International investor sentiment toward Sri Lanka has warmed significantly, with foreign direct investment (FDI) surging 15% to $507 million in January-October 2025, signaling confidence in post-crisis stability and President Dissanayake’s reform trajectory. Apparel captured 40% ($200M) via Indian/Singaporean factory expansions in Katunayake SEZ, tourism drew $127M for 20 new southern resorts, and IT/BPO secured $100M targeting European digital compliance contracts. Board of Investment approvals for 300+ projects promise 30,000 jobs, technology transfer in automation, and $1 billion annual export uplift.
Strategic versus portfolio inflows distinguish this wave: 70% long-term greenfield investments versus speculative bonds, reducing volatility risks seen in 2021 taper tantrums. Neighboring Bangladesh/India comparisons favor Sri Lanka’s English proficiency (20% population fluent), geopolitical neutrality amid US-China tensions, and 15% corporate tax holidays through 2028. Hambantota SEZ revival attracts Japanese logistics firms, creating 10,000 positions with local sourcing mandates ensuring 60% Sri Lankan employment.
For communities, benefits materialize through multiplier effects: each FDI dollar generates 2.5 jobs via supply chains benefiting 50,000 MSMEs. Women’s participation rises to 35% in new factories with creche facilities. However, risks loom—policy reversals on tax breaks, 23% youth unemployment mismatches, and cyclone disruptions underscore insurance gaps.
Equitable frameworks demand: 30% local content rules preventing enclave economies, TVET upgrades training 100,000 for Industry 4.0, and profit repatriation caps channeling 10% to community funds. Capital Markets Authority’s ESG bond issuances ($200M target) align green FDI with climate resilience.
Past cycles warn caution: 2010-2015 FDI boom bypassed North/East; transparent BOI portals now track regional distribution. Regional peers like Vietnam leverage FDI for 7% growth through skill ecosystems Sri Lanka must emulate.
In conclusion, Sri Lanka’s investor renaissance offers catalytic growth if harnessed equitably—jobs for youth, tech for competitiveness, revenues for welfare—transforming stability into inclusive prosperity without repeating boom-bust traps that marginalized communities.
References:
https://internationalbanker.com/finance/sri-lanka-from-stability-to-growth/
https://www.reuters.com/world/asia-pacific/sri-lankan-economy-grew-54-third-quarter-2025-2025-12-15/
https://www.cbsl.gov.lk/en/sri-lanka-economy-snapshot
