100
in 2018

Economic Rankings of sri Lanka:

 1. Gross Domestic Product:

The Gross Domestic Product (GDP) in Sri Lanka was worth 74.40 billion US dollars in
2022, according to official data from the World Bank. The GDP value of Sri Lanka
represents 0.03 percent of the world economy

2. Gross Domestic Product per capita:

The Gross Domestic Product per capita in Sri Lanka was last recorded at 3988.08 US dollars in
2022. The GDP per Capita in Sri Lanka is equivalent to 32 percent of the world's average.
Corruption Perception Index ranking for srianka

Sri Lanka's Corruption Perception Index (CPI) ranking for 2022 is 101 out of 180 countries,
with a score of 36. This indicates that Sri Lanka is perceived to have a moderate level of
corruption in the public sector. The country's CPI score has been improving in recent years,
from a score of 33 in 2020 to 36 in 2022.
Inflation rate

Sri Lanka’s key inflation rate slowed to an eight-year low of 1.3% in September 2023, down
from 4% in the previous month, primarily attributed to ongoing reduction in food inflation (-
5.2% vs -4.8% in August) as well as slowdowns in prices of non-food items (4.7% vs 8.7%).
On a monthly basis, consumer prices rose by 0.9%, rebounding from a marginal decline (-
0.02%) in August
Competitiveness Rankings of sri Lanka

Sri Lanka is the 84 most competitive nation in the world out of 140 countries ranked in the
2019 edition of the Global Competitiveness Report published by the World Economic Forum.

Competitiveness Index:

Sri Lanka scored 57.11 points out of 100 on the 2019 Global Competitiveness Report
published by the World Economic Forum.
 social and Human Rights Rankings of Sri Lanka

 Human Development Index (HDI): Sri Lanka ranks 97th out of 187 countries, with a
score of 0.691. It's the highest-ranked South Asian country in terms of development.
 Gender Inequality Index (GII): Sri Lanka ranks 74th.
 Corruption Index: Sri Lanka ranks 102nd out of 180 countries. Its score of 37/100 is
close to the previous four years' score of 38/100.
 Global Social Mobility Index: Sri Lanka ranks 59th out of 82 countries.
 Rule of Law Index: Sri Lanka ranks 11th globally, with an overall score of 0.07.
 Gender Inequality Index (GII) rank of 74
 WJP Rule of Law Index overall score of 0.07

Import and export

Overall Exports and Imports for Sri Lanka 2021

• The total value of exports (FOB) is US$ 13,331 million.

• The total value of imports (CIF) is US$ 21,502 million.
• At the HS6 digit level, 2,995 products are exported to 196 countries and 4,145 products
are imported from 192 countries.

Top trading partners (import sources) of Sri Lanka in 2022 :

 India with a share of 26% (4.62 billion US$)

 China with a share of 20% (3.51 billion US$)
 United Arab Emirates with a share of 5.47% (960 million US$)
 Malaysia with a share of 5.17% (908 million US$)
 Singapore with a share of 4.23% (743 million US$)
 USA with a share of 2.35% (414 million US$)
 Other Asia, nes with a share of 2.29% (402 million US$)
 Russia with a share of 2.14% (377 million US$)
 Pakistan with a share of 2.04% (359 million US$)
 Indonesia with a share of 1.91% (335 million US$)

Imports structure to Sri Lanka in 2022 represented by the following main

commodity groups:

 22% (3.98 billion US$): Mineral fuels, mineral oils and products of their distillation;
bituminous substances; mineral waxes
 6.02% (1.05 billion US$): Knitted or crocheted fabrics
 5.87% (1.03 billion US$): Nuclear reactors, boilers, machinery and mechanical
appliances; parts thereof
 5.69% (999 million US$): Electrical machinery and equipment and parts thereof; sound
recorders and reproducers, television image and sound recorders and reproducers, and
parts and accessories of such articles
 4.17% (733 million US$): Plastics and articles thereof
 3.92% (689 million US$): Cotton
 3.39% (596 million US$): Cereals
 2.66% (467 million US$): Paper and paperboard; articles of paper pulp, of paper or of
paperboard
 2.55% (448 million US$): Pharmaceutical products
 2.37% (416 million US$): Man-made filaments; strip and the like of man-made textile
materials

Top export destinations of commodities from Sri Lanka in 2022:

 USA with a share of 25% (3.46 billion US$)

 United Kingdom with a share of 7.43% (1.01 billion US$)
 India with a share of 6.71% (912 million US$)
 Germany with a share of 5.76% (783 million US$)
 Italy with a share of 4.98% (677 million US$)
 Netherlands with a share of 3.32% (452 million US$)
 United Arab Emirates with a share of 2.84% (386 million US$)
 Canada with a share of 2.79% (379 million US$)
 Belgium with a share of 2.39% (325 million US$)
 France with a share of 2% (272 million US$)

Exports structure from Sri Lanka in 2022 represented by the following main
commodity groups:

 26% (3.55 billion US$): Articles of apparel and clothing accessories, knitted or
crocheted
 16% (2.18 billion US$): Articles of apparel and clothing accessories, not knitted or
crocheted
 12.2% (1.66 billion US$): Coffee, tea, matT and spices
 7.81% (1.06 billion US$): Rubber and articles thereof
 3.48% (473 million US$): Natural or cultured pearls, precious or semi-precious stones,
precious metals, metals clad with precious metal and articles thereof; imitation jewelry;
coin
 3% (408 million US$): Electrical machinery and equipment and parts thereof; sound
recorders and reproducers, television image and sound recorders and reproducers, and
parts and accessories of such articles
 2.23% (304 million US$): Fish and crustaceans, molluscs and other aquatic
invertebrates
 2.22% (302 million US$): Mineral fuels, mineral oils and products of their distillation;
bituminous substances; mineral waxes
 2.01% (273 million US$): Nuclear reactors, boilers, machinery and mechanical
appliances; parts thereof
 1.64% (223 million US$): Edible fruit and nuts; peel of citrus fruit or melons

TRADE, INVESTMENT & TAXATION POLICY

Trade policy

1. Sri Lanka's trade policy is aimed at integrating the country into the global economy
and promoting economic growth. The government has adopted a number of
measures to liberalize trade, including reducing tariffs, eliminating non-tariff barriers,
and simplifying trade procedures.

2. Sri Lanka has a four-band tariff structure, with tariffs ranging from 0% to 30%. The
government has eliminated customs duties on 50% of tariff lines, which will
 progressively increase to 80% over 14 years. The remaining 20% of tariff lines are
protected for sensitive industries, such as agriculture and textiles.

3. Sri Lanka has signed a number of trade agreements with other countries, including
the India-Sri Lanka Free Trade Agreement (ISFTA), the Pakistan-Sri Lanka Free
Trade Agreement (PSFTA), and the China-Sri Lanka Free Trade Agreement
(CSFTA). These agreements have helped to boost Sri Lanka's trade with its partners.

4. In addition to these free trade agreements, Sri Lanka is also a member of the World
Trade Organization (WTO) and the South Asian Preferential Trade Area (SAPTA).
These organizations provide Sri Lanka with access to a wider range of markets and
help to reduce trade barriers.

5. Sri Lanka's trade policy is also aimed at promoting exports. The government has
introduced a number of export promotion measures, such as tax breaks, duty-free
imports of raw materials, and access to financing.

6. The government is also working to improve Sri Lanka's trade infrastructure. This
includes developing new ports and airports, and improving roads and railways.

Investment policy

1. Sri Lanka's investment policy in 2023 is aimed at attracting foreign direct investment
(FDI) to boost economic growth and create jobs. The government has introduced a
number of incentives to attract FDI, including tax breaks, duty-free imports of machinery
and equipment, and a simplified approval process.

2. Foreign investors are welcome in almost all sectors of the economy, except for a few
regulated areas such as banking and insurance. Investors are permitted to repatriate
100% of their profits and are exempted from most of the exchange control regulations.
They can also enjoy preferential tax benefits and constitutional guarantees on their
investment.

The government is particularly interested in attracting FDI in the following sectors:

 Manufacturing
 Tourism
 Infrastructure
  Information and communication technology
 Renewable energy
 Agriculture
 The government has established a number of special economic zones (SEZs) to attract
FDI. These SEZs offer investors a number of advantages, such as tax breaks, duty-free
imports, and simplified regulations.
The following are some of the key features of Sri Lanka's investment policy in

1. Foreign investors are welcome in almost all sectors of the economy.

2. Investors are permitted to repatriate 100% of their profits.
3. Investors are exempted from most of the exchange control regulations.
4. Investors can enjoy preferential tax benefits and constitutional guarantees on their
investment.
5. The government is particularly interested in attracting FDI in the manufacturing, tourism,
infrastructure, ICT, renewable energy, and agriculture sectors.
6. The government has established a number of SEZs to attract FDI.
7. The government is working to improve the overall business environment in Sri Lanka.

Taxation policy

1. Sri Lanka's taxation policy in 2023 is aimed at raising revenue to support government
spending and to promote economic growth. The country has a progressive income tax
system, with rates ranging from 12% to 30%. Companies are taxed at a rate of 30%.
There is also a value-added tax (VAT) of 15%.
In addition to these main taxes, there are a number of other taxes and duties levied in Sri
Lanka, including:

 Withholding taxes
 Stamp duties
 Capital gains tax
 Gift tax
 Inheritance tax
 Betting and gaming taxes

2. The government has introduced a number of tax concessions to promote investment and
economic growth. For example, companies in certain industries are eligible for a reduced
tax rate or a tax holiday. There are also tax concessions for research and development,
and for exports.
Here are some of the key features of Sri Lanka's taxation policy in 2023:

 Progressive income tax system with rates ranging from 12% to 30%
  Corporate tax rate of 30%
 Value-added tax (VAT) of 15%
 A number of tax concessions to promote investment and economic growth
 Steps taken to simplify the tax system and to reduce red tape

TARIFF & NON TARRIF BARRIERS

Tariff barriers

1. Sri Lanka has a four-band tariff structure, with tariffs ranging from 0% to 30%. The
government has eliminated customs duties on 50% of tariff lines, which will progressively
increase to 80% over 14 years. The remaining 20% of tariff lines are protected for
sensitive industries, such as agriculture and textiles.

2. Tariff barriers can have a significant impact on trade and investment. They can increase
the price of imported goods, making them less competitive in the domestic market. They
can also discourage foreign investment, as businesses may be reluctant to invest in a
country with high tariffs.

3. The Sri Lankan government is committed to reducing tariffs and promoting trade.
However, the government is also facing some challenges, such as the need to protect
sensitive industries and the desire to raise revenue.

4. If you are considering importing or exporting goods to or from Sri Lanka, it is important to
be aware of the tariff rates that apply. You should consult with a trade advisor to learn
more about the specific requirements for the goods that you are interested in trading.

Non-tariff barriers
Non-tariff barriers (NTBs) are trade barriers that do not involve tariffs. They can be more difficult
to identify and quantify than tariffs, and they can be just as effective in restricting trade.

1. Technical barriers to trade (TBTs): TBTs are regulations that affect the production,
distribution, or consumption of goods. They can include product standards, testing and
certification requirements, and labeling requirements. For example, Sri Lanka has strict
product standards for food and medical devices.

2. Sanitary and phytosanitary (SPS) measures: SPS measures are regulations designed to
protect human, animal, and plant health. They can include import bans, quarantine
requirements, and inspection requirements. For example, Sri Lanka prohibits the import
of certain fruits and vegetables to prevent the spread of pests and diseases.
 3. Quantitative restrictions: Quantitative restrictions are limits on the quantity of goods that
can be imported or exported. They can include quotas, embargoes, and licensing
requirements. For example, Sri Lanka has a quota on the import of rice.

4. NTBs can have a significant impact on trade and investment. They can increase costs,
reduce efficiency, and delay the movement of goods. For example, a company that
wants to export food products to Sri Lanka may have to comply with a number of TBTs,
such as product standards and labeling requirements. This can be a complex and
expensive process.

5. The Sri Lankan government is working to reduce NTBs and to make it easier for
businesses to trade with other countries. However, there are still a number of NTBs in
place that can make it difficult for foreign businesses to import and export goods to and
from Sri Lanka.

MEMBERSHIP OF SRI LANKA WITH GLOBAL GROUPS

Sri Lanka is a member of a number of global groups, including:

 United Nations (UN)

 Commonwealth of Nations
 South Asian Association for Regional Cooperation (SAARC)
 Non-Aligned Movement (NAM)
 World Trade Organization (WTO)
 International Monetary Fund (IMF)
 World Bank
 Asian Development Bank (ADB)
 Colombo Plan
 Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation
(BIMSTEC)
 Shanghai Cooperation Organisation (SCO)
These memberships allow Sri Lanka to participate in global decision-making and to cooperate
with other countries on a range of issues, including trade, investment, development, and
security.

Sri Lanka is also a member of a number of specialized international organizations, such as the
International Civil Aviation Organization (ICAO), the World Health Organization (WHO), and the
International Labour Organization (ILO). These memberships allow Sri Lanka to participate in
the development of international standards and to benefit from the technical assistance provided
by these organizations.
 FTA & RTA WITH OTHER COUNTRIES

1. India-Sri Lanka Free Trade Agreement (ISFTA): This is Sri Lanka's largest and most
important FTA. It has helped to boost Sri Lanka's exports to India, which is Sri Lanka's
largest trading partner.

2. Pakistan-Sri Lanka Free Trade Agreement (PSFTA): This FTA has helped to increase
trade between Sri Lanka and Pakistan, which is a growing market for Sri Lankan
products.

3. China-Sri Lanka Free Trade Agreement (CSFTA): This FTA has helped to increase Sri
Lanka's exports to China, which is Sri Lanka's second-largest trading partner

4. Singapore-Sri Lanka Free Trade Agreement (SLSFTA): This FTA has helped to increase
trade between Sri Lanka and Singapore, which is a regional hub for trade and
investment.

5. South Asian Free Trade Area (SAFTA): This RTA provides for preferential tariffs on trade
between Sri Lanka and other South Asian countries.

6. Asia Pacific Trade Agreement (APTA): This RTA provides for preferential tariffs on trade
between Sri Lanka and other Asia Pacific countries.