Sri Lanka: How newfound peace and leadership affects business

Date: May 2015

For more than three decades, Sri Lanka's progress had been hampered by the civilian conflict between the Sinhala majority and the Tamil minority. The conflict erupted into full-fledged war when the terrorist group Liberation Tigers of Tamil Eelam (LTTE), claiming to represent the minority population, took up arms against the state. The LTTE was finally defeated in 2009 under then-President Mahinda Rajapaksa's leadership.

After the civil war's end, Sri Lanka continued to be somewhat of an international outsider, with Rajapaksa not enjoying the best of relations with the West. However, with the recent election of Maithripala Sirisena as Sri Lanka's new president, questions arise as to whether political realignments will follow and how they will impact the business environment.

The government is being run by a coalition that includes President Sirisena's own party, Sri Lanka Freedom Party, along with the All Ceylon Muslim Congress, National Union of Workers, Sri Lanka Muslim Congress, Jathika Hela Urumaya and the United Nations Party (UNP), headed by former President Ranil Wickremasinghe.

President Sirisena appointed Wickremasinghe as the country's new Prime Minister, as promised before the elections, and the UNP has secured 19 seats out of the 27-member Cabinet of Ministers.

Kroll's Senior Director Probal Dasgupta shares his insights on what the new government means for Sri Lanka as well as for businesses contemplating new investments in the country.

1. What is the big picture message from Sri Lanka after the recent presidential elections?

2. The new government has signaled that there might be a departure from the earlier policies of Rajapaksa. How does that impact the investment environment?

3. Sri Lanka has recently made certain overtures toward India. The Sri Lankan president visited India, and India and Sri Lanka signed a nuclear deal.2 What are the repercussions of the government's foreign policy outlook on investments?

4. How are countries likely to view Sri Lanka as it grapples with its post-conflict peace and a change in leadership?

5. Will Sirisena's background as a left-of-center politician hurt Sri Lanka's investments and business-friendly image that Rajapaksa had built up?

6. What is the extent of opportunity available for investors in Sri Lanka; which sectors do you think are likely to witness large-scale investment and growth?

Despite its complexities, Sri Lanka presents a great opportunity for investors with its stable democracy, improving infrastructure and a peaceful environment, which are all standout features. One of the best indicators of Sri Lanka's potential is the rapid growth achieved after the end of the civil war.

Key Sectors

  • Infrastructure
  • Manufacturing
  • Textiles
  • Tourism

7. Do you see issues of corruption being addressed under the new administration and how will that impact companies?

8. What are the big challenges of doing business in Sri Lanka?

9. Will the proposed changes in policies by the new government help companies conduct business more easily?

10. In view of the changing environment in Sri Lanka, how should foreign investors conduct due diligence before investing?

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