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Last update:Tue, 26 Sep 2017

Sri Lanka – Hub of Asia

colombo nightSri Lanka is not only a holiday paradise but also a hub for trafficing goods from and to Asia.

Sri Lanka is located at the southern tip of India and thus precisely along the most important shipping routes between Europe and South Asia. Due to this favorable geostrategic location it is valuable for German entrepreneurs to take a closer look on this Asian island country.

It was the first country in South Asia , which already in the 70s liberalized it's own economy. Even though the economic boom was heavily impaired by the 30 -year civil war, since the end of the war in 2009 the small island nation unfolds increasingly its true potential. Impressive Example in this reegardis the gross domestic product, which increased during the period 2009-2013 over 33 percent (on average 7.3 percent increase per year). This growth is not only due to an increase in tourist arrivals, but also due to a strong growth in foreign trade. In fact the exportes increased in this period by nearly 64 percent, while imports increased even by nearly 80 percent. The most important commercial products, Sri Lanka exports are garments, rubber products and Tea. In apparel, the main export item of Sri Lanka , the country exported in 2013 goods worth 4.3 billion U.S. Dollars. Of these , Germany imported goods to the value of nearly 200 million euros, of which nearly 50 percent went to North Rhine-Westphalia (NRW). From NRW Sri Lanka sources machinery, chemicals products and textiles.

This strong growth in the foreign trade of Sri Lanka corresponds to the so-called " 5 Hub Strategy" , according to which the government plans to develop the country to a hub in the areas of Shipping, aviation, commercial , education and energy. With regard to trade this development is done through massive investment in infrastructure. The aim of this strategy is to unfold the full extend of the countries true potential which is due to it's geostrategic location by development of the said areas.

Thus, the container capacity of the Colombo Port (photo) was expanded from four to about twelve million TEU. With the new Hambantota port another port of comparable size was created . In just 20 kilometers to this port also the new Mattala Rajapaksa International Airport was built . This second international airport in the Country shall relieve the airport in Colombo regarding the rising Tourist arrivals and increase the airfreight capacity of the country. 

Sri Lanka at glance
Land area 62.705 km²
population 20.328,00
Labour force 8.464.706
Unemployment rate 3,50%
GDP (market prices) in US$ 59,4 Billion
GDP per capita (market prices) in US$ 3.280,00
Foreign Trade  
Import in Million US$ 2.716.464
Export in Million US$ 1.899.852
Import from Germany in Million Euro 254,17
Export to Germany in Million Euro 448,60
Languages Sinhala, Tamil, English as business language
Literacy rate 92,20%

 

With the expansion of the traffic infrastructure in 2011 the first Highway of Sri Lanka was opened. At the same time numerous road projects were started and more highways planned, to adjust the infrastructure of the country for the demands of the 21st century. A particular focus in this regard exists to equip industrial areas with a quickly accessible road network : The new highways are designed that way that industrial centers, which produce mainly for the export, profit specially from these new roads and the shortened transportation times.

Such industrial centers are mostly under the mandate of Sri Lanka Board of Investment ( BOI), an authority of the country, which was established already in the 70s Years. The task of the BOI is to support investors who want to invest into the export economy of the country. It supports to master bureaucratic hurdles , is available for questions considering Sri Lanka and can grant special incentives.

 

Targeted assistance for businesses

The BOI is capable to support companies tightly focussed. Specially for export-oriented
Companies it can for a period of up to twelve years liberate them from of taxes and import duties
for capital goods and raw materials. The same applies to projects of national Interest, such as the development of infrastructure or the education system. Likewise, the Energy sector is considered particularly worth promotion due to the expected economic growth, in which case the renewable
energies are in the first place . Foreigners investments and contracts with the BOI are guaranteed by the Constitution and cannot be touched even in case of changing governments.

Thanks to these modernizations the free trade agreement Sri Lanka maintains with India and Pakistan gain an increased attractivity. This allows products which are at least 35 percent produced in Sri Lanka to be exported to those countries customs free.

Also the expansion of educational system is pushed as part of the " 5 hub Strategy ". Sri Lanka has with 92.2 percent the highest literacy rate in the South Asian region. The labour force of the country have earned the reputation to be particularly capable of learning. For Sri Lanka education remains the most important key for the future: for example the Country this years March took a 100 million US Dollar loan from the Asian Development Bank to further expand the area " Technical and Vo -
cational Education Training ( TVET) ". TVET refers to an education system, which is similar to the dual training system in Germany oriented to close the gap between school education and the needs of modern world of labour in terms of practical experience.

In view of the described activities of the government , to develop the country along these five pillars and adapt to the requirements of of the 21st century further increase of the Economic growth is to be expected. To this conclusion also the Coface Group comes in an up-to-date analysis , according to which the country has good chances, to follow in its economic Development pattern the BRICS countries.

Accordingly, the country should especially of interest especially for companies in the construction and Machine building industry, since due to the described economic upturn a correspondingly high demand on modern machines is to be expected.