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SWOT ANALYSIS

SWOT Analysis for Sri Lanka as a commercial Hub

Strength

Political stability: Sri Lanka has emerged from a long internal conflict into a new stage in its political and economic transformation. The elections of 2015, largely heralded as a win for inclusive governance, provided a clear mandate tothe Government’s administration, which focuses on economic development.
Open economy and conducive investment environment: Sri Lanka is an open economy and has heavily steered towards improving its infrastructure, and attracting foreign investment.
Pool of facilities and incentives provided by the Board of Investment in Sri Lanka for foreign investors.
Sri Lanka is the only country that has Free Trade Agreements with both India and Pakistan, giving duty free access to nearly 1.5 billion consumers in South Asia from the island. In addition, by locating in Sri Lanka, a company can gain preferential trade access to two large regional blocs under the SAFTA and APTA92.
Investment protection and double taxation:Sri Lanka is one of the safest countries in the world to invest in due to a number of mechanisms in place to protect investors. Sri Lanka has signed bilateral investment protection agreements with 28 countries. The country has a very independent system of courts which can redress any concerns of investors93.
Cultural orientation, religious value, respect for people, traditions and sacred sites
English is the main language used by the business community. More than 67% of the population is between 15-64 years old, and as a result, the country currently has a high percentage of its population in the labour force94.
Sri Lanka leads the South Asian region in human development indices and Sri Lanka’s human development index ranked 73rdamong 188 countries95.
Low mortality rate of 8.40% in 2015 and the steadily declining population growth of below 1% reflect the country’s progress in the sphere of social development and health care96.
12thplace in Global Location Trends Report in 201597.
19thposition by the Tholons (service globalization and investment advisory firm) Top 100 Outsourcing Destinations Report in 201498.
Sri Lanka has no volcanoes, huge earthquakes and enjoys a tropical climate with varying temperatures according to the location.
The Sri Lankan Government has launched an ambitious program of infrastructure development to completely upgrade the sea, air, road, and power and telecom backbone of the country.

Opportunities

  • Sri Lanka is recognized as a fast growing economy in the South Asian region with a GDP growth over 6% for the last three years (2013-2015)99.
  • Geographical location of Sri Lanka in the path of major sea routes gives Sri Lanka a strategic naval link between West Asia and South East Asia
  • The geographical diversity, rich cultural heritage, wildlife, and beautiful coastline makeSri Lanka an attractive tourism destination.
  • The geographical size of the country facilitates easy movement within the country
  • Long-term Government support for foreign investors
  • Growing political and economic relationships with the world
  • Trainable workforce with the basic English knowledge
  • Sri Lanka is embarking to be a commercial hub. Sri Lanka is well positioned to support the needs of international trade, transportation and logistics. With the growing Asian middle class which would account for 50% of the global middle class by 2030, as predicted by UNCTAD, the requirement to manage global inventory and supply chain,is going to be a significant challenge and an opportunity in Asia100. This will give Sri Lanka a huge boost to expand its economic activity to become the hub in South Asia.
  • Emerging as a logistic centre in Asia
  • Ethnic and religious diversity within the country
  • The government’s target tourist arrivals and tourism revenue requires further investment in new hotel rooms and touristic activities
  • Sri Lanka has a reputation for highly treasured gems. Sri Lanka’s mineral rich soils have been yielding a seemingly never ending supply of high quality precious and semi-precious gemstones.
  • Constitutional guarantee on safety of foreign investment.

Weaknesses

Limited international air connectivity and domestic transportation network
Limited size of the domestic market
Shortage of skilled workers
Limited diversity of Sri Lankan exports
High price of electricity charges

Threats

High fiscal deficit may constrain infrastructure spending
Fluctuation of oil prices