By Vipula Wanigasekera –

Dr. Vipula Wanigasekera

The World Bank’s latest Sri Lanka Development Update could not have been clearer: the country is still failing to attract meaningful private investment. Despite a gradual macroeconomic recovery and a wave of reform talk, the reality on the ground remains bleak. Investors are hesitating, projects are stalling, and bureaucracy seems to be winning over business. Unless the government moves from announcements to action, time will soon run out.

The most glaring problem lies in land management. Nearly four-fifths of Sri Lanka’s land belongs to the state, but responsibility is scattered across dozens of institutions. The result is a confusing maze for investors trying to secure a project site. Even when land is identified, approvals move at a glacial pace, often bouncing between ministries. The absence of pre-approved, infrastructure-ready investment zones outside the Western Province forces every investor to start from zero, discouraging all but the most determined.

Bureaucratic paralysis compounds the problem. The Board of Investment (BOI) was created to be a one-stop shop but has instead become a mere forwarding desk, dependent on decisions from other ministries. Investors report being sent from pillar to post, waiting months for routine permits. Despite new legislation such as the Economic Transformation Act, coordination remains weak, and accountability for delays is virtually nonexistent.

Environmental clearance procedures—particularly Environmental Impact Assessments (EIA) and Initial Environmental Examinations (IEE)—are another major source of frustration. These reviews are essential, but the process is slow, opaque, and riddled with duplication. Several renewable energy projects worth billions of dollars are reportedly stuck in limbo because no agency takes responsibility for final approval (World Bank, 2024). According to the World Bank (2024) and the Asian Development Bank (ADB, 2023), this regulatory bottleneck has severely hindered progress in expanding solar and wind capacity despite significant private sector interest. The International Energy Agency (IEA, 2024) further notes that Sri Lanka’s renewable potential—especially in wind power along the Mannar coast—remains largely underutilized due to policy uncertainty and grid integration delays.

Behind these systemic failures are outdated laws and institutions. Many of the acts governing labour, land, and investment date back decades, reflecting an era when efficiency was secondary to bureaucracy. Labour laws discourage flexibility, while land regulations overlap and contradict one another. Investors have cited unpredictable tax policies, possible shifting incentives, and rules that change midway through projects—all of which create a climate of uncertainty that no serious investor can afford.

At the human level, there is also a culture of inertia. Many state officials are capable and well-intentioned, but they operate within a system that rewards caution, not performance. Too often, avoiding blame is safer than getting things done. Unions, low productivity, and a lack of initiative in parts of the public sector have further diminished investor confidence.

Meanwhile, Sri Lanka’s diplomatic network does not seem to have kept pace with the global competition for capital. Some missions still focus on protocol rather than proactive trade and investment promotion, which is typically entrusted to trade departments. Competing nations send out aggressive, well-prepared delegations that market their industrial zones and policy stability.

What investors seek is not perfection but predictability and efficiency. They want to know that their approvals will be processed on time, their contracts will be respected, and the rules will remain stable. These are not unreasonable demands—they are basic conditions for modern investment.

The government must act decisively: streamline environmental and land approvals, empower the BOI to issue all investment permits within clear timeframes, modernize archaic laws, digitize government processes, and make officials directly accountable for performance. Without such reforms, the much-publicized economic “transformation” will remain an illusion.

The World Bank (2024) has warned that Sri Lanka’s foreign direct investment stands at barely 0.5 percent of GDP—one of the lowest in the region. Competing countries are moving ahead precisely because they removed the very obstacles that still hold Sri Lanka back.

The message is simple and urgent: investors have options, and patience is running out. Unless the government delivers visible, credible reforms soon, Sri Lanka risks being left behind once again—watching opportunity slip away while others move forward.

References

* Asian Development Bank. (2023). Sri Lanka Energy Sector Assessment, Strategy, and Road Map. Manila: ADB.

* International Energy Agency. (2024). Renewables 2024: Analysis and Forecast to 2029. Paris: IEA.

* World Bank. (2024). Sri Lanka Development Update: Mobilizing Private Investment for Growth. Washington, D.C.: The World Bank.

*The writer is a former diplomat and Head of the Sri Lanka Tourism Authority, currently a lecturer in business, YouTuber, author, meditation coach, and Reiki healer.