Sri Lanka

Sri Lanka is an island at the southern tip of Hindustan, large and green, surrounded by ocean, famous for its historical and natural attractions.

General information

The official name of the state is the Democratic Socialist Republic of Sri Lanka. The state occupies an area of ​​65,610 km² (120th in the world). The population is about 21,910,500 people (as of 2024).

Ethnic composition: Sinhalese — 74.9%, Tamils —​- 24.6% (of which "Indian" Tamils, brought by the British in the 19th century to work on tea plantations, are 4.2%; Tamils ​​who converted to Islam and moved from India — 9.2%), Burghers (descendants of European settlers), Malays, Veddas (the indigenous population of the island), Sri Lankan Chetty and Bharatas (descendants of Tamils) — 0.5%.

Confessional composition: Buddhists (Theravada) — 70.2%, Hinduism (Shivaism) — 12.6%, Islam (Moors, Malays) — 9.7% and Christianity (Burghers and a small part of Sinhalese and Tamils) — about 7.4%, 0.1% — other religions.

Sinhala and Tamil are the official and national languages ​​of Sri Lanka. According to the country's constitution, English has the official status of the language of interethnic communication. It is also used in official documents and in commerce.

The official currency of the country is the Sri Lankan rupee.

Colombo is the largest city in Sri Lanka, often unofficially called its capital. It is also the industrial and cultural center of the country. The city has developed chemical, textile, oil refining, glass, cement, woodworking, leather and footwear industries, and jewelry production. The Port of Colombo is one of the largest in South Asia, ranking fourth after the Indian ports of Paradip, Nova Sheva, and Mumbai.

Sri Jayewardenepura Kotte, also known as simply Kotte, is the capital of Sri Lanka (since 1982), and the seat of the country's parliament. It is a suburb of Colombo.

Administratively, the country is divided into 9 provinces, which in turn are subdivided into 25 districts.

History, geography, culture, mentality

Finds from the Horton Plains site indicate the existence of agriculture on the island of Sri Lanka around 8000 BC, including cattle raising and the cultivation of oats and barley. Cinnamon grown in Sri Lanka was used in ancient Egypt around 1500 BC, indicating that the kingdom maintained trade relations with the island.

The arrival of the Sinhalese from northern India to the island dates back to the 6th century BC. The 3rd century BC is considered the date of the arrival of Buddhism on the island.

Traditionally, the first king of Sri Lanka is considered to be Vijaya, who founded the kingdom of Tampabani in 543 BC, with its capital at Anuradhapura. It existed until 1815 CE. During this time, 189 monarchs changed, 17 invasions from neighboring states were experienced, Buddhism was adopted, unique structures were built, and complex hydraulic systems were invented.

With the arrival of the Portuguese on the island in 1505, the colonial history of Sri Lanka began. The Portuguese founded a fort in the port city of Colombo in 1517 and gradually expanded their control over the coastal areas. In 1592, the locals moved their capital to the city of Kandy, a location that was safer from attacks by invaders. Intermittent warfare continued throughout the 16th century.

Rajasing II, the king of Kandy, made an agreement with the Dutch in 1638 to get rid of the Portuguese invaders, who controlled most of the coastal area of ​​the island. The agreement was violated by both sides. By 1660, the Dutch controlled the entire island except for the kingdom of Kandy. The taxes they imposed on the local population were much higher than the Portuguese.

With the outbreak of the Napoleonic Wars, the island came under the control of Great Britain and became its colony in 1802. During this period, huge tea plantations were created in Sri Lanka, and by the mid-19th century, Ceylon tea had become the main product of the British market, bringing in huge profits.

In 1948, the country gained independence, being transformed into the Dominion of Ceylon.

In 1972, the country was renamed Sri Lanka and ceased to be a dominion, remaining a member of the Commonwealth of Nations.

The island of Sri Lanka (also known as Ceylon) is washed by the waters of the Indian Ocean and its Bay of Bengal. It is separated from Hindustan by the Gulf of Mannar and the Palk Strait, 50 km wide. The territory of Sri Lanka includes not only the island of the same name, but also a number of islands that make up the archipelago, the total area of ​​which is over 342 square kilometers. Most of the islands are concentrated in the northern and northeastern regions of the country: in Trincomalee, Batticaloa, Puttalam, Mannar, Kilinochchi and Jaffna. Numerous islands in the northern part of the country vary significantly in size. Thus, one of the smallest in area is Pigeon (Trincomalee), occupying an area of ​​only 0.01 square kilometers, while the largest - North Mannar occupies 126 square kilometers. The main part of the island is occupied by a plain, the height of which rarely exceeds 100 meters above sea level. In the center of the island is the Central Mountain Range - the Highlands. The highest point of the island is Mount Pidurutalagala (height 2524 m). The most famous is Adam's Peak - 2243 m. Numerous rivers of the country flow down from the mountains. Some rivers of the island are navigable. The largest river Mahaweli Ganga (335 km) originates near Adam's Peak and flows into the Indian Ocean in the east of Sri Lanka near Trincomalee. Along the entire coast of Sri Lanka there are 1600 km of beautiful tropical beaches.

In Sri Lanka there are and are being developed significant reserves of such rocks as: limestone, graphite, quartzite, marble, minerals, phosphates, clays. The lands of the island in the Ratnapura area are rich in deposits of precious stones.

The culture of Sri Lanka has very deep roots and traditions. On such a small island, not only Buddhists are combined, but also Hindus, and even Christians and Muslims. The architecture and attractions are imbued with Buddhism, since it is in Sri Lanka that the largest number of Buddha images in the world have been preserved. Almost everything in Sri Lanka is accompanied by rituals: household chores, moving, the first day of school, laying the foundation of a new house, sowing rice, harvesting and all other events of personal and social life.

There are six historical and two natural sites on the territory of the country, listed as UNESCO World Heritage Sites. Among them is the city of Polonnaruwa, the medieval capital of the Sinhalese kingdom, where the stone temple of Gal Vihara is located with four colossal statues of Buddha carved in granite rock. The list of the most valuable cultural sites of mankind includes the golden cave Buddhist temple of Dambulla, created in the 1st century BC. Polonnaruwa and Dambulla are truly masterpieces of human genius.

And, of course, Sri Lanka is famous for its ancient crafts. For example, wood or ivory carving, as well as the manufacture of masks for festivals, batik making, weaving.

Power

Sri Lanka is a unitary presidential-parliamentary republic.

The head of state is the president, elected for 6 years by direct universal suffrage. The president is the head of government and commander-in-chief. The president is responsible to parliament; he can be impeached if he is supported by 2/3 of parliament and approved by the supreme court. The president forms a government, which is also responsible to parliament. The assistant to the president is the prime minister, the head of the ruling party.

The Parliament of Sri Lanka is unicameral, with 225 seats. Members of parliament are elected by direct universal suffrage on the basis of a proportional system, with the following feature: the party that receives the majority of votes in any district receives an additional seat. Only parliament can make laws. The president has the right to postpone or cancel a session of parliament, dissolve parliament if it has worked for at least one year.

The judicial system comprises the Supreme Court of Sri Lanka, the Court of Appeal, the High Courts, the District Courts and the Magistrates' Courts. The judicial power in the Sri Lanka Armed Forces is exercised by military courts (tribunals).

Economy

The Sri Lankan economy is based on agriculture and related manufacturing, which employs about 45% of the country's working population. The main crop is rice, in which the country is virtually self-sufficient. Tea, rubber and coconut are also important crops, with tea being the main source of foreign exchange. Other important crops include cocoa and spices such as cinnamon, cardamom, nutmeg, pepper and cloves, fruits and vegetables grown in both tropical and temperate regions of the island. Sri Lanka is also a major exporter of precious and semi-precious stones. Over the past few years, remittances from Sri Lankans working abroad have contributed significantly to the country's foreign exchange earnings.

The mechanical engineering industry is represented by assembly production in the automobile and shipbuilding industries. There are small metallurgical, woodworking and oil refining enterprises, as well as the production of building materials.

There has been rapid growth in the manufacturing industry, which offers a wide range of export products such as petroleum products, leather goods, ready-made garments and electronic equipment.

Over the past three decades, tourism has become an important sector of the country's economy, which is facilitated by the presence of a large number of both historical and natural attractions in Sri Lanka.

Historical attractions are concentrated in the central part of the country, the so-called "Cultural Triangle" ("Ancient Cities"), which includes the cities of Dambulla with the temple of the same name, Polonnaruwa, Anuradhapura, Mihintale and the Sigiriya plateau. The second center of attractions is Kandy and Nuwara Eliya (translated as "city of light"). The "Cultural Triangle" is the area of ​​​​ancient, two-thousand-year history of the Sinhalese kingdoms and empire, Kandy and Nuwara Eliya - modern history, as part of the British Empire.

There are also several world-famous Buddhist relics on the territory of the country.

Natural attractions are numerous reserves that preserve the island's rich fauna and bird life.

Relations with Russia

Trade turnover in 2021 amounted to $373 million. Russian exports accounted for $89.5 million, while imports accounted for $283.5 million. Russia continues to be one of the largest consumers of Ceylon tea. In addition to tea, Russia imports rubber, leather goods, spices, and clothing from Sri Lanka, while Sri Lanka, in turn, purchases steel, cast iron, newsprint, asbestos, fertilizers, and electrical equipment from Russia.

Sri Lanka has consistently become one of the popular destinations for Russian tourists.

There is a wide range of areas of economic cooperation between the two countries, as well as the development of trade relations in new directions. The most interesting types of products for the Russian market are tea in ready-made retail packages, rubber, industrial rubber products, canvas and leather footwear, coconut and coconut products, clothing and accessories, precious stones and jewelry, ceramic and porcelain products, wooden and soft toys, groceries, spices in retail packages.

At present, progress is being made in the field of armaments and technical equipment, as well as military training programs offered by Russia to the armed forces of Sri Lanka.

The first meeting of the Russian-Sri Lankan Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation (IGC) was held on February 10-12, 2016. On June 15, 2021, a meeting of the co-chairs of the Intergovernmental Russian-Sri Lankan Commission on Trade, Economic, Scientific and Technical Cooperation, Head of the Federal Agency for Fisheries I.V. Shestakov and First Deputy Minister of Trade J.M.B. Jayawardana, was held via videoconference.

Since 2001, the Sri Lanka-Russia Business Council has been operating under the Ceylon Chamber of Commerce.

Business climate

When registering a company in Sri Lanka, the Companies Act No. 07 of 2007 must be followed.

In Sri Lanka, the rules regarding foreign ownership vary by industry. Some industries completely prohibit foreign ownership, while others allow a maximum of 40% ownership, and some allow up to 100% foreign ownership. It is important to be aware of the specific restrictions that apply in each industry.

There are certain sectors and industries in Sri Lanka that are reserved exclusively for persons of Sri Lankan origin. These sectors include:

• pawnbroking,
• money lending,
• security services (both private and otherwise),
• coastal fisheries,
• retail trade with investment of less than US$5 million.

Industries in Sri Lanka where foreign ownership is limited to 40% or less include:

• education,
• travel agencies,
• mass communications,
• freight forwarding,
• shipping agencies,
• deep-sea fishing,
• timber processing industries using locally available timber,
• mining and primary processing of non-renewable natural resources,
• growing and primary processing of tea, cocoa, coconut, rubber, rice, spices and sugar,
• manufacturing of goods falling under internationally established export quotas for Sri Lanka.

There are industries in Sri Lanka where foreign ownership requires approval from the line ministry and the percentage of foreign ownership may depend on it. These industries include:

• air transport,
• coastal shipping,
• lottery,
• large scale mechanized mining of precious stones,
• industry engaged in the production of coins, currency or securities,
• aircraft and military equipment,
• arms, explosives and ammunition,
• industries related to narcotics, poisons and other harmful substances.

Foreign ownership up to 100% is permitted in any industry in Sri Lanka except the categories mentioned earlier. However, companies wishing to operate in Sri Lanka as foreign entities must obtain permission from the Board of Investment (BOI). While not all foreign companies require BOI approval, companies in the retail, manufacturing, and branch sectors do. The process of obtaining BOI approval typically requires an investment of around US$5 million.

Certain industries also require approval from the relevant government departments to legally conduct business. These approvals are usually in the form of licenses and permits that must be obtained before commencing operations. Examples of industries that may require departmental approvals include food and beverages, manufacturing, construction, and environmental services.

In Sri Lanka, all foreign-owned businesses are required to have a local company secretary who can provide guidance and assistance on all relevant procedures. Usually, law and accounting firms in Sri Lanka also offer company secretary services as part of their package.

Investment climate

Sri Lanka is a lower-middle-income country with a significant middle class that relies on foreign products and services. The country has significant infrastructure needs for public transport, ports, public housing, water and energy projects. Due to the unsustainable public debt situation, the government mandated in 2022 that all development initiatives should be on a build-own-operate-transfer basis with no debt-financed projects. The country is committed to significant investment in renewable energy projects for long-term energy security.

Sri Lanka’s strategic location off the southern coast of India, along the major east-west shipping lanes of the Indian Ocean, gives it a regional logistical advantage, especially since India does not have deep-water ports comparable to Sri Lanka’s. This geographical advantage remains relatively untapped.

As a tourism hub, Sri Lanka also requires a range of services and high-quality products. The country is also seeking to position itself as a logistics and technology hub for the region, creating opportunities for the export of IT equipment and services. Priority sectors include:

• Energy and Infrastructure Development: engineering, construction, equipment, products and services for projects in the areas of roads, power plants, sewerage, water supply, railways, ports and airports.
• Real Estate and Construction: the country’s construction sector has been a key driver of the economy, but the economic crisis has slowed progress, with many companies reporting a lack of projects and an inability to continue fulfilling existing contracts due to soaring costs.
• Textiles: Sri Lanka imports textiles and yarn worth about US$2.8 billion annually for the garment industry and requires a variety of equipment and services.
• Agriculture: import demand for wheat, lentils, cotton yarn and livestock feedstocks including corn and soybeans; and the development of agricultural infrastructure, including cold storage facilities.
• Telecoms and Technology: Sri Lanka is aiming to become an information technology hub, with 5G trials underway. The government has also launched a digitalization drive as part of its efforts to combat endemic corruption and promote foreign direct investment, focusing on upgrading systems for government agencies and the financial sector to better meet global standards.

Business and investment support structures

Sri Lanka offers a variety of support structures for business and investment, making it an attractive destination for foreign and local entrepreneurs. Key structures and initiatives include:

• Board of Investment (BOI): This is the primary agency responsible for attracting and facilitating investment. The BOI offers a range of incentives such as tax incentives, import duty exemptions and fast-track business registration. It also assists investors in selecting suitable locations for their businesses and provides advisory services.
• Economic Zones and Free Trade Zones: Sri Lanka has Special Economic Zones (SEZ) and Free Trade Zones (FTZ) that offer unique business environments. Companies operating in these zones can count on tax incentives, simplified customs procedures and access to world-class infrastructure.
• Export Development Board (EDB): This agency promotes export development and supports exporters. The EDB provides market information, conducts educational seminars and supports companies’ participation in international exhibitions and fairs.
• Ministry of Industry and Trade: The ministry provides support for industrial development by offering subsidy programs, loans and grants to small and medium-sized enterprises (SMEs). It also plays a key role in developing policies to improve the business climate.
• SME Development Center: This center provides support to small and medium businesses through training programs, business advice, assistance in obtaining financing and grants.
• Banking support: The Sri Lankan banking system offers various financial products to support businesses, including loans for start-ups, soft credit lines and specialized programs for exporters.
• Government initiatives: The country's authorities are actively working to improve the business climate by introducing reforms aimed at simplifying administrative procedures, improving transport and energy infrastructure, and providing legal protection for investors.

These structures and initiatives help create a favorable environment for business and attract foreign investment to the country, making Sri Lanka an attractive destination for doing business business.