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Economy and Business in Sri Lanka

According to countryaah, Sri Lanka is a developing country and the economy has traditionally been based on agriculture and simple industry, and tea, coconut and rubber used to make up most of its exports. The textile industry, the service sector and the construction industry have taken over in recent decades, and today provide large revenues to the country. The technology industry, especially the IT and telecommunications sectors, has been growing rapidly since the late 1990s.

Business and Economy of Sri Lanka

The country has high debt and the country's economy was hit relatively hard by the global financial crisis in 2008-2009. After the peace in 2009, more and more foreign companies have also established themselves in Sri Lanka.

The distribution of income is uneven and poverty is particularly marked in the countryside. Sri Lanka is the recipient of financial assistance, including from the World Bank, the International Monetary Fund and Norway.

Economy

Foreign investors have gained increased interest in Sri Lanka since the end of the civil war (1983-2009), and the country has enjoyed steady economic growth in recent years.

Sri Lanka's economy has traditionally been based on agriculture and simple industry, and tea, coconut and rubber used to make up most of its exports. The textile industry, the service sector and the construction industry have taken over in recent decades, and today provide large revenues to the country.

During the first three decades of independence, a number of economic and social reforms were implemented. The government had a strong commitment to developing social welfare and to replacing imports with local products. There were statutory price controls on consumer goods and access to free health care and free education. Economic policy introduced measures to increase local production while introducing various import restrictions. Through active welfare policy, the country achieved reduced illiteracy, lower mortality and a significant increase in life expectancy.

Industrial production was dominated by several large state-owned companies that produced goods such as cement, steel, ceramics, fuel and lubricant oils, paper, leather, tires, textiles, sugar and spirits. Only a few factories, most of them light consumer goods, were in private hands.

The strong state control of the economy hampered economic growth, and in 1977 the authorities introduced an economic liberalization policy. The goal was increased economic growth by stimulating private investment and increasing the country's income by promoting a more export-oriented economy. Several state-owned industrial enterprises were privatized, and the authorities introduced incentives to attract foreign investors. Among other things, investment promotion zones were created where investors were offered a package of incentives.

Tourism was one of the industries that flourished under the liberalization policy, but this sector has been very sensitive to political instability.

Following the end of the 26-year civil war in 2009, the authorities have launched several major development projects to rebuild the country's infrastructure and to stimulate growth in the war-affected areas. Small and medium-sized enterprises have been established, and measures have been taken to increase agricultural production in areas hit hard during the war.

The country has high debt, and the country's economy was hit relatively hard by the global financial crisis in 2008-2009. After the peace in 2009, more and more foreign companies have also established themselves in Sri Lanka. Nevertheless, the country's export earnings do not cover imports, and the country has a large foreign debt.

The financial contribution of the many Sri Lankans living abroad is a significant contribution to the country's economy. Nearly one million of the population work abroad, most of them in the Middle East.

The distribution of income is uneven, and poverty is particularly marked in the countryside. Sri Lanka receives financial assistance, including from the World Bank, the International Monetary Fund and Norway.

Sri Lanka is traditionally a popular destination, and the tourism industry is the dominant sector in the service industries. The numbers of visitors were marked by strong fluctuations as a result of the conflict, but have increased sharply since the end of the civil war in 2009.

Unemployment in Sri Lanka has been declining in recent years, but youth unemployment is still high.

Agriculture, forestry and fishing

About 30 per cent of the land area is cultivated. The earlier clear divide between state plantation operations and private small farms has been more evened in recent years. Export products are grown to a greater extent among small farmers, and local agriculture has become more commercialized. Tea is one of the country's most important export product, and Sri Lanka is one of the world's largest tea producers.

Rice production is the most important economic activity for Sri Lanka's farmers. Since independence, there has been a strong increase in the country's rice production. Important factors for this increase are that in the 1970s it was adapted for rice production in the new area and that technology was used that contributed to increased crops. Rice is grown mainly for domestic consumption

Coconuts are grown in low-lying areas and were previously an important export commodity. Sri Lanka is one of the world's seven largest rubber producers. Despite the authorities' efforts to improve irrigation and fertilization methods and increased production, some rice must be imported to meet the country's needs. The most important livestock are cattle, buffaloes, pigs and poultry.

In fisheries, the resource potential is plentiful, especially on the north and northwest coasts. The fishing is mainly conducted as coastal fishing for own and local consumption. Over the last few decades, the authorities have been focusing on modernization, including to increase fish consumption and to provide employment in coastal districts.

In 2016, agriculture (including forestry and fisheries) contributed 8.2 per cent of the gross domestic product (GDP) and employed 28.4 per cent of the working population.

Industry and mining

The industry has grown significantly since the 1990s, especially in the IT and textile sectors. Among other things, an extensive rubber industry has been developed based on the country's own rubber resources, and in recent years the country's clothing industry has grown so much that it is necessary to import textiles into the country's clothing factories. Industrial development areas have been established to attract international capital through tax cuts and other benefits.

Sri Lanka's mineral extraction industry includes mining of gems and graphite, as well as excavation of beach sand containing ilmenite and monasite, and kaolin, apatite, quartz sand, clay and salt.

Most important is mining to extract gemstones such as sapphire, ruby ​​and topaz, as well as a number of semi-precious stones. Most of the gem extraction goes to exports. Ratnapura is famous for its gemstones.

Sri Lanka has been preparing experimental drilling for oil and gas offshore since the turn of the millennium.

Industry and mining account for 31 per cent of GDP and employ 26 per cent of the working population, and the figures for service industries are 62 per cent and 46 per cent respectively. (2016).

Foreign Trade

The country's exports go mainly to the United States, the United Kingdom, India, Germany and Italy. The most important export products are textile products, teas and spices, gemstones, rubber products, coconut products and fish. The majority of imports consist of textiles, mineral products, machinery, transport equipment, petroleum and petroleum products. Among the most important suppliers of imported goods are India, Singapore, China and Iran.

Transport and Communications

Sri Lanka has a relatively well-developed road network (approximately 114,000 km) and almost 1500 km of railway. Colombo has an international airport (Katunayake), and is also the country's most important port city. Other important port cities are Trincomalee (main port for tea exports), Galle and Jaffna.

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