Exploring the Opportunity

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Investing in Sri Lanka Exploring the Opportunity 1

2010 KPMG Ford, Rhodes, Thornton & Co, a member firm of the KPMG network of independent member firms affiliated with KPMG International

Cooperative (KPMG International), a Swiss entity. All rights reserved.

Exploring the OpportunityAn overview of Sri Lankas economic environment and prospective

investment opportunities July 2010

KPMG in Sri Lanka

A D V I S O R Y


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ContentsCountry Overview 04

Investment Opportunity 04

Why Invest in Sri Lanka? 08

Investor Challenges 10

Investment Schemes 12

Investment Advisory Services 14

Key Contacts 16



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Contents

Country overview 06

Investment opportunity 11

Why invest in Sri Lanka? 19

Modes of investment 25

Development potential 29

Investor challenges 32

We can assist 34

More than just business 38

Key contacts 48


Image courtesy BOI


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Terms of reference

This report has been prepared by KPMG Ford, Rhodes, Thornton & Co., a

member firm of KPMG International Coorporative (KPMG International), a Swiss

entity. The information contained herein is of a general nature and is not intended

to address the circumstances of any particular individual or entity. Although we

endeavour to provide accurate and timely information, there can be no guarantee

that such information is accurate as of the date it is received or that it will continue

to be accurate in the future.

In preparing this document we have relied upon and assumed, without

independent verification, the accuracy and completeness of various sources of

information, some of which have been derived from public sources. Details of the

sources that we have used are given in our report. KPMG Ford, Rhodes,

Thornton & Co. accepts no responsibility or liability to any party in connection with

such information or views.

Our core fieldwork and research was performed between December 2009 and

June 2010. We have not undertaken to update our report for events orcircumstances arising after that date.

Appropriate professional advice should be sought to undertake a more specific

examination of the particular circumstances applicable to a potential investor. The

contact details of KPMG firms professionals who could assist in this regard are

given at the back of this report. Please note that this publication is not a

comprehensive investment guide.

Acknowledgments

KPMG Ford, Rhodes, Thornton & Co. would like to thank the Board of Investment

of Sri Lanka and the numerous entities and people who contributed insight &

content towards this publication.


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Exploring the Opportunity

Nirmal Fernando

Senior Partner KPMG in Sri Lanka

The year 2010 is an important year

for Sri Lanka as it marks the first fresh

year with peace in the country

subsequent to the end of the Civil

War which spanned over two

decades and affected the lives of

many. Sri Lanka now moves towards

a phase of accelerated development

and opportunity as the country

prepares to revamp infrastructure,

enhance enterprise and provide

increased opportunity to its people.

During the recent half year, we have

received much interest from overseas

investors with varied interests across

multiple industries. Sri Lanka has also

begun to receive much Foreign Direct

Investment primarily due to the strong

value proposition for investment and

trade with the country.

A range of investor incentives have

also recently been structured to

attract investment and convert the

investments into successful industry.

The opportunity is seen to be

tremendous with benefit for investors,

people and the international markets.

This publication is an initiative to

share an overview of the current

economic and business environment

in Sri Lanka which we believe would

be useful and informative to those

interested in exploring investment

and trade opportunities with Sri

Lanka.

Nirmal Fernando


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Sri Lanka

Image courtesy BOI

Situated in close proximity to the

southern coastal tip of India, Sri

Lanka is a sovereign nation and a

trade hub with convenient market

access to many countries in Asia and

the Middle East.

Sri Lanka has a tropical climate and is

rich in natural resources. The palm-

fringed, sandy beaches co-exist with

the mountainous lush terrain creating

a splendorous atmosphere within the

country.

The nation benefits from a rich

cultural history dating back many

centuries. The Portuguese, Dutch and

British have also left their mark on the

island in the form of monuments,

colonial architecture and culture.

Often known as the Pearl of the

Indian Ocean, Sri Lanka offers much

value to both its communities as well

as to potential investors and tradepartners.

Legend has it that traders and

travelers from ancient times such as

Sinbad, Marco Polo and Iban Buttuta

visited Sri Lanka and experienced the

splendor of the island.

Ironically, the teardrop shape of the

island has been in keeping with Sri

Lankas marred past due to the

impacts of a civil war which affected

the nation for over two decades. With

the dawning of peace and moving

forward, Sri Lanka now strives

towards realizing its real potential.

Presently considered as an emerging

investment, trade and tourism

destination, Sri Lanka is beginning to

experience an increasing pace in

development and economic activity.

Significant opportunities are expected

to arise in the vast number of

industries which contribute towards

domestic consumption requirements

and international exports.

Country Highlights

The New York Times ranked Sri

Lanka as No. 1 of the Best

Places to Go in 2010. (1)

Sri Lankas Stock Market became

2nd Best Performing Stock

Market in the World in 2009. (2)

Sri Lanka ranked among the Top

Ten Fastest Economies,

positioned at eighth in the world

according to the Economist

Intelligence Unit (3)

Inflation reduces to 6 percent in

2009. (4)

Civil War which impacted the

country for over 26 years ended

in 2009.

Annual Economic Growth Rate of

6 per cent for year 2008. (5)


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Economic Growth

The Sri Lankan economy expanded

to 4.2% in the third quarter of 2009(6).

Tourist arrivals and demand for the

islands tea and rubber are alsoestimated to have increased during

the recent half year. Even though

exports recorded a marginal decline

in 2009 due to impacts of the global

financial crisis, it is expected that

exports will increase considerably by

end year 2010.

A key attribute in the value

proposition of the island nation is its

untapped resources which could be

better leveraged by development of

industry and investment. Government

spending on projects in infrastructure

and specific sectors is expected to

contribute to fueling the Sri Lankan

economy. Mobility and revival of

industry in the Northern & Eastern

provinces of Sri Lanka is also likely tocontribute to the growth in industry.

Exchange controls

The year 2010 is anticipated to see

the Central Bank of Sri Lanka further

reduce foreign-exchange controls.

This is likely to make it easier forforeign companies to make

investments in Sri Lanka and also

result in increasing convenience in

trade and profit repatriation. Many

larger scale local companies are also

likely to list their shares on foreign

stock exchanges and also encourage

investors from overseas to invest in

local private corporates. The opening

up of the Sri Lankan economy paves

way for increasing trade and business

opportunities with Sri Lanka which is

also seen as an attractive production

centre and off-shoring destination.

Investments

Sri Lanka has demonstrated strong

investment potential luring in many

investors from countries across the

globe. Recent FDIs included severalmultinationals commencing business

or expanding operations in Sri Lanka.

Gains in many equity stocks,

availability of mandates and reforms

to the regulatory environment

currently taking place is creating a

more conducive environment which

provides a platform for trade and

export. Emerging and developing

economies are expected to grow by

around 6 per cent in 2010(6) and this

in turn should also positively affect

the Sri Lankan economy.

Source

1 New York Times

2 Lanka Business Online

3 The Permanent Mission of Sri Lanka to the

United Nations office at Geneva


5 Asian Tribune

6 Central Bank Annual Report 2009

Image courtesy BOI


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Growing EconomyAmidst the global financial crisis, Sri Lanka is

one of the few economies that showed a

positive growth that is expected to continue.

Reyaz Mihular explains the increasingpotential of the Sri Lankan economy.


Image courtesy BOI


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Growing EconomyThe Sri Lankan economy recorded

significant development during the 3rd

and 4th quarters of 2009 amidst a

landscape of a global financial crisis

and a recession which impacted on

many economies across the globe.

Compared to the 3rd quarter of 2008,

the third quarter in 2009 recorded a

growth of 4.2%(1). This growth was

greatly fuelled by the liberation of the

North and the promise of a united

country.

Economic Climate

The end of the civil war marked an

important milestone in Sri Lankas

development path as the nation can

now focus more attention on

development objectives. As business

confidence increases, it is likely that

more domestic investment and trade

will take place which could also be

complemented by increasing FDI

attracted to the country during recent

months. Revival of industry and

restoration of enterprise will further

contribute to positive economic

activity.

Gross Domestic Product

Sri Lanka depends on a strong global

economy for investment and for

development of its export base which

became a concern area during the

global financial crisis. Sri Lanka

earned the distinction of being one of

the few economies which performed

well during the last year. GDP has

shown a positive growth from 2005

and increased by 6% in 2008 (2) and

3.5% in 2009(5) .

The Service Sector, which accounts

for around 59.3% of the GDP in

2009(5), contributed significantly to the

growth of the countrys economy.

Approximately 28.6% of the GDP in

2009(2) came from the Industrial

sector and manufacturing which is the

largest sub sector within this category

accounted for as much as 17.4% of

the GDP(5). The agriculture sector,

which accounts for about 12% of the

GDP(5), and includes domestic

agriculture is anticipated to progress

significantly in the years ahead.

In addition, GDP per capita also

showed significant improvement by

growing to over USD 2,000 in 2009

when compared to USD 1,634 in

2007(5).

Foreign Direct Investment

Annual foreign direct investment to

Sri Lanka increased from USD 604

million in 2006 to USD 889 million in

2008(3) but it decreased to USD 601

million in 2009(5) and this was largely

attributed to the backlash of the

global economic recession. However

with the slow recovery of the global

market, 2010 is anticipated to show

Source: (2,5)

Source: (2,5)

Source: (5)


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increased FDI. In addition, foreign

investors have also shown much

interest towards investing in Sri Lanka

due to its geographical location,

convenient access to regional

markets, work force capacity, the

open economy and the various free

trade agreements.

Inflation

The economy which was impacted by

inflation levels exceeding 20% for

many years has now reduced to just

7.6% in 2008(2). Low inflation could

minimize the development of adverse

expectations, and the resulting

stability supports investors,

consumers, planners and policy

makers to make informed decisions.

Unemployment

The growth of the Sri Lankan

economy also led to the

unemployment rate recording 6

percent in 2007 compared to 7.7

percent in 2005(2). The unemployment

rate recorded a slight increase in

2009 but it is anticipated to decrease

in the near future due to the

development of industry and new

ventures as well as the required

increase in domestic production.

Economic Potential

Amidst the civil war and natural

calamities Sri Lanka strove to achieve

the potential that lies dormant in its

midst. Now with the end of the civil

war and the return of normalcy to the

land, the country stands poised to

reach its fullest potential and create

with it a land that is peaceful and

prosperous.

The road to recovery has begun

creating with it various opportunities

for numerous institutions to work

collectively in developmental efforts.

The investments made by the

government have helped increase

employment through job creation and

economic growth.

The country has within a short span

of time since the end of the civil war,

taken encouraging and positive steps

towards development. This has led to

Sri Lanka standing strong and

performing relatively well amidst a

global recession. In addition, thelifting of restrictions and the

encouragement of foreign investment

to the country has led to further

avenues being opened up for

exploration.

The Government of Sri Lanka is likely

to place significant emphasis on

economic objectives such as the

expansion of exports and domestic

production, increasing infrastructure

investments, controlling inflationary

pressures and bridging the presently

prevailing balance of payments

deficit. The private sector is apt to

play an important role in this process

as more and more initiatives are now

opening up for private sector

involvements.

Source

1 Bloomberg


3 Board of Investment of Sri Lanka

4 Department of Census & Statistics


Source: (3,5)

Source: (2,5)


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Investment

Opportunity

A conducive economic

environment and industry

growth potential are key to

investment.


Image courtesy BOI


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Manufacturing

Manufacturing has for many years

been an integral part of Sri Lankan

industry and contributed immensely

towards the export sector of the

country. Accounting for 17.4% of Sri

Lankas GDP in 2009(1), the sector

benefited enterprise by leveraging of

opportunities and the economythrough creation of employment and

foreign exchange inflows.

Manufacturing i n Sri Lanka

Sri Lanka is a production house to

many types of products including

apparel, ceramics, rubber products,

steel, toys, furniture, concrete and

equipment among many others. The

sector comprises establishments of

varied scale raining from mass

production factories to SME scale

manufacturing plants. Existing factory

infrastructure, labour in the form of

skilled and unskilled workers, an often

attractive wage cost structure and

logistical linkages makes Sri Lanka

an attractive location for housingproduction a centre.

Textiles & Apparel Sector

Textiles, wearing apparel and leather

products are one of the largest

industries in the island. The industry

has gained international repute for its

quality of products and ethical

conduct which prohibits practices like

sweatshops and child labour.

Rubber Products

The manufacture of rubber based

products has been a part of Sri

Lanka's economy since the early

1930's. As one of the world's largest

rubber producing countries, Sri Lanka

produces different types, forms and

grades of rubber as well as rubber

based products for export markets.

Ceramics

Sri Lankas ceramic industry boasts a

history dating back several centuries

and this influence maybe seen in its

craftsmanship. The local availability of

the raw materials is a strength

acknowledged in the industry along

with the advantage of a skilled cost

effective and efficient work force.

Other Industries

Relatively new opportunity in the

manufacturing sector is likely to cover

industries such as electronics and

components, industrial and machine

tools while industries such as

ceramics and glassware, rubber-

based industries are also likely to

further develop.

Source


Image courtesy BOI


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Agriculture and PlantationThe agriculture sector continues to be

a contributor to the Sri Lankan

economy and provides for both

domestic consumption as well as

international exports. The main

plantations in Sri Lanka include tea,

rubber, coconut and paddy which

have plantations spanning across

hundreds of square kilometers. In

addition, Sri Lanka has a number of

vegetable, fruit, herb, floral and

timber plantations.

Conducive Environment

Sri Lankas tropical climate with both

dry and wet lands makes the country

conducive to many types of

plantations. Rainfall in two main

seasons, irrigation systems and

natural soil in most areas also

supports in cultivation.

Plantation Potential

Sri Lankan tea is considered to be

one of the most sought after

beverages in the world and Sri Lanka

is also known for its rubber, coconut,

sugar, oil palm, cashew and palmyrah

produce. Apart from large scale

corporate owned plantations, a

significant proportion of the

population living in rural areas are

also engaged in agro-based industry.

The focus on agro based industries

as a source of livelihood has become

part of the rural development strategy

in Sri Lanka and is also a contributor

to economic development. Availability

of further land area which are

presently unutilized for plantation

creates considerable possibilities for

capacity expansion and domestic

employment creation.

Agri culture Sector

According to the Central Bank report

of 2008, the Agriculture sector

recorded significantly high sectoral

growth of 7.5 per cent in 2008 over

the growth of 3.4 per cent recorded in

2007(1) and it recorded a lower growth

of 3.2% in 2009 owing to the

contraction in the output of tea and

paddy(2) . Export agriculture growth

was led by tea and coconut

production while rubber also

contributed favorably.

Competitive Advantage

Sri Lanka provides well suited

atmospheric conditions for several

plantations including tea plantation.

Sri Lanka, brings a variety of taste,

quality, character and appearance to

its tea. This can be attributed to the

varying landscape of the country, its

climate and seasonal rainfall.

Source



Image courtesy BOI


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Infrastructure Projects

Recent economic development in

Sri Lanka has resulted in an

increasing pace in infrastructure

projects in spheres of roadways,

water supply, energy, ports &

airports, healthcare, telecom and

other infrastructure projects.

Energy

Sri Lankas main energy source is

hydropower which is harnessed

from the Mahaweli dam. In addition,

a number of hydro and thermal

power plants also contribute to the

national grid. Increasing energy

requirements and the need for

alternative energy is likely to imply

further growth in the energy sector.

Telecommunication

Currently seen as one of the fastest

growing sectors in the country, the

telecommunications industry recorded

significant development during the past

decade expanding from less than

0.76mn subscribers in year 2000 to

3.435mn in 2009 in the fixed line

segment and from 0.43mn subscribers

in year 2000 to over 14mn subscribers

in 2009 in the mobile segment.(1)

Roadways

Sri Lanka has embarked on a number

of road way, highway, flyover, bridge

and tunnel construction projects in

many districts as well as improvements

to its existing rail infrastructure. There

has been much demand for

specialized contractors in such

infrastructure projects.

Ports & Airports

There are currently 4 major ports in

Sri Lanka in Colombo, Galle,

Trincomalee and Kankasanturai

regions. The Port of Colombo is the

leading port which handles both

conventional cargo as well as

containers. The port of Colombo was

rated as one of the top 35 ports in the

world by 2008(2).

Sri Lanka also has 14 airfields and an

international airport. The International

Airport of Sri Lanka is also expected

to emerge as a regional hub between

Singapore and Dubai. A further

international airport is presently in

construction in the Southern region of

the country.

Challenges

Infrastructure development is of

paramount importance to Sri Lanka in

achieving its projected economic

targets and FDI is believed to play a

crucial role in this process.

Source

1 Telecommunication Regulatory Commission

2 New World Encyclopedia

Image courtesy BOI


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Technology and BPO

Sri Lanka is an emerging destination

for offshore software development as

well as business process outsourcing

(BPO) and knowledge process

outsourcing (KPO) services. The

country ranked within the Top 50

Global Outsourcing destinations by

AT Kearney and also ranked among

the Top 20 Emerging Cities by Global

Services Magazine (1).

IT and BPO Industry

At present, the industry comprises of

over 250 IT and BPO companiesincluding many captive operations.

These operations range from large

offshore processing and software

development centres to niche and

SME based BPOs. Within Sri Lankas

portfolio of BPOs are several back

office processing centres of global

companies.

Industry Development

The IT and BPO industries in Sri

Lanka have recorded significant

growth during the past decade and in

2007 the SLASSCOM association

was formed for collective industry

representation. The IT and BPO

industry in Sri Lanka is benchmarked

on a target of generating

approximately USD 1 billion in export

revenue by year 2012(1).

Knowledge Workers

Sri Lankas IT and BPO industries

employ approximately fifty thousand

people(1) and is powered by skilled

human capacity in spheres such as

information technology, finance, legal

and medical. Sri Lanka also produces

an estimated 30,000 IT and Finance

graduates and professionals each

year.

Infrastructure

Developed telecommunication and

office infrastructure is generally

available in most major cities in Sri

Lanka. In recent years, several rural

BPOs have also been formed as

sustainable citizenship initiatives.

Cost Structure

The inherent cost advantage in Sri

Lanka compares wage cost to be

appreciably lower than that of an

equivalent resource in a developed

country and is also significantly lower

than the resource cost in many

developing countries.

Markets

Sri Lankan IT and BPO operators

provide services to many international

markets including the United States,

the United Kingdom, Europe and

Australasia.

Source

1 SLASSCOM

Image courtesy BOI


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Equity Investments and

Corporate Debt

The Colombo Stock Exchange

The Colombo Stock Exchange

(CSE)s primary ASPI and Milanka

indices recorded significant gains with

the ASPI index closing at 3,385.6

points with a growth of 125% and the

Milanka index reaching 3,849.4 points

with a growth of 136% by end year2009(1). The annual gains of equity

stock was fueled by much interest

from both local and foreign investors

and led to the Colombo Stock

Exchange being recognized as Asias

Best performing and the world

second best performing bourse(2) .

Market Opportunit y

The often volatile market in Sri Lanka

has given opportunity for risk taking

investors to aim towards benefiting

from short term investments. To a

more cautious investor, the market

offers a range of equity stock for

longer term investments. In addition

to retail investors, the market has also

attracted several local and

international funds which invest in

portfolios of stock spanning across

investments in a number of industries.

Al ternate Investment Instruments

Even though equity stock is the most

common investment mode in Sri

Lanka, there are a number of

alternative investment options such

as corporate debt in the form of

debentures, warrants and a number

of investment funds operating in Sri

Lanka which could be considered.

Investing in Sri Lanka

Foreign institutions and individuals

are generally permitted to make

equity investments in Sri Lanka with

the exception of investments in a few

industries. At present, investment in

shares in Sri Lanka and repatriation

of proceeds should take place

through a specific category of

investment account known as the

Share Investment External Rupee

Accounts (SIERA) opened with

licensed commercial banks, which are

appointed as authorized dealers in

foreign exchange under the

Exchange Control Act. Individuals

resident outside Sri Lanka (inclusive

of Sri Lankans resident outside Sri

Lanka), approved regional funds,

approved country funds as well as

corporate bodies incorporated outside

Sri Lanka are generally permitted to

open SIERA accounts. Exchange

control regulations may apply when

making investments or repatriating

proceeds. Special provisions have

also been made at CDS to

accommodate foreign clients

operating from time zones different to

that of Sri Lanka(2). Specific

conditions may also apply.

Source

1 Colombo Stock Exchange


Image courtesy BOI


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Services Sector

The services sector is the largest

contributor to the GDP of the country.

Accounting for 59.3% of the overall

GDP this sector currently employs

42% of the local labour force(1).

Transport, communication, banking,

insurance, health care, education and

real estate are key contributors to the

growth of this sector and their full

potential remains untapped.

Financial Services

The banking sector is one of the most

dynamic sectors in the country and

during the last few years there has

been increased development in terms

of institutions, instruments, range of

services, and the geographic

coverage. There are an estimated

2200 plus bank branches across the

island and currently there are eleven

foreign commercial banks including

five multinationals in the country.

There are eighteen insurance

companies in the Insurance sector(3)

and this includes a number of

insurance companies with domestic/

foreign partnerships. Both Banking

and Insurance were key performers in2009 and the banking, insurance and

real estate sub sector accounted for

8.9 percent of the nations GDP (1).

Education and Skills Development

Another area that has been gaining

increasing attention and demand is

the education services sub sector.

Due to the limited capacity in the local

university system, a vast majority of

persons with entry qualifications

cannot go to university. This has led

to the establishment of a number of

educational institutions offering

external degrees and professional

qualifications through international

collaborations and opening of trainingcentres in many regions across the

country.

Service Sector Development

The service sector is one of the most

resilient sectors in the country and

although there was a slowdown in

2008 in reaction to domestic

monetary tightening and the effects ofthe global economic crisis, the

situation has changed for the better

and the Department of Census and

Statistics, in their recently released

breakdown of Sri Lankas GDP

performance for the third quarter of

2009 showed that GDP grew by

4.2%(2). This was largely attributed to

the return of growth in the services

sector caused by increased domestic

trade, transport and financial

services. This resilience is partly why

a significant percentage of FDI is

spent on the services sector and

there is still much potential for the

sector to grow in the near future.

Source


2 Department of Census and Statistics

3 Insurance Board of Sri Lanka

Image courtesy BOI


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Tourism and Leisure

Nestled in the heart of the Indian

Ocean, Sri Lanka is a tropical

paradise which offers much to see

and do for travelers and tourists from

around the world. Comprising of clear

sandy beaches, a mountainous hill

country with waterfalls and fauna,

ancient monuments dating back

centuries, wild life sanctuaries and a

range of other tourist attractions, Sri

Lanka is indeed a must see

destination for any tourist and also a

potential investment destination for

tourism and leisure sector entities.

Tourism Industry in Sri Lanka

Sri Lanka recorded 233,922 tourist

arrivals during the first five months of

2010 representing a 48.5% increase

from the same period in 2009(1). The

number is expected to rise further

due to improvements in recent

international tourism ratings and the

removal of travel advisory restrictions.

Tourism Infrastructure

The country presently has a number

of five star class hotels and over 180

hotels and resorts including boutique

hotels, resort hotels, semi luxury

hotels, rest houses as well as a range

of serviced apartment complexes.

The industry is also complemented by

tour operator companies.

Hospitality and Service Quality

Hospitality is an integral part of Sri

Lankan culture and most tourists find

the locals to be friendly and helpful.

The tourism industry benefits from a

skilled workforce trained through hotel

schools as well as through

experience in existing hotel

operations.

Investment Opportun ity

Anticipated increases in tourist

arrivals and potential for capacity

expansion is likely to imply a need for

more tourism sector infrastructure

including luxury hotels, specialized

hotels as well as industry support

infrastructure.

A number of tropical beach front

locations and land in relatively close

proximity to heritage sites, scenic

locations and sanctuaries provides

opportunity for tourism sector

operations. The tourism industry also

creates opportunity in related spheres

such as travel support, airlines and

luxury retail.

Establishing investments in the

tourism sector requires a number of

requisite approvals and may also be

subject to qualifying criteria

depending on the nature of the

investment.

Source

1 Sri Lanka Tourism Development Authority

Image courtesy BOI


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Why Invest in Sri Lanka?Premila Perera explains why Sri Lanka has become anincreasingly popular investment destination in Asia.


Image courtesy BOI


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Market Access

Sri Lanka is home to a population of

over 20 million people and is also an

entry point to many markets in the

Asian and Middle Eastern region.

Free Trade Agreements (FTA), Trade

Agreements and Quota arrangements

also make Sri Lankan exports

attractive in many international

markets.

Sri Lankan Market Access

The once traditional saving economy

is now seen as a small but interesting

market place for many international

products and services. Growing

demand for consumer goods,

electronics, retail, automobiles and

household products as well as niche

markets for luxury and fashion

creates a range of business and trade

possibilities within the country. Trade

is also supported by existing

distribution channels with retailers,

wholesalers and agents in most

industries. Commencing trade in Sri

Lanka often requires prior approvals

depending on the product or service

offerings and may also be subject to

taxation generally at points such as

importation and sales.

Market for Services

In addition to product consumption;

Sri Lanka also has a market for

services such as mobile

telecommunication, transportation,

financial services, education and

healthcare with broad penetration to

the mass market. Licenses may berequired to enter such industries.

Regional Market Access

Sri Lanka has a number of trade

agreements in place with neighboring

countries in the South Asian region

and also has close trade relations

with several countries in the Middle

East, Europe and Asia Pacific

regions. Trade agreements provide

for convenient exports which often

become more cost effective and in

most instances avoids double

taxation.

Sri Lankas geographic position gives

the country an inherent trade

advantage due to close proximity to

the Southern Coastal tip of India as

well as its position amidst a key trade

route in the Indian Ocean. As a trade

hub for South Asia, Sri Lanka has a

number of ports, an international

airport and developed freight &

logistics infrastructure which further

enhances market access potential.

Trade Agreements

Many countries have trade

agreements with Sri Lanka which

provide for reciprocal trade

opportunities between the two

countries. Some of the countries

which have trade agreements with Sri

Lanka* include;

India

Pakistan

Bangladesh (a)

China (b)

Korea (b)

Bangkok (b)

Maldives (a)

(a) Through SAARC Preferential

Trading Agreement

(b) Through Asia Pacific Trade

Agreement

(1)

* - Subject to change

Image courtesy BOI


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Double Taxation Treaties

Sri Lanka has entered into double

taxation treaties with over 30

countries which assists in the creation

of a conducive framework for foreign

investment and international trade.

Such treaties also eliminate or

mitigate the incidence of juridical

double taxation and avoidance of

fiscal evasion in international trade or

transactions. Some of the countries

having double taxation treaties with

Sri Lanka include the United States of

America, United Kingdom, Germany,

France, UAE, Singapore, Malaysia,

China, India and Pakistan.* (2)

Investment Protection

Sri Lanka has a number of bilateral

investment protection agreements

which provide increased comfort to

international investors and trade

partners. Investment protection

agreements exist between Sri Lanka

and countries such as Belgium,

Canada, China, Denmark, Egypt,

Finland, France, Germany, Iran,

India, Italy, Indonesia, Japan, Korea,

Malaysia, Netherlands, Norway,

Pakistan, Romania, Singapore,

Sweden, Switzerland, Thailand, the

United Kingdom and the United

States of America.

Sri Lanka is also a founder member

of the Multilateral Investment

Guarantee Agency (MIGA).

This provides further safeguards

against expropriation and non-

commercial risk. Investors may also

refer disputes for arbitration under the

rules of the International Chamber of

Commerce.*

* - Please note that the applicability

and availability of such agreements

are contextual and maybe subject to

change.

Source

1 Board of Investment - Sri Lanka 2 Inland Revenue Department - Sri Lanka

Image courtesy BOI


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Manufacture and Exporting

Production in Sri Lanka

Sri Lanka is home to over a thousand

factories engaged in the manufacture

and export of a range of goods and

semi processed produce. Access to a

cost effective pool of skilled and semi

skilled labour, comparatively cost

effective overheads and abundant

space to set up factory operations

makes Sri Lanka a lucrative

production centre.

Exporting Potential

Among Sri Lankas production

locations are several world class

factories which adopt 5-S

frameworks, work on 24 hour

operations and adhere to benchmark

quality and process standards. Sri

Lankan exports in apparel, ceramic

and industrial rubber products are

considered to be leaders in several

international markets. Exporting

continues to be a key income

generator for the Sri Lankan

economy.

Competitive labour cost with monthly

wages ranging between approximate

USD 64 - 97 for skilled labour, USD

50 for semi skilled labour and USD 45

for unskilled labour(2) is yet another

strength in Sri Lankas value

proposition. Sri Lankas export sector

also benefits from a developed freight

and logistics network comprising

container yards, container

transportation, shipping and airfreight

facilities. Sri Lankan produce is

exported to many countries across

the globe.

Infrastructure

Existing factory infrastructure such as

buildings, machinery and systems are

often available for acquisition or

alternatively could be constructed and

prepared for operation by a number

of specialized industrial contractors

operating in Sri Lanka. There are aseries of concessions available when

importing equipment and machinery

which is to be used for export

manufacturing in Sri Lanka.

In addition to direct infrastructure,

supportive infrastructure such as

water & air purification systems,

power generation and roadways are

often accessible or easily

constructible.

1

Source

1 Export Development Board of Sri Lanka

2 Board of Investment Sri Lanka

Image courtesy BOI

Image courtesy BOI


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Export Processing Zones

Sri Lanka has a number of

designated Export Processing Zones,

Industrial Parks and Export

Processing Parks situated across the

country. The zones provide for

convenient access to factors of

production and often close proximity

to ports and airport facilities for

convenient dispatching of produce.

The approximately 22 hectare

Katunayake Zone (KEPZ) and the 80

hectare Biyagama Zone (BEPZ)

house a large number of production

operations and are located in close

proximity to the countrys commercial

capital Colombo.

Benefits to Exporters

The main benefits of EPZ include the

convenient access to land, premises,

labour, materials and infrastructure as

well as an existing supply &

deployment chain which fuels and

greatly supports productionoperations. Operations located within

export processing zones may also

benefit from time to time concessions,

grants and financing assistance. The

export processing zone concept

attempts to maximize economies of

scale in production through the

sharing of centralized infrastructure

between a large number of factory

operations for the mutual benefit of all

operators within the zones as well as

for the development of the

communities living in close proximity

to these regions.

Expansion of Zones

Economic development priorities in

the country is likely to pave way for

the creation of further processing

zones in the Northern, Eastern and

Southern provinces of Sri Lanka while

also establishing focused zones

which place emphasis on specific

industries such as IT and

Technology. Continued investments

are also likely to take place to further

enhance infrastructure within existing

processing zones in the foreseeable

future.

Source

1 Board of Investment Sri Lanka

Image courtesy BOI

Image courtesy BOI

(1)


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Modes of InvestmentSuresh Perera describes some of the modes of investment into Sri Lanka.


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Modes of InvestmentBoard of Investment

The Board of Investment of Sri Lanka

(BOI) functions as the central

facilitation point for investors entering

into Sri Lanka. Investors who enter

into agreements with the BOI may

benefit from a range of incentives

and/or concessions and is often a

popular mode of entry for medium

and large scale investments into Sri

Lanka. Companies that have entered

into agreements with the BOI employ

over 400,000 workers and account for

nearly 70% of Sri Lankan exports and

80% of the countrys industrial

exports(1).

Investments routed through the BOI

fall into two categories;

i. Approvals granted by the BOI for

the investment to be governed by the

normal laws of the land.

ii. Where investments are made

consequent to the investor entering

into an agreement with the BOI tosecure privileges such as tax

holidays, concessions, and waivers

from the application of certain

statutes.

As an autonomous statutory body, the

BOI is empowered to grant incentives

such as tax holidays, preferential tax

rates, exemptions from customs duty

and foreign exchange controls to an

eligible enterprise at its discretion

subject to the regulatory framework.

Eligibility for each scheme is

generally based on specific qualifying

criteria such as the industry, nature of

business, quantum of investment,

employment creation and geographic

location within the country and in

specific instances may also be

subject to specific conditions as

deemed by the BOI.

Source

1 Board of Investment of Sri Lanka

Image courtesy BOI

Image courtesy BOI


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Modes of Investment

Investment in Shares

Investment in shares is yet another

popular method for investment into Sri

Lanka and there are hundreds of

instances where overseas companies

and individuals have invested in

shares of local companies in Sri

Lanka as a mode of entry.

Non residents are permitted

investment in shares in local

companies subject to rules

promulgated by the exchange control.

subject to limited areas restricted for

locals, foreigners may invest in sharesin most of the areas such as financial

services, manufacturing operations

and exporting. Whilst both listed and

unlisted shares are open for

investment, rules provide for easy

repatriation of dividends and sale

proceeds of shares.

A number of mandates, private

placements and IPOs are usuallyavailable to be considered by

potential investors who could also

consider the investment potential in

listed companies as well as in private

companies where present owners

might be considering a dilution of their

equity holding or an outright sale.

There are approximately 250

companies listed in the CSE. Many

companies also seek additional

capital injections to facilitate

expansion giving potential for

investors considering investment into

such companies

Branch OperationsForeign companies may register

branches in Sri Lanka in compliance

with the provisions of the Companies

Act No. 7 of 2007. This mode of entry

has been utilized by several

multinational banks in their entry to

Sri Lanka. Branch operations whilst

exposing the foreign companies to

the liabilities of the branch, is outsidethe purview of the BOI.

Public-Private-Partnerships

Sri Lanka encourages Public-Private-

Partnership (PPP) arrangements in

specific investment areas which are

generally centric on collaboration

between the State Sector institution

and the investing organization. Such

projects are generally long term

project of large magnitude which

attempt to contribute significantly

towards the economic objectives of

the country. PPP projects have taken

place in sectors such as

infrastructure, education, healthcare,

and technology. PPP projects also

generally tend to enhance the use of

State assets towards a mutually

beneficial arrangement which benefits

multiple stakeholder communities

including the State institution, the

community and the private investor.

The Sri Lankan Government has also

encouraged a number of Build, Own

Transfer (BOT) and Build Own

Operate (BOO) arrangements for

major projects during recent years

and it is likely that the interest in this

segment of PPPs will continue in the

foreseeable future.

Image courtesy BOI


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Modes of Investment

Such arrangements are often

considered on a case by case basis

where the Government may provide

special concessions such as the

reimbursement of local taxes andcustoms duty to the investing party.

BOT and BOI arrangements are

generally initiated by the relevant

state institution and then passed

through a number of requisite

approvals prior to contracting.

Al ternat ive investments

Other investment avenues which maybe considered include the acquisition

of assets or business as a going

concern with appropriate structuring,

investments in real estate such as

land and property or investments in

securities such as treasury bills orbonds. Non residents are also

permitted to invest in instruments

such as government securities

(Treasury bills and Treasury bonds,

Sri Lanka development bonds, Sri

Lanka Nation Buildings bonds and

Reconstruction bonds). Investment

procedures would differ depending on

the mode of such investments.

Image courtesy BOI

Image courtesy BOI


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Development PotentialIncreased accessibility to the Northern and Eastern provinces of Sri Lanka brings new

economic opportunity. Jagath Perera describes.


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With the end of a two and a half

decade long civil war, the Northern

and Eastern Provinces of Sri Lanka

have recently generated much

interest as areas that offer good

investment opportunity to both

domestic and foreign investors.

Northern province

The Northern province of Sri Lanka

stands in close proximity to the South

region of India. Legend has it that the

Northern Province was connected to

the Indian mainland by Ramas bridge

which was used by the people of both

countries to go to and fro. The

Northern Province is surrounded by

the Gulf of Mannar and Palk Bay to

the west, Palk Strait to the north, the

Bay of Bengal to the east and the

Eastern, North Central and North

Western provinces to the south.

Covered in tropical forest,

complimented by lagoons and with a

coastal belt about thirty meters above

sea level this province has the

potential to be developed into a great

commercial hub. Due to the civil war a

great number of people migrated toother areas across Sri Lanka.

Agriculture and Fisheries, which were

among the main businesss of this

region are slowly being nurtured and

there has also been recent

investment into industries like ceramic

manufacturing in this area. Jaffna is

the capital city of the Northern

Province. The fisheries sector in the

Jaffna district employs a large

number of people. With the end of the

war, there is opportunity for this

sector to reach its full potential. The

agriculture sector in Jaffna focuses

on the production of food and cashcrops. The production in this region

has been generally high due to the

favorable weather and soil conditions.

Eastern Province

The Eastern Province is roughly

10,000 square kilometers. It boasts of

one of the few natural deep water

harbours in the region and legend

has it that has welcomed many of the

great sea farers including Ptolemy

and Marco Polo. Trincomalee, the

Capital city of the Eastern Province is

home to the bay of the trincomalee

harbour, a large and strategically

important natural harbour which has

the distinction of being considered as

one of the largest and most secure

harbours in the area. It has the

characteristic of being accessible to

most types of crafts in varied weather

conditions. The coast of this area is

also suited for water sports and waterrecreation activities. In addition this

area also has one of the largest

Dutch Forts in Sri Lanka.

Another feature of this region is the

seven Hot Springs of Kinniya which is

bound by a high wall. Though the

progress and the development of this

area had been hindered by the civil

war, its strategic location and natural

resources makes it one of the key

areas that are being looked at for

development. There is also effort to

develop the harbour of Trincomalee

into a commercial sea port.

In addition there is also targeted effort

to develop dairy, horticulture,

fisheries, aquaculture, tourism, and

logistics in this area.

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Challenges

One of the key challenges to the

development of this region is the lack

of proper infrastructure facilities. Due

to the intensity of the conflict both

domestic and foreign investors were

reluctant to invest in the region for

many years. This combined with the

mass migration of a good percentage

of its population led to the area being

neglected for many years.

However recently together with the

renewed interest in the region the

Government of Sri Lanka has set

aside a large percentage of its funds

for the development of the

infrastructure in the North and the

East regions of the country. This in

turn has encouraged a large number

of its people to return to the area. As

a result the labour force in the regionhas also seen a rapid increase.

Opportunities

The growing demands from nearby

markets makes Sri Lanka one of the

preferred sources for tropical fruits

and other fresh produce. The

Eastern Province in particular has the

potential to re engage in the

production of cashew for the

domestic and foreign markets.

Another avenue of opportunity in the

East lies in the development of the

Fisheries sector. This region has

significant access to fresh, brackish,

and saltwater required for

aquaculture and inland fisheries

sector development.

A further advantage offered in this

region is a skilled labour force. Before

the war Jaffna in particular was

known for its cement, chemicals and

salt factories. With the civil war many

of these factories closed down and

its employees were left with the

knowledge but without the means to

utilize them. The literacy rate in this

area is also high and this combined

with their knowledge makes them an

ideal skilled labour force.

Tourism in the region also seems

poised to grow. The beaches in the

North and the East are the some of

the best in Sri Lanka and this area

also has many historic and religious

sites including Nallur Kovil, Jaffna

Fort, churches, temples and kovils

people can visit. According to

estimates around 500 people visit

Jaffna daily(1) . This has led to more

investors setting up hotels in the area

to meet the needs of the increasing

crowds. Trincomalee too has already

created a name for itself as a tourist

location. Blessed with some of the

finest coast lines and recognized as

one of the best surfing locations, it

offers both history and idyllic beauty

to its visitors.

Jaffna and Trincomalee with their

surrounding regions are in fact

resource lands whose potential was

untapped for many years. All these

factors combined with the beauty of

the region makes it a land of

significant opportunity for the

imaginative investor.

Source

1 Daily News

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Investor ChallengesPriyanka Jayatilake provides insights into the challenges

faced when investing in Sri Lanka and how KPMG

engagement teams could assist.


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Incorporation and requisite

approvals

Establishing a local operation in Sri

Lanka often requires theincorporation of a company as well as

seeking a range of requisite

approvals prior to commencement of

business. There are also a series of

alternative methods which could be

considered in business formation.

Avail ing incent ives

Investing in Sri Lanka may give

opportunity to avail certain incentives

if the investment meets defined

qualifying criteria, the investment is

made through an investment scheme

and through a specific investment

authority. Identifying incentive

opportunities requires a detailed

understanding of the various

investment schemes offered tointernational investors and adequate

knowledge of qualifying criteria.

Taxation and profi t repatriation

Investment structuring is an important

focus area for any investment to Sri

Lanka. Firstly the structuring of the

investment could affect the entitys

tax exposure and secondly also

impact on repatriation of earnings

both in the short term and the longer

term. Investment structuring prior to

investment is generally advantageous

since little flexibility exists to transfer

between the various schemes after

commencement of operations.

Evaluating investments

While it is anticipated that there is

significant investment potential in Sri

Lanka, it would be beneficial for the

investor organization to evaluate the

opportunity in context of its own

organizational alignment. Not every

investment is suitable for everyoneand a feasibility assessment is useful.

Understanding locality

As is the scenario in many offshore

investment projects, the investor

often requires an adequate

understanding of the local operating

environment of the investment

destination as well as the market and

culture which become increasingly

important concern areas in

investment evaluation and business

operation. Sri Lanka as a nation has

its own culture, operating procedures

and regulations.

Regulation

Depending on the nature of

investment and mode of operation, a

number of regulatory and legal

requirements may also need to be

considered prior to commencement of

business. This could range from

considerations such as labour laws

and corporate regulations.

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We can assist

KPMG in Sri Lanka provides a range of advisory and tax

services for corporates which are exploring investmentopportunities or establishing operations in Sri Lanka.

The following section of this publication describes how

KPMG in Sri Lanka could assist investors through theinvestment process.


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We can assistKPMG in Sri Lanka

KPMG Ford, Rhodes, Thornton & Co. (KPMG in Sri Lanka) is

one of the largest and oldest professional practices in Sri Lanka

counting over a century of operation since inception. In Sri

Lanka, the Firms resource base comprises of 12 Partners and

over 750 professionals and administration staff providing audit,

tax and advisory services to over a thousand client

organizations. The Firms reach spans across the island with

branch offices in multiple districts in Sri Lanka covering the cities

of Colombo, Galle, Kandy, Kurunegala and Jaffna.

During the recent decade KPMG in Sri Lanka has provided

advisory and tax services to over one hundred inbound

investment projects to Sri Lanka ranging from multinationals

establishing operations in Sri Lanka to small scale business

entities setting up offshore processing centres.

Investment Advisory Team

The investment advisory services virtual business unit brings

together resource persons from multiple divisions of KPMG in Sri

Lanka who combine a wealth of experience and knowledge

towards supporting inbound investment projects. Their

experiences in advising on investment structuring, assisting in

the various phases of the investment process, understanding of

the challenges facing inbound investment and prior experience in

liaising with relevant authorities would enable them to provide a

value enhancing proposition for your inbound investment. A

number of related advisory services are discussed in the

subsequent sections of this publication.

Reyaz Mihu lar

Partner Head of Advisory

KPMG in Sri Lanka

Premila Perera

Partner Head of Tax

KPMG in Sri Lanka

Priyanka J ayatilake

Partner Head of Outsourcing

KPMG in Sri Lanka

Jagath Perera

Partner Head of IARCS

KPMG in Sri Lanka

Suresh Perera

Principal Tax & Regulatory

KPMG in Sri Lanka

Investment Advisory Team


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We can assist

Investment Structuring

There are many methods and investment vehicles

which could be used in inbound investments to Sri

Lanka. Investments are often eligible for multiple

schemes of entry and as such it would be beneficial to

carefully evaluate the options since this choice would

subsequently affect the extent of incentives which

could be availed, the complexity of business operation,

compliance requirements and profit repatriation.

KPMG in Sri Lankas investment advisory team

advises in structuring of investments and thereby

assists client organizations to avail incentives and

better manage tax exposure.

Company Incorporation

Incorporating a company in Sri Lanka as a subsidiary

or associate of the parent company is a common step

of entry which is adopted by large, medium and small

scale international investors when making investments

into Sri Lanka. The company incorporation process in

Sri Lanka requires the filing of several documents with

the relevant authorities in Sri Lanka and also satisfying

several compliance requirements which need to be

satisfied in order to incorporate the company.

Secretaries and Registrars (Private) Limited (S&R),

an associate company of KPMG in Sri Lanka can

assist in the company incorporation process and also

provides a range of secretarial services to support

client establishments thereafter.

Acquisit ions & Mergers

Acquisition of existing business entities is a popular

mode of entry for overseas institutional investors making

investments into Sri Lanka. The acquiring party often

benefits from the existing operations of the target entity

in Sri Lanka and also bypasses the complexities and

possible time requirement in business inception. KPMG

in Sri Lankas Transaction Services and Corporate

Finance teams provide a range of advisory services to

assist in an acquisition or merger. These include;

financial and commercial due diligences, advise on

acquisitions or mergers and valuation services. A

number of mandates are also generally available for

discussion with interested investors.

Financial Feasibil ities

Some of the relatively large scale investment projects to

Sri Lanka may require financial feasibility reports and

business plans to be produced to assist in negotiations

with relevant authorities. Such reports enable the

organization to build a justified business case which

would be useful when seeking requisite approvals for

the proposed investment project or incentive scheme.

KPMG in Sri Lankas investment advisory team advises

on the preparation of financial feasibility reports and

business plans contributing industry understanding,

commercial insight, locality and experience.


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We can assist

Outsourcing

Inception is often considered as one of the most

challenging phases of business operation which can

often result in a strain on management resource

persons who have to manage administrative

requirements in addition to their business functions.

KPMG in Sri Lanka provides a range of outsourcing

services to assist companies in establishing and

operating finance and other back office functions.

These include; accounting functions, assistance in

setting up systems and procedures and payroll

services.

Human Resource Sourcing

Inbound investment companies also face the

challenge of recruiting suitable human capital with the

skills and experience to contribute towards their

business. KPMG in Sri Lankas Executive Search &

Selection team provides a range of services including

head hunting, advising through the recruitment

process as well as advisory services such as

remuneration surveys, incentive scheme structuring

advise and maintaining of HR records.

Infrastructure Projects Advisory

Investments in large infrastructure projects such as

roadway construction, energy, healthcare infrastructure

and construction often benefit from the experience and

advise from professionals with prior experience in

projects of similar magnitude within Sri Lanka. KPMG in

Sri Lanka provides a range of services to assist in

infrastructure projects including advise on business

planning, financial feasibilities, project management

advise, advise in structuring of investments, assistance

in negotiations with authorities and advise in entry

strategy formulation.

Public-Private-Partnerships

Public-Private-Partnerships are another investment

avenue for entities wishing to make investments of a

significant magnitude specifically aligned with State

Sector development goals in the country. PPPs in Sri

Lanka generally involve a collaboration between the

private / international investor and the relevant State /

Semi-Governmental institution which work towards

combining strengths and synergies to realize the

outcomes of the project. KPMG in Sri Lanka advises on

PPP arrangements and assists in discussions with

relevant authorities and agencies in Sri Lanka.


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More than just business..

Amidst all the development and business opportunity offered

in Sri Lanka, travelers and investors have also found that the

country offers a host of attractions that make it one of the

most desirable places to visit.


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Things to see

In Colombo

Land locked on one end with the blue

of the Indian ocean courting the

other, Colombo has emerged as the

commercial hub of Sri Lanka. Though

never a planned city it has been

moulded by time and its people. Over

time Colombo has developed into a

picturesque yet busy city centre and it

is the commercial heart of Sri Lanka.

During the latter half of last year Sri

Lanka has seen an influx of investors

and tourists, taking advantage of the

many opportunities and breathtaking

beauty offered by this city. Investors

have found that the infrastructure and

intellectual capital makes Colombo a

prime location from which to host their

business or operate regional access

centres. At the same time tourists too

find that the entertainment, shopping

and sight seeing offered in Colombo

make it a prime location from which to

start their tour of Sri Lanka.

Colombo is a city bustling with life

and vibrancy and it has diverse

attractions to offer. Shopping has

become the favourite past time for

many a tourist and Colombo houses

a diverse range of shopping options

from malls to boutiques to craft stores

and street stalls which offers a wide

variety of items from clothing to

furniture and porcelain. Whether you

are looking for a gift for a loved one,

or just window shopping in the hope

of finding a good bargain the shops of

Colombo are likely to meet your

needs.

The restaurants in Colombo are rich

and varied. With diverse cuisine to

suite the most discerning palate

ranging from restaurants specializing

in western favorites to eateries that

cater to more exotic appetites.

Down South

Sight seeing is another past time that

many tourist engage in as they visit

other countries. A few miles south of

Colombo will find you amidst the

breathtaking beaches and palm trees,

where you can relax in the numerous

hotels dotting the coast line or try

your hand in the various water sports

and games offered in the area.

Another famous past time offered in

this area is Dolphin and Whale

watching. The Sri Lankan coast is

also a great place to catch a glimpse

of the several species of turtle who

come ashore. Whether you wish to

retreat to a therapeutic Ayurvedic

hotel or pampered and cosseted inn a

luxury boutique hotel the down south

area offers a choice of leisure options

to suit the most discerning traveler.

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Up Country

If you get tired of lolling around the

beach and wish to visit a more scenicand temperate place then the hills of

Nuwera Eliya will welcome you with

open arms.

Affectionately known as Little

England, Nuwera Eliya which means

City on the Plain, offers one of the

most charming and beautiful natural

landscapes in the country. Founded

in the 19th

century and frequented by

the British in Sri Lanka at the time for

their fox hunts and horse races, the

architecture of this city still retains its

colonial feel.

The drive up to Nuwera Eliya is steep

and winding but the breath taking

scenery is one of the best features of

the drive. Surrounded by lush and

rolling mountains, complimented with

waterfalls and streams this area is

one of the must see sights for any

nature lover.

Travelers can also see the traditional

tea pluckers carrying their baskets on

their back and plucking tea amidst the

tea estates and even visit a tea

factory to learn about the process that

takes a tea leaf and makes it into one

of the most delicious brews of all

time.

Nuwera Eliyas current attractions

include the golf course, trout streams,

Victoria Park, and boating or fishing

on Lake Gregory. This city is also

justifiably famous for its tea, and you

will find many tea stores that offer the

weary traveler a chance to sit, relax

and refresh themselves with a

steaming cup of Sri Lankan tea.

National Parks

There are a number of National Parks

in Sri Lanka which are managed and

maintained by the Department of WildLife and Conservation. These

national Parks are home to a variety

of wild life including elephants,

leopards, sloth bears, spotted deers,

wild boars, sambhur and numerous

varieties of birds.

With its beauty, history and culture of

hospitality Sri Lanka truly is the Pearl

of the Indian Ocean.

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Cultural Triangle

Sri Lanka houses many monuments

and statues that have stood the test

of time and remains as a testament to

the history and grandeur of the Sri

Lankan people. One of the most

famous historical sites is the Cultural

Triangle. Anuraddhapura and

Pollonaruwa are two of the oldest and

greatest capitals in Sri Lanka. The

cultural triangle refers to the

monumental ruins of these ancient

cities which includes statues and

libraries, palaces and places of

worship including the ancient

monasteries, whose architecture and

beauty continues to draw admiration

today.

Another historical site (and the centre

of the cultural triangle) is the

magnificent Sigiriya Fortress built by

the King Kashyapa in the 14th century

as a fortress and palace from which

he could reign. Originally believed to

have been built in the shape of a lion

this ancient site is home to one of the

most elaborate landscaped gardens

of ancient times. A feature in Sigiriya

are the stunning frescos of the palace

maidens and the mirror wall which

runs along one area of the rock which

was used by many visitors to leave

behind their comments and

compliments of the rock city.

The Cultural Triangle also covers the

ancient city of Dambulla, which is

home to the famous Rock Temple

and the ancient city of Kandy which

continues to be one of the most

important cities in Sri Lanka and it is

renowned for hosting the Kandy

Perahara, a colourful and historically

significant religious pageant that has

taken place routinely since the 15 th

century.

Sri Lanka is indeed considered as a

must see tourist attraction and with its

splendorous environment, rich history

and a strong culture it is certainly a

destination one should visit .

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Appendices


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ReferencesPg.7 (1) New York Times: 31 Places to Go 2010 (10 January, 2010); at:

http://www.nytimes.com/2010/01/10/ travel/10places.html

(2)

(3)

(4)

(5)

(6) Central Bank Annual Report 2009 (Web Edition) at: http://www.cbsl.gov.lk/pics_n_docs/10_pub/

_docs/ efr/annual_report/ar2009e/ar09_content_2009_e.htm

Pg.10 (1) Bloomberg: Sri Lanka Economy to Expand More Than Forecast, Cabraal Says (4 January 2010);

at: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aHXW_2uQjy7A

(2) Central Bank Annual Rep

Exploring the Opportunity

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