RESTRICTED  
  
WT/TPR/S/347  
27 September 2016  
(16-5142) Page: 1/131 
Trade Policy Revi ew Body   
 
TRADE POLICY REVIEW  
REPORT BY THE SECRET ARIAT  
SRI LANKA 
This report, prepared for the fourth Trade Policy Review of Sri Lanka, has been drawn up by the 
WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement 
establishin g the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement 
Establishing the World Trade Organization), sought clarification from Sri Lanka on its trade policies 
and practices.  
 
Any technical questions arising from this report may be addressed to Ms Denby Probst 
(tel.: 022 739 5847), Mr. Usman Ali Khilji (tel.: 022 739 6936) and Mr. Masahiro  Hayafuji 
(tel.: 022 739 5873).  
 
Document WT/TPR/G/347 contains the policy statement submitted by Sri Lanka.  
 
 
Note: This report is subje ct to restricted circulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Sri Lanka. This report was drafted in 
English.  WT/T PR/S/347 • Sri Lanka  
 
- 2 - 
 
  CONTENTS  
SUMMARY  ................................ ................................ ................................ ........................  8 
1   ECONOMIC ENVIRONMENT  ................................ ................................ ........................  12 
1.1   Fiscal Policy  ................................ ................................ ................................ ............... 15 
1.2   Moneta ry and Exchange Policy  ................................ ................................ ..................... 15 
1.3   Structural Changes  ................................ ................................ ................................ .....16 
1.4   Balance of Payments  ................................ ................................ ................................ ...17 
1.5   Developments in Trade  ................................ ................................ ............................... 18 
1.5.1    Composition of merchandise trade  ................................ ................................ ............. 18 
1.5.2    Direction of merchandise t rade ................................ ................................ .................. 18 
1.6   Foreign Direct Investment  ................................ ................................ ........................... 19 
2   TRADE AND INVESTMENT  REGIME  ................................ ................................ ............  22 
2.1   General Framework and Policy  ................................ ................................ ..................... 22 
2.2   Trade Policy Objectives  ................................ ................................ ............................... 24 
2.3   Trade Agreements and Arrangements  ................................ ................................ ........... 26 
2.3.1    WTO ................................ ................................ ................................ ...................... 26 
2.3.2    Regional and preferential agreements  ................................ ................................ ........ 26 
2.3.2.1    Reciprocal trade agreements  ................................ ................................ .................. 27 
2.3.2.1.1    Asia–Pacific Trade Agreement (APTA)  ................................ ................................ ...27 
2.3.2.1.2    South Asian Free Trade Ar ea (SAFTA) and SAARC Framework Agreement on 
Trade in Services (SATIS)  ................................ ................................ ................................ ...28 
2.3.2.1.3    Indo–Sri Lanka Free Trade Agreement (ISFTA)  ................................ ...................... 29 
2.3.2.1.4    Pakistan –Sri Lanka Free Trade Agreement (PSFTA)  ................................ ................ 29 
2.3.2.1.5    Global System of Trade Preferences among Developing Countries (GSTP)  ................. 29 
2.3.2.2    Unilateral preferential regimes  ................................ ................................ ................ 30 
2.3.3    Other agreements and arrangements  ................................ ................................ ......... 31 
2.3.3.1    Bay o f Bengal Initiative for Multi -Sectoral Technical and Economic Cooperation 
(BIMSTEC)  ................................ ................................ ................................ ........................ 31 
2.3.3.2    Indian Ocean Rim Association (IORA)  ................................ ................................ ......31 
2.4   Investment Regime  ................................ ................................ ................................ ....32 
2.4.1    Legal framework  ................................ ................................ ................................ ......32 
2.4.2    Investment management and policy  ................................ ................................ ........... 33 
2.4.3    Investment restrictions  ................................ ................................ ............................. 33 
2.4.4    Investment incentives and promotion  ................................ ................................ ......... 34 
2.4.5   Export processing zones, industrial parks, free ports, and bonded areas  ......................... 37 
3   TRADE POLICIES AND P RACTICES BY MEASURE  ................................ ........................  40 
3.1   Measures Directly Affecting Imports  ................................ ................................ .............. 40 
3.1.1    Customs procedures and requirements  ................................ ................................ .......40 
3.1.2    Customs valuation  ................................ ................................ ................................ ...41 
3.1.3    Rules of origin  ................................ ................................ ................................ ......... 41 WT/TPR/S/347 • Sri Lanka  
 
- 3 - 
 
  3.1.4    Tariffs  ................................ ................................ ................................ .................... 42 
3.1.4.1    Structure  ................................ ................................ ................................ ............. 42 
3.1.4.2    Tariff bindings  ................................ ................................ ................................ ......43 
3.1.4.3    Applied tariff  ................................ ................................ ................................ ........ 43 
3.1.4.4    Tariff dispersion  ................................ ................................ ................................ ....46 
3.1.4.5    Tariff preferences  ................................ ................................ ................................ ..47 
3.1.5    Other charges affecting imports  ................................ ................................ ................. 48 
3.1.5.1    Concessional entry and exemptions  ................................ ................................ ......... 48 
3.1.5.2    Tariff quotas  ................................ ................................ ................................ ......... 49 
3.1.5.3    Variable levi es and seasonal tariffs  ................................ ................................ .......... 49 
3.1.5.4    Export Development Board Levy (Cess)  ................................ ................................ ...49 
3.1.5.5    Excise Duty  ................................ ................................ ................................ .......... 49 
3.1.5.6    Value Added Tax (VAT)  ................................ ................................ .......................... 49 
3.1.5.7    Ports and Airports Development Levy (PAL) ................................ .............................. 49 
3.1.5.8    Nation Building Tax  ................................ ................................ ............................... 50 
3.1.5.9    Special Commodity Levy  ................................ ................................ ........................ 51 
3.1.6    Import prohibitions, restrictions, and licensing  ................................ ............................ 51 
3.1.6.1    Import restrictions and prohibitions  ................................ ................................ ......... 51 
3.1.6.2    Import licensing  ................................ ................................ ................................ ....51 
3.1.7    Contingency measures  ................................ ................................ ............................. 52 
3.1.8    Standards and other technical requirements  ................................ ............................... 53 
3.1.8.1    Technical regul ations  ................................ ................................ ............................. 53 
3.1.8.2    Standards and certification  ................................ ................................ ..................... 54 
3.1.9    Sanitary and phytosanitary requirements  ................................ ................................ ....55 
3.2   Measures Directly Affecting Exports  ................................ ................................ .............. 56 
3.2.1    Export procedures and requirements  ................................ ................................ .......... 56 
3.2.2    Export taxes, charges, and levies  ................................ ................................ ............... 57 
3.2.3    Export prohibitions, restrictions, and licensing  ................................ ............................. 57 
3.2.4    Export incenti ves ................................ ................................ ................................ .....57 
3.2.5    Export finance, insurance, and guarantees  ................................ ................................ ..60 
3.3   Measures Affecting Production and Trade  ................................ ................................ .......61 
3.3.1    Incentives  ................................ ................................ ................................ ............... 61 
3.3.2    Competition policy and price controls  ................................ ................................ ......... 61 
3.3.2.1    Price regulation ................................ ................................ ................................ .....61 
3.3.3    State trading, state -owned enterprises, and privatization  ................................ ............. 62 
3.3.4    Government procurement  ................................ ................................ ......................... 63 
3.3.5    Intellectual property rights  ................................ ................................ ........................ 65 
3.3.5.1    Copyright and related rights  ................................ ................................ ................... 66 
3.3.5.2    Patents  ................................ ................................ ................................ ................ 66 
3.3.5.3    Industrial designs  ................................ ................................ ................................ .67 WT/T PR/S/347 • Sri Lanka  
 
- 4 - 
 
  3.3.5.4    Trademarks  ................................ ................................ ................................ .......... 68 
3.3.5.5    Geographical indications  ................................ ................................ ........................ 68 
3.3.5.6    Unfair competition and undisclosed information  ................................ ........................ 68 
3.3.5. 7   Layout designs of integrated circuits  ................................ ................................ ........ 69 
3.3.5.8    Enforcement  ................................ ................................ ................................ ......... 69 
4   TRADE POLICIES BY SE CTOR  ................................ ................................ .....................  70 
4.1   Agriculture and Fisheries  ................................ ................................ ............................. 70 
4.1.1    Agriculture  ................................ ................................ ................................ .............. 70 
4.1.1.1    Policy and programmes  ................................ ................................ ......................... 71 
4.1.1.2    Production  ................................ ................................ ................................ ........... 73 
4.1.1.3    Trade  ................................ ................................ ................................ .................. 73 
4.1.1.4    Tariffs and special levies  ................................ ................................ ........................ 75 
4.1.1.5    Legal and institutional framework  ................................ ................................ ........... 76 
4.1.1.6    Domestic support  ................................ ................................ ................................ ..77 
4.1.1.6.1    Fertilizer subsidy  ................................ ................................ ................................ 78 
4.1.1.7    Financing  ................................ ................................ ................................ ............. 79 
4.1.1.8    Export subsidies  ................................ ................................ ................................ ...80 
4.1.1.9    Key subsectors  ................................ ................................ ................................ .....80 
4.1.1.9.1    Tea ................................ ................................ ................................ .................. 80 
4.1.1.10    State agricu ltural entities and agricultural marketing boards  ................................ .....81 
4.1.1.10.1    National Livestock Development Board (NLDB)  ................................ ..................... 81 
4.1.1.10.2    Milco ................................ ................................ ................................ ............... 81 
4.1.1.10.3    Paddy Marketing Board  ................................ ................................ ..................... 81 
4.1.1.10.4    Sri Lanka Cashew Corporation  ................................ ................................ ............ 81 
4.1.1.10.5    Ceylon Fertilizer Company  ................................ ................................ ................. 82 
4.1.1.11    Lanka Sugar Company Limited  ................................ ................................ .............. 82 
4.1.2    Fisheries  ................................ ................................ ................................ ................. 82 
4.1.2.1    Production and trade  ................................ ................................ ............................. 82 
4.1.2.2    Legal and regulatory framework  ................................ ................................ ............. 83 
4.1.2.3    Structure  ................................ ................................ ................................ ............. 83 
4.2   Mining and energy  ................................ ................................ ................................ ......84 
4.2.1    Mining  ................................ ................................ ................................ .................... 84 
4.2.1.1    Developments  ................................ ................................ ................................ ......84 
4.2.1.2    Legal and regulatory framework  ................................ ................................ ............. 85 
4.2.1.3    Incentives  ................................ ................................ ................................ ............ 86 
4.2.1.4    Production and trade  ................................ ................................ ............................. 86 
4.2.2    Energy  ................................ ................................ ................................ ................... 87 
4.2.2.1    Production, con sumption, and trade  ................................ ................................ ........ 87 
4.2.2.2    Policy framework  ................................ ................................ ................................ ..88 
4.2.2.3    Legal developments  ................................ ................................ .............................. 89 WT/TPR/S/347 • Sri Lanka  
 
- 5 - 
 
  4.2.2.4    Electricity  ................................ ................................ ................................ ............. 89 
4.2.2.5    Petroleum  ................................ ................................ ................................ ............ 90 
4.3   Manufacturing  ................................ ................................ ................................ ............ 92 
4.3.1    Key subsectors  ................................ ................................ ................................ ........ 95 
4.3.1.1    Processed food  ................................ ................................ ................................ .....95 
4.3.1.2    Clothing and garments  ................................ ................................ .......................... 96 
4.4   Services  ................................ ................................ ................................ .................... 98 
4.4.1    Tourism services  ................................ ................................ ................................ ......98 
4.4.1.1    Overview  ................................ ................................ ................................ ............. 98 
4.4.1.2    Statistical overview  ................................ ................................ ............................... 98 
4.4.1.3    Framework  ................................ ................................ ................................ ........... 99 
4.4.1.4    Policy and strategy  ................................ ................................ ................................ 99 
4.4.1.5    Legal and regulatory framework  ................................ ................................ ...........  100 
4.4.1.6    Incentives  ................................ ................................ ................................ ..........  101 
4.4.1.7    GATS commitments  ................................ ................................ .............................  101 
4.4.2    Financial services  ................................ ................................ ................................ ... 102 
4.4.2.1    Overview  ................................ ................................ ................................ ...........  102 
4.4.2.1.1    Banking  ................................ ................................ ................................ ..........  102 
4.4.2.1.2    Insurance  ................................ ................................ ................................ ........  103 
4.4.2.1.3    Capital markets  ................................ ................................ ...............................  104 
4.4.2.1.4    GATS commitments  ................................ ................................ ..........................  106 
4.4.3    Telecommunications services  ................................ ................................ ..................  106 
4.4.3.1    Statistical overview  ................................ ................................ .............................  106 
4.4.3.2    Framework  ................................ ................................ ................................ .........  107 
4.4.3.3    Developments  ................................ ................................ ................................ .... 107 
4.4.3.4    Structure  ................................ ................................ ................................ ...........  108 
4.4.3.5    GATS commitments  ................................ ................................ .............................  108 
4.4.4    Transport services  ................................ ................................ ................................ . 109 
4.4.4.1    Legal framework  ................................ ................................ ................................ . 109 
4.4.4.2    Ports ................................ ................................ ................................ .................  110 
4.4.4.3    Air ................................ ................................ ................................ ....................  112 
4.4.4.4    Rail ................................ ................................ ................................ ...................  113 
4.4.4.5    Roads  ................................ ................................ ................................ ................  114 
4.4.4.5.1    Infrastructure and p olicy ................................ ................................ ...................  114 
4.4.4.5.2    Services  ................................ ................................ ................................ ..........  116 
4.4.4.6    GATS and FTA commitments  ................................ ................................ ................  118 
REFERENCES  ................................ ................................ ................................ ................  119  
5   APPENDIX TABLES  ................................ ................................ ................................ .. 120  
 WT/T PR/S/347 • Sri Lanka  
 
- 6 - 
 
  CHARTS  
 
Chart 1.1 Product composition of merchandise trade, 2010 and 2015  ................................ .......20 
Chart 1.2 Direction of merchandise trade, 2010 and 2015  ................................ ....................... 21 
Chart 2.1 Imports by type of import regime, 2 014 ................................ ................................ .27 
Chart 2.2 Trade under GSTP, 2010 -15 ................................ ................................ .................. 30 
Chart 3.1 Distribution of MFN applied tariff rates, 2016  ................................ ........................... 44 
Chart 3.2 Average applied MFN tariff rates, by HS section, 2010 and 2016  ................................ 45 
Chart 3.3 Tariff escalation by 2 -digit ISIC industry, 2016  ................................ ........................ 47 
Chart 4.1 Ministries responsible for policies on agriculture, 2016  ................................ .............. 71 
Chart 4.2 Manufacturing output value, by ISIC sector, 2013  ................................ .................... 92 
 
TABLES  
 
Table 1.1 Selected macroeconomic indicators, 2011 -15 ................................ .......................... 12 
Table 1.2 Basic economic indicators, 2011 -15 ................................ ................................ ........ 13 
Table 1.3 Balance of payments, 2010 -15 ................................ ................................ .............. 17 
Table 2.1 Overview of government responsibilities on certain trade -related matters  ................... 23 
Table 2.2 Investment restrictions, exclusions, or limitations, 2016  ................................ ........... 33 
Table 2.3 Overview of investment incentives, 2010 -31 Oc tober 2014  ................................ .......35 
Table 2.4 Overview of EPZs, 2016  ................................ ................................ ........................ 38 
Table 2.5 Overview of industrial estates by province, 2016  ................................ ..................... 38 
Table 3.1 Rules of origin  ................................ ................................ ................................ .....42 
Table 3.2 Sri Lanka's tariff structure, 2010 and 2016 ................................ .............................. 43 
Table 3.3 Sri Lanka's MFN applied tariff summary, 2016  ................................ ......................... 45 
Table 3.4 Summary analysis of Sri Lanka's preferential tariffs, 2016  ................................ ........ 47 
Table 3.5 Revenue forgone from products benefitting from tariff concessions, 2010 -2014 ........... 48 
Table 3.6 Nation Building Tax exceptions  ................................ ................................ .............. 50 
Table 3.7 Export incentives prior to May 2016  ................................ ................................ .......58 
Table 3.8 Products subject to price regulation, May 2016  ................................ ........................ 62 
Table  3.9 Industrial property statistics, 2010 -15 ................................ ................................ ....67 
Table 4.1 Key agricultural strategy areas identified by the Ministry of Agriculture, 2015  .............. 72 
Table 4.2 Agricultural production, 2009 -15 ................................ ................................ ............ 73 
Table 4.3 Exports of main agricultural products, 2010 -15 ................................ ........................ 74 
Table 4.4  Imports of main agricultural products, 2010 -15 ................................ ....................... 74 
Table 4.5 Special Commodity Levy (SCL) revenues, 2010 -15................................ ................... 75 
Table 4.6 Export cess revenue, by major crop, 2010 -15................................ .......................... 76 
Table 4.7 Main agricultural laws, 2016  ................................ ................................ .................. 76 
Table 4.8 Agricultural subsidies, 2010 -15 ................................ ................................ .............. 77 
Table 4.9 Specific domestic support programmes, 2015  ................................ .......................... 78 
Table 4.10 Fish production and trade, 2010 -15 ................................ ................................ ......82 WT/TPR/S/347 • Sri Lanka  
 
- 7 - 
 
  Table 4.11 Government entities in the fish sector, 2016  ................................ .......................... 83 
Table 4.12 Mining licences issued, 2010 -15 ................................ ................................ ........... 85 
Table 4.13 Mining production and trade, 2010 -15 ................................ ................................ ..86 
Table 4.14 Energy statistics, 2010 -15 ................................ ................................ ................... 88 
Table 4.15 Investme nt incentives for manufacturing, 2010 -31 October 2014  ............................. 94 
Table 4.16 Processed food exports, 2010 -14 ................................ ................................ ......... 95 
Table 4.17 Clothing trade  and production, 2010 -15 ................................ ................................ 97 
Table 4.18 Tourism indicators, 2010 -15 ................................ ................................ ................ 99 
Table 4.19 Overview of the financial sector, 2010 -15................................ ............................  102 
Table 4.20 Overview of the banking sector, 2010 -15 ................................ ............................  103 
Table 4.21 Insurance sector statistics, 2010 -15 ................................ ................................ ... 104 
Table 4.22 Capital market indicators, as of June 2016  ................................ ..........................  105 
Table 4.23 Telecommunications indicators, 2010 -15 ................................ .............................  106 
Table 4.24 Cumulative licences granted under Section 17 of the Sri Lanka 
Telecommunications Act No. 25 of 1991, as of December 2015  ................................ ..............  108 
Table 4.25 Main transport laws  and regulations, 2016  ................................ ..........................  109 
Table 4.26 Port statistics, 2010 -15 ................................ ................................ .....................  111 
Table 4.27 Air Transport, 2010 -15 ................................ ................................ .....................  112 
Table 4.28 Road network, 2011 -15 ................................ ................................ ....................  116 
Table 4.29 Bus operations, 2010 -14 ................................ ................................ ...................  117 
 
BOXES  
 
Box 2.1 Industry, trade, and investment priority activities, 2015  ................................ ............. 25 
Box 2.2 Promotion of investment in certain sectors, 2014  ................................ ....................... 35 
Box 4.1 Energy sector targets in the Energy Empowered Nation development plan ..................... 88 
Box 4.2 Key objectives in the Tourism Development Strategy  ................................ .................. 99 
 
APPENDIX TABLES  
 
Table A1.1 Merchandise exports by group of products, 2010 -15 ................................ .............  120 
Table A1. 2 Merchandise imports by group of products, 2010 -15 ................................ ...........  121 
Table A1. 3 Merchandise exports by destination, 2010 -15 ................................ .....................  122 
Table A1. 4 Merchandise imports by origin, 201 0-15 ................................ ............................  123 
 
Table A2.1 Selected notifications to the WTO, 1 January 2010 -1 July 2016  ..............................  124 
Table A2.2 I nvestment protection agreements  ................................ ................................ ..... 125 
 
Table A3.1 HS codes for which the MFN rate exceeds the bound rate  ................................ ...... 126 
 
Table A4.1 Summary of the Special Commodity Levy, 2011 -15................................ ..............  129 
 WT/T PR/S/347 • Sri Lanka  
 
- 8 - 
 
  SUMMARY  
1. Sri Lanka, a middle -income economy, has performed relatively well since its last review in 
2010. Its economy has s hown resilience in the aftermath of the global financial crisis and following 
the resolution of the internal conflict, with an average annual growth rate in real GDP of 6% during 
the review period. Growth was mainly driven by the construction, wholesale an d retail trade, a nd 
financial services sectors. The main risks to growth sustainability and development result from the 
weak fiscal position – the fiscal deficit increased from 6.5% of GDP in 2011 to 7.5% in 2015, well 
above the government target of 4.4%; the declining revenue collection – revenue collection as a 
proportion of GDP declined to around 13% in 2015; and the resulting public debt overhang . The 
Government's reform agenda for the next three years plans to address these risks by introducing 
fundame ntal changes to tax policy and administration, encouraging stronger revenue performance, 
and reforming state -owned enterprises (SOEs). With inflation declining from 7.5% in 2012 to less 
than 1% in 2015, the Central Bank pursued an accommodative monetary po licy from 2012, in part 
to spur economic growth, however, as credit and monetary aggregates expanded, the Central 
Bank commenced tightening monetary policy grad ually towards the end of 2015. Economic activity 
is dominated by the services sector, which acco unts for 60 % of GDP, followed by manufacturing at 
20%, and agriculture at 9% of GDP.  
2. Trade played an important, albeit declining role in the economy during the review period, as 
trade in goods and non -factor services declined from the equivalent of about 5 5% of GDP in 2011 
to 49% in 2015 . While exports and imports grew in absolute terms over the review period, the 
merchandise trade deficit widened as imports increased more rapidly from US$12 billion to nearly 
US$19 billion, and exports from US$8 billion to US$10 billion. Sri Lanka's merchandise exports 
remain heavily concentrated with agriculture and clothing accounting for over 70% of 2015 total 
exports, while im ports remain more diversified. Services trade exhibited strong growth, both in 
imports and expor ts, thus contributing to a reduction of the current account deficit during the 
period from US$4.6 billion i n 2011 to US$2 billion in 2015.  Receipts more than doubled due to 
large increases in transport and travel services, reflecting a significant increase  in tourism.  
3. In term of policy, Sri Lanka has been focusing on long -term strategic and structural 
development since the end of its internal conflict, as it strives to become a n upper -middle -income 
country. Since its last review, the Government has been gui ded by its 2010 " Mahinda Chinthana  – 
Vision for the Future" which sets out specific targets, e.g. for GDP and export growth, and also for 
structural change to reduce the reliance on agriculture in order to focus on development of the 
services and industria l sectors. There are also broad mandates for trade and investment policies, 
including pursuing preferential trade negotiations, revising tariffs under reciprocal trade 
agreements, and reviewing import tariff policies and border measures.  Key priorities are  to review 
and renegotiate existing trade agreements, adopt an export promotion strategy, encourage more 
foreign direct investment, and promote the diversification of exports.  
4. Sri Lanka's preferential trade regime has remained unchanged during the review p eriod and 
it continues to provide long -standing reciprocal preferences pursuant to two bilateral agreements 
with India and Pakistan, and two regional trade agreements – the Asia -Pacific Trade Agreement 
(APTA), and the South  Asian Free Trade Area (SAFTA) Ag reement . Sri Lanka receives GSP benefits 
from a number of countries and participates in the Global System of Trade Preferences amon g 
Developing Countries (GSTP). Developments during the review period included the launch of free 
trade negotiations with Chin a in September 2014, and deepening of the bilateral relationship with 
India through the launch of negotiations on a new Indo –Sri Lanka Economic and Tech nology 
Cooperation Agreement. Trade under reciprocal preferential agreements for Sri Lanka is minimal, 
amounting to 3.4% of 2014 imports; this is in part attributed to overlapping trade concessions 
with the same trading partners through different preferential regimes.  
5. Sri Lanka recognizes the importance of attracting foreign direct investment, in particular to 
rebuild the country after the internal conflict, as FDI levels remain relatively low . Despite a general 
increase over the period, FDI inflows declined in 2015 and stood at about 2% of GDP, below the 
Government's target of 3% of GDP.  The telecommunicatio ns sector has been the largest recipient 
of foreign investment followed by manuf acturing. Sri Lanka has a long -standing policy of offering 
incentives to attract investment, mostly through tax concessions and import duty exemptions, and 
has also specific ally targeted certain sectors. The incentives have been modified and scaled back 
during the period and, since October 2014, no new fiscal  incentives have been offered. As of June 
2016, the Government was formulating a new incentive scheme in which it planned to focus on WT/TPR/S/347 • Sri Lanka  
 
- 9 - 
 
  facilitating investments and improving the ease of doing business . Despite efforts to encourage 
investment, there have been no changes in the long -standing investment restrictions, some of 
them applied in many strategic sectors, and more restri ctions have been put in place such as 
prohibiting the sale of land to foreigners.  Also to encourage investment, Sri Lanka maintains a 
number of specialized zones, in particular export processing zones which offer customs facilities 
and bonded facilities to  attract potential investors.  
6. In terms of the multilateral trading system, Sri Lanka granted at least MFN treatment to all 
its trading partners, made proposals to the DDA and participated in the regular work and 
Committees of the WTO, and has not been invo lved in any disputes under the WTO Dispute 
Settlement Mechanism during the review period. Sri Lanka made many WTO notifications during 
the review period that pertained mainly to customs valuation, agriculture, import licensing, SPS, 
TBT, TRIMs, and TRIPS.  
7. Sri Lanka's trade measures on imports focus on tariffs, import licences, and additional 
charges and taxes; it does not have non -preferential rules of origin nor does it have legislation for 
trade remedies, i.e. anti-dumping, counterv ailing duties, and safe guards. Sri Lanka has followed 
the rules for valuation under the WTO Customs Valuation Agreement since 2003 but retains the 
right to use minimum values under certain conditions, which it applied to certain categories of 
motor vehicles during the review per iod. 
8. The tariff regime remained relatively unchanged during the period, with applied rates 
declining slightly from an average of 1 1.5% in 2010 to 10.3% in 2016. MFN tariffs are quite 
varied; over 50% of tariff lines are duty -free, about 20% of tariff lines  have a 15% duty, and 23% 
have a duty of 30%. About 4% of tariff lines have non -ad valorem  rates, these include alternate 
and specific duties; specific duties mainly concern agricultural products . On average, there is 
significantly higher tariff protection  in the agricultural sector (24%) compared to the industrial 
sector (7.5%). Sri Lanka maintains considerable flexibility with respect to tariffs as only 37.5% of 
tariff lines are bound and the average rate for bound tariffs is 34%, thus reducing somewhat t he 
predictability of the tariff regime. Sri Lanka has amended its tariffs during the review period to 
reduce the number of tariff bands from four to three, which has also had an impact on the number 
of applied tariffs exceeding the bound rates. This has de teriorated since the last review with the 
MFN rate exceeding the bound rate on 132 lines in 2016, up from 103 lines in 2010; this situation 
mainly affects tobacco products, alcoholic beverages, textiles, carpets and switches.  
9. Sri Lanka has in place a large  number of additional levies and charges that are applied in 
addition to the tariff on a wide variety of products; these include the Export Development Board 
Levy (Cess), Excise Duty, Value Added Tax (VAT), Ports and Airports Development Levy, Nation 
Building Tax, port handling charges and the Special Commodity Levy. The Excise Duty, VAT, and 
Nation Building Tax apply to both imported and domestic goods while the others are charged on 
imported goods. The charges can be high and significantly increase the co st of importing, in some 
cases exceeding 100% of the c.i.f. value . Furthermore, many have been modified several times 
during the review period, thus adding u npredictability for importers.  
10. The main developments in terms of customs procedures during the peri od were Sri Lanka's 
implementation of a single window system in January 2016 and its acceptance of the WTO Trade 
Facilitation Agreement in May 2016. Sri Lanka's single window application allows all entities 
involved in importing and exporting to submit req uired regulatory information to a single electronic 
gateway and to use electronic fun ds transfer or online payments.  Pursuant to its notification of 
Category A commitments under the Trade Facilitation Agreement, Sri Lanka identified 11 
provisions for imple mentation upon its entry into force.  
11. Sri Lanka's regime and legislation for TBT and SPS measures have remained unc hanged 
over the review period. The main legislation governing standards continues to be the Sri Lanka 
Standards Institution Act No. 6 of 1984;  123 trade -related technical regulations are in place.  Food 
imports are regulated by the Food Act No. 26 of 1980, including its regulations and related 
amendments; animal, veterinary, and related products by the Animal Diseases Act No. 59 of 1992; 
while pl ant imports are governed by the Plant Protection Act No. 35 of 1999. Since January 2010, 
Sri Lanka has made 19 notifications to the Committee on Sanitary and Phytosanitary Measures 
regarding its SPS measures and 2 notifications to the Committee on Technica l Barriers to Trade on 
technical regulations.  WT/T PR/S/347 • Sri Lanka  
 
- 10 - 
 
  12. In terms of export measures, Sri Lanka applies duties, an export cess, prohibitions, and 
licensing requirements for selected exports. These are applied on a variety of products pursuant to 
the laws and requirem ents of different government entiti es. Export prohibitions are maintained for 
reasons of public health, protection of endangered species and the environment, and concern 
items such as explosives and drugs. The export cess is often levied on Sri Lanka's maj or export 
items, such as tea, rubber, coconuts, and cinnamon . There have been no major changes to Sri 
Lanka 's export procedures except for the establishment of the single window system.  Export 
incentives include tax and various fiscal incentives, a duty dr awback scheme, a Temporary 
Importation for Export Processing (TIEP) Scheme, and  a manufacture in bond scheme. A number 
of export finance instruments have been introduced during the review period to mitigate the 
impact of the financial crisis and to provide  financial assistance; these include an Export 
Development Reward Scheme (EDRS), a Simplified Value Added Tax Scheme (SVAT), and the 
establishment of an Exim bank.  
13. SOEs represent a substantial share of Sri Lanka's economic activity and the Government has 
acknowledged there is a need for their reform. There are 245 SOEs in Sri Lanka that collectively 
represent a risk to public finances as their outstanding obligations are the equivalent of 12% of 
GDP. As such, initiatives have commenced to strengthen the leg al framework and oversight of 
SOEs, introduce market -based pricing mechanisms, and improve the efficiency of SOEs.  
14. Government procurement in Sri Lanka represents about 6.3% of GDP and it is characterized 
as being fragmented, as it is done by decentralized agencies. Procurement continues to be an 
important instrument of economic policy, to promote domestic suppliers by granting price 
preferences for locally manufactured goods. There are 13 different procurement methods 
depending on the threshold and type of good/service or work to be procured. Works, services, and 
supplies are generally procured through the open competitive procedure but exceptions may occur 
under specific circumstances, e.g. emergency purchase or below thresholds . Sri Lanka has 
participated in the WTO Plurilateral Agreement on Government Procurement (GPA) as an observer 
since 2003.  
15. Intellectual property rules in Sri Lanka cover copyright and related rights, industrial designs, 
patents, marks and trade names, layout designs of integrated circu its, unfair competition and 
undisclosed information, and geographical indications.  They continue to be covered under the 
Intellectual Property Act No. 36 of 2003 and the Intellectual Property Regulations No. 1 of 2006.  
No new developments have occurred in the IP sector d uring the review period. Legislation on plant 
varieties has been developed but has not yet been adopted.  
16. Sri Lanka's agricultural sector remains an important contributor to the economy and trade, 
accounting for nearly 9% of GDP and about on e fourth of total exports. The sector can be divided 
into the main plantation crops, e.g. tea, rice, rubber, and coconut; and minor export crops, i.e. 
spices such as cinnamon, ginger, and pepper.  Agricultural exports are dominated by a few 
commodities, i.e . tea, coconuts, cinnamon, and pepper, while imports are to meet domestic 
consumption needs, e.g. wheat, sugar, and milk products.  A number of policy instruments are 
used in the sector, such as a special commodity levy; export cess; subsidies, notably the fertilizer 
subsidy; and tariffs. A number of state enterprises or marketing boards operate in the sector 
mainly for distribution and marketing, e.g. Paddy Marketing Board, Sri Lanka Cashew Corporation, 
and Sri Lanka Tea Board.  
17. Manufacturing continues to be  a significant area of economic activity accounting for  about 
20% of GDP.  Sri Lanka continues to encourage development of its manufacturing sector by 
promoting value -added goods, capitalizing on its relatively low labour costs, benefiting from its 
connecti vity, and improving linkages through value chains. The sector is dominated by the food 
products and beverages, and textiles and  clothing subsectors. The textiles and clothing subsector 
is particularly important to trade and the economy as it accounted for over 45% of 2015 total 
exports, ranked second in terms of foreign exchange earnings, and acco unted for approximately 
50% of manufacturing employment.  
18. Sri Lanka has a number of mineral resources that contribute to its economy and exports, in 
particular high  purity graphite, mineral sands, and gemstones. The mining sector has not 
undergone any significant changes in its legal framework but recent developments included the 
prohibition of foreign firms from mining gems, a temporary ban on the export of scrap me tal, and 
restrictions on soil mining . In the energy sector, Sri Lanka has diversified its energy sources during WT/TPR/S/347 • Sri Lanka  
 
- 11 - 
 
  the period by starting to use coal and promoting alternative sources such as wind and solar; 
achieved 100% countrywide electrification; and is e xpected to resume its first oil exploration 
activities in more than 25 years . Both the mining and energy sectors continue to have significant 
participation of state -owned enterprises either in production or distribution activities.  
19. Sri Lanka's tourism sect or has exhibited strong growth in recent years, achieving a 14.2% 
compound average growth rate, as it has benefited from policy initiati ves and investment 
incentives. Tourism has been a focus of the Government post -conflict as a sector to expand the 
econom y and invest in infrastructure. The sector has a significant impact on the economy as it is 
the third -largest foreign exchange earner, contributing over 12% to the fo reign exchange earned 
in 2015. Developments during the period include the launching of a n ew policy and strategy for the 
sector, aligning regulations with international standards, and establishing a "One Stop Unit" for 
investment in tourism.  
20. Other services sectors examined include financial, telecommunications, and transportation 
services as th ey are considered important to the continued development of the country by 
providing the necessary infrastructure for economic progress. While there has not been any major 
liberalization in the telecommunications sector during the last six years, the secto r nonetheless 
experienced significant expansion during the review period mainly due t o growth in the mobile 
sector. The introduction of the Telecommunications Levy in 2011 was to simplify the various taxes 
by having one composite tax applied to telecommuni cations services.  Sri Lanka's financial sector, 
i.e. banking, insurance, and other specialized financial institutions, continued to show improved 
performance, reflecting prudential regulatory measur es undertaken in recent years. The insurance 
subsector has  undergone substantial liberalization and deregulation over the last decade, 
promoting its continued expansion, reaching a growth of 16. 12% in total premiums in 2015. As for 
capital markets, as of June 2016, a number of legal amendments were being consolid ated into a 
draft law to further strengthen regulatory oversight, e.g. align SEC governance with international 
standards and introduce civil and administrative penalties. During the review period, the 
transportation sector benefited from continued investme nt in both ports and roads to improve 
infrastructure for trade in goods and movement of persons. The air transport subsector 
experienced overall growth of over 50% between 2010 and 2015, in part due to the increases in 
tourism and trade . There was continue d reliance on foreign grants to maintain the rail sector.  
 WT/TPR/S/ 347 • Sri Lanka  
 
- 12 - 
 
  1  ECONOMIC ENVIRONMENT  
1.1.  Sri Lanka is a middle -income economy, characterized by a dominant services sector, which 
accounts for around 60% of GDP and is responsible for around 45% of employment, making  labour 
productivity relatively high in the sector. In contrast, the agricultur al sector's contribution to GDP 
is around 9%, while it employs nearly 30% of the workforce. Manufacturing's contribution to GDP 
and employment is nearly 20%. Trade plays an impo rtant role i n the economy, with trade 
(i.e. exports and imports) in goods and non -factor services as a share of GDP being about 50%.  
1.2.  In the aftermath of the global financial crisis and  the resolution of the internal conflict, the 
Sri Lankan economy has sho wn resilience. Between 2011 and 2015, real GDP growth averaged 
over 6% annually, with growth expected to be around 5% in 201 6.1 As a result, GDP per capita 
rose from about US$3,100 to nearly US$4,000. On the other hand, the unemployment rate rose 
from 4.2%  to 4.6% during the same period (Table 1.1).  
Table 1.1 Selected macroeconomic indicators, 2011 -15 
  2011  2012  2013  2014  2015a 
National account (% change, unless otherwise indicated)     
Real GDP  8.4 9.1 3.4 4.9 4.8 
   Consumption  8.6 2.6 7.0 5.7 6.9 
   Gross fixed capital formation  16.6 16.1 5.5 -2.1 1.4 
   Exports of goods and non -factor services  10.2 -0.2 6.6 4.3 4.7 
   Imports of goods and non -factor services  23.6 0.5 -1.5 9.6 10.6 
       XGS/GDP (%) ( current prices)  20.9 19.8 20.3 20.9 20.5 
       MGS/GDP (%) (current prices)  34.1 31.7 28.9 28.9 28.0 
Exchange rate       
Rs/US$ (annual average)  110.57  127.60  129.07  130.56  135.86  
Nominal effective exchange rate (end -period, % 
change)  -0.2 -9.4 1.1 0.7 5.0 
Real effective exchange rate (end -period, % 
change)  1.8 -5.9 5.0 1.3 4.2 
Prices and interest rates       
Inflation (CPI, % change)  6.7 7.5 6.9 3.3 0.9 
Central bank interest rate (%, end -period)       
     Repurchase (repos) rate (overnight)  7.00 7.50 6.50 6.50 6.00 
     Rediscount (reverse repo) rate (overnight)  8.50 9.50 8.50 8.00 7.50 
Commercial bank interest rate (%, end -period)       
     Deposit rate (average weighted)  7.24 10.10  9.37 6.20 6.20 
     Prime lending rate (average weighted)  10.77 14.40  10.13  6.26 7.53 
Fiscal policy (% of GDP)       
Government balance (excluding grants)  -6.5 -5.8 -5.5 -5.8 -7.5 
Revenue  13.4 12.0 11.9 11.4 13.0 
  Tax revenue  11.7 10.4 10.5 10.1 12.1 
Expenditure, incl. net lending  19.9 17.8 17.4 17.2 20.5 
Reven ue including grants  13.6 12.2 12.0 11.5 13.1 
Government balance (including grants)  -6.3 -5.6 -5.4 -5.7 -7.4 
Government total debt (end -period)  71.1 68.7 70.8 70.7 76.0 
    Domestic debt  38.8 37.0 40.0 40.9 44.3 
Savings and investment (% of GDP)       
Gross national savings  26.3 33.3 29.9 29.5 27.8 
Gross domestic capital formation  33.4 39.1 33.2 32.0 30.1 
Savings -investment gap  -7.1 -5.7 -3.4 -2.5 -2.2 
External sector (% of GDP, unless otherwise indicated)     
Current account  -7.1 -5.8 -3.4 -2.5 -2.4 
Goods balance  -14.9 -13.8 -10.2 -10.4 -10.2 
     Exports  16.2 14.3 14.0 13.9 12.8 
                                                
1 IMF Press Release No. 16/262.  WT/TPR/S/ 347 • Sri Lanka  
 
- 13 - 
 
    2011  2012  2013  2014  2015a 
     Imports  31.0 28.0 24.2 24.3 23.0 
Services balance  1.7 1.8 1.6 2.3 2.8 
Capital account  0.3 0.2 0.1 0.0 0.1 
Financial account  6.3 7.3 5.6 3.9 3.2 
     Direct invest ment 1.4 1.3 1.2 1.0 0.8 
Balance of payments  -1.6 1.1 1.5 1.9 0.4 
Terms of trade (% change)  -9.1 -1.4 4.7 4.1 2.3 
Goods exports (% change)b 22.4 -7.4 6.4 7.1 -5.6 
Goods imports (% change)b 50.7 -5.3 -6.2 7.9 -2.5 
Service exports (% change)b 24.6 23.2 23.3 19.6 14.1 
Service imports (% change)b 12.3 27.9 38.1 6.3 9.3 
Foreign exchange reserve (US$ million)  6,170.0  6,300.2  6,522.1  7,237.2  6,470.4  
Total external debt (US$ million, end -period)  32,747.9  37,098.1  39,905.3  42,914.1  44,797.0  
Memorandum:       
Current GDP at market price (Rs billion)  7,219.1  8,732.5  9,592.1  10,448.5  11,183.2  
Current GDP at market price (US$ million)  65,292.7  68,434.4  74,317.8  80,025.3  82,316.2  
GDP per capita (US$)  3,129.0  3,351.0  3,610.0  3,853.0  3,924.0  
Unemployment rate ( %) 4.2 4.0 4.4 4.3 4.6 
a Estimates.  
b Growth rate based on trade figures in U .S. dollar s. 
 Sri Lanka changed the base year to 2010 for national accounts, hence 2010 data was not used as 
growth rates would not be comparable.  
Source:  Central Bank of Sri Lan ka online information; and IMF online information.  
1.3.  Trade continues to play an important albeit declining role in the economy. Trade in goods and 
non-factor services as a proportion of GDP declined from around 55% in 2011 to 48.5% in 2015. 
The share of merc handise trade in GDP declined markedly; it fell from around 47% in 2011 to 36% 
in 2015. In contrast , the share of services trade in GDP increased from around 7.8% to nearly 
13% of GDP over the same period. These changes can be explained by weak demand in k ey 
merchandise export markets and an increase in tourism -related activity in Sri Lanka during the 
review period.  
1.4.  Growth during the review period was driven by the construction sector, wholesale and retail 
trade, financial services , real estate including ow nership of dwellings, transport including 
warehousing, and , to a lesser extent , mining and insurance (Table 1.2). In contrast, growth in the 
agriculture, forestry and fisheries sector was tepid; this can be attributed to the vagaries of the 
weather.  
Table 1.2 Basic economic indicators, 2011 -15 
   2011  2012  2013  2014  2015  
GDP by economic activity in real 2002  prices (annual % change)     
Agriculture, forestry and fishing  4.6 3.9 3.2 4.9 5.5 
Mining  18.6 24.6 7.6 2.2 -0.9 
Manufacturing  3.5 3.2 2.3 2.3 4.7 
Electricity, gas and water  7.1 4.7 2.9 4.7 10.1 
Construction  26.3 21.2 7.5 6.6 -0.9 
Services  8.9 11.2 3.8 5.2 5.3 
 Wholesale and retail trade  11.7 7.7 1.3 4.5 4.7 
 Transportation including warehousing  12.6 8.0 5.5 3.6 5.5 
 Postal and courier  activities  0.0 9.2 -1.7 -7.1 -5.6 
 Accommodation, food and beverages  20.2 27.3 -5.8 4.0 -1.3 
 Programming/broadcasting activities and audio video 
productions  -13.8 3.4 7.5 3.8 5.5 
 Telecommunication  6.5 8.3 3.6 13.1 10.1 
 IT programming consultancy  16.5 10.5 21.6 9.3 21.1 
 Finance services  14.5 15.9 5.8 10.4 15.8 
 Insurance, reinsurance and pension funding  -0.3 2.1 2.6 5.8 9.3 
 Real estate, including ownership of dwelling  6.8 12.7 12.8 6.5 9.6 
 Professional serv ices 13.6 22.3 4.0 2.8 -7.1 WT/TPR/S/ 347 • Sri Lanka  
 
- 14 - 
 
     2011  2012  2013  2014  2015  
 Public administration and defence; compulsory social 
security  -4.4 5.0 -0.8 5.2 6.9 
 Education  -1.7 22.7 -5.8 10.3 -7.5 
 Human health and social work activities  14.2 11.5 -15.7 1.0 5.5 
 Other personal activities  8.6 13.6 10.0 4.7 2.9 
Share of sector in GDP (%, current basic prices)      
Agriculture, forestry and fishing  9.6 8.0 8.2 8.6 8.7 
Mining  2.3 2.6 2.7 2.6 2.5 
Manufacturing  20.0 20.9 19.3 18.9 19.5 
Electricity, gas and water  1.3 1.2 1.3 1.1 0.7 
Construction  6.8 7.6 8.0 8.1 7.9 
Services  60.0 59.7 60.5 60.8 60.6 
 Wholesale and retail trade  12.7 12.0 11.7 11.7 11.6 
 Transportation including warehousing  11.8 13.0 13.0 13.2 12.5 
 Postal and courier activities  0.1 0.1 0.1 0.0 0.0 
 Accommodation, food and beverages  1.7 1.9 1.7 1.7 1.6 
 Programming/broadcasting activities and audio video 
productions  0.0 0.0 0.0 0.0 0.0 
 Telecommunication  0.4 0.4 0.5 0.5 0.5 
 IT programming consultancy  0.1 0.1 0.1 0.1 0.2 
 Finance services  3.4 3.5 3.5 3.6 3.6 
 Insurance, reinsuranc e and pension funding  0.9 1.0 0.9 1.0 1.0 
 Real estate, including ownership of dwelling  5.3 5.2 5.7 5.8 6.0 
 Professional services  2.0 2.2 2.2 2.2 1.9 
 Public administration and defence; compulsory social 
security  6.4 5.6 5.6 5.8 6.1 
 Education  2.2 2.1 2.1 2.2 2.4 
 Human health and social work activities  2.6 2.3 2.2 2.2 2.4 
 Other personal activities  10.3 10.3 11.0 10.9 10.7 
Share of sector in total employmenta (%)      
Agriculture  33.0 31.4 29.8 28.5 28.2 
Mining  .. 1.1 1.2 0.9 0.7 
Manufacturing  16.9 17.6 18.0 18.2 18.3 
Construction, electricity, gas, and water  .. 7.6 7.0 7.3 7.0 
Services  42.8 42.3 44.1 45.0 45.8 
 Wholesale and retail trade, repair of motor vehicles and 
motor cycles  .. 13.8 13.7 13.2 13.5 
 Transport and storage  .. 6.1 6.1 6.3 6.2 
 Accommodation and food services  .. 1.6 2.2 2.4 2.6 
 Information and communication  .. 0.9 0.7 0.8 0.7 
 Finance and insurance  .. 1.6 1.8 1.9 1.9 
 Professional, scientific and technical services  .. 0.7 0.8 0.6 0.9 
 Administrative and support services  .. 0.9 1.3 1.3 1.6 
 Public administration and defence, compulsory social 
security  .. 7.0 7.5 7.8 7.7 
 Education  .. 4.1 3.9 4.0 4.1 
 Health and social work activities  .. 1.7 1.7 1.6 1.7 
 Other services  .. 3.9 4.3 5.0 5.0 
.. Not available.  
a Figures fo r 2011 are based on household population aged 10 years and above; from 2012 onwards 
aged 15 years and above.  
Source:  Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/English/17_Appendix.
pdf. 
1.5.  The main risks to growth sustainability and development in Sri Lanka result from the weak 
fiscal position and the resulting pub lic debt overhang. To a lesser degree , risks may also manifest 
themselves due to the concentrated nature of Sri Lanka's exports. Clothing and tea account for 
over 60% of export receipts. Exogenous shocks such as an economic downturn in key export 
markets, collapse in international commodity prices or adverse weather conditions would leave Sri 
Lanka's external position quite vulnerable.  
1.6.  The authorities are cognizant of the above issues, and the Government's reform agenda for 
the next three years is reflectiv e of this: "The Government’s economic programme aims at 
fundamental changes to tax policy and administration to reverse a two -decade decline in tax WT/TPR/S/ 347 • Sri Lanka  
 
- 15 - 
 
  revenues and put public finances on a sustainable medium -term footing. Stronger revenue 
performance will ena ble smaller fiscal deficits and lower borrowing, reduce the overhang of public 
debt, and ease pressure on the balance of payments – while at the same time preserving room for 
the Government’s key social and develop ment spending objectives. State -owned ente rprise (SOE) 
reform will reduce fiscal risk, increase transparency and facilitate commercially viable operations. 
The macroeconomic stability and renewed market confidence from this fundamental re -set of 
policies will reduce vulnerabilities, boost growth, and foster sustainable job creation."  
1.1  Fiscal Policy  
1.7.  During the period under review, the fiscal deficit increased from 6.5% of GDP in 2011 to 
7.5% in 2015, well above the targeted 4.4%. The fiscal deficit for 2016 is targeted to be 5.4% of 
GDP.2 Although gr owing in absolute terms, revenue collection as a proportion of GDP declined to 
around 13.0% in 2015. The decline came about despite the one -off revenue measures that the 
Government implemented such as the "super gains tax", which was a retroactive tax on i ndividual s 
and companies that earned in excess of Rs 2 billion in profits in 2014. The authorities recognize 
that the continued weak revenue increase has been the key challenge of fiscal consolidation. 
Recent efforts to broaden the tax base, improve tax ad ministration and to rationalize tax 
exemptions have not produced the desired results. Steps continue to be taken to enhance tax 
compliance, and to improv e tax audit and risk management. Initiatives are also being taken to 
increase the efficiency of the Customs and Excise Departments by curtailing undervaluation, 
improving audits and streamlining licensing procedures.  
1.8.  To compensate for below target revenue collection, the authorities squeezed expenditure, 
including public -sector investment spending. Expendit ure as a proportion of GDP declined from 
nearly 20% in 2011 to around 17% in 2014. However, current expenditure rose as the authorities 
increased public sector wages and pensions ; consequently , expenditure as a proportion of GDP 
rose to 20.5% in 2015. Cons equently , Sri Lanka is in a position where revenues cannot meet 
current expenditures and the Government has to borrow just to function. As a result of the 
persistent fiscal deficits, public debt rose to 76% of GDP in 2015 compared with around 71% in 
2011.  
1.9.  Going forward, in the absence of new , more permanent revenue enhancing measures and the 
expiration of one -off measures, it is likely that revenue as a proportion of GDP will decline. 
Furthermore, the permanent increase in recurrent expenditure coupled with  little or no space to 
reduce capital expenditures will in all probability lead to a higher fiscal deficit. To be able to sustain 
growth and meet its long -term growth objectives, the fiscal situation needs to be resolved. 
Tinkering with tax rates is not th e answer. Rather a considerable expansion of the tax base is 
needed.  
1.2  Monetary and Exchange Policy  
1.10.   Under the Monetary Law (Amendment Act) No. 32 of 2002, the Central Bank's main 
monetary policy objective is to achieve economic and price stability. The Centr al Bank, which is 
semi-autonomous, sets monetary policy independently, through the Monetary Board.3 The 
Monetary Policy Committee (MPC), established in 2001, makes recommendations to the Monetary 
Board.  
1.11.   Monetary policy is based on a monetary targeting fram ework in which the final target is 
price stability. This is to be achieved by influencing money supply through reserve money, which is 
the operating target. The monetary programme sets out the desired path for monetary growth 
through quarterly average rese rve money targets. To achieve the target, the Central Bank 
conducts open market operations within a corridor of policy interest rates, i.e. the repo rate and 
the reverse repo rate. Policy rates are reviewed usually once a month and adjusted if necessary to  
bring reserve money to the targeted path.  
1.12.   With the backdrop of a relatively benign inflationary environment, and with the objective of 
spurring growth, the Central Bank had pursued an accommodative monetary policy since 2012, 
                                                
2 Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/English/ content.htm . 
3 Central Bank of Sri Lanka online information. Viewed at: http://www.cbsl.gov.lk/ . WT/TPR/S/ 347 • Sri Lanka  
 
- 16 - 
 
  with the rediscount (reverse repo) overnight rate being 7.5% in September 2015 compared with 
9.5% in 2012. This also resulted in private sector credit growth of nearly 24% on a year -on-year 
basis during the first eight months of 2015, compared with 12.3% at the end of 2014. However, a s 
credit and monetary aggregates continued to expand at a faster pace than expected, the Central 
Bank commenced tightening monetary policy gradually towards end -2015. Accordingly, the 
statutory reserve requirement applicable to all rupee deposit liabilitie s of commercial banks was 
raised to 7.5%. Furthermore, several policy measures were introduced in the last quarter of 2015 
to contain excessive credit flows to selected sectors; these include a minimum cash margin 
requirement on letters of credit opened fo r the importation of motor vehicles, which was replaced 
later on by a maximum loan to value ratio, and a macro prudential measure on loans and 
advances granted for the purpose of purchase or utilization of motor vehicles. Additionally, 
considering the poss ible aggravation of demand -driven inflationary pressures due to continued 
high monetary expansion, the Central Bank raised, as a pre -emptive measure, its standing deposit 
facility rate and the standing lending facility rate by 50 basis points each, to 6.5%  and 8%, 
respectively, effective from 20 February 2016.  
1.13.   Inflation , as measured by the consumer price index, declined from 7.5% in 2012 to less 
than 1% in 2015. Reasons for the sharp fall in inflation can be attributed to a reduction in energy 
prices (in l ine with international prices), and the reduction of import duties on a number of food 
items under the 100 -day programme of the Government (Section 3).  
1.14.   The de jure  exchange rate arrangement has been  free floating since its introduction by the 
Central Bank of Sri Lanka in 2001. The Sri Lankan rupee  has stabilized within a 2% band against 
the U .S. dollar. Accordingly, the de facto  exchange rate arrangement is classified as a stabilized 
arrangement. With pressure on the balance of payments and thus on foreign exchange reserves, 
the Central Bank allowed greater exchange rate flexibility. It adopted a policy of only intervening 
to address large foreign exchange needs related to oil or other large current account payments or 
to smooth excessive foreign exchange ma rket volatility; otherwise allowing markets to clear on 
their own. As a result , the Sri Lankan rupee  has depreciated by nearly 23% against the U .S. dollar 
since 2011 (Table  1.1). 
1.3  Structural Changes  
1.15.   The weak fiscal position continues to hamper Sri Lanka's g rowth prospects. It is also 
exacerbated by the underperforma nce of state -owned enterprises (SOEs), which are a drain on the 
budget. With this backdrop , the Government has embarked on a fiscal consolidation through , 
inter alia, a tax and SOE reform programm e. 
1.16.   Tax reforms include , inter alia , eliminating tax exemptions, holidays, and special rates. The 
reform is expected to broaden the tax base and create a tax system that is simple, efficient, and 
more equitable. Under the programme, which is implemented thr ough a new Inland Revenue Act 
as well as reforming the VAT and the customs code, the Government targets raising the tax -to-
GDP ratio to 15% by 2020.  
1.17.   These efforts on tax policy will be complemented by capacity building and reform in revenue 
administration , which would make full use of automated systems and information technology to 
bolster tax collection while also clamping down on corruption and discretionary tax treatment. 
Indeed, some of these measures such as the Revenue Administration Management Infor mation 
System and the Single Window at Customs are already in place. Additionally, the Integrated 
Treasury Management Information System will cater to the requirements of the Treasury by 
automation of management of revenue and expenditure.  
1.18.   The programme en visages that the above measures, coupled with more efficient 
management of government expenditure, will realize a steady reduction of the overall fiscal deficit 
to 3.5% of GDP by 2020; this will be equivalent to a shift from primary (excluding interest cos ts) 
fiscal deficits to primary surpluses that will underpin a much -needed reduction of public debt. 
Under the programme, the authorities target containing the outstanding government debt to 
around 69% of GDP by 2017.  
1.19.   With a view to limiting future risk to public finances and enhancing the role of market forces 
in the economy, SOE reform is imperative. In this regard, the programme requires that key SOEs WT/TPR/S/ 347 • Sri Lanka  
 
- 17 - 
 
  and the Government’s financial relations with these be governed transparently. This would require 
annuall y published statements of corporate intent. Under the programme , the Government will 
also ensure that the pricing of electricity and fuels is guided by the market, with subsidies needed 
to protect the poor and vulnerable being better targeted and clearly r eflected in the Government’s 
budget. This will avoid the accumulation of unfunded subsidy bills and ensure SOE operations are 
conducted on a commercially viable basis.  
1.4  Balance of Payments  
1.20.   During the period under review, Sri Lanka's current account deficit peaked at US$4.6 billion 
(7.1% of GDP) in 2011; it then decreased to around US$2 billi on (2.4% of GDP) in 2015 
(Table  1.3). The decrease came about mainly due to the narrowing of the trade deficit and the 
large surplus registered in the services account re flecting the robust performance of the tourism 
sector, and the growth in current transfers  – in particular, remittances by Sri Lankans abroad (a 
large and important source of consumption expenditure), which rose from US$5.1 billion in 2011 
to nearly US$7 b illion in 2015. In contrast, the deficit on the income account rose sharply.4 
1.21.   The capital and financial account has traditionally financed the current account deficit. The 
capital and financial account surplus declined from about US$4.3 billion in 2011 to US$2.7 billion in 
2015. During the period under review, FDI inflows remained steady ; in contrast, portfolio 
investment went from outflows of US$171 million in 2011 to inflows of around US$2 billion in 2014, 
and have since declined to around US$700 million i n 2015. Inflows under other investment 
declined from nearly US$3.4 billion in 2011 to around US$1.3 billion in 2015.  
1.22.   Foreign exchange reserves declined to US$6.5  billion in 2015, providing approximately 
4 months of import cover.  
Table 1.3 Balance of payments, 2010 -15 
(US$ million)  
  2010  2011  2012  2013  2014  2015  
Current account  -1,075.0  -4,615.4  -3,981.7  -2,540.6  -1,987.7  -2,008.5  
Goods and services balance  -4,118.5  -8,611.2  -8,155.2  -6,428.7  -6,406.6  -6,104.9 
    Goods balance  -4,825.1  -9,710.0  -9,416.7  -7,608.5  -8,286.7  -8,429.7  
             Exports  8,625.8  10,558.8  9,773.5  10,394.3  11,130.1  10,504.9  
             Imports  13,450.9  20,268.8  19,190.2  18,002.8  19,416.8  18,934.6  
     Services balance  706.6 1,098.8  1,261.5  1,179.8  1,880.1  2,324.8  
             Receipts  2,474.2  3,083.9  3,799.9  4,685.1  5,605.0  6,396.7  
                Transportation  1,162.0  1,392.0  1,633.9  1,783.7  1,923.2  2,104.7  
                Travel  575.9  830.0  1,038.7  1,715.5  2,431. 1 2,980.7  
             Payments  1,767.6  1,985.1  2,538.4  3,505.2  3,724.9  4,071.9  
                Transportation  817.0  953.0  1,172.4  1,382.0  1,461.6  1,578.7  
                Travel  453.0  501.0  710.4  1,188.1  1,262.5  1,419.6  
Primary income  -616.9  -647.0  -1,218.6  -1,751.4  -1,808.1  -2,096.9  
   Credit  323.3  466.6  142.3  131.8  155.2  127.3  
       Compensation of employees  7.2 8.2 14.3 15.2  18.5 19.4 
       Investment income  316.1  458.4  128.0  116.6  136.7  107.9  
   Debit  940.1  1,113.6  1,360.8  1,883.2  1,963.3 2,224.3  
       Compensation of employees  18.1 19.3 33.8 66.0  68.3 82.6 
       Investment income  922.1  1,094.3  1,327.0  1,817.2  1,895.0  2,141.7  
Current transfers  3,660.3  4,642.8  5,392.0  5,639.5  6,227.0  6,193.3  
   Credit  4,168.4  5,204.5  6,038.3  6,427.9  7,045.8  7,007.0  
       Worker remittances  4,116.0  5,144.8  5,985.3  6,407.0  7,017.8  6,980.3  
   Debit  508.1  561.7  646.3  788.4  818.7  813.7  
Capital and financial account  2,876.7  4,261.8  5,154.2  4,246.3  3,142.8  2,667.3  
   Capital account  163.9  164.4  130.3  70.9  58.3 46.3 
   Financial account  2,712.8  4,097.4  5,023.9  4,175.4  3,084.5  2,621.0  
                                                
4 The income account is mainly the balance of remittance of profits of foreign firms based in Sri Lanka 
and Sri Lankan  firms based abroad.  WT/TPR/S/ 347 • Sri Lanka  
 
- 18 - 
 
    2010  2011  2012  2013  2014  2015  
     Direct investment  435.1  895.9  877.2  867.5  826.8  628.0  
          In Sri Lanka  477.6  955.9  941.1  932.6  893.6  681.2  
          Abroad  -42.5 -60.0 -63.9 -65.1  -66.8 -53.3 
     Portfolio investment  -229.7  -171.4  2,125.7  2,068.4  2,065.3  688.9  
     Other investment  2,507.3  3,372.8  2,021.0  1,239.5  192.5  1,304.1  
Net errors and omissions  -537.0  -706.9  -412.0  -594.1  393.4  -308.4  
Reserve assets  -1,264.6  1,060. 5 -760.5  -1,111.7  -1,548.5  -350.4  
Note:  2010 and 2011 reflect BPM5. Years 2012 onwards reflect BPM6. Thus 2010 and 2011 are not strictly 
comparable with the rest.  
 
Source:  Central Bank of Sri Lanka online information.  
1.5  Developments in Trade  
1.23.   During the per iod under review, both the shares in GDP of merchandise exports and imports 
fell; the share of exports declined from 16.2% in 2011 to 12.8% in 2015, while that of imports fell 
from 31.0% to 23.0% over the same period. In contrast, both the shares of servic es exports and 
imports increased during the same period . This was  due mainly to increased payments and 
receipts on account of transport and travel services , reflecting a significant increase in tourism 
following  the end of the internal conflict and the exp ansion of the tourist infrastructure such as 
hotels and resorts.  
1.5.1   Composition of merchandise trade  
1.24.   Sri Lanka's exports continue d to be heavily concentrated in a few product groups, with 
agriculture and clothing accounting for over 70% of total exports in 2 015 (Chart 1.1 and 
Table  A1.1). The combined share of these product groups was approximately the same in 2010. 
However, within these product groups there were changes; for example , the share of agriculture 
fell mainly due to a decrease in tea exports. In c ontrast , the shares of spices and pepper and of 
manufactures (including clothing) increased during the review period. However, within 
manufactures, the shares of semi -manufactures , including diamonds and jewellery , declined 
mainly reflecting weak demand.  
1.25.   As in most countries, the structure of Sri Lanka's imports is less concentrated than exports. 
The largest single import category continue d to be machinery and transport equipment, and its 
share increased during the review period (Chart 1.1 and Table A1.2),  which in turn led to an 
increase in the share of manufactures in the total import bill. Within machinery and transport 
equipment, the share of automobiles gr ew considerably. Consequently, the share of primary 
products in total imports fell. Within primary  products, the decline was mainly due to a fall in the 
share of fuels and, to a lesser extent, against the background of a decline in international 
commodity prices , especially those of fuel.  
1.5.2   Direction of merchandise trade  
1.26.   Sri Lanka's largest export market s continue d to be the EU-28, followed by the United States 
and India (Chart 1.2 and Table A1.3), although the share of the EU-28 declined considerably 
during the period under review. A plausible reason for the decline could be the cancellation of 
GSP+ and the banning of fish imports from Sri Lanka. On the other hand, the share of the 
United  States and Asia, particularly China and India, has risen since 2010 . A reason for the latter 
could be the FTA with India.  
1.27.   In 2015, Sri Lanka's largest import supplier wa s India,  followed by China and the EU-28 
(Chart 1.2 and Table A1.4). The shares of India, China and the United States have risen 
considerably since 2010, while the shares of  the EU-28, the Middle East and Singapore h ave 
posted a decline since then . Further more, the share of Asia as a whole posted an increase. The 
share of the Middle East has shown a significant decline since 2012, presumably due to the fall in 
international oil prices.  WT/TPR/S/ 347 • Sri Lanka  
 
- 19 - 
 
  1.6  Foreign Direct Investment  
1.28.   Sri Lanka is an attractive FDI destination due  to the many incentives in place for such 
investment (Section 2.4). According to Board of Investment data, since 2011 FDI inflows have 
been growing steadily and reached US$1.6 billion in 2014, while the stock of FDI in 2014 was 
approaching US$10 billion.5 FDI inflows decreased to US$1.1 billion in 2015. The 
telecommunications sector has been the largest recipient of foreign investment followed by 
manufacturing, infrastructure projects and services.  
1.29.   The largest foreign investors in Sri Lanka are Malaysia fol lowed by the U .K., China, India 
and Hong Kong,  China. The single largest investor in 2015 was also Hong Kong, China.  
                                                
5 According to data provided by the Board of Investment, the stock of FDI covers 2005 -2014.  WT/TPR/S/ 347 • Sri Lanka  
 
- 20 - 
 
  Chart 1.1 Product composition of merchandise trade, 2010 and 2015  
Chart 1.1    Product composition of merchandise trade, 2010 and 2015
2010 2015
(a)    Exports (f.o.b.)
Other consumer
goods  3.9%
Manufactures
66.5%
Total:  US$8,304.1 million Total:  US$10,439.7 million
(b)    Imports (c.i.f.)
Chemicals
11.2%Transport 
equipment
9.5%
Manufactures
64.1%
Electrical 
machines  5.5%
Non-electrical 
machinery  6.4%Other 
0.3%
Electrical 
machines  6.5%Machinery and
transport equipment
6.4%
Other semi -manuf.  
10.0%Chemicals 
11.6%Manufactures
69.1%Textiles
11.5%
Total:  US$12,353.7 million Total:  US$18,967.2 millionManufactures
70.1%
Textiles
2.7%Mining
2.3% 
Other consumer 
goods  5.3%  Other  
0.7%
Iron & steel 
3.0%Semi-manufactures  
11.3% Clothing
45.7%
Mining
1.0%
Source :  UNSD, Comtrade database (SITC Rev.3).Other consumer
goods  4.3%Other consumer 
goods  4.0%Tea
16.5%
Semi-manufactures  
13.2%
Machinery and 
transport equipment
5.3%
Other semi -manuf.
10.2%Clothing
42.0%
Agriculture
15.3%Agriculture
16.7%
Transport 
equipment
13.3%Tea
12.7%
Other agriculture  
14.9% 
Textiles
2.1%
Fuels  
14.0%
Fuels
16.7%
Other mining
1.4%
Other mining  
1.8%
Non-electrical
machinery  7.3%Other
1.6%
Other agriculture
14.4%
Iron & steel
3.5%Textiles
13.9%
 
Source:  UNSD, Comtrade database (SITC Rev.3).  WT/TPR/S/ 347 • Sri Lanka  
 
- 21 - 
 
  Chart 1.2 Direction of merchandise trade, 2010 and 2015  
Chart 1.2   Direction of merchandise trade, 2010 and 2015
2010 2015
(a)    Exports (f.o.b.)
Asia
19.9%
Total:   US$8,304.1 million Total:  US$10,439.7 million
Other 
6.6%EU-28
12.4%
UAE
2.7%
Malaysia  3.1%Thailand  2.6%(b)    Imports (c.i.f.)
EU-28
9.5%
Malaysia  2.7%
India
22.5%
Total:   US$12,353.7 million Total:   US$18,967.2 millionOther Asia
14.2%
China
19.7% China
10.1%Thailand  2.6%United States
21.3%United States
26.8%
Other Middle 
East  6.0%
Source:  UNSD Comtrade database.Japan
7.3%EU-28
29.1%CIS
4.5%
Japan
4.7%Other  
8.2%
Other Asia
14.3%China
2.9%
EU-28
35.0%Other Middle 
East  6.9%India
5.6%
UAE
2.7%
Singapore
13.1%Singapore
4.9%Other Asia
11.6%
Other Asia   
15.5%India
6.8%
CIS
2.7%
Asia
73.9%Asia
69.7%Asia
21.3%
Other Middle 
East  2.7%
Other Middle 
East  8.5%UAE
3.0%
UAE
5.7%
India
20.6%Other 
11.2%Other
9.5%
 
Source:  UNSD, Comtrade database.  WT/TPR/S/ 347 • Sri Lanka  
 
- 22 - 
 
  2  TRADE AND INVESTMENT  REGIME  
2.1  General Framework and Policy  
2.1.  The Democratic Socialist Republic o f Sri Lanka, an island nation in the Indian Ocean , has a 
population of approximately 21 million. It is situated  in a strategic location for sea traffic, has 
excellent harbours, and possesses one of the largest ports in South Asia.1 Since its independence 
in 1948, the country has had three constitutions , including the current one since 1978.2 The 
constitution provides for Sri Lanka's legal and institutional framework; it includes provisions for the 
legislature, the judiciary, and the executive, i.e. the Pres ident of the Republic, the Cabinet of 
Ministers, and the public service. It also contains provisions for sovereignty, fundamental rights, 
Buddhism, language, citizenship, principles of state policy, the superior courts, franchise and 
elections, finance, an d public security.  
2.2.  Sri Lanka's current constitution has been amended 19 times, most recently in 2015 with the 
19th Amendment, which , inter alia , reduced the powers of the Executive Presidency in such a way 
that it repealed the provisions of the 18th Amendm ent (2010) relating to the enhanced powers 
granted to the President, limited the term of office of the President to five years, and brought back 
many of the components of the 17th Amendment (2001).3 The 19th Amendment re -established a 
Constitutional Counci l to act as a check on some of the presidential powers, and to set up certain 
independent commissions, such as the Election Commission. The amendment also reaffirmed that 
the President is , inter alia , the Head of State and the Head of the Executive and of the 
Government , and Commander -in-Chief of the Armed Forces.4 
2.3.  Parliament, as the legislative branch in Sri Lanka, is comprised of 255 members elected by 
proportional representation and has the power to enact laws. It is the executive that is responsible 
for the direction of policy and the initial drafting of the laws. Through the relevant ministry, the 
proposed law is framed and sent to the Cabinet of Ministers for approval and authorization for 
drafting. The judiciary comprises six types of court: the Supre me Court, the Court of Appeal, high 
courts, district courts, magistrate 's courts, and primary courts. District courts are courts of first 
instance with wide civil powers , including jurisdiction over commercial litigation. High courts have 
both original and  appellate jurisdiction , and include commercial high courts, which have 
jurisdiction over commercial transactions of over R s 3 million and cases under the Intellectual 
Property Act.  
2.4.  The Government is comprised of 72 ministries, 75 departments, 61 statutory  boards, 1  public 
company, 25 district secretariats, 333 divisional secretariats, 9 provincial councils, and many local 
authorities , including municipal, divisional, and urban councils.5 The Constitution delegates certain 
functions to the central governmen t (e.g. foreign affairs, defence, finance, trade (including inter -
provincial trade), ports and harbours, national transport, minerals and mines, and aviation) and 
others to the provincial councils (e.g. police and public order, food supply, rural developme nt, 
unincorporated societies and associations, and taxation); some functions are jointly shared (e.g. 
planning, education, agriculture, health, tourism, social services, and fisheries).6 There are many 
ministries, departments, and institutions having gener alized responsibilities for trade policy and its 
implementation (Table 2.1). Since September 2015, the Ministry of Development Strategies and 
International Trade  has had a role in respect of potential free trade agreements with India, China, 
Singapore, and  others.  
2.5.  Trade, investment, and related policies are developed under the aegis of the Ministry of 
National Policies and Economic Affairs with the necessary inputs furnished by the various other 
government bodies including the Department of Commerce of the Ministry of Industry and 
                                                
1 The Port of Colombo is ranked 33rd in the world in terms of container ports. World Shipping Council  
(2016) .  
2 Policy Research & Information Unit of the Presidential Secretariat of Sri Lanka online information. 
Viewed at: http://www.priu.gov.lk/Cons/1978Constitution/CONTENTS.html . 
3 Ministry of Finance of Sri Lanka  online  information. Viewed at:  http://www.treasury.gov.lk/documents  
/10181/12870/2014/23cd697c -85b6-4ad6-8ba3-2a007be8b56e?version=1.0 . 
4 Nineteenth Amendment to the Constitution. Viewed at : 
http://slembassyusa.org/downloads/19th_Amendment_E.pdf . 
5 Official Web Portal of the Government of Sri Lanka online information. Viewed a t: https://www.gov.lk/ . 
6 Centre for International Migration and Development online information. Viewed at: 
http://www.l ogcluster.org/sites/default/files/documents/CIM -Overview -State -Structure . WT/TPR/S/ 347 • Sri Lanka  
 
- 23 - 
 
  Commerce, the Department of National Planning of the Ministry of National Policies and Economic 
Affairs, and the Trade and Investment Policy Department of the Ministry of Finance. They work 
under broad mandates for trade, tariff, a nd investment policies, including pursuing preferential 
trade negotiations; implementing revised tariffs under reciprocal trade agreements; and reviewing 
import tariff policies and border measures.  
2.6.  The implementation of Sri Lanka's trade policies is largel y carried out by the Department of 
Commerce. The Department plays a key role in coordinating and integrating Sri  Lanka's bilateral, 
regional and multilateral trade policy objectives and their implementation. The Ministry of 
Development Strategies and Inter national Trade , created in 2015, has oversight committees to 
monitor progress in regard to trade -related policies conducted by other ministries and 
departments, and advisors and designated members of agencies for international trade and 
development7; these  are operational but await formal establishment by an Act of Parliament.  
2.7.  According to the authorities, all ministries and institutions concerned with international trade 
have regular consultations with the private sector, although there are no specific law s on the 
matter. These consultations take place through trade associations, industry associations, as well as 
trade chambers. In dialogues concerning particular sectors, individual exporters, manufacturers, or 
industrialists are often included for their co mments and inputs through a series of meetings or 
individual consultations.  
Table 2.1 Overview of government responsibilities on certain trade -related matters  
Subject  Relevant ministry or body  
Trade agreement s, tariff policy  Ministry of Industry and Commerce (Department of Commerce), 
Ministry of Development Strategies and International Trade  
Customs matters  Sri Lanka Customs  
Agriculture and fisheries  Ministry of Agriculture (Department of Agriculture), Minis try of 
Primary Industries (Department of Export Agriculture), Ministry of 
Rural Economic Affairs (Department of Animal Production and 
Health), Ministry of Fisheries and Aquatic Resources  Development  
(Department of Fisheries and Aquatic Resources), Ministry  of 
Plantation Industries (Department of Rubber Development and Sri 
Lanka Tea Board)  
Investment  Board of Investment  
Intellectual property  National Intellectual Property Office of Sri Lanka  
Trade remedies  Department of Commerce  
Licensing  Department of Import and Export Control  
TBT Sri Lanka Standards Institution  
SPS Ministry of Health care and Nutrition , Department of Animal 
Production  and Health , National Plant Quarantine Servic e 
Exports  Sri Lanka Export Development Board, Department of Import and 
Export Control  
State enterprises  Ministry of State Resources and Enterprise Development  
Government procurement  National Procurement Agency  
Manufacturing  Ministry of Industrial Development, Ministry of Industry and 
Commerce, Department of Government Factor y, Ministry of Textile 
Industry Development  
Business  Department of Registrar of Companies  
Competition  Consumer Affairs Authority  
Tourism  Ministry of Tourism  Development and Christian Religious Affairs , 
Sri Lanka Tourism Development Authority  
Source:  Compiled by the WTO Secretariat based on Official Web Portal of the Government of Sri Lanka online 
information (viewed at:  https://www.gov.lk/index.php ) and other sources.  
2.8.  Since the end of its internal conflict, S ri Lanka has been focusing on long -term strategic and 
structural development, as it strives to become an upper -middle -income country.8 As part of these 
development plans, Sri Lanka launched a " Mahinda Chinthana  – Vision for the Future" in 2010 as 
its devel opment policy. The Vision has sought "to reposition Sri Lanka in the global arena as a 
knowledge -based strong middle -income country with better and improved living standards which 
                                                
7 Cabinet Memorandum PMO/06/03/CM/2016.  
8 World Bank  online information . Viewed at: http://www.worldbank.org/en/results/2014/04/11/sri -
lanka -transforming -into-a-middle -income -country . WT/TPR/S/ 347 • Sri Lanka  
 
- 24 - 
 
  continues to preserve cultural values and traditions".9 Particular emphasis was paid to Sri Lanka's 
strategic geographical location, whereby developing naval, aviation, commercial, energy, and 
knowledge hubs were important to place Sri Lanka as a key link between East and West. The 
Vision also proposed to reach specific targets by  2016 through rapid economic growth and 
changing the structure of the country:  
 Almost doubling GDP per capita by 2016 to above US$4,000 , to be attained through an 
economic growth of over 8% per annum;  
 Investment to be increased to 33 -35% of GDP with sustai ned commitment of public 
investment of 6 -7% of GDP to support private investment;  
 Exports to grow at twice the rate of real GDP;  
 High-spending tourism to grow in order to generate fourfold expansion in tourist earnings , 
and remittances inflows, based on sk ills, to be doubled;  
 The share of rural employment to decline from about two  thirds to half; and  
 The share of urban population to increase from a quarter to a third.10 
2.9.  There were improvements in many of the target areas during the review period . In 2015, fo r 
example, per  capita GDP reached US$3,924; total investment as a percentage of GDP reached 
30.1%; tourist earnings reached US$2.92 billion; and remittances reached US$6.98 billion.11 
2.10.   Structural change in Sri Lanka was also foreseen in the Vision. The main shift envisioned 
was a reliance on agriculture in the initial phase to start a rapid recovery. In addition to 
agriculture, industry12 and services were also recognized as key drivers, and it was anticipated 
that the share of agriculture in GDP was to be eve ntually consolidated at 12%, industry at 28 -
30%, and services at around 60% by 2016, thereby diversifying the economy.13 It was noted that 
managing balanced growth was important to prevent widening of the urban -rural divide and for 
those in agriculture to h ave higher returns. As of  2015, the share of agriculture, industry, and 
services to GDP was at 7.9%, 26.2%, and 56.6% respectively.14 
2.11.   As a result of its elections in 2015, Sri Lanka had a change of government and shift in 
certain policies. For the first tim e in its history , Sri Lanka has formed a coalition or national unity 
government for two years that includes all parties in the Parliament in order to achieve 
reconciliation among all communities and achieve greater socio -economic development. 
Accompanying this development, as an initial step to address certain policy changes, a "100 Day 
Programme" was launched for reforms and to address fundamental and structural changes.15 In 
addition to setting up the National Executive Council for the inclusive representa tion of parties 
represented in Parliament, the 100 Day Programme has introduced , inter alia , guaranteed 
purchase prices for various basic agricultural commodities; lowered taxes on essential food items; 
provided for higher quality fertilizer ; introduced st ate contributions for agricultural insurance 
schemes; initiated a process to regain GSP+ (an extended version of the Generalized System of 
Preferences) provisions; established an institution to regulate trade in food items, cosmetics, drugs 
and other essen tial items; removed excessive taxes on fishing boats; and addressed barriers to 
fish exports to the EU market.16 
2.2  Trade Policy Objectives  
2.12.   Comprehensive and consistent trade, investment, and related policies are currently being 
developed by the  Ministry of De velopment Strategies and International Trade . A key priority 
                                                
9 Department of National Planning, Ministry of Finance and Planning  (2010), Mahinda Chinth ana – Vision 
for the Future .  
10 Department of Na tional Planning, Ministry of Finance and Planning  (2010), Mahinda Chinth ana – 
Vision for the Future .  
11 Information provided by the authorities.  
12 Includes mining, manufacturing, electricity, gas, and construction.  
13 Department of National Planning, Minist ry of Finance and Planning  (2010), Mahinda Chinth ana – 
Vision for the Future .  
14 Information provided by the authorities.  
15 Ministry of Finance online information. Viewed at: 
http://www.treasury.gov.lk/images/depts/fpd/docs/reports/annualreport/2014/full/annualReport -2014E.pdf . 
16 Partial list of initiatives under the 100 Day Programme. For full list, see Colombo Telegraph  online 
information . Viewed at: https://www.colombotelegraph.com/index.php/maithripala -sirisenas -100-day-work-
programme -detailed -diary-descripti on/. WT/TPR/S/ 347 • Sri Lanka  
 
- 25 - 
 
  identified by the Government at this time is to review and renegotiate existing trade agreements. 
According to the Trade and Investment Policy Department of the Ministry of Finance, there are 
broad mandates for trade, tariff, and investment policies; these include pursing preferential trade 
negotiations; implementing revised tariffs; and reviewing import tariff policies and border 
measures.17 Further, the Government has recognized the importance of  export promotion and 
diversification, encouraging more foreign direct investment, import replacement initiatives, and the 
promotion of locally value -added products.18 The authorities plan to adopt an export promotion 
strategy that will aim to develop compe titive high -value -added products and processes to ensure 
transformation and diversification of exports.  
2.13.   Sri Lanka's "Vision" outlines overall economic and development policies as well as certain 
trade -specific policies such as implementing a paperless trad e facilitation system, adopting 
"competitive high -value -added" export promotion and import replacement strategies to increase 
global trade, and creating international trade -related infrastructure and logistics facilities.19 More 
recently,  emphasis is being placed on encouraging export product specialization rather than the 
value added of processing everything within the country.20 
2.14.   Sri Lanka's "100 Day Programme" , issued after the 2015 change of government , also 
contained some objectives specific to trade ( Section 2.1). In November 2015, the policy statement 
by the Prime Minister outlined policies that led to an activity plan for the industry, trade, and 
investment sectors, containing many elements (Box 2.1).21 These activities are executed by the  
Ministry of De velopment Strategies and International Trade , and monitored by the Department of 
Project Management and Monitoring of the Ministry of National Policies and Economic Affairs.  
Box 2.1 Industry, trade, and investme nt priority activities, 2015  
Activities  
Put in place an Investment Act to replace the Strategic Development Act  
Introduce a Trade Regulation Act to replace the Imports and Exports (Control) Act to facilitate trade  
Attract globally competitive investors to Sri Lanka  
Strive to connect local and global investors in Sri Lanka to the value added chain  
Establish economic development zones – commence work on Hambantota, Raigama, Trincomalee, and 
Mahaoya in 2016  
Restructure the Board of Investment, Export Dev elopment Board and Tourism Authority  
Establish an Agency for Development to bear the responsibility of managing all economic activities during the 
restructuring period of the Board of Investment, Export Development Board and Tourism Authority  
Establish a n International Trade Agency to handle all aspects of international trade and formulate an 
international trade policy framework  
Impose new laws to protect local and global investors and give them freedom to engage in business  
Further review the Trans -Pacific Partnership (TPP) Agreement to avoid an adverse impact on Sri Lanka's 
exports  
Appoint a committee to create a council for the development of small - and medium -scale enterprises  
Encourage small - and large -scale entrepreneurs to participate in the glo bal economy  
Enter into trade agreements with the United States, India, and China and enter EU markets through GSP+ 
concessions  
Provide tax concessions for small and medium businesses  
Provide tax concessions for local entrepreneurs from 2016 to enhance t heir productivity levels and develop 
competitiveness  
Source:  Department of National Planning, Draft Activity Plan Based on the Policy Statement of the 
Honourable Prime Minister on 5 November 2015 . 
2.15.   Sri Lanka's Department of Commerce also has specific trade  objectives for areas falling 
under its auspices. Its 2014 work programme focused on strengthening existing trade ties, finding 
                                                
17 Ministry of Finance online information. Viewed at: 
http://www.treasury.gov.lk/documents/58941/59617/Performance+Re port+2015+ -TIP.pdf/b218f39d -b7f3-
4f24-90e5-4382a4c593ff .  
18 Ministry of Finance online information. Viewed at: 
http://www.treasury.gov.lk /documents/10181/12870/2014/23cd697c -85b6-4ad6-8ba3-
2a007be8b56e?version=1.0  . 
19 Department of National Planning, Ministry of Finance and Planning  (2010), Mahinda Chinth ana – 
Vision for the Future .  
20 Information provided by the authorities.  
21 Department of National Planning, Draft Activity Plan Based on the Policy Statement of the Honourable 
Prime Minister on 5 November 2015 . WT/TPR/S/ 347 • Sri Lanka  
 
- 26 - 
 
  new markets for products, promoting new products, encouraging effective participation of SMEs in 
the international trading syste m, and promoting Sri Lanka as a trading hub in the South Asian 
region.22 For 2015, emphasis was placed on: regaining EU GSP+; entering into new trading 
agreements with Japan, Korea, Bangladesh, Viet Nam, and BRICS23; conducting surveys to identify 
new market s; preparing for Sri Lanka E xpo 2016; organizing overseas business forums and 
participation in international trade fairs; and organizing trade missions.24 
2.3  Trade Agreements and Arrangements  
2.3.1   WTO  
2.16.   Sri Lanka became  a GATT contracting party in 1948; it is an orig inal Member of the WTO, 
and participates in many aspects of the WTO. Sri Lanka grants at least MFN treatment to all its 
trading partners. Its trade policies have been reviewed three times under the Trade Policy Review 
Mechanism (TPRM), the last review havi ng taken place in 2010. During the review period, Sri 
Lanka made proposals to the DDA and participated in the regular work and Committees of the 
WTO. Sri Lanka was not  involved in any disputes under the WTO Dispute Settlement Mechanism 
during the review pe riod; its last involvement was as a third party in 2003.25 Sri Lanka is not a 
party to any of the WTO plurilateral agreements; it has been an observer to the Agreement on 
Government Procurement since 2003.  
2.17.   In terms of the Trade Facilitation Agreement, Sri L anka notified its Category A commitments 
on 31 July 2014, in which it identified 11 provisions for implementation upon the entry into force 
of the agreement.26 Furthermore, it ratified the agreement and presented its instrument of 
ratification to the WTO on  31 May 2016.27 
2.18.   In terms of the Doha Round, Sri Lanka made proposals and/or revisions to proposals to the 
Negotiating Group on Market Access, the Negotiating Group on Rules, and the Trade Negotiations 
Committee (TNC) during the review period. The co -sponsor ed proposal on market access 
concerned an understanding that would interpret the Agreement on Technical Barriers to Trade 
with respect to the labelling of textiles, clothing, footwear, and travel goods.28 The co -sponsored 
proposal submitted to the Negotiati ng Group on Rules concerned an  amendment to Articles 27.2 
and 27.4 of the Agreement on Subsidies and Countervailing Measures  in respect of developing 
countries covered under Annex VII.29 Sri Lanka was also one of a number of countries that co -
sponsored a dr aft decision to the TNC to amend Section 3 of Part II of the TRIPS Agreement with 
respect to the protection of geographical indications.30 
2.19.   During the review period, Sri Lanka made many notifications to several WTO Committees 
(Table A2.1). Notifications duri ng the review period pertained mainly to customs valuation, 
agriculture, import licensing, SPS, TBT, TRIMs, and TRIPS.  
2.3.2   Regional and preferential agreements  
2.20.   Sri Lanka's regional and preferential trade regime has remained largely unchanged since its 
last rev iew. Sri Lanka continues to participate in two longstanding regional and two longstanding 
bilateral free trade agreements: Asia -Pacific Trade Agreement (APTA), South  Asian Free Trade 
Area (SAFTA), Indo –Sri Lanka Free Trade Agreement (ISFTA), and the Pakist an–Sri Lanka Free 
Trade Agreement (PSFTA). Sri Lanka receives GSP benefits from a number of countries and 
participates in the Global System of Trade Preferences among Developing Countries (GSTP). One 
feature of Sri Lanka's regional and preferential agreeme nts is that they involve a limited number of 
                                                
22 Department of Commerce, Performance Report and Annual Accounts for the Year 2014 . 
23 Brazil, Russia, India, China and South Africa . 
24 Department of Commerce, Performance Report for 1st-3rd Quarter 2015 . 
25 DS246.  
26 WTO document WT/PCTF/N/LKA/1. The 11 provisions are: 4.1, 5.2, 6.3, 7.2, 7.8, 9, 10.6, 10.7, 10.8, 
10.9, and 11.  
27 WTO online information. Viewed at: http://www.tfafacility.org/ratifications . 
28 WTO documents TN/MA/W/93/Rev.2 and TN/MA/W/93/Rev.1/Add.1.  
29 WTO documents TN/RL/GEN/177/Rev.1 and TN/RL/GEN/177/Rev.2.  
30 WTO document TN/C/W/60.  WT/TPR/S/ 347 • Sri Lanka  
 
- 27 - 
 
  partners in close proximity and often with overlapping concessions through more than one 
agreement.  
2.21.   Developments during the review period include the launch of free trade negotiations with 
China in September 201 4.31 The proposed agreement was still under negotiation as of June 
2016.32 Negotiat ions concerned  a comprehensive FTA covering goods, services, investment, 
customs cooperation, technical barriers to trade, sanitary and phytosanitary measures, and 
safeguards.  Furthermore , with a view to deepening and widening Sri Lanka's economic ties and 
trade prospects with India, negotiations are being held on a new Indo –Sri Lanka Economic and 
Technology Cooperation Agreement.  
2.3.2.1   Reciprocal trade agreements  
2.22.   Trade under recipro cal preferential agreements for Sri Lanka is minimal, amounting to just 
3.4% of 2014 imports, while the majority of trade enters MFN duty  free (Chart 2.1). While 
Sri Lanka has provided many concessions under reciprocal trade regimes, many of these have 
been eroded due to the large number of tariff lines that are currently MFN duty  free. Sri Lanka's 
FTAs are also concentrated on countries in the region, sometimes with overlaps, as in the case 
with India, whereby concessions are possible through three agreeme nts. 
Chart 2.1 Imports by type of import regime, 2014  
MFN duty -free
60.0%
Reciprocal trade 
agreements
3.4%MFN dutiable
36.6%Chart 2.1 Imports by type of import regime, 2014
Source:    WTO Secretariat estimates, based on data provided by the authorities and UNSD Comtrade database."Reciprocal trade agreements" cover trade benefitting from an RTA ; and "MFN duty -free" covers all  trade entering at 
MFN duty -free rates (based on 2014 tariff schedule). ab
b
b Figures are approximative as no import data is available at 8 -digit tariff line level.a
 
a "Reciprocal trade agreements" cover trade benefiting from an RTA; and "MFN duty -free" covers all 
trade entering at MFN duty -free rates (based on 2014 t ariff schedule).  
b Figures are approximative as no import data is available at 8 -digit tariff line level.  
Source:  WTO Secretariat estimates, based on data provided by the authorities and UNSD Comtrade 
database.  
2.3.2.1.1   Asia–Pacific Trade Agreement (APTA)  
2.23.   Since its  entry into force in 2006, APTA, known previously as the Bangkok Agreement, was 
the first preferential trade agreement among developing countries in the region; it is intended to 
promote economic development through the adoption of mutually beneficial trad e liberalization 
measures.33 Sri Lanka has participated in APTA34 since 2006, and was a member of the Bangkok 
Agreement from 1976; it has participated in the four rounds of tariff reductions under the 
agreement. As of June 2016, the fourth round of negotiati ons was expected to be concluded at the 
fourth Ministerial Council which was scheduled to be held in 2016. Thus, Sri Lanka now provides 
                                                
31 Chinese Ministry of Commerce (MOFCOM ) online information. Viewed at: 
http://fta.mofcom.gov.cn/list/ensri/enchinasrinews/1/encateinfo.html ; and information from the Sri Lankan 
authorities.  
32 Informatio n provided by the authorities.  
33 UNESCAP online information. Viewed at: 
http://www.unescap.org/sites/default/files/01_APTA%20Brochure_20140820.pdf . 
34 Current ATPA pa rticipants include Bangladesh, China, India, Laos, Mongolia, Republic of Korea, and 
Sri Lanka.  WT/TPR/S/ 347 • Sri Lanka  
 
- 28 - 
 
  preferences negotiated during the first three rounds on 427 tariff lines35 under the normal APTA 
regime (approximately 20 0 are already MFN duty free ), mostly on industrial products including 
plastics, machinery, steel products, and wood. Special and differential treatment is provided for 
APTA LDCs, whereby additional concessions are granted; for Sri Lanka this includes an ad ditional 
77 tariff lines, of which the majority, i.e. 60 tariff lines , are already MFN duty free , concentrated on 
textile goods. ATPA is accompanied by common rules of origin for participants, and operational 
procedures for the certification and verificati on of the origin of the goods.36 
2.24.   In addition to the main agreement on tariffs on goods, APTA participants have also signed 
framework agreements on trade facilitation, investment, and trade in services.37 Sri Lanka has 
signed and accepted these framework agre ements, including the Framework Agreement on the 
Promotion and Liberalization of Trade in Services signed in August 2011. The agreement on trade 
facilitation includes provisions for harmonization and standardization, simplicity and efficiency, and 
transpar ency and consistency , in order to improve the efficiency of trading goods across national 
borders.38 The framework on investment calls for: negotiation and implementation for the 
cooperation and facilitation programme; the promotion and awareness programme;  the 
liberalization programme; and the protection programme.39 For trade in services, the framework 
agreement calls for the liberalization of services beyond what is committed in the GATS. In 
particular , it provides for liberalization and negotiation of spe cific commitments.  
2.3.2.1.2   South Asian Free  Trade A rea (SAFTA) and SAARC Framework Agreement on 
Trade in Services (SATIS)  
2.25.   Under the auspices of the South Asian Association for Regional Cooperation (SAARC), in 
which Sri Lanka participates, the South Asian Free  Trade Area (SAFTA) Agreement was signed in 
January 2004 and implemented with effect from 1 January 2006 . As a successor to the South 
Asian Preferential Trade Arrangement (SAPTA) , SAFTA was designed  to reach a higher level of 
integration of trade in the region , while cognizant of the varying levels of development , in order to 
reach achievable targets. SAFTA comprises the eight SAARC members40, including Sri Lanka, and 
has developed a trade liberalization programme containing tariff schedules providing tariff 
reductions (for LDC s and non -LDCs), and also sensitive lists where no reductions occur per an 
agreed schedule for LDCs and non -LDCs respectively. Sri Lanka completed this tariff liberalization 
with effect from 21 November 2015 for non -LDCs, and LDCs are to be  completed by 2016. In 
2012, SAFTA undertook initiatives to reduce the number of products on the sensitive lists by 20%; 
these were implemented in 2014, thus Sri Lanka has 1,765 tariff lines on the revised sensitive list 
for LDCs and 1,948 tariff lines on the revised sensitive list for non -LDCs.41 This 20% reduction in 
the sensitive list was also subject to a gradual phase out, which is scheduled to be completed by 
2020 and for Sri Lanka, by 2018. The SAFTA also contains provisions on rules of origin, 
consul tations and dispute settlement, and safeguard measures. Sri Lanka has provided zero duties 
or a margin of preference on over 5,000 tariff lines for non -LDCs and nearly 7,000 lines for LDCs, 
covering nearly all agricultural and industrial sectors. However, the majority of these tariff lines 
are MFN duty free , thus the concessions apply to approximately 1,500 tariff lines only.  
2.26.   SAARC members also cooperate on other areas such as customs, standards, double 
taxation, and trade in services. In 2010, SAARC compl eted negotiations on trade in services, and 
the SAARC Framework Agreement on Trade in Services (SATIS) entered into force in 2012.42 
However, SATIS focuses on schedules of specific commitments to achieve services' liberalization, 
                                                
35 Tariff lines means at the 8 -digit level.  
36 UNESCAP online information. Viewed at: http://www.unes cap.org/apta/tariff -concessions . 
37 The agreements are: Framework Agreement on Trade Facilitation (15 December 2009); Framework 
Agreement on the Promotion, Protection and Liberalization of Investment (15 December 2009); and the 
Framework Agreement on the P romotion and Liberalization of Trade in Services (24 August 2011). UNESCAP 
online information. Viewed at: http://www.unescap.org/apta . 
38 UNESCAP online information. Viewed at: http://www.unescap.org/resources/framework -agreement -
trade -facilitation -0. 
39 UNESCAP online information. Viewed at: 
http://www.unescap.org/sites/default/files/04_FA%20on%20Trade%20in%20Investment.pdf . 
40 These include: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. 
SAARC online information. Viewed at: http://saarc -sec.org/ . 
41 SAARC online information. Viewed at: http:// saarc -
se.org/areaofcooperation/detail.php?activity_id=35 ; and information provided by th e authorities.  
42 SAARC online information. Viewed at: http://saarc -se.org/areaofcooperation/detail.php?activity_id= 
46.  WT/TPR/S/ 347 • Sri Lanka  
 
- 29 - 
 
  and this process was not ye t completed as of June 2016; the draft official SATIS list of Sri Lanka is 
under the scrutiny of its higher authorities. SATIS participants agreed to a higher level of 
commitments for non -LDC participants, thus Sri Lanka's offer on specific commitments inc ludes 
commitments on telecommunications, financial, and tourism and travel -related services; and 
additional commitments on business and transport services.43 
2.3.2.1.3   Indo–Sri Lanka Free Trade Agreement (ISFTA)  
2.27.   The Indo –Sri Lanka Free Trade Agreement (ISFTA) was sig ned by the parties in 1998 and 
entered into force in 2000, with full implementation achieved in 2008. The agreement covers only 
trade in goods, providing additional market access through the elimination of duties, or respective 
lists providing a margin of preference for selected products. There are related provisions on rules 
of origin and safeguards.44 In addition, both parties maintain negative lists, in respect of which no 
concessions can be granted; in the case of Sri Lanka,  1,220 lines at the 6 -digit le vel are affected . 
India also retains tariff rate quotas (TRQs) under ISFTA on a number of items including tea, 
pepper, clothing, and coconut s, many of whic h are major Sri Lankan exports.  
2.28.   As of 2016, Sri Lanka provided concessions on 4,675 tariff lines, alt hough the majority are 
already MFN duty free  – thus only about 1,000 lines have concessions that are applied, nearly all 
at 0%. Most products covered under the agreement are industrial goods, e.g. chemicals, wood and 
paper, textiles and clothing, steel, an d machinery. India remains one of Sri Lanka's most important 
trading partners, and the balance of trade has been in favour of India during the review period, 
averaging about US$3 billion. Only a small part of the trade however is covered by ISFTA.  
2.29.   As noted  above, Sri Lanka and India have agreed to expand their economic cooperation and 
a preliminary exchange of information on a proposed Economic and Technology Cooperation 
Agreement has taken place.  
2.3.2.1.4   Pakistan –Sri Lanka Free Trade Agreement (PSFTA)  
2.30.   Sri Lanka's second FTA was signed with Pakistan in 2002 and entered into force in 2005, 
reaching full implementation in 2010 . It has a similar structure to that with India, as it contains 
mainly tariff concessions in the form of zero duties or a margin of preference ( for Pakistan only), 
and related provisions on rules of origin and safeguards. It also contains a negative list (list of 
products not subject to tariff concessions) and a list of products subject to TRQs for each party. Sri 
Lanka's negative list contains ab out 700 lines at the 6 -digit level , including  in agriculture, rubber, 
footwear, iron and steel products, machinery, and furniture.45 
2.31.   Concessions were granted by Sri Lanka on 5,511 tariff lines covering agricultural and 
industrial products such as meat, fish , vegetables, minerals, chemicals and plastics, wood and 
paper, textiles and clothing, steel products, and machinery and equipment. The majority of the 
tariff lines are already MFN duty free , leaving about 1,800 tariff lines where concessions are 
utilized.  Sri Lanka's trade with Pakistan is about one  tenth that with India, and Sri  Lanka 
maintained a US$245 million trade deficit with Pakistan on average during the period.46 
2.3.2.1.5   Global System of Trade Preferences among Developing Countries (GSTP)  
2.32.   Sri Lanka partici pates in the Global System of Trade Preferences among Developing 
Countries  (GSTP) and grants GSTP benefits on 135 tariff lines, although concessions are actually 
given on 98 tariff lines, as 37 are MFN duty free . All GSTP benefits are in the form of a duty  
reduction from the MFN rate, with GSTP rates ranging from 9 to 27% ad valorem . Most tariff lines 
impacted are vehicles of chapter 87 of the HS. Other sectors having benefits include certain 
machinery (including ball bearings), certain stones, rock phospha te, certain fish, and apples.  
                                                
43 Information provided by the authorities.  
44 Departmen t of Commerce online information. Viewed at: 
http://www.doc.gov.lk/web/index.php?option= com_content&view=article&id=110&Itemid=112&lang=en . 
45 Department  of Commerce online information. Viewed at: http://www.doc.gov.lk/web/images/stories/ 
PSFTA/nl%20sl.pdf . 
46 UNSD Comtrade.  WT/TPR/S/ 347 • Sri Lanka  
 
- 30 - 
 
  2.33.   Like the concessions, most GSTP imports are vehicles of chapter 87. During the review 
period, there was a sharp decline in GSTP imports and a growth in GSTP exports; imports declined 
by over 90% (Chart 2.2). During the review period, there were no changes in the coverage of 
GSTP products; declining GSTP imports were mainly due to a reduction in imports of passenger 
cars, particularly from India.  
2.34.   Sri Lanka's exports under GSTP are concentrated on Peru, Mexico, and Chile; they are 
mainly cinnamon, cinnamon -tree flowers, and desiccated coconuts.  
Chart 2.2 Trade under GSTP, 2010 -15 
(US$ million)  
020406080100120
2010 2011 2012 2013 2014 2015
Note:        Figures for 2015 are partially only.
Source:     Data provided by the authorities.Chart 2.2   Trade under the General System of Trade Preference (GST)
US$ million
Imports
Exports
 
Note:  Figures for 2015 are for part  of the  year only.  
Source:  Data provided by the authori ties. 
2.3.2.2   Unilateral preferential regimes  
2.35.   Sri Lanka, as a developing country, receives GSP benefits from a number of trading partners  
including Australia, Belarus, Canada, the EU, Japan, Kazakhstan, the Kyrgyz Republic, New 
Zealand, Norway, the Russian Federat ion, Switzerland, Turkey, and the United States. Additionally, 
it receives GSP+ benefits from Norway. Recently, as announced in its 100  Day Programme, 
Sri Lanka made a request to the EU to regain GSP+ benefits that were revoked in 2010 by the EU. 
As of Jun e 2016, a draft comprehensive application was being prepared that would address the 
issues raised by the EU. If Sri Lanka were to re -gain GSP+ benefits, it would attain zero duties on 
nearly all of its exported products to the EU.47 
2.36.   GSP benefits from the EU  are the most utilized, as Sri  Lankan GSP exports to the EU 
amounted to US$2,122 million in 2015.48 Other GSP exports are mainly to the United States, the 
Russian Federation, Japan, and Canada.  
2.37.    According to the Sri Lankan authorities, Sri Lanka provides un ilateral preferences to 
Bangladesh on 28 tariff lines , of which 18 are already MFN duty free . Thus, concessions are 
provided on imports of ginger, certain cosmetic items, certain soaps or surfactants, and electrical 
insulators.  
                                                
47 Information provided by the authorities.  
48 Information provided by the authorities.  WT/TPR/S/ 347 • Sri Lanka  
 
- 31 - 
 
  2.3.3   Other agreements and arrange ments  
2.3.3.1   Bay of Bengal Initiative for Multi -Sectoral Technical and Economic Cooperation 
(BIMSTEC)  
2.38.   The Bay of Bengal Initiative for Multi -Sectoral Technical and Economic Cooperation 
(BIMSTEC) comprises seven member States, including Sri Lanka, and was establis hed in 1997 as a 
bridge between South and South East Asia for cooperation and reinforcement of relations.49 
BIMSTEC cooperates in a number of areas, including trade and investment, tourism, fisheries, 
agriculture, transport and communication, and energy, am ong others. Member countries agreed to 
negotiate a Free Trade Area Framework Agreement through the establishment of a Trade 
Negotiating Committee to cover trade in goods and services, investment, economic cooperation, 
trade facilitation, and technical assi stance for LDCs.50 The Trade Negotiating Committee has been 
finalizing the text on trade in goods and Sri Lanka has submitted its schedule of commitments , 
which includes concessions and a negative list. The trade liberalization programme of BIMSTEC 
consists  of three tracks : fast-track elimination, normal track elimination, and normal track 
reduction.  
2.3.3.2   Indian Ocean Rim Association (IORA)  
2.39.   The Indian Ocean Rim Association (IORA) was created in 1997 to enhance economic 
cooperation among the countries of the India n Ocean Rim. It comprises 21 member States , 
including Sri Lanka . They aim to build and expand understanding through consensus and 
cooperation in a number of areas including maritime safety and security; trade and investment 
facilitation; fisheries manageme nt; disaster risk management; academi a, science and technology; 
tourism and cultural exchanges; and gender empowerment.51 In terms of trade, IORA has 
recognized that effective trade linkages should be established for member States  in several 
sectors, includ ing: food, SMEs, financial services, mining, tourism, the ocean economy, and 
renewable energy. For 2016, IORA has recognized that enhancing trade and investment will be an 
area of priority.52 
2.40.   In October 2015, IORA member States  agreed to a Maritime Cooperat ion Declaration that 
contains six main elements supporting the maritime sector in the region.53 These are: promoting 
sustainable development of coastal and small island areas through sustainable tourism and leisure 
activities; encouraging increased investme nt in and development of sustainable and resilient 
maritime infrastructures; encouraging cooperation in shipping, logistics, and allied industries; 
enhancing cooperation in sustainable marine economic development and food security through 
responsible fishe ries management and marine resource preservation; supporting and 
strengthening regional cooperation in challenges such as illegal unreported and unregulated 
fishing, piracy, irregular movement of people, marine pollution, drug trafficking, illegal traffick ing 
in wild life, and disasters; and increasing engagement between research institutions on maritime 
education, research, development, and innovation. According to the authorities, there has been no 
tangible progress in these areas. 
2.41.   In terms of preferentia l trade, Sri Lanka made a proposal to IORA members to establish a 
preferential trade agreement for the region to remove trade and tariff barriers for the expansion of 
short- and medium -term trade and investment opportunities within the region. 54 No progres s has 
been made on this initiative.  
                                                
49 Member States  include: Bangladesh, Bhutan, India, Nepal, Sri Lanka, Myanmar, and Thailand. 
BIMSTEC online information. Viewed at: http://www.bimstec.org/ind ex.php?page=overview . 
50 BIMSTEC online information. Viewed at: http://www.bimstec.org/index.php?page=free -trade-
agreement . 
51 Member States  include: Australia, Bangladesh, Comoros, India, Indonesia, Iran, Kenya, Madagascar, 
Malaysia, Mauritius, Mozambique, Oman, Seychelles, Singapore, Somalia, South Africa, Sri Lanka, Tanzania, 
Thailand, United Arab Emirates, and Yemen. IORA online information. Viewed at: http://www.iora.net/about -
us/membership.aspx . 
52 IORA online information. Viewed at: http://www.iora.net/media/160811/151222_iora_round_up.pdf . 
53 IORA online information. Viewed at: 
http://www.iora.net/media/160000/iora_maritime_cooperation_declaration_2015.pdf . 
54 IORA online information. Viewed at: http://www.iora.net/projects/flagship -projects/preferential -
trade -agreement.aspx . WT/TPR/S/ 347 • Sri Lanka  
 
- 32 - 
 
  2.4  Investment Regime  
2.42.   Since the end of the internal conflict, Sri Lanka has recognized the importance of rebuilding 
the economy and establishing an attract ive environment for foreign direct investment. As part of 
its 2010 Vi sion, it was recognized that FDI would be important to bring new technology and 
development to Sri Lanka. It was also recognized  that investment inflows were disproportionately 
low (about 1.5% of GDP) and that there was an infrastructure gap between Sri La nka and its 
neighbours. Thus, the Vision established targets to raise FDI to 3% of GDP and to prioritize the 
targeting of investments.55 Despite a number of incentives and an overall growth in FDI to record 
levels, FDI has not reached the levels envisaged, and remains at about 2% of GDP.56 According to 
UNCTAD, Sri Lanka rank ed fifth in the South Asia region in terms of 2014 investment inflows, 
behind India, Iran, Pakistan, and Bangladesh.57 Furthermore, there have been no major 
multinational enterprises settin g up operations in Sri Lanka in manufacturing during the past 
decade.58 Some recent government policies, such as restricting land purchases by foreigners and 
utilization of the Underutilized Assets Act, adopted by Parliament in November 2011, to 
expropriate  companies and assets , may have actually deterred potential foreign investment.  
2.4.1   Legal framework  
2.43.   Sri Lanka's main law on investment, the Board of Investment of Sri Lanka Act  (BOI Act) , as 
amended, continues to provide the main legal framework for investment  in Sri Lanka. The law was 
last amended in 2012 and its related regulations were last updated in 2006.59 The 2012 
amendments mainly concerned the election and term of the Board as well as the appointment of 
the Director -General of the Board.  
2.44.   In 2014, Sri La nka passed the Land (Restrictions on Alienation) Act that imposed new 
restrictions on the sale, transfer, or lease of land, properties, or condominium units.60 The law 
prohibits the transfer of land to a foreigner, foreign company, or a local company with m ore than 
50% foreign ownership. Certain exceptions applied to any land transferred to a company with 
more than 50% foreign ownership from 1 January 2013 to 29 October 2014 if the company had 
been in active operation in Sri Lanka for a period of not less th an 10 consecutive years; and also 
for diplomatic missions, condominium parcels on or above the fourth  floor, transfer/disposition to a 
next of kin foreigner, and duel citizens. The law also introduced a new land lease tax of 15% 
applied to foreigners leasi ng land , but it only remained in place for about two years, as it was later 
removed in the 2016 Budget.61 
2.45.   The Finance Act No. 12 of 2012 (Part IV ) and the Commercial Hub Regulation No. 1 of 2013 
amended certain provisions so as to exempt certain foreign inv estors (65% minimum ownership) 
involved in certain business activities , such as entrep ôt trade , from the provisions of the Customs 
Ordinance (Chapter 235), the Exchange Control Act (Chapter 423), and the Imports and Exports 
(Control) Act No. 1 of 1969 ( see Section 2.4.5 on commercial hub activities). Other laws that may 
impact investment are the Companies Act No. 7 of 2007, the Exchange Control Act No. 24 of 1953, 
and the Strategic Development Projects Act No. 14 of 2008.  
2.46.   Sri Lanka currently has 24 bilatera l investment treaties, also known as Investment 
Protection Agreements (IPAs), with other countries or groups of countries in force (Table A2.2). It 
has also signed agreements with the Czech Republic, Iran, Kuwait, and Viet Nam, but these 
agreements have no t yet entered into force. Sri Lanka's IPAs generally include provisions on scope 
and definition of investment, admission and establishment, national treatment, most -favoured -
                                                
55 Department of National Planning, Ministry of Finance and Planning  (2010), Mahinda Ch inthana – 
Vision for the Future .  
56 Ministry of Finance online information. Viewed at: 
http://www.treasury.gov.lk/document s/58941/59617/Performance+Report+2015+ -TIP.pdf/b218f39d -b7f3-
4f24-90e5-4382a4c593ff .  
57 UNCTAD online information. Viewed at: http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf . 
58 Daily Mirror online information. Viewed at: http://www.dailymirror.lk/94949/reforming -sri-lanka -s-
trade -and-investment -policies -for-expor t-growth . 
59 Board of Investment of Sri Lanka (Amendment) Act No. 3 of 2012.  
60 Land (Restrictions on Alienation) Act No. 38 of 2014. Gazette of the Democratic Socialist Republic of 
Sri Lanka  of 31 October 2014.  
61 PricewaterhouseCoopers online information. Viewed at: 
https://www.pwc.com/lk/en/assets/document/PwC_Budget_2016_Summary.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 33 - 
 
  nation treatment, fair and equitable treatment, compensation in the event of expro priation or 
damage to the investment, guarantees of free transfers of funds, and dispute settlement 
mechanisms (both state -state and investor -state). 
2.47.   In 2014, Sri Lanka notified the TRIMs Committee that it had six laws relating to investment, 
but that to t he best of its knowledge, none provided any measures inconsistent with the TRIMs 
Agreement.62 
2.4.2   Investment management and policy  
2.48.   As established by the Board of Investment  of Sri Lanka  Act, Sri Lanka's Board of Investment 
(BOI) is tasked with facilitating fore ign direct investment into the country and it is the central 
facilitation point for investors. It is also the government body authorized to enter into agreements 
with investors regarding tax holiday s, tax concessions, and exemptions from customs duties.  
2.49.   Overall policy direction for investment is determined by the Ministry of Development 
Strategies and International Trade  and as outlined in various policy documents ( Section s 2.1 and 
2.2). Current policy considerations include: encouraging more foreign direct  investment, enacting 
the Investment Act in replacement  of the Strategic Development Act, attracting globally 
competitive investors to Sri Lanka, striving to connect local and global investors in Sri Lanka to the 
value added chain, and restructuring the Bo ard of Investment.  
2.4.3   Investment restrictions  
2.50.   Sri Lanka continues to restrict investments in certain sectors or otherwise impose limitations 
such as advance permissions or additional capital on certain investments; these remain unchanged 
since the previous re view (Table 2.2). Many of the restrictions are in strategic sectors such as tea, 
coconut s, communications, and fishing; and there are no plans at present to liberalize these. 
Furthermore, there are restrictions on the sale of land to foreigners ( Section 2. 4.1). 
Table 2.2 Investment restrictions, exclusions, or limitations, 2016  
Subject to:  Provisions  Sectors/businesses  
Exclusions  Permission shall not apply in respect of shares of a 
company proposing to carry o n or carrying on any of 
the following businesses  Money lending, pawn broking, retail 
trade with a capital of less than one 
million U .S. dollars, coastal fishing, 
and provision of security services 
including security management, 
assessment and consulting to  
individuals or private organizations  
Limitations  a. The permission shall apply in respect of shares in 
a company carrying on or proposing to carry on any 
of the following businesses only up to 40% of the 
issued capital of such company, or if approval has  
been granted by  the Board of Investment of 
Sri Lanka for a higher percentage of foreign 
investment in any company, only up to such higher 
percentage  
 
 
 
 
 
 
b. The permission shall apply in respect of the shares 
of a company carrying on or proposing to carr y on 
any of the businesses up to the percentage of the 
issued capital of the company for which percentage 
either general or special approval has been granted 
by the Government of Sri Lanka or any legal or 
administrative authority set up for the approval of  Production of goods where Sri Lanka's 
exports are subject to internationally 
determined quota restrictions; 
growing and primary processing of 
tea, rubber, coconut s, cocoa, rice, 
sugar and spices; mining and primary 
processing of non -renewable national 
resources; timber -based industries 
using local timber; fishing (deep sea 
fishing); mass communications; 
education; freight forwarding; travel 
agencies; and shipping agencies  
Air transportation; coastal shipping; 
industria l undertaking in the second 
schedule of the Industrial Promotion 
Act No. 46 of 1990, namely any 
industry manufacturing arms, 
ammunitions, explosives, military 
vehicles and equipment , aircraft and 
other military hardware ; any industry 
manufacturing poison, narcotics, 
                                                
62 WTO document G/TRIMs/N/2/Rev.24/Add.3 , 23 December 2014 . WT/TPR/S/ 347 • Sri Lanka  
 
- 34 - 
 
  Subject to:  Provisions  Sectors/businesses  
foreign investment in such businesses  alcohols, dangerous drugs and toxic, 
hazardous, or carcinogenic material ; 
any industry producing currency, 
coins or security documents; 
large-scale mechanized mining of 
gems; and lotteries  
Conditions  a. A person resident outside Sri Lanka who i s a party 
to a transaction permitted under the Exchange 
Control Act  shall make a declaration to the effect 
that such person is resident outside Sri Lanka on the 
share transfer form or share application form as 
applicable  
b. The payment for shares in any is sue or 
transaction permitted under the Exchange Control 
Act shall be made only out of or into a Securities 
Investment Account opened in a commercial bank of 
Sri Lanka in accordance with directions given by the 
Controller of Exchange in that behalf to comme rcial 
banks  
c. A commercial bank, a licensed share broker or any 
other person entrusted with the payment of capital 
monies such as sale proceeds of shares, dividends 
and commissions in respect of any transaction 
permitted hereunder shall make such payment only 
into or out of a Securities Investment Account 
referred to in sub -paragraph b. above  
d. The Secretary/Registrar to a company in which 
the issue or transfer of shares to persons resident 
outside Sri Lanka are limited under "Limitations"  
shall not regis ter the name of any person resident 
outside Sri Lanka or a citizen of a foreign State or 
their nominee as a shareholder in such company if 
by such registration the limits specified in 
"limitations" shall be exceeded  n.a. 
n.a. Not applicable.  
Source:  Notice under the Exchange Control Act, Gazette of the Democratic Socialist Republic of Sri Lanka , 
19 April 2002.  
2.4.4   Investment incentives and promotion  
2.51.   Sri Lanka has had specific provisions to attract certain industries or sectors (Box 2.2); fiscal 
incentives are provided on a case -by-case basis. As of June 2016, corporate income tax holidays 
were being revised and a new incentive scheme was to be formulated by the Government, placing  
special focus on facilitating investments and ease of doing business.  Investment incentives have 
included corporate tax incentives, import duty exemption, exemption of the tax on dividends, and 
exemption of exchange controls. These fiscal investment incentives were amended periodically  
during the review period . The Government ceased to  offer them to new investments as of 
31 October 2014, however, those agreements concluded with investors under the BOI Act 
(Section  17) before that date remain active and in place. It is noted that Sri Lanka has promot ed 
certain sectors in which  investment  restrictions still remain, e.g. aviation, energy/mining, 
telecommunications, and retail trade.  
2.52.   FDI must receive government approval. The BOI Act has two types of approval for foreign 
investments : under  Section 16 , which  provides for the approval of forei gn investment without 
fiscal incentives, subject to normal Sri  Lankan laws ; and under  Section 17 , which  involves approval 
of projects and the entering into agreements with the BOI to grant exemptions to certain laws 
allowing incentives. The BOI also helps arrange visas, aid in import/export facilitation, and 
facilitate industrial labour relations. Sri Lanka's 2012 Budget introduced a new tax incentive 
regime for private investors, according to the size and type of enterprise and the sector in which it WT/TPR/S/ 347 • Sri Lanka  
 
- 35 - 
 
  opera tes (Table 2.3). Generally, the larger the investment, the longer the period for which the tax 
incentives were given.  
2.53.   A One -Stop-Shop (OSS) has been formally established by the BOI to expedite the 
investment approval process. All investor needs are met within the BOI premises without the need 
to go to other line agencies. The OSS is expected to reduce the lead time for investment approval 
to a target of no more than 25 days. The relevant regulatory agencies63 provide a response to the 
OSS within 20 working d ays of receipt of the request for the relevant approval, permit, or required 
regulatory or administrative clearance.  
Box 2.2 Promotion of investment in certain sectors, 2014  
Sectors  
Maritime sector  
Aviation se ctor 
Knowledge sector  
Energy sector  
Commercial hub related services  
Tourism sector  
Manufacturing sector (apparel, rubber -based products, food processing, high -tech manufacturing)  
Infrastructure sector (roads, ports, housing, shopping malls, water sup ply, industrial zones, and warehousing 
and logistical centres)  
Services sector  
Agriculture sector  
Development of zones  
Note:  Promotion of certain sectors ceased as of 31 October 2014.  
Source:  BOI, BOI Investment Guide 2014 . Viewed at: 
http://www.investsrilanka.com/images/publications/pdf/Investment_Guide_2014.pdf . 
Table 2.3 Overview of investment incentives, 2010 -31 October 2014  
Category  Sub-category or general conditions  Qualifying 
criteria  Tax incentive or period 
(years)  
Small 
enterprises 
(new 
enterprises)  Manufacturing (other than any liquor or 
tobacco products)  Minimum 
investment  of 
Rs 50 Mn  4 
1. Agricultur e and/or agro processing,  
animal husbandry and/or processing,  
fisheries and/or fish processing  
2. Services: creative work including 
work of an artist and information 
technology  Minimum 
investment  of 
Rs 25 Mn  4 
Medium 
enterprises 
(new 
enterprises)  1. Manuf acturing (other than any liquor 
or tobacco products)  
2. Agriculture: including animal 
husbandry or fishing  
3. Services: information technology, 
software development, 
business/ knowledge process 
outsourcing, healthcare, education, 
beauty care, cold room and storage 
facilities, tourism, sports and fitness 
centres, creative work including art 
work and mini hydro power projects  Investment of  
Rs 50 Mn and  
above Up to 6 years  
                                                
63 These are: Urban Developmen t Authority (UDA), Central Environment Authority (CEA), Tourism 
Development Authority, Geological Survey and Mines Bureau, Department of Registrar of Companies, 
Department of Immigration and Emigration, municipal councils/ local authorities, Department of I nland 
Revenue, Coast Conservation, Disaster Management Centr e, Ministry of Agricul ture, Mahaweli Authority of 
Sri Lanka, Land Commissioner General 's Department, Forest Conservation Department, Sri Lanka Land 
Reclamation and Development Corporation, Departm ent of Wild Life, Ceylon Electricity Board,  National Water 
Supply and Drainage Board, Ministry of Finance/Treasury, Ministry of Defence, Attorney General 's Department, 
Sri Lanka Customs, and Department of Import and Export Control.  WT/TPR/S/ 347 • Sri Lanka  
 
- 36 - 
 
  Category  Sub-category or general conditions  Qualifying 
criteria  Tax incentive or period 
(years)  
Large 
enterprises 
(new 
enterprises)  1. Agriculture or forestry cultivation of 
food crops , industrial crops or 
horticulture, forestry, animal 
husbandry: dairy, poultry, swine, goat, 
etc. 
 Minimum 
investment of 
Rs Mn: 
300-500 
500-700 
700-1,000  
1,000 -1,500  
1,500 -2,500  
Above 2,500   
 
 
6 
7 
8 
9 
10 
12 
2. Manufacturing  
2.1 Manufacturing, production or 
processing of non -traditional goods for 
export, including deemed exports  
2.2 Manufacturing for domestic and/or 
export market: boats, pharmaceuticals, 
tyres and tubes, motor spare parts, 
furniture, ceramics, glassware or other  Minimum 
investment of 
Rs Mn: 
300-500 
500-700 
700-1,000  
1,000 -1,500  
1,500 -2,500  
Above 2,500   
 
 
6 
7 
8 
9 
10 
12 
3. Services  
‐ Provided to a person or partnership 
outside Sri Lanka  
‐ Tourism or tourism -related projects  
‐ Providing hotel services, guest houses 
or similar services  
‐ Infrastructure projects including 
construction of commercial buildings  
‐ Development of any warehousing or 
storage facility  
‐ Power generation using renewable  
resources  
‐ Establishment of industrial estates, 
special economic zones or knowledge 
cities 
‐ Urban h ousing or town centre 
development  
‐ Provision of any sanitation facility or 
waste management systems  
‐ Development of water services  
‐ Development of internal waterways, 
and /or related transport 
(passenger/freight)  
‐ Construction of hospitals and provisio n 
of healthcare services  
‐ Maintenance /repair of maritime 
vessels/aircrafts  
‐ Sporting services (e.g. motor racing or 
golf course)  
‐ Information technology  
‐ Software development  
‐ Business/knowledge process 
outsourcing  
‐ Any project in light or heavy 
engineering industry  
‐ Artificial insemination for cattle (dairy 
development)  
‐ Higher education/skills development 
/adult education  
-Processing and solid waste 
management  Minimum 
investment of 
Rs Mn: 
300-500 
500-700 
700-1,000  
1,000 -1,500  
1,500 -2,500  
Above 2, 500  
 
 
6 
7 
8 
9 
10 
12 WT/TPR/S/ 347 • Sri Lanka  
 
- 37 - 
 
  Category  Sub-category or general conditions  Qualifying 
criteria  Tax incentive or period 
(years)  
Expansion of 
existing 
undertakings  Any existing enterprise (activities 
specified in Section 16C or 17A)  Minimum 
investment  of 
Rs 50 Mn  The investment will be treated 
as a qualifying payment 
deductible from the assessable 
income of the  enterprise subject 
to a maximum of 25% of the 
investment for each year of 
assessment falling within the 
period of 4 years commencing 
from the year of investment 
since 01.04.2011  
Strategic 
import 
replacement 
enterprises  i. Fabric  
ii. Pharmaceutical  
iii. Milk Powder  
iv. Cement  Minimum 
investment of 
Rs Mn: 
5 
10 
30 
50 For new enterprises: 5 -year tax  
holiday followed by a 
concessionary tax rate of 12%  
 
For existing enterprises:  
Concessionary tax rate (12%) 
for 5 years coupled with, 
qualifying payment relief  
(investment is considered as a 
qualifying payment deductible 
from the assessable  
income of the enterprise subject 
to a maximum of 25% of the 
investment for each year of 
assessment falling within the  
period of 4 years commencing 
from the year of investment)  
Strategic 
development 
projects  Any investment capable of altering the 
economic landscape of Sri Lanka  n.a. Strategic Development Projects 
Act covers full or partial 
exemptions (depending on the  
type and the level of 
investment) of the following 
taxes : (i) Value Added Tax 
(VAT)  (ii) Income Tax (iii) 
Economic Service Charge (ESC) 
(iv) Customs Duty (v) Excise 
Duty (vi) Nation Building Tax 
(NBT)  (vii) Ports and Airports 
Development Levy (PAL) (viii) 
Taxes under the Finance Acts  
Section 17A, 
strategic 
import 
replacement 
enterprises 
and project  
expansions  VAT, Customs Duty, and PAL – 
exemptions on imports of capital goods  n.a. To reduce the upfront cost 
incurred on account of 
importation of project -related 
plant, machinery and 
equipment, the applicable VAT, 
Custo ms Duty, and PAL will be 
deferred during the project 
implementation period, and 
such deferment will be treated 
as an  exemption on the 
fulfilment of the conditions 
specified by the BOI  
n.a. Not applicable.  
Note:  Ceased as of 31 October 2014  
Source:  Ministr y of Finance online information. Viewed at: 
http://www.treasury.gov.lk/depts/fpd/taxreform/new -incentive -regime.pdf . 
2.4.5   Export processing zones, industrial parks, free por ts, and bonded areas  
2.54.   Sri Lanka maintains a number of special zones to , inter alia , improve industrial development 
and attract investment inflows into the country. There are a number of different types of zones 
including: export processing zones (EPZs) ( Section 3.2.4), industrial estates, export processing 
parks, investment zones, and free ports. The BOI administers 13 EPZs and the Ministry of Industry 
and Commerce administers 29 industrial estates. There are also two private zones relating to the WT/TPR/S/ 347 • Sri Lanka  
 
- 38 - 
 
  apparel an d related industries sector and IT/ knowledge services.64 The Government has plans to 
make 45 new development zones in different regions, including agro zones and tourist zones.65 
2.55.   In addition to providing infrastructure, EPZs often provide f acilities of the C ustoms of 
Sri Lanka for importation and exportation, and bonded areas. The number of zones has remained 
constant during the review period. There have been no changes to the laws or regulations 
pertaining to EPZs during the review period. Of the 13 EPZs, th e one at Katunayake (Western 
Province) is the most significant, accounting for the largest number of establishments and highest 
annual revenue and exports (Table 2.4). Nearly all EPZs contain firms producing for the garment 
industry, while other typical ma nufacturing includes rubber products, paper, food and beverage s, 
steel products, and vehicle spare parts.  
Table 2.4 Overview of EPZs, 2016  
 
Number of 
establishments  Annual revenue 
(Rs) Exports from 
EPZs (Rs mi llion)  Cumulative 
investment 
(Rs million as of 
Dec. 2014)  
Katunayake  83 760,000,485  200,542  50,718  
Biyagama  58 494,898,030  57,026  72,160  
Koggala  21 128,545,230  6,528  13,561  
Kandy  13 119,225,206  719 .. 
Mirigama  9 75,560,955  5,723  .. 
Malwatta  6 22,868, 030 597 .. 
Wathupitiwela  16 61,660,207  13,214  .. 
Seethawaka  26 341,260,706  39,169  .. 
Horana  17 172,224,497  3,553  .. 
Mawathagama  7 42,295,865  56 .. 
Polgahawela  5 43,430,603  8,948  .. 
Mirijjawila  4 11,997,411  332 .. 
Wagawatha  2 .. .. .. 
.. Not availa ble. 
Source:  Information provided by the authorities.  
2.56.   Industrial estates, which are outside the customs territory of Sri Lanka, have been 
established to enhance industrialization and increase employment opportunities at the regional 
level, which thus far h as been concentrated in a few districts. The Ministry of Industry and 
Commerce provides infrastructure facilities – mainly water, road, and electricity infrastructure – 
and technical consultancy assistance to industrialists. To date, the Ministry has spent  Rs 3.1 billion 
on infrastructure development and the value of investments by private investors is Rs 28.8 billion, 
with annual turnover of the industries in the estates at Rs 31.4 billion. There are 338 industries 
operating in the estates, with over one  third concentrated in the Western Province. Slightly more 
firms export (59), compared to import (48); and there are few firms with foreign investors (15) 
(Table 2.5).  
Table 2.5 Overview of industrial estates by  province, 2016  
 Number of 
industries  Number 
importing  Number 
exporting  Number with 
foreign 
investment  
Western Province  133 9 19 4 
North Western Province  74 14 22 3 
Central Province  22 7 5 1 
North Central Province  11 3 0 0 
Southern Province  18 6 5 2 
Eastern Province  15 2 2 2 
Sabaragamuwa Province  59 4 3 3 
Uva Province  3 1 1 0 
Northern Province  3 2 2 0 
Source:  Information provided by the authorities.  
                                                
64 BOI online information . Viewed at: http://www.investsrilanka.com/setting_up_in/boi_zones . 
65 Information provided by the authorities.  WT/TPR/S/ 347 • Sri Lanka  
 
- 39 - 
 
  2.57.   Since 2012 , Sri Lanka has established provisions for commercial hub activities, specifically 
free p orts and bonded areas, to facilitate the import of goods and services.66 There are currently 
two established free ports, two declared bonded areas, and two specified bonded areas for projects 
engaged in entrep ôt trade with approval for manufacturing or asse mbling a product.67 Free ports 
and bonded areas are legally outside the customs territory of Sri  Lanka and only allow the 
following types of activities: entrep ôt trade, off -shore business, front end services to clients 
abroad, headquarters operations, and l ogistic services. Entrep ôt trade normally involves 
importation, minor processing, and re -export, but under certain conditions a per cent may be sold 
locally if approval is given by the BOI and Ministry of Finance. Depending on the type of activity, 
the min imum investment of fixed assets required ranges from US$1 to US$5  million, and the 
annual re -export turnover to be reached in 5 years ranges from US$10 to US$20 million. Like the 
other investment incentives, free ports and bonded area investments are exemp t from VAT, excise 
taxes, import and export controls, special commodity levy, exchange controls, customs ordinance, 
etc. and benefit from certain tax concessions.  
                                                
66 Finance Act No. 12 of 2012, Finance Act No. 12 of 2013, and Commercial Hu b Regulation No. 1 of 
2013 ( Gazette of the Democratic Socialist Republic of Sri Lanka  No. 1818/30 of 11/07/2013).  
67 BOI online information. Viewed at: http://ww w.investsrilanka.com/images/publications/pdf/ 
Investment_Guide_2014.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 40 - 
 
  3  TRADE POLICIES AND P RACTICES BY MEASURE  
3.1  Measures Directly Affecting Imports  
3.1.1   Customs procedu res and requirements  
3.1.  During the period under review, the main change to import procedures in Sri Lanka was the 
implementation of a single window system in January 2016. Under the programme, all entities 
involved in importing and exporting are able to submi t the required regulatory information to a 
single electronic gateway. Furthermore, all traders using the system can use electronic funds 
transfer or online payments to pay customs duties and levies associated with clearance formalities. 
Sri Lanka Customs i s also implementing an online payment system, which would link all major 
banks in the country. Currently two banks are linked to the system.  
3.2.  The authorities stated that the above measures would help overcome many obstacles in the 
import and export procedur es; they would also help reduce clearance times as well as fraud and 
malpractice.  
3.3.  The main legislation governing customs procedures in Sri Lanka is the Customs Ordinance; it 
was amended most recently through the Customs (Amendment) Act No. 2 of 2003. The O rdinance 
is administered and implemented by Sri Lanka Customs, which is under the remit of the Ministry of 
Finance.  
3.4.  As per the provisions of the legislation, importers and exporters must be registered with 
Customs to be able to trade in Sri Lanka. For regi stration purposes, importers need to obtain a tax 
identification number (TIN) by registering with the Inland Revenue Department. In addition, 
importers need to submit a completed customs declaration (CUSDEC) form to Customs, with all 
other relevant documen ts. These documents include: a delivery order ; bill of lading; invoice; 
exchange documents; packing list; certificate of origin; certificate of registration (with an English 
translation for used motor vehicles); a load port survey certificate for food item s; and, if 
applicable, an import licence and/or a sanitary and phytosanitary or quarantine certificate. Sri 
Lanka Customs must ensure that the necessary approvals have been obtained from other relevant 
government authorities (e.g. Import and Export Control  Department, Sri Lanka Standard s 
Institution, and Ministry of Healthcare and Nutrition , and National Plant Quarantine  Service ) prior 
to releasing a cargo. Sri Lanka uses the Automat ed System for Customs Data (ASYCUDA) for 
centralized, electronic implementa tion and control of customs procedures. The  authorities stated 
that if documents are in order it takes less than 4 hours on average to clear a consignment and 
over 80% of the consignments are cleared on the same day.  
3.5.  Letters of credit (LC), documents again st payment (DP), documents against acceptance (DA), 
or advance payment (AP) can be used to pay for import charges. Letters of credit are valid for up 
to a year. AP terms are allowed where the total value of the goods does not exceed US$10,000; 
goods must b e received by the importer within 90 days of payment. Customs charges include seal 
charges at Rs 100 per container and container examination charges at Rs 400 for the first 
container and Rs 100 per additional container. According to the World Bank's 2015 D oing Business 
Report, seven documents are required to import in Sri Lanka. The time needed to complete an 
import operation is 136 hours and the cost to import is US$693 per container.1 
3.6.  With respect to disputes arising due to classification issues, exchange , and import control 
violations, the Customs Department Imports Division Secretariat ("D" Branch) and the 
Nomenclature Committee are the final authorities. Furthermore, duty waivers, concessions, and 
exemptions are also processed by the D Branch, which is responsible for the registration of 
Customs house agents, and for conducting investigations and inquiries on matters related to 
imports.  
3.7.  The Specialized Services Directorate also gives pre -import classification rulings on 
commodities. Importers who wish to  obtain the HS classification of a commodity must apply to the 
Classification Unit; there is a fee of Rs 300 (around US$2.70). The ruling is binding for a period of 
                                                
1 According to the World Bank's 2015 Doing Business Report, import clearance takes 406 hours in India, 
786 hours in Pakistan and 347 hours in Bangladesh, while costs incurred are US$ 1,254, US$2,048 and 
US$1,861 respectively.  WT/TPR/S/ 347 • Sri Lanka  
 
- 41 - 
 
  six months, but Customs has the right to change the HS classification before the end of thi s period 
if new information becomes available. The new classification would be applicable to all imports 
made on the basis of the earlier opinion and, if required, customs duties would be adjusted.  
3.8.  No duties are levied on goods in transit or trans -shipped goods. Goods re -imported into 
Sri Lanka after two years are subject to the same duties, regulations, and restriction s as any 
normal import. Goods subject to any duty rebates or drawback at the time of exportation would be 
subject to the appropriate duties,  if re-imported.  
3.9.  Sri Lanka has notified to the WTO that it has no regulations on pre -shipment inspection.2 
However, currently Pre -Shipment Inspection Certificates are demanded by Customs under Gazette 
of the Democratic Socialist Republic of Sri Lanka  No. 1804/17 of 3  April 2013 for vehicle imports.  
3.1.2   Customs valuation  
3.10.   With the coming into force of the Customs (Amendment) Act No. 2 of 2003, Sri Lanka 
started applying the WTO Customs Valuation Agreement on 7 January 2003.3 Under the provisions 
of the Act, the p rimary method of valuation is transaction value. If this is not available, the 
following are used in order of precedence: transaction value of identical goods; transaction value 
of similar goods; deductive value; computed value; and lastly , a fall back val ue. The fall back 
value implies that when no other methods are suitable, Customs will determine the value by taking 
into account the above valuation methods and any other relevant information.  
3.11.   Additionally , Article 10 of Schedule "E" of the Customs (Amendm ent) Act No. 2 of 2003 
grants the Minister (of Finance)  – with the approval of the Cabinet of Ministers and in the interest 
of the national economy or for any other reason  – the authority to apply minimum values for any 
goods and for a period to be specifi ed in the Order implementing the measure.  As such, Sri Lanka 
has established minimum values on certain products for customs purposes. Minimum values are 
used for motor vehicles under HS headings 87.02, 87.03, 87.04 and 87.11. The valuation method 
used is t he transaction value method based on an invoice issued by the manufacturer. Vehicles 
older than three years cannot be imported. As of 27 May 2016, automobile imports are only 
subject to an excise tax, which ranges from 70% to 290% depending on engine type and size.4 
3.12.   Sri Lanka submitted its replies to the Checklist of Issues on Customs Valuation contained in 
WTO document G/VAL/5 and notified the WTO on 11 May 2015.5 
3.1.3   Rules of origin  
3.13.   Sri Lanka does not employ non -preferential rules of origin; however, it has n ot notified the 
WTO to this effect. Sri Lanka does apply preferential rules of origin under bilateral and regional 
trade agreements (Table 3.1). The criterion to confer origin is generally a change in tariff heading 
at the four - or six -digit level, and a p ercentage of local value added, which ranges between 30% 
and 60% according to the agreement and trading partner. Goods that undergo no transformation 
must be fully originating in the preferential trading partner. Accumulation is allowed under the 
various a greements.  
3.14.   Separate origin certificates need to be submitted to Customs by importers to be eligible for 
preferential rates under different trade agreements. Certificates need to be submitted through the 
Commerce Ministry of the respective party. Certificat es issued by China, India and Korea can be 
verified online. Non -preferential certificates of origin are issued by chambers of commerce.  
                                                
2 WTO documents G/VAL/W/41/Add.1, 3 March 2000 ; and G/PSI/N/1/Add.10, 19 July 2004.  
3 WTO document  G/VAL/N/1/LKA/1 , 11 May 2015.  
4 Sri Lanka Customs online information. Viewed at: http://www.customs.gov.lk/tariff/xid160527.pdf . 
5 WTO document G/VAL/N/2/LKA/1 , 11 May 2015.  WT/TPR/S/ 347 • Sri Lanka  
 
- 42 - 
 
  Table 3.1 Rules of origin  
Agreement  Rules of origin  
Asia-Pacific Trade A greement 
(APTA)  Foreign content must not exceed 55% of f.o.b. value (65% for LDCs). 
Cumulative rules of origin: products that comply with origin requirements 
and are used by a participating State as input for a finished product 
eligible for preferential tr eatment by another participating State are 
considered as a product originating in the territory of the participating 
State where working or processing of the finished product has taken place, 
provided that the aggregate content originating in the territory  of the 
participating States is not less than 60% of its f.o.b. value (50% for LDCs)  
 
South Asia Preferential Trading 
Agreement (SAPTA)  Foreign content should not exceed 60% of the f.o.b. value of the finished 
good if produced in a single country (70% for  LDCs); and 50% if several 
members are involved (40% for LDCs). Cumulative rules of origin: 
products that comply with origin requirements and are used by a 
contracting State as input for a finished product eligible for preferential 
treatment by another con tracting State are considered as a product 
originating in the territory of the contracting State where working or 
processing of the finished product has taken place provided that the 
aggregate content originating in the territory of the contracting States is 
not less than 60% of its f.o.b. value (50% for LDCs)  
 
South Asian Free Trade Area 
(SAFTA)  Agreement  Change in tariff heading at the HS 4 -digit level. Foreign content should not 
exceed 60% of the f.o.b. value of the finished good if produced in a single  
country (70% for LDCs); and 50% if several members are involved (40% 
for LDCs). Regional accumulation allowed if the aggregate content (value 
of inputs plus domestic value added in further manufacture) is not less 
than 50% of the f.o.b. value; and the dom estic value content (value of 
inputs originating in the exporting contracting State plus domestic value 
added in further manufacture in the exporting contracting State), is not 
less than 20% of the f.o.b. value; and there is change of tariff heading  
 
Indo–Sri Lanka Free Trade 
Agreement  Change in tariff heading at the HS 4 -digit level. Minimum national content 
35% of the f.o.b. value; foreign content should not exceed 65% of the 
f.o.b. value of the product.  
 
Pakistan –Sri Lanka Free Trade 
Agreement (PSFTA)  The domestic value added (DVA) in the exporting country must not be less 
than 35% of the f.o.b. value of the finished product and HS codes of the 
imported raw materials and the finished products should be different at 
the 6-digit level ( change of tariff heading criteria)  
 
Global System of Trade 
Preferences (GSTP)  No less than 50% of the f.o.b. value of the final good if it originates from a 
single member State (60% for LDCs); 60% if several members are 
involved (50% for LDCs)  
Source:  WTO document G/RO/W/ 129, 28 September 2009; Sri Lanka Department of Commerce online 
information. Viewed at: http://www.doc.gov.lk/web/indusrilanka_freetrade.php  and 
http://www.doc.gov.lk/web/pakissrilanka_freetrade.php ; SAARC online information. Viewed at: 
http://www.saarc -sec.org ; UNESCAP online information. Viewed at: 
http://www.unescap.org/tid/aptaro.pdf ; and GSTP online information. Viewed at: 
http://www.unctadxi.org/Secured/GSTP/LegalInstruments/gstp_en.pdf . 
3.1.4   Tariffs  
3.1.4.1   Structure  
3.15.   In 2016, the applied MFN tariff in Sri Lanka consists of ad valorem  rates, specific rates, and 
alternate rates. The tariff varies between 0% and 1,225% (including ad valorem  equivalents of 
non-ad valorem  rates). Over 96% of the tariff is  applied on an ad valorem  basis, with 3.6% of 
lines subject to specific rates (compared with 3.9% in 2010). The 2016 tariff, which is based on 
the HS2012 nomenclature, comprises 6,965 lines at the eight -digit level, an increase from 6,592 
lines in 2010 , which was based on the HS2007 nomenclature (Table 3.2).  WT/TPR/S/ 347 • Sri Lanka  
 
- 43 - 
 
  Table 3.2 Sri Lanka's tariff structure, 2010 and 2016  
(% unless otherwise indicated)  
 MFN applied rate  
Final boundc 2010a 2016a 2016b 
Bound tariff line s (% of all tariff lines)  36.4 37.5 37.5 37.5 
Simple average rate  11.5 10.3 10.9 34.0 
WTO agricultural products  25.6 25.3 28.6 50.3 
WTO non -agricultural products  9.2 7.8 7.8 22.8 
Duty-free tariff lines (% of all tariff lines)  44.4 56.3 56.3 0.8 
Simple  average rate of dutiable lines only  20.8 23.9 25.1 34.0 
Tariff quotas (% of all tariff lines)  0.0 0.0 0.0 0.0 
Non-ad valorem  tariffs (% of all tariff lines)  3.9 3.6 3.6 1.9 
Domestic tariff "peaks" (% of all tariff lines)  0.3 0.3 0.6 0.0 
International tariff "peaks" (% of all tariff 
lines)d  23.9 23.1 23.7 71.5 
Overall standard deviation of tariff rates  14.7 15.3 22.8 20.1 
Nuisance applied rates (% of all tariff lines)e  0.0 0.0 0.1 0.0 
Total number of tariff lines  6,592  6,965  6,965  2,613f 
Ad valore m rates 3,413  2,790  2,790  2,543  
Duty free  2,923  3,922  3,922  20 
Specific rates  54 67 67 0 
Alternate rates  202 186 186 50 
a Including the ad valorem  component  of alternate rates and excluding specific tariff lines.  
b Including the ad valorem  part of alte rnate rates and AVEs, for specific lines, as available, provided 
 by the authorities. Out of 67 specific rates 56 AVEs are calculated.  
c Final bound rates are based on the 2016 tariff schedule. Calculations are based on bound (including 
 partially bound) t ariff lines only.  
d International tariff peaks are defined as those exceeding 15%.  
e Nuisance rate s are those greater than zero, but less than or equal to 2%.  
f Bound lines only.  
Note:  2010 tariff is based on HS07 nomenclature, 2016 tariff is based on HS12 . Calculations for averages 
are based on national tariff line level (8 -digit).  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.1.4.2   Tariff bindings  
3.16.   Sri Lanka has bound 37.5% of its tariff lines at the HS eight -digit level. All a gricultural lines 
(WTO definition) , except whale oil (HS15043010), sperm oil (HS15043020) and other 
(HS15043090) , are bound compared with 26.3% of non -agricultural lines. Most bound rates are 
ad valorem ; there are 50 alternate bound tariff rates. Bound rat es range from 0% to 75%. Nearly 
half of all bound tariffs are bound at 50%. The average bound tariff is 34%. The average bound 
tariff for agricultural products (WTO definition) is 50.3%, while the average bound rate for non -
agricultural products (WTO defin ition) is 22.8%.  
3.17.   The applied MFN rate exceeded the bound rate for 132 lines in 2016, up from 103 lines in 
2010 (Table A3.1). The products affected include , inter alia : tobacco products, alcoholic 
beverages, textiles, carpets and switches. The authorities s tated that the increase was due to the 
reduction in the number of tariff bands from four to three in November 2015, and corrective 
measures would be undertaken.  
3.1.4.3   Applied tariff  
3.18.   The simple average applied MFN tariff (including the ad valorem  component of alt ernate 
rates and excluding specific tariff lines) in 2016 was 10.3%, down from 11.5% in 2010 . The 
difference (nearly 24%) between the simple average applied MFN tariff and the average bound 
rate, and the fact that less than 38% of tariff lines are bound, g ives the authorities considerable 
scope to raise tariffs; this adds to the unpredictability of the import regime.  WT/TPR/S/ 347 • Sri Lanka  
 
- 44 - 
 
  3.19.   Nearly 76% of applied tariffs range from 0% -15%, while the modal or most common rate is 
zero; over 56% of tariff lines are duty free (Chart 3. 1). 
Chart 3.1 Distribution of MFN applied tariff rates, 2016  
(Number of tariff lines)  
(56.3)
(19.6) 
(0.04)(22.8) 
(0.06) (0.01) (0.7) (0.1) (1.0)
05001,0001,5002,0002,5003,0003,5004,0004,500
Duty free 15% 20% 30% 75% 85% 125% 250% Specific
rates
Note:      Figures in parentheses denote the percentage share of total lines.  Including the ad valorem component of alternat e rates.
Source:  WTO Secretariat calculations, based on data provided by the authoritiesNumber of tariff linesChart 3.1   Distribution of MFN applied tariff rates, 2016
 
Note:  Figures in parentheses denote the percentage share of total line s. Calculations include the 
ad valorem  component of  alternative rates.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.20.   As per WTO sectoral definitions, average tariffs on agricultural products are higher than 
those for non -agricultural products. During the period under revi ew, the average applied MFN tariff 
on agricultural products declined slightly from 25.6% in 2010 to 25.3% in 2016. The average 
applied MFN tariff on non -agricultural products declined from 9.2% to 7.8% over the same period 
(Chart 3.2).  
3.21.   Duty-free rates appl y to nearly 15% of agricultural ta riff lines and about 64% of 
non-agricultural tariff lines (Table 3.3). The highest ad valorem  rates apply to tobacco products 
with three lines being subject to a rate of 75%, one line to 85% and five lines to 125%. The 
highest alternate rates of 250% or Rs 1,600/kg also apply to tobacco products. Specific rates are 
charged on 67 tariff lines ; AVEs of over 100% apply to rice, alcoholic beverages and tobacco 
(Table 3.3). According to the ISIC classification, Sri Lanka's tarif f displays mixed escalation, with 
the tariff rate on raw materials (first stage of processing) being nearly 16%, while the tariff on 
intermediate goods is approximately 4% and rising again to about 14% for finished goods . 
Furthermore, with regard to sector s, food, beverages and tobacco, textiles and leather , and 
chemicals show positive escalation, while wood and furniture and total manufacturing display 
mixed escalation (Chart 3.3).  WT/TPR/S/ 347 • Sri Lanka  
 
- 45 - 
 
  Chart 3.2 Average applied MF N tariff rates, by HS section, 2010 and 2016  
0%5%10%15%20%25%30%35%40%
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21
Calculations  exclude specific rates and include the ad valorem component of alternate rates.  2010 averages are based on 
HS07 nomenclature, 2016 averages on HS12.  
WTO Secretariat calculations, based on data provided by the authorities.Chart 3.2   Average applied MFN and bound tariff rates, by HS section, 2010 and 2016
Note:
Source :01   Live animals & products        
02   Vegetable products
03   Fats & oils      
04   Prepared food, etc.
05   Mineral products
06   Chemicals & products07   Plastic & rubber
08   Hides & skins
09   Wood & articles
10   Pulp, paper, etc.
11   Textiles & articles
12   Footwear, headgear13   Articles of stones
14   Precious stones, etc.
15   Base metals and products
16   Machinery
17   Transport equipment
18   Precision instruments19   Arms & ammunition
20   Miscellaneous manuf.
21   Works of art, etc.Average applied rate
2010 (11.5%)
2016 (10.3%)MFN 2016 MFN 2010
 
Note:  Calculations exclude specific rates and include the ad valorem component of alternate rates. 2010 
averages are based on HS07 nomenclature, 2016 averages on HS12.  
Source:  WTO Secretariat calculations, bas ed on data provided by the authorities.  
Table 3.3 Sri Lanka's MFN applied tariff summary, 2016  
 Number 
of lines  Average  
(%) Range  
(%) Standard 
deviation  Duty -free 
lines  
(%) 
Total 6,965  10.3 
(10.9)  0-250 
(0-1,225.2)  15.3 
(22.7)  56.3 
HS 01 -24 1,229  24.4 
(27.3)  0-250 
(0-1,225.2)  22.6 
(45.0)  10.1 
HS 25 -97 5,736  7.5 0-30 11.3 66.2 
By WTO category:       
WTO agricultural products  1,064  25.3 
(28.6)  0-250 
(0-1,225.2)  24.5 
(48.4)  14.8 
   Animals and products thereo f 122 25.3 
(25.4)  0-30 
(0-38.9)  10.8 14.8 
   Dairy products  22 25.9 15-30 6.1 0.0 
   Fruit, vegetables, and plants  298 24.8 
(24.6)  0-30 
(0-55.3)  10.7 
(11.1)  13.4 
   Coffee and tea  78 29.4 15-30 2.9 0.0 
   Cereals and preparations  127 21.5 
(23.4)  0-30 
(0-100.7)  11.5 
(15.1)  15.7 
   Oilseeds, fats, oil and their products  100 23.0 0-30 9.1 6.0 
   Sugars and confectionary  29 20.6 
(16.7)  0-30 9.0 
(9.8) 3.4 
   Beverages, spirits and tobacco  69 82.6 
(116.1)  30-250 
(9.1-1,225.2)  81.7 
(161)  0.0 
   Cotton  7 0.0 0-0 0.0 100.0  
   Other agricultural products, n.e.s.  212 15.9 0-30 12.3 31.1 
WTO non -agricultural products  5,901  7.8 0-30 11.3 63.8 
   Fish and fishery products  251 15.2 0-30 5.6 6.4 
   Minerals and metals  1,067  8.7 0-30 11.2 57.5 
   Chemicals and photographic supplies  1,226  3.6 0-30 8.8 83.6 
   Wood, pulp, paper and furniture  374 14.1 0-30 12.9 40.1 
   Textiles  641 3.6 0-30 8.9 84.6 
   Clothing  224 0.0 0-0 0.0 100.0  WT/TPR/S/ 347 • Sri Lanka  
 
- 46 - 
 
   Number 
of lines  Average  
(%) Range  
(%) Standard 
deviation  Duty -free 
lines  
(%) 
   Leather, rubber, footwear and travel 
goods  199 15.2 0-30 10.7 24.6 
   Non-electric machinery  661 4.5 0-30 9.9 80.8 
   Electric machinery  336 7.5 0-30 10.0 59.2 
   Transport equipment  447 15.7 0-30 13.3 36.9 
   Non-agricultural products, n.e.s.  456 11.2 0-30 12.7 52.0 
   Petroleum  19 6.6 
(7.7) 0-15 
(0-28.2)  7.4 
(8.6) 47.4 
By ISIC (Rev.2) sector:       
   Agriculture, hunting and fishing  553 20.6 
(20.9)  0-75 
(0-100.7)  12.3 
(13.0)  17.9 
   Mining  112 4.8 0-30 7.6 69.6 
   Manufacturing  6,299  9.5 
(10.2)  0-250 
(0-1,225.2)  15.3 
(23.4)  59.4 
        Manufacturing excluding food 
processing  5,552  7.4 0-30 11.3 66.5 
   Electrical energy  1 0.0 0-0 0.0 100.0  
By stage of processing:       
   First stage of processing  998 15.6 
(15.9)  0-75 
(0-100.7)  13.1 
(13.7)  33.6 
   Semi-processed products  2,166  3.8 
(3.9) 0-30 7.8 
(7.9) 78.2 
   Fully processed products  3,801  12.7 
(13.7)  0-250 
(0-1,225.2)  17.6 
(28.6)  49.8 
By HS section:       
  01  Live animals and products  385 17.6 
(17.9)  0-30 
(0-73.4)  9.2 
(9.7) 11.4 
  02  Vegetable products  486 24.3 
(24.5)  0-30 
(0-100.7)  10.7 
(11.8)  13.2 
  03  Fats  and oils  61 25.3 15-30 6.9 0.0 
  04  Prepared food, beverages and 
tobacco  297 35.5 
(44.4)  0-250 
(0-1,225.2)  42.2 
(87.1)  5.4 
  05  Mineral products  183 3.9 
(4.1) 0-30 7.0 
(7.2) 73.8 
  06  Chemicals and products thereof  1,109  2.6 0-30 7.5 88.5 
  07  Pla stics, rubber, and articles 
thereof  316 12.8 0-30 11.4 37.7 
  08  Raw hides and skins, leather, and 
its products  75 20.6 0-30 8.8 5.3 
  09  Wood and articles of wood  117 12.2 0-30 13.0 48.7 
  10  Pulp of wood, paper and 
paperboard  206 12.2 0-30 11.8 42.2 
  11  Textiles and textile articles  858 1.9 0-30 6.6 91.1 
  12  Footwear, headgear, etc.  58 14.7 0-30 13.2 39.7 
  13  Articles of stone, plaster, cement  185 18.4 0-30 11.6 21.1 
  14  Precious stones and metals, pearls  58 0.0 0-0 0.0 100.0  
  15  Base  metals and articles thereof  656 8.6 0-30 10.9 56.9 
  16  Machinery, electrical equipment, 
etc. 1,005  5.3 0-30 9.7 74.2 
  17  Transport equipment  458 15.6 0-30 13.3 37.1 
  18  Precision equipment  232 6.3 0-30 11.2 74.1 
  19  Arms and ammunition  18 8.3 0-15 7.5 44.4 
  20  Miscellaneous manufactured 
articles  195 20.2 0-30 12.4 22.6 
  21  Works of art, etc.  7 15.0 15-15 0.0 0.0 
Note:  Calculations are based on national tariff line level (8 -digit). Excluding specific rates and including the 
ad valorem  component of alternate rates. Figures in parentheses include AVEs for specific rates, as 
available, provided by the authorities.  
Source:  WTO Secretariat calculations, based on data provided by the authorities.  
3.1.4.4   Tariff dispersion  
3.22.   Apart from the overall level of  the tariff, as reflected in the average applied MFN tariff rate, 
there are potential efficiency losses depending on the dispersion of these tariff rates across 
product lines. The greater the differentials in tariff rates, especially within groups of simil ar and WT/TPR/S/ 347 • Sri Lanka  
 
- 47 - 
 
  thus substitutable products, the higher the chance that consumer and producer decisions are 
distorted by the tariff structure. Since 2010, the dispersion of tariff rates has decreased; the 
proportion of tariff lines involving domestic peaks has rema ined unchanged , while the proportion of 
those involving international peaks ha s declined slightly. The overall standard deviation of the 
tariff rates increased from 14.7 in 2010 to 15.3 in 2016 (Table  3.2). 
Chart 3.3 Tariff escalation by 2 -digit ISIC industry, 2016  
n.a.n.a.
0%5%10%15%20%25%30%35%
31 32 33 34 35 36 37 38 39 Total
manuf.Chart 3.3    Tariff escalation by 2 -digit ISIC industry, 2016
Average applied rate
in manufacturing
(9.5%)First stage of processing
Semi-processed
Fully processed
n.a.       Not applicable.
Note:    Excluding specific rates, and inlcuding the ad valorem component of alternate rates.
Source:   WTO Secretariat calculations, based on data provided by the authorities.31   Food, beverages and tobacco      
32   Textiles and leather  
33   Wood and furniture      37   Basic metals
38   Fabricated metal products and machinery
39   Other manufacturing34   Paper, printing and publishing
35   Chemicals
36   Non -metallic mineral products
 
n.a. Not applicable.  
Note:  Excluding specific rates, and including the ad valorem  component of alternate rates.  
Source:  WTO Secretariat calculations based on data provided by the authorities.  
3.1.4.5   Tarif f preferences  
3.23.   Preferential rates are granted for certain articles under multilateral (GSTP), regional (SAFTA 
and APTA), and bilateral agreements (India –Sri Lanka FTA, and Pakistan –Sri Lanka FTA) 
(Section  2.3.2). Preferences are granted mainly to Bangladesh , Bhutan, India, Laos, Maldives, 
Nepal, and Pakistan; preferences under the GSTP are granted to only a few countries, and margins 
with respect to MFN rates are small. Only preferences under the ISFTA and the PSFTA, and to 
LDCs under SAFTA , are significantl y lower than the simple aver age applied MFN of 10.9% 
(Table  3.4). 
Table 3.4 Summary analysis of Sri Lanka's preferential tariffs, 2016  
 Number of  
preferential  
linesa Total  WTO agriculture  WTO non -agriculture  
Average  
(%) Duty -free 
rates(%)  Average  
(%) Duty
-free 
rates  
(%) Average  
(%) Duty -free 
rates  (%) 
MFN  10.9 56.3 28.6 14.8 7.8 63.8 
GSTP  99 10.9 56.3 28.5 14.8 7.7 63.8 
APTAb 298 10.8 56.3 28.5 14.8 7.6 63.8 
LDCs under 
APTAc 17 10.9 56.3 28.5 14.8 7.8 63.8 
SAFTAd 1,354  8.2 56.3 25.8 14.8 5.0 63.8 
LDCs under 
SAFTAe 1,490  7.7 56.4 24.4 14.9 4.7 63.8 
SAPTAf 6 10.9 56.3 28.5 14.8 7.8 63.8 
Bangladesh 
preferentials  10 10.9 56.3 28.5 14.8 7.8 63.8 WT/TPR/S/ 347 • Sri Lanka  
 
- 48 - 
 
   Number of  
preferential  
linesa Total  WTO agriculture  WTO non -agriculture  
Average  
(%) Duty -free 
rates(%)  Average  
(%) Duty
-free 
rates  
(%) Average  
(%) Duty -free 
rates  (%) 
Indo–Sri Lanka 
FTA (ISFTA)  1,095  7.8 72.0 26.1 26.7 4.5 80.2 
Pakistan FTA 
(PSFTA)  1,814  5.3 82.4 13.1 72.7 3.9 84.2 
a The number of preferential lines includes only lines on which the rates are lower than the 
corresponding MFN applied rate. The 2016 MFN tariff consists of 6,965 tariff lines out of which 
3,922  lines bear a duty -free rate.  
b Applicable to Bangladesh, China, India, Laos, and the Republic of Korea.  
c Applicable to Bangladesh and Laos.  
d Applicable to Bangladesh, Bhutan, India, Nepal, Pakistan, and the Maldives.  
e Applicable to Bangladesh, Bhutan, Ind ia, Nepal, and the Maldives.  
f Applicable to Bangladesh, Bhutan, India, Nepal, Pakistan, and the Maldives.  
Source:  WTO Secretariat calculations, based on information provided by the authorities.  
3.1.5   Other charges affecting imports  
3.24.   In addition to the tariff, Sr i Lanka applies a number of additional levies and charges. These 
include the Export Development Board Levy (Cess), Excise Duty, Value Added Tax (VAT), Ports 
and Airport Development Levy, Nation Building Tax, port handling charges and the Special 
Commodity Levy. Cumulatively, these significantly increase the cost of importing and , in some 
cases , can exceed 100% of the c.i.f. value. Furthermore, these additional taxes and levies are 
prone to change, which adds to the unpredictability of the import regime.  
3.1.5.1   Concessional entry and exemptions  
3.25.   Imported goods may be stored in a bonded warehouse exempt from customs duties for up 
to two years. If goods are taken out of the warehouse for domestic consumption, they are subject 
to the duties.  
3.26.   The Minister of Finance may issue a revenue protection order to modify customs duties at 
any time.6 Under Revenue Protection Order (RPO) No. 01/2008, a number of imported inputs and 
capital goods were eligible for a concessional duty rate of 2.5%; RPO No. 01/2010 reduced this to 
zero as of 1 June 2010. Under the terms and conditions approved by the Secretary of Treasury, 
export -oriented industries may import goods under concessional terms, contingent upon the 
quantity exported. Import duty and tax exemptions may be granted on a provis ional basis, under 
Section 19(A) of the Customs Ordinance and the Excise (Special Provisions ) Act. 
3.27.   According to the authorities, duty waivers have been granted for selected products on 
various grounds , including national defence and religious purposes , as authorized by the 
designated agencies. The authorities stated that it is difficult to ascertain the list of products 
benefiting from the tariff concessions. Duty concessions are also provided to certain essential 
commodities, so as to minimize the impact o f global market price fluctuations of these 
commodities on the domestic prices (Table 3.5).  
Table 3.5 Revenue forgone from products benefitting from tariff concessions , 2010 -2014  
(Rs million)  
 2010  2011  2012  2013 2014  
Milk powder  7,863  10,500  5,488  1,167  4,816  
Petrol  10,630  11,785  11,267  16,496  14,903  
Diesel  2,871  14,934  14,049  23,134  18,103  
Maize  35 17 Not granted  Not granted  Not granted  
Palm oil  1,857  5,867  Not granted  Not granted  Not granted  
                                                
6 WTO (20 10), Trade Policy Review : Sri Lanka , Chapter 2.  WT/TPR/S/ 347 • Sri Lanka  
 
- 49 - 
 
   2010  2011  2012  2013 2014  
Wheat grai n 9,400  Not granted  Not granted  Not granted  Not granted  
Coconut oil  Not granted  102 Not granted  Not granted  Not granted  
Cashew nuts  Not granted  Not granted  4 Not granted  Not granted  
Source:  Information provided by the authorities.  
3.1.5.2   Tariff quotas  
3.28.   Sri Lank a does not apply tariff quotas.  
3.1.5.3   Variable levies and seasonal tariff s 
3.29.   Sri Lanka does not apply variable levies or seasonal tariffs. However, agricultural tariffs and 
Special Commodity Levy rates are modified (or waived) by the Minister of Finance in certain  
instances according to domestic market conditions; these tariff changes could have the same 
results as a seasonal tariff.  
3.1.5.4   Export Development Board Levy (Cess)  
3.30.   Since 2004, the Sri Lankan Government has been charging a cess on a range of imports, 
including fruits, vegetables, processed and unprocessed food, shoes, bags, rubber and plastic 
products, textile products, consumer items such as toiletries and perfumes, ceramic ware, 
glassware and pens. The Cess is applied to over 3,500 tariff lines at the HS eight -digit level. The 
Cess is applied on the c.i.f. value and ranges from 1% to 35%. Most of the items are subject to 
either an ad valorem  or specific duty, and the rate with the higher tax incidence is applied when 
calculating the tax. In some cases , such as biscuits, chocolates and soap, the tax is not charged on 
the import price, but on 65% of the maximum retail price. The authorities state that the Cess is 
imposed for revenue generation reasons. In 2015, the Cess accounted for over 3.4% of total tax 
revenue  in Sri Lanka.  
3.1.5.5   Excise Duty  
3.31.   Tobacco products, oil products, aerated water, liquor, beer, motor vehicles and certain 
household electrical items are subject to an excise duty in Sri Lanka. The duty is applied to both 
imported products and domestically  produce d goods. However, with regard to imported products , 
the duty applied is based on a price that includes a 15% profit margin in addition to all other taxes 
and fees. Since October 2014, the excise duty is imposed on automobile imports; it has replaced 
severa l other taxes (including import tariffs) and is a composite tax. The excise duty accounted for 
nearly 37% of tax revenue in 2015.  
3.1.5.6   Value Added Tax (VAT)  
3.32.   VAT is applicable on sales by manufacturers, importers and service providers. VAT was 
introduced in Augu st 2002; it replaced the Goods and Services Tax and the National Security Levy. 
Until May 2016, VAT was charged at a flat rate of 11%. Since May 2016, the rate of VAT has been 
increased to 15.0%. The VAT registration threshold has been lowered to Rs 12 mil lion per annum 
from Rs 15 million per annum. Import or supply of telecommunication equipment or machinery, or 
high-tech equipment including copper cables for the telecom industry , and the issue of licen ces to 
local telecom operators by the Telecommunicatio ns Regulatory Commission of Sri Lanka (TRCSL) 
are now subject to the increased VAT. Additionally, the supply of goods or services to any specified 
project , other than housing projects approved on or after 5 May 2016, will be taxed. Wholesale 
and retail tra de (other than by a manufacturer or importer) , as well as healthcare services , will 
also be liable for VAT.  
3.1.5.7   Ports and Airports Development Levy (PAL)  
3.33.   As per the Ports and Airports Development Levy Act N o. 18 of 2011, imports were 
previously subject to a le vy of 5% of the c.i.f. value of the imports, while inputs used solely for 
processing and re -export purposes were charged 0.5%. Since January 2016, the rate of PAL has 
been increased to 7.5%. At the same time, to encourage spending by tourists, PAL has been  WT/TPR/S/ 347 • Sri Lanka  
 
- 50 - 
 
  reduced from 5% to 2.5% on certain electronic and electrical items, while PAL on certain 
machinery has been abolished.7  
3.1.5.8   Nation Building Tax  
3.34.   Nation Building Tax (NBT) is governed by the NBT Act No. 9 of 7 January 2009 and its 
subsequent amendments. The NB T is payable on a self -assessment basis by importers, 
manufacturers, and service providers , including  in wholesale and retail trade. The threshold for the 
NBT was Rs 3.75 million per quarter ( Rs 3 million prior to 1 January 2015), or Rs 15 million 
per annum (Rs 12 million prior to 1  January 2015). As of January 2016, the NBT rate was 2%, 
while the threshold was reduced to Rs 3 million per quarter.  
3.35.     Manufacturers and service providers need to be registered with the Nation Building Tax 
(NBT) Unit of the Inla nd Revenue Department of the Ministry of Finance. Importers are not 
required to register, since the NBT is charged at the border and is payable to the Customs 
Department.  
3.36.   Exports and imported parts and inputs to be used in the manufacture of articles for e xport 
are exempt from the NBT (Table 3.6). The NBT on imports is applied on the customs value 
calculated in rupees plus a 10% margin, and including all other taxes applied on imports, except  
VAT. 
Table 3.6 Nation Building Tax exceptions  
Any product exported by the manufacturer of such article  
Products, other than plants, machinery or fixtures imported exclusively for use in the manufacture of any 
article for export  
Products sold to any exporter showing a let ter of credit opened in any bank in Sri Lanka in respect of the 
export of that product or other documentary evidence that such article has  in fact been exported from 
Sri Lanka  
Products imported for: display at an exhibition; temporary use in Sri Lanka in a ny article to be produced in 
Sri Lanka; for the purposes of repairs to be carried out in Sri Lanka; or to be re -shipped, within a one year of 
the date of importation  
Products imported, which prior to their importation, were taken out of Sri Lanka for repai rs, if proved to 
satisfaction  
Cinematographic or television films produced in Sri Lanka for further processing or printing  
Spare parts imported by airlines or shipping companies  
Articles sold to the United Nations or any specialized agency or diplomatic mission  
Fertilizers; petroleum and petroleum products; LP gas; pharmaceuticals; tea supplied by the manufacturers  
Imports made considering the economic benefit to the country  
Temporary imports for the use of projects on the condition of re -export  
Articles imported for use in pharmaceutical manufacturing in Sri Lanka and packing material not 
manufactured in Sri Lanka  
Banking and financing; medical services; supply of water; transport of goods or passengers; leasing of 
movable properties; construction servic es of contractors (buildings, roads, bridges, water supply, drainage or 
sewerage, harbour, airport or any infrastructure project in telecommunication or electricity); services 
provided to exporters of any article directly related to improv ing the quality a nd ch aracter  of such article; 
services provided for exporter s of sewing garments; services provide d by a freight forwarder, shipping agent 
or courier in respect of the export of any article from Sri Lanka; services provided by a public corporation in 
respe ct of the export of any article from Sri Lanka; operating a hotel, guest house, restaurant or other 
similar business registered with the Sri Lanka Tourist Board; services provide by an auctioneer, broker, 
insurance agent or commission agent of any local pr oduce; services provided by a travel agent in respect of 
inbound tours registered with the Sri Lanka Tourist Board; software developed for use wholly outside Sri 
Lanka for which the payment is received in foreign currency through a bank; services provided over the 
internet, using software built by a person in Sri Lanka to a person abroad for payment in foreign currency; 
client support services provided over the internet or telephone by an enterprise for the payment in foreign 
currency; life insurance busine ss; distribution or production and supply of any cinematographic films 
primarily for exhibition in cinemas; exhibiting films in a cinema; services provided to the United Nations or 
any specialized agency or diplomatic mission; any service rendered in or ou tside Sri Lanka for foreign 
currency and if remitted to Sri Lanka through a bank; services of any "General Sales Agent " registered under 
the Civil Aviation Authority of Sri Lanka; importation of aircrafts or ships on leases or outright purchases; 
                                                
7 For details see Gazette of the Democratic Socialist Republic of Sri Lanka  No. 1947/47 , 1 January 2016 . 
Viewed at : http://www.treasury.gov.lk/images/depts/fpd/docs/gazetts/1947_47E.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 51 - 
 
  services obtained from any foreign consultancy under any foreign funded project  
Exemptions granted by the Cabinet of Ministers  
Importation of any article for use exclusively in manufacturing pharmaceuticals in Sri Lanka and for packing 
material used exclusively for  pharmaceuticals manufactured in Sri Lanka  
Leases or outright purchases of aircraft and ships brought to Sri Lanka  
Articles subject to the Special Commodity Levy as specified by the Special Commodity Levy Act No. 48 of 
2007, when sold after any value added  in Sri Lanka  
Plant, machinery and equipment imported for the use of projects on temporary basis on the condition of re -
export after the completion of work  
Services obtained from foreign consultancies in respect of these projects  
Importation of machinery a nd equipment by the Ceylon Electricity Board (CEB) or by any other agency that 
entered into an agreement with the CEB for electricity generating projects implemented to supply electricity 
to the national grid  
Importation of gold  
Source:  Sri Lanka Departme nt of Fiscal Policy and Sri Lanka Customs. Viewed at: 
http://www.customs.gov.lk/news/nbtexcempt.pdf . 
3.1.5.9   Special Commodity Levy  
3.37.   With a view to controlling price increases in essential food commodit ies such as milk 
powder, dhal, sugar, potatoes, and onion, the Government introduced the Special Commodity Levy 
under the Special Commodit y Levy Act No. 48 of 2007. The Levy is imposed at a rate specified by 
the Minister of Finance. Rates are adjusted peri odically to reflect price and demand and supply 
development; adjustments may be general or limited to some products. Currently 39 commodities 
are subject to the Levy (Table A4.1); the revenue generated from the levy in 2015 was 
Rs 52.3 billion.  
3.1.6   Import proh ibitions, restrictions, and licensing  
3.1.6.1   Import restrictions and prohibitions  
3.38.   On account of health, safety, security, environment, and moral reasons, Sri Lanka imposes 
import restrictions on a range of products. These include: appliances for discharging gas ; crackers 
that contain explosives; firearms; toy pistols; counterfeited coins; fish, grain, and other articles 
unfit for human consumption; meat (fresh or frozen) derived from any warm -blooded animal, if it 
consists of offal, scraps, trimmings and other pie ces in such condition as to afford insufficient 
means of identification with a definite part of a carcass, or from which certain glands have been 
removed; road vehicles; and agricultural and construction machinery, more than ten  years old8; 
guns designed t o be disguised; weapons, ammunition, explosives, vehicles and equipment capable 
of being used by the armed forces, except by licence from the Ministry of Defence; jewellery or 
articles made out of ivory ; and some medicaments and chemicals.  
3.39.   Imports of arti cles and books that are deemed obscene or that may offend religious beliefs, 
and of narcotic drugs are prohibited.  
3.40.   The list of restricted imports may be amended by Parliament. The current list of controlled 
and prohibited imports is detailed in the Gazette  of the Democratic Socialist Republic of Sri Lanka  
No. 1813/14  of 5 June 2013.  
3.1.6.2   Import licensing  
3.41.   The import and export licensing system in Sri Lanka is governed by the Imports and Exports 
(Control) Act No. 1 of 1969 and subsequent amendments and regulations  published under the Act 
as Extraordinary Gazette Notifications. These have all been notified to the WTO.9 The 
Extraordinary Gazette Notifications list the goods subject to import licensing.  
                                                
8 Gazette  No. 1813/14 , 5 June 2013.  
9 WTO documents G/LIC/N /1/LKA/1, 20 May 2003 ; G/LIC/N/3/LKA/1, 27 May 2003 ; G/LIC/N/3/LKA/2, 
19 February 2014 ; G/LIC/N/1/LKA/2 19, February 2014 ; and G/LIC/N/2/LKA/1, 12 January 2015.  WT/TPR/S/ 347 • Sri Lanka  
 
- 52 - 
 
  3.42.   There is no automatic licensing in Sri Lanka. Non -automatic licen sing is primarily for the 
purpose of safeguarding environmental, public security and public health interests. The system 
applies  to goods originating and coming from all countries. Furthermore, there are no products 
under quantitative or value -based restri ctions except for the chemical varieties detailed in 
Schedule I of the Gazette of the Democratic Socialist Republic of Sri Lanka (Extraordinary)  
No. 1821/40  of 1 August 2013. The system is administered by the Import and Export Control 
Department . 
3.43.   Licences are issued in a week; requests for licences are considered on a "first come, first 
served" basis. Licences are usually granted a month prior to the importation . However, 
applications for a licence may be made up to a week before importation and licences ma y be 
obtained within a shorter time  limit for goods arriving at the port without a licence. Certain 
licences, such as block licences with one -year validity for the import of drugs, require past 
performance (importers need to have imported drugs during the past three years). In some cases, 
licences may be issued on condition that the goods are exported and not sold in the domestic 
market. This situation is applicable only to imports made by companies approved by the Board of 
Investment of Sri Lanka as operat ing in export -oriented industries.  
3.44.   Under the provisions of the Import s and Export s (Control ) Act (Schedule II of the Gazette  
(Extra ordinary)  No. 1739/3 of 2  January 2012), the following entities are eligible to apply for an 
import licence: any individual, or an individual trading, in his/her own name or under a business 
name; firm , partnership or other entity that is registered in Sri Lanka; public companies and 
private companies that are incorporated in Sri Lanka under the Compan ies Act No. 7 of 2007; and 
non-nationals that have a valid visa to reside in Sri Lanka. Licence fees vary depending on the 
product. There is no penalty for the non -use of a licence or a portion of it. Licences are not 
transferable between importers. The v alidity period of licen ces varies depending on  the 
commodit y. Blanket licen ces are also being issued for some selected commodities such as certain 
drugs and some petroleum products. The number of extensions will depend on the justification 
provided by importers. The v alidity period o f the licences can be extended a maximum of three 
times and is subject to a maximum period of one year. Conditions of the licen ce also require that 
free trade samples should be limited to 10% of the trade stock. An analysis report from the 
manufacturer is specially requested for "Western drugs". This report should provide information on 
composition and ingredients, strength of pack aging, date of manufacturing and expiry, side effects 
etc. Additionally special conditions may apply depending on the commodity;  these include a letter 
of recommendation from the respective authorities.  
3.45.   In case of refusal, the applicant has a right of appeal under paragraph 11 of the Import s 
and Export s (Control ) Act to the Minister concerned.  
3.1.7   Contingency measures  
3.46.   Sri Lanka has no laws or regulations governing anti -dumping or countervailing actions. In 
2009, Sri  Lanka notified the WTO that it had not established an authority competent to initiate and 
conduct an investigation within the meaning of Article 16.5 of the Anti-Dumping Agreement and 
thus had not, to date, taken any anti -dumping actions within the meaning of Article  16.4.10 Sri 
Lanka also stated that it did not anticipate taking any anti -dumping actions for the foreseeable 
future. Sri Lanka also made a similar notification re garding countervailing measures.11 
3.47.   With respect to safeguard measures, Sri Lanka currently has no laws or regulations to 
address these. According to the authorities, proposed trade defence bills on anti -dumping, 
countervailing and safeguard measures  were su bmitted to the Cabinet in July 2014. The Cabinet 
required changes to the bills; the bills (with the required changes incorporated) have subsequently 
been resubmitted to the Cabinet for approval before being submitted to Parliament for approval. 
The authori ties stated that these bills were part of the Trade Promotion Bill, which would be 
submitted to Parliament for approval.  
                                                
10 WTO documents G/ADP/N/193/LKA, 23 December 2009; and G/ADP/N/1/LKA/1 – G/SCM/N/1/LKA/1, 
26 Ap ril 1995.  
11 WTO document G/SCM/N/202/LKA, 23 December 2009.  WT/TPR/S/ 347 • Sri Lanka  
 
- 53 - 
 
  3.1.8   Standards and other technical requirements  
3.1.8.1   Technical regulations  
3.48.   During the period under review, there ha ve been no change s to the legi slative or regulatory 
framework governing technical regulations and standards in Sri Lanka. The main piece of 
legislation governing standards continues to be the Sri Lanka Standards Institution Act No. 6 of 
1984, which is administered by the Sri Lanka Stan dards Institution (SLSI). The SLSI, which is 
under the ambit of the Ministry of Science, Technology and Research , is the national authority for 
notifications and the national enquiry point.12 The SLSI is a member of the International 
Organization for Standa rdization (ISO). Sri Lanka has accepted the WTO TBT Code of Good 
Practice.13 
3.49.   According to the notifications submitted to the WTO, 123 trade -related technical regulations 
are in place.14 The authorities stated that new products were introduced under the Impor ts 
(Standardization and Quality Control) Regulations 2013, while others were removed from the list.15 
3.50.   Items on the list are subject to the Import Inspection Scheme (IIS) , so as to ensure they 
are in conformity with the technical regulations specified in  the relevant Sri Lanka standard (SLS). 
Consignments being imported are classified under five different categories. Categories 1 to 4  carry 
some kind of certificate of compliance with the stipulated standard, issued by a body recognized by 
the Sri Lanka Standa rds Institution (SLSI).16 Samples of goods falling under these categories are 
checked randomly. Category 5 goods are sampled at the port and the consignment is not released 
until the test report is available, or where facilities are available, the goods may  be released to a 
bonded warehouse, until clearance.  
3.51.   Furthermore, if the domestic and foreign standards are fully compatible with each other, a 
quality certificate need not be submitted. In cases where a particular requirement of the national 
standard devi ates from the SLS, a test certificate is needed to certify that the particular 
requirement complies with the SLS.  
3.52.   SLS formulation takes into account the equivalent international standards including those 
established by international bodies such as the ISO,  the IEC, and the Codex Alimentarius as well 
as those by other countries.  
3.53.   The categories of products specified in the gazetted list of technical regulations17 include , 
inter alia : certain types of milk, milk powder, butter, certain vegetable oils, margarine , canned 
fish, brown sugar, biscuits, noodles, jams, fruit concentrates, some sauces, bottled water, 
turmeric, lozenges, salt, cement, some toiletries, safety matches, some polyvinyl pipes, motor 
cycle and bicycle tyres, some types of thread, some steel pr oducts, aluminium utensils, some 
electrical appliances, toothpaste, toothbrushes, soya sauce, lentils, batteries, LPG products, steel 
containers, fluorescent lamps, switches, plugs, cords, cables, umbrellas, tiles, and porcelain ware. 
The list has been exp anded since the previous review, when it included 103 items. These have 
been notified to the WTO.18 
                                                
12 WTO document G/TBT/ENQ/36, 5 February 2010.  
13 WTO document G/TBT/CS/N/76, 7 August 1997.  
14 WTO document G/TBT/N/LKA/33, 29 January 2014.  
15 For the full list of products please see Gazette  (Extra ordinary ) No. 1844/49 , 8 January 2014, and 
information provided by the authorities.  
16 Category 1 consignments are accompanied by a quality certificate from an accredited overseas 
laboratory or an inspection agency with which SLSI has signed a memorandum of  understanding. Category 2 
consignments are accompanied by a quality certificate from the national standards body of the exporting 
country. Consignments in Category 3 are imported from a manufacturer registered with the SLSI, and are 
accompanied by a quali ty certificate from the manufacturer. Consignments under Category 4 comprise 
products carrying the " certification mark" of the national standards body of the exporting country where the 
national standard of the exporting country is compatible with the corr esponding Sri Lanka standard. 
Consignments that do not fall into Categories 1 -4 are classified under Category 5.  
17 Gazette  (Extraordinary ) No. 1844/49 , 8 January 2014, and information provided by authorities.  
18 WTO document G/TBT/N/LKA/33, 29 January 2014.  WT/TPR/S/ 347 • Sri Lanka  
 
- 54 - 
 
  3.54.   The national accreditation authority continues to be the Sri Lanka Accreditation Board for 
Conformity Assessment (SLAB), which is an autonomous body under th e Ministry of Science, 
Technology and Research.19 The SLAB was established under Act No. 32 of 2005.  
3.55.   Five accreditation schemes come under the purview of the SLAB. The accreditation scheme 
for testing and calibration laboratories is based on ISO/IEC 17025. All types of laboratories 
covering chemical testing, biological testing, physical and mechanical testing, and calibration are 
included under this scheme. The accreditation scheme for medical/clinical laboratories is based on 
ISO 15189, and covers clinical pathology, clinical biochemistry, haematology, microbiology and 
serology, histopathology, immunology, molecular biology, pharmacology and nuclear medicine. 
The accreditation scheme for inspection bodies, based on ISO/IEC 17020, provides formal 
recognition to organizations required to conduct various types of inspections for regulatory 
purposes. The accreditation scheme for certification bodies (CBs)  covers systems, product and 
person certification, and is based on ISO/IEC 17021, and on ISO/IEC 17065 and ISO /IEC 17024. 
The certification provided by these CBs includes certification of quality management systems 
(QMS), environmental management systems (EMS), food safety management systems, 
certification of products (e.g. tea and textiles), certification of pers ons (e.g. non -destructive 
testing) and occupational health and safety management systems. Lastly the accreditation scheme 
for greenhouse gas validation and verification bodies (GHG V/VBs) covers GHG assertion of 
different technical sectors based on ISO/IEC  14065.  
3.56.   There are currently 34 domestic laboratories and institutions accredited for chemical 
testing20, 17 for mechanical testing21, three for electrical testing22, 11 for biological testing23, and 
six for calibration.24 Additionally, 20 medical laboratories, three certification bodies and 2 GHG 
validation/verification bodies are also accredited.  
3.57.   Sri Lanka has not signed any mutual recognition agreements (MRAs) with third  countries 
pertaining to technical regulations, standards, or conformity assessment procedu res.  
3.58.   The SLAB is a full member of: the Asia Pacific Laboratory Accreditation Corporation (APLAC) 
and is a signatory to the APLAC's MRA; the International Laboratory Accreditation Cooperation 
(ILAC), and a signatory to ILAC's MRA; and, the Pacific Accredit ation Council (PAC), an association 
of accreditation bodies whose objective is to facilitate trade and commerce among economies in 
the Asia Pacific region by promoting the international acceptance of the accreditations granted by 
its members. The SLAB is also a full member of the International Accreditation Forum (IAF) and a 
signatory to the Multi lateral Arrangement (MLA) of the IAF. The SLAB was admitted as a signatory 
to the Multi lateral Arrangement (MLA) of the IAF for management system certification (QM S, EMS) 
and product certification in March 2014 and for food safety and management systems (FSMS) in 
November 2015.  
3.59.   Technical regulations from trading partners are accepted as equivalent after evaluation of a 
declaration of conformity and a technical dossi er. Pursuant to Cabinet Decision 
No. 16/0071/716/003 of 20 January 2016, accreditation is mandatory for all technical decisions 
pertaining to imports. As a result , certificates issued by accredited certification bodies  that are 
signator ies to the IAF MLA, as well as tests and inspection reports issued by accredited 
laboratories and inspection bodies that are signator ies to the ILAC MRA , are accepted when taking 
technical decisions.  
3.1.8.2   Standards and certification  
3.60.   The Sri Lanka Standards Institution (SLSI) conti nues to be responsible for formulating 
national standards. It also provides certification, inspection, testing and industrial calibration 
services.25 
                                                
19 SLAB online information. Viewed at: http://www.slab.lk/# -. 
20 For list see: http://slab.lk/AccOrgChemicalTesting.aspx . 
21 For list see: http://slab.lk/AccOrgMechanicalTesting.aspx . 
22 For list see: http://slab.lk/AccOrgElectricalTesting.aspx . 
23 For list see: http://slab.lk/AccOrgBialogicalTesting.aspx . 
24 For list see: http://slab.lk/AccOrgCalibrationTesting.aspx . 
25 SLSI online information. Viewed at: http://www.slsi.lk . WT/TPR/S/ 347 • Sri Lanka  
 
- 55 - 
 
  3.61.   Standards development takes place in requisite committees and is a consultative process 
involving all stake holders such as: interested parties representing consumers, producers, users, 
public institutions, and independent technical organizations. To the extent possible , international 
standards are followed; priority is given to standards that facilitate interna l and external trade and 
enhance the international competitiveness of Sri Lankan products.26 
3.62.   There are over 1,400 standards relating to products, commodities, materials, processes and 
practices.27 These standards are primarily voluntary; 41 out of some 1,400  standards (mainly on 
building materials, household electrical appliances, food and consumer products) are referred to as 
technical regulations.  
3.63.   The "SLS Marks Scheme", Sri Lanka's product certification scheme, enables the SLSI, under 
the provisions of the  Sri Lanka Standards Institution Act, to grant permits to eligible local and 
foreign manufacturers to use the "SLS" mark on their products.28 The SLS mark certifies that the 
product has been manufactured in accordance with the relevant Sri Lanka standard 's specification 
and verified by regular inspections and tests by the SLSI. Permits are valid for three years and 
may be renewed; they may be revoked if production stops, if fees are not paid or if the product 
does not conform.  
3.64.   Furthermore, under the Sri Lank a Standards Institution Act No. 6 of 1984, the SLSI 
operates management systems certification schemes based on international standards such as 
ISO 9001 and ISO 22001. In addition to the SLSI, the Telecommunication s Regulatory Commission 
of Sri Lanka (TRCSL) sets quality regulations and technical specifications for equipment and quality 
of service (Q OS) standards in the telecommunications sector.  
3.1.9   Sanitary and phytosanitary requirements  
3.65.   There ha ve been no change s to the legislation or regulation s governing SP S in Sri Lanka 
during the period under review. Food imports are regulated by the Food Act No. 26 of 1980, 
regulations under the Act and subsequent amendments .29 The importation of any animal, animal 
product, veterinary drug or veterinary biological product,  animal semen or embryo is governed by 
the Animal Diseases Act No. 59 of 1992, while plant imports are governed by the Plant Protection 
Act No. 35 of 1999. The Ministry of Healthcare and Nutrition is Sri Lanka's enquiry point and 
notification authority on SPS matters.30 Sri Lanka is a member of the Codex Alimentarius 
Commission and the World Organi sation for Animal Health (OIE), and a contracting party to the 
International Plant Protection Convention (IPPC).  
3.66.   Under the Sri Lanka Standards Institution Act No. 6 of 1984, the SLSI operates a 
generalized hazard analysis critical control point (HACCP) certification scheme to ensure food 
safety.31 A certificate holder develops and maintains its food safety assurance programme based 
on the internationally accepted pri nciples of ISO 22000.  
3.67.   Under the provisions of the Animal Diseases Act No. 59 of 1992, a special permit , issued by 
the Controller of Imports and Exports based on the recommendation of the Director  General of the 
Department of Animal Production and Health (D APH) in the Ministry of Rural Economic Affairs , is 
required for the import of any animal, animal product, veterinary drug or veterinary biological 
product, animal semen or embryo. A certificate from the Chief Veterinary Officer of the country of 
origin, st ating that the product is free from any infective substance likely to cause disease in 
animals as well as zoonotic diseases is required for the issuance of a permit for the import of 
animal products. For live animals, a certificate is required from the Chi ef Veterinary Surgeon or an 
authorized veterinary surgeon of the country of origin. The certificate must set out: the country of 
origin of the animal; that the animal is and has been free from disease and has not been in contact 
with diseased animals for t hree months prior to its exportation; that the place of origin of the 
animal has been free from disease for 3 -12 months (depending on the type of animal) prior to the 
                                                
26 SLSI online information. Viewed at: http://www.slsi.lk . 
27 SLSI online information. Viewed at: http://www.slsi.lk . 
28 SLSI online information. Viewed at: http://www.slsi.lk . 
29 The Act was amended in 2014 and published in the Gazette (Extraordinary ) No. 1867/8  dated 17 June 
2014.  
30 WTO documents G/SPS/ENQ/25,  15 October 2009 ; and G/SPS/NNA/15, 15 October 2009.  
31 SLSI online inf ormation. Viewed at: http://www.slsi.lk/systems -certification -haccp.php . WT/TPR/S/ 347 • Sri Lanka  
 
- 56 - 
 
  date of the departure of the vessel carrying the animal from the port of exit; and that t he animal 
has been immunized against the specified diseases. Imports of meat or meat products must be 
accompanied by a certificate issued by a competent authority in the country of origin warranting 
that they are fit for human consumption and free from any  infective substance likely to cause 
disease in animals. Animal products to be imported into Sri Lanka must be slaughtered and 
processed in establishments registered with the veterinary authority in the country of origin. 
Imports of live animals for human consumption are prohibited.  
3.68.   A safety certificate from the Chief Veterinary Officer (or a veterinary surgeon authorized by 
him/her) in the country of origin is required for the importation of veterinary drugs or veterinary 
biological products. Furthermore, animal imports are subject to a minimum quarantine 
requirement of 30  days.  
3.69.   Plant imports are covered by the Plant Protection Ac t No. 35 of 1999 and its regulations in 
relation to plant quarantine activities . The Act  is administered by the National Plant Qu arantine 
Service in the Department of Agriculture. Plant imports need to be accompanied by a permit, 
issued by the Director  General of Agriculture or the Additional Director of the National Plant 
Quarantine Service. Permits are issued immediately for veget able seeds that are included in an 
approved list, which is published in newspapers periodically. In addition, consignments must also 
be accompanied by : a phytosanitary certificate issued within 14 days prior to shipment ; an 
International Safe Transit Assoc iation (ISTA) certificate ; a declaration stating that the consignment 
is free of soil, certain pests and seed treatment ; and a certificate of origin. Imports of fresh fruits 
and vegetables for human consumption must be accompanied by a certificate from the  plant 
protection authority of the country of origin stating that the fruit has been in cold storage for more 
than two weeks. Certificates from countries having an incidence of fruit flies are not accepted. The 
consignment is subject to inspection by a Pla nt Quarantine Officer.  
3.70.   The importation of certain plants is prohibited, except for research.32 Imports of soil and 
living modified organisms (LMOs) are also prohibited. Imports of animals and animal products are 
only permitted from countries officially decl ared as "HPAI Provisional Free Status" by the OIE.  
3.71.   Imports of GM foods require prior approval from the Chief Food Authority in the Ministry of 
Health care and Nutrition . 
3.72.   Since January 2010, Sri Lanka has made 19 notifications to the Committee on Sanitary an d 
Phytosanitary Measures, covering inter alia : measures on foodstuffs covered by SLSI standards ; 
shelf life of imported foods ; food packaging materials and articles ; meat and meat products ; milk 
and milk products ; plants, plant products, organisms, soil, a nd other culture media ; food colouring 
substances ; tea; coffee ; rice flour ; carbonated and caffeinated beverages ; bottled or packaged 
drinking water ; iodized salt ; and genetically modified food.  
3.2  Measures Directly Affecting Exports  
3.2.1   Export procedures and req uirements  
3.73.   During the period under review, there have been no major changes to the export 
procedures , except the establishment of the Single Window in January 2016 ( Section 3.1.1); the 
authorities stated that the One-Stop-Shop and the Export Facilitation Ce ntre were fully 
operational. Exports continue to be governed primarily by the Customs Ordinance. Other sector - 
and issue -specific legislation also affects exports.33 
3.74.   Documents required for exporting include : a goods declaration, which includes a customs 
declaration (CUSDEC) in four copies; licences and permits if required; a shipping note (containing 
details of the cargo) or airway bill; an invoice; a packing list ; and other supporting documents, as 
and when necessary. The goods declaration must specify the quantity, quality, and value of the 
                                                
32 An import licence is needed for the import of plants for research.  
33 These include the Revenue Protection Act, the  Export and Exchange Controls Act, the Rubber Control 
Act, the Tea Board Act, the Coconut Development Authority Act, the Fauna and Flora Protection Act, the Animal 
Disease s Act, the Antiquities Act, the Forest Act, the Wild life Act, the Fire arms Act, the O pium and Dangerous 
Drugs Act, the Export Development Board Act, the Sri Lanka Standards Institut ion Act, the Textiles Act, the 
Minerals and Mineral Sands Act, the Excise Act, and the Fisheries and Aquatic Resources Act.  WT/TPR/S/ 347 • Sri Lanka  
 
- 57 - 
 
  goods. Additionally, export control permits are required for some items. Exported cargo may be 
put in the green or red channel. The Superintendent of Exports (Customs) decides the type of 
examination required for cargo p laced in the red channel. Registration with Customs is mandatory 
for exporters. If required by the importer, quarantine or veterinary certificates, issued by the 
Department of Agriculture or the Department of Animal Production and Health are provided, for 
plants and animals, respectively. All consignments of animals and animal products exported from 
Sri Lanka are subject to quarantine inspection.  The authorities stated that approximately 5% of 
the consignments are inspected.  
3.2.2   Export taxes, charges, and levie s 
3.75.   With a view to ensuring the availability of raw materials, promoting further processing of 
local materials, financing export promotion activities, protecting national security, and protecting 
the environment, Sri Lanka applies both export duties and a cess on certain goods. Export duties 
are applied under the Customs Ordinance, while an export cess is applied under the Export 
Development Board (EDB) Act No. 40 of 1979. Customs export duties are currently levied on 
cashew nuts (fresh and in shells), raw ve in quartz and semi -finished products of iron or non -alloy 
steel. Cesses are levied on a number of products including , inter alia : tea, rubber, coconut s, 
pepper, vanilla, cinnamon, rice , maize, granite, graphite, quartz, wood and metal scrap. The rates 
of cess vary according to the product.34 
3.2.3   Export prohibitions, restrictions, and licensing  
3.76.   The export of certain goods is prohibited on grounds of public health, and the protection of 
endangered species and the environment. Some export restrictions are maintaine d in accordance 
with UN sanctions or international conventions (e.g. CITES). According to the authorities, currently 
there are no export bans under the Import s and Export s (Control ) Act. 
3.77.   The export of explosives is prohibited under the Explosives Ordinance  (Chap. 633). Exports 
of drugs are forbidden under the Poisons , Opium and Dangerous Drugs Ordinance (Chap.  549). 
Exports of flora and fauna listed in Appendi x I of the CITES are banned and exports of Cinchona 
bark, in any form, are prohibited under Schedul e "B" of the Customs Ordinance.  
3.78.   There are 13 products that require licen ces, permits or certificates for export. These are 
issued by various ministries and departments.35 In addition, as per the Extraordinary Gazette  
Notification No. 1627/02 dated 9 Novembe r 2009, there are four items under licence control, 
which require an export licence issued by the Controller of Imports and Exports prior to export. 
These are metal waste, scraps, dusts, ingots, scales , etc.; wood and articles of woods ; motor 
vehicles regi stered before 1 January 1948 ; and ivory and ivory products.  
3.2.4   Export incentives  
3.79.   Sri Lanka offer s a number of incentives to exporters. Fiscal incentives include income tax 
concessions, concessions under the Nation Building Tax and the Ports and Airports Devel opment 
Levy, VAT exemptions, deferment and zero rating (Table 3.7). In addition, Sri Lanka customs 
operates a duty drawback scheme, a Temporary Importation for Export Processing (TIEP) Scheme 
and a manufacture in bond scheme. Sri Lanka graduated from Annex  VIIb of the SCM Agreement 
on 31  December 2015. As such , no new export incentives will be provided to investors. According 
to the authorities, a new incentive scheme, which is expected to be neutral and horizontal in 
application, is being formulated. Under  the scheme, the authorities plan to apply a reduced rate of 
17.5% to all target sectors. The new legislation is yet to be passed.  
                                                
34 For complete list of products and the rates at which cess is levied please see: 
http://www.srilankabusiness.com/pdf/cesses_new.pdf  and Gazette  No. 1941/32 , 20 November 2015.  
35 For list of products requiring licen ces, permit s or certificates for export, and the relevant  ministry or 
department please see: http://www.srilankabusiness.com/pdf/export -procedure -21-10-2014.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 58 - 
 
  Table 3.7 Export incentives prior to May 2016  
Incentive   
Income Tax  
  Profits  from export of non -traditional products are taxed at a concessionary rate of 12% . 
 Profits from deemed exports of non -traditional products are taxed at a concessionary rate 
 of 12% . 
 Profits from export of gold, gems and jewellery are exempted from income t ax. 
 Profits from local sales of gems and jewellery for payment in foreign currency are 
 exempted from income tax . 
 Profits from cutting and polishing of gems which are brought to Sri Lanka and exported 
 after such cutting and polishing are exempted from inc ome tax . 
 Three -year tax holiday for Export Production Village companies . 
 Profits from services provided to exporters for value addition are taxed at a concessionary 
 rate of 12% . 
 Profits from entrepôt trade are taxed at a concessionary rate of 10% . 
 Profits  from providing facilities for storage of goods involved in entrepôt trade are taxed at 
 10%. 
 Profits from manufacture and supply of textiles, leather products, footwear and bags to be 
 exported through a trading house are exempted from income tax . 
 Profits  from professional services provided for construction projects outside Sri Lanka for 
 payment in foreign currency are exempted from income tax . 
 Profits from export of professional services are exempted from income tax . 
 Royalties received in foreign currenc y are exempted from income tax . 
 Any export development rebate paid by the Export Development Board is exempted from 
 income tax . 
 Concessionary income tax rate of 12% is applicable for joint ventures to manufacture and 
 export tea in value -added form . 
 Conce ssionary income tax rate of 10% is applicable for export of high -value -added 
 products (over 65%) having Sri Lanka brand names with patent rights reserved in Sri 
 Lanka . 
 Income tax holidays ranging from 6 years to 12 years for investments over Rs 300 Mn fo r 
 manufacture of goods for export . 
 
Nation 
Building Tax   Turnover from direct export of articles or export of articles through a trading house is 
 exempted from NBT . 
 Any article except plant, machinery or fixtures imported for exclusive use in manufacturi ng 
 of articles for export is exempted from NBT . 
 Turnover from deemed export of articles are exempted from NBT . 
 Services provided to any exporter for improving quality and character of articles exported 
 are exempted from NBT . 
 The services of sewing garmen ts provided to an exporter of garments are exempted from 
 NBT. 
 Payments received for any service rendered outside Sri Lanka for payment in foreign 
 currency are exempted from NBT . 
 Imports of gold and yarn are exempted from NBT . 
 Services provided by an ente rprise over the internet for payment in foreign currency are 
 exempted from NBT . 
 Services of a computer software developer for software to be used outside Sri Lanka for 
 which payment is received in foreign currency are exempted from NBT . 
 Gems imported sub ject to a special service fee are exempted from NBT . 
 Articles other than plant, machinery, or fixtures imported for use in the manufacture of 
 articles for export are exempted from NBT . 
 
Ports and 
Airports 
Development 
Levy  No levy is charged on exports . 
 Articles imported into Sri Lanka for processing and export or to be used for manufacture of 
 goods for export are exempted from PAL . 
 
VAT 
exemption   Goods that enter into a customs bonded area . 
 Fabric or accessories imported by a person registered under the  Simplified Value Added Tax 
 (SVAT) scheme, to manufacture garments for export . 
 Supply or import of agricultural machinery, machinery used for production of rubber or 
 plastic products, and semi -conductor devices . 
 Supply of research and development service s. 
 Sum paid out of the Export Development Fund as an export development rebate . 
 Services supplied to improve quality, character or value of fabric or garments . 
 Import of greenhouses . 
 Supply of locally manufactured desiccated coconut, rubber, leather, tea, rice flour, and liquid 
 milk. 
 WT/TPR/S/ 347 • Sri Lanka  
 
- 59 - 
 
  Incentive   
VAT 
deferment  Deferment by the Commissioner General of Inland Revenue  
 
 Supply of goods or services by a person registered under the SVAT scheme to;  
 Any exporter or provider of zero -rated services,  
 Any manufacturer who suppl ies goods manufactured in Sri Lanka to any exporter, and  
 Any supplier who provides value -added services to an exporter which result in the 
 improvement of quality etc. of goods manufactured for export . 
 
Deferment by the Director General of Customs  
 
 Goods imported or received from a bonded area by a person for manufacture of goods for 
 export . 
 Any plant or machinery imported or received from a bounded area where such plant or 
 machinery is used for manufacture of goods for export . 
 Goods imported or received  from a bonded area by a person registered with the SVAT 
 scheme for manufacture of goods or provision of services to a manufacturer of goods for 
 export . 
 Any plant or machinery imported or received from a bonded area by a person registered with 
 the SVAT scheme for the purpose of manufacture of goods or provision of services for a 
 manufacturer of goods for export . 
 Goods temporarily imported to Sri Lanka as exhibition material or for technical 
 demonstrations . 
 
VAT zero 
rated   Exports of goods are zero rat ed 
 Exports of services are zero rated  
 Services related to development of computer software for exports are zero rated  
 Client support services provided over the internet for payment in foreign currency are zero 
 rated 
 Payments received in foreign currency b y a garment buying office for provision of services to 
 overseas buyers are zero rated  
 
VAT refund   Input tax refund on exports will be made within 45 days  
 
Source:  Information provided by the authorities.  
3.80.   To avail themselves of the duty drawback scheme, exporters need to register with the Duty 
Rebate Unit of the Sri  Lanka Customs Export Division. Registration is required for each export 
shipment, and must be accompanied by an export invoice, receipt/airway bill, and part y's' copy of 
the export shipment. E xporters need to submit a claim to the commercial bank that received the 
remittance for the exported products, along with relevant export documents. The rate of rebate, a 
percentage of the f.o.b. value, is determined by the Director  General of Customs, bas ed on the 
cost statements submitted and approved by the Deputy Secretary to the Treasury. Exporters can 
appeal the decision within 30 days. The rebate must be claimed within six months of the date of 
export.  
3.81.   The Temporary Importation for Export Processing (TIEP) Scheme allows direct and indirect 
exporters to import inputs without payment of fiscal levies. The TIEP scheme has two sub -
schemes: TIEP1 and TIEP4. TIEP1 allows for the importation of raw materials, components, parts 
and packaging materials, exempt  of duties. Exporters need to be approved by the Director  General 
of Customs to operate under the scheme. Exporters availing  themselves of  TIEP1 cannot operate 
under any other scheme that provides duty -free import of inputs.  
3.82.   The TIEP4 scheme covers the imp ortation of capital goods, appliances, spare parts, 
intermediate materials (excluding raw materials), transport and handling equipment, and breeding 
stock (for agricultural projects), which are eligible for whole or partial exemption of customs 
duties, imp ort surcharge, EDB Cess, and excise tax. The amount of the duty and tax exemption 
granted depends upon the amount exported: 100% for exporters who export 50% or more of their 
output, and indirect exporters who supply 50% or more of their output to direct e xporters; and 
50% for exporters who export between 25% and 50% of their output, and indirect exporters who 
supply 25% to 50% of their output to direct exporters.  
3.83.   Any manufacturer that exports may apply to the Customs Department for approval to 
establish a manufacturing -in-bond warehouse. Through this scheme, these manufacturers are 
exempt from paying import duties and taxes. All kinds of production processes, including mixing 
and assembling , are permitted in such warehouses. Imported goods may be stored for  up to six 
months without payment of duties and taxes, extendable for up to two years. Further extension is WT/TPR/S/ 347 • Sri Lanka  
 
- 60 - 
 
  possible, under exceptional circumstances. The manufacturer must furnish a bank guarantee equal 
to the full value of the duty and taxes payable. The  manufacturer must also obtain an annual 
licence for the bonded warehouse.  
3.84.   Sri Lanka has 13 free -trade zones (called export processing zones), administered by the 
Board of Investment (BOI) ( Section 2.4.5). There are some 267  enterprises operating in the EP Zs, 
employing over 132,000  persons.36 The estimated value of exports from the EPZs was some 
Rs 336 billion (US$2.5 billion) in 2015.37 The largest EPZ, Katunayake, is mainly devoted to the 
production of garments. It employs over 40,000 people, has Sri Lanka,  United States, 
United  Kingdom, and Hong Kong, China investment, and exported over Rs 200 billion 
(US$1.5  billion) in 2015. Other important EPZs are Biyagama (surgical gloves, knitted fabrics, 
electronic circuits, tobacco processing, garments, and tyres; with investors from Australia, 
Sri Lanka, the United Kingdom, the United States, the Netherlands, Germany, and Hong Kong, 
China), and Horana (confectionery and polymers ; with mostly domestic investment).  
3.85.   According to the authorities, enterprises located in an EPZ were not entitled to any special 
tax concessions, but were treated the same as enterprises established in any part of the country.  
3.2.5   Export finance, insurance, and guarantees  
3.86.   To mitigate the impact of the global financial crisis, the Government introd uced an Export 
Development Reward Scheme (EDRS) for tea, rubber, cinnamon, garment, and leather exporters. 
Furthermore, a Simplified Value Added Tax Scheme (SVAT) was also initiated to help direct and 
indirect exporters overcome cash flow difficulties ( Section 3.2.4).38 The authorities also took a 
decision to establish an Exim Bank so as to provide financial assistance to exporters and 
importers, and to promote international trade in goods, services, and capital. The proposed Exim 
Bank is expected to take on  a product -oriented approach during the formative years which will 
gradually evolve into a more customer -oriented approach. The bank would also help exporters to 
develop export markets and to expand export production capacity through a variety of short -term 
financing products. The E xim Bank is still not operational.  
3.87.   The Sri Lanka Export Credit Insurance Corporation (SLECIC), incorporated under Act No.  15 
of 1978, is the accredited export credit agency of the Government of Sri Lanka; it is a part of the 
Ministry of Finance. The SLECIC insures exporters of goods and services against non -receipt or 
delayed receipt of payments resulting from commercial and non -commercial risks. It also issues 
guarantees to banks and other financial institutions to facilitate the  granting of pre -shipment and 
post-shipment finance. The SLECIC also offers pre -shipment credit guarantees and export 
performance guarantees. The authorities pointed out that the SLECIC does not provide any form of 
export financing including loans or grant s. 
3.88.   The Sri Lanka Export Development Board (EDB) is the state body responsible for the 
promotion and development of exports. The EDB was established under Sri Lanka Export 
Development Board  Act No. 40 of 1979, and is a part of the Ministry of Industry and C ommerce. 
The EDB is financed mainly by public funds, but also by the Export Development  Board Levy  
(Cess). The EDB's main function is to assist producers and exporters of goods and services to 
identify and access new markets, to make their products more co mpetitive, as well as to develop 
goods and services that will meet market demands. The EDB also offers export marketing support 
through market research identifying marketing opportunities as well as advice on international 
marketing and trade negotiations.   
                                                
36 Information provide d by the authorities; and BOI online information. Viewed at: 
http://www.boi.lk/2009/free_trade_zones_industrial_parks.asp . 
37 Information provided by the authorities.  
38 Eligible co mpanies, which include exporters, indirect exporters and value -added service providers, are 
allowed to procure any local input on a suspended VAT basis. These companies need to prove to the 
Commissioner General of Inland Revenue, that they are exporting , directly or indirectly , more than 51% of 
their turnover. Furthermore, any supplier supplying to any such eligible entity is required to register with the 
Inland Revenue Department as an eligible supplier.  WT/TPR/S/ 347 • Sri Lanka  
 
- 61 - 
 
  3.3  Measures Affecting Production and Trade  
3.3.1   Incentives  
3.89.   In addition to incentives offered to exporters (Section 3.2.4), Sri Lanka also previously 
provided incentives under the BOI Act, which provided for fiscal incentives based on the size of the 
investment, the type of enterprise and the sector in which it operated (Table 2.3 and Box 2.2). 
However, the Inland Revenue Amendment Act No. 8 of 2014, discont inued all tax holidays as of 
31 October 2014 ( Section 2.4.4).  
3.3.2   Competition policy and price controls  
3.90.   There is  no single comprehensive competition law in Sri Lanka. The Con sumer Affairs 
Authority Act No. 9 of 2003 is the main law regulating competition policy, price regulation, and 
consumer protection in Sri Lanka. The Act is administered by the Consumer Affairs A uthority 
(CAA), which is under the Ministry of Industry and Commerce. The Act applies to all undertakings 
dealing with goods and services, and the supply and sale of public utilities (electricity, water, gas, 
and telecommunications).  
3.91.   The CAA comprises an i nvestigative authority and an adjudicative body, the Consumer 
Affairs Council (CAC). The CAA is mandated to protect consumers against unfair trade practices 
and against the marketing of goods or the provision of services that are hazardous to the life and 
property of consumers. The CAA is also mandated to protect consumers' interest, and to ensure 
that, wherever possible , consumers have adequate access to goods and services at competitive 
prices. The CAA's functions include controlling or eliminating: restr ictive trade agreements among 
enterprises, price collusion, abuse of a dominant position, or any other restraint of competition 
adversely affecting domestic or international trade or economic development. The CAA has 
investigative powers into anti -competit ive practices and abuse of a dominant position.39 It hears 
and determines all applications made under the law, and may issue orders to, inter alia , cease the 
anti-competitive practice, which is operating against the "public interest". Although the CAA may 
investigate the effects of anti -competitive practices,  neither  the CAA nor the CAC have the power 
to initiate investigations into the existence of monopolies or to examine mergers or acquisitions. 
However, the CAA may carry out investigations with regard to  the prevalence of any anti -
competitive practices that prevent, restrict or distort competition, in the sale of goods or provision 
of any services. In this regard, it has the judicial powers of a district court. The authorities stated 
that they receive app roximately 20 complaints a year ; the majority of these are settled. Currently, 
the CAC has issued two orders.  At the time of Sri Lanka's last review, draft competition legislation 
was being analysed and it was to enhance the powers of the competition autho rity (CAA) and 
introduce rules to make pre -merger notification analysis mandatory. Furthermore, the authorities 
have stated that amendments to the Consumer Affairs Authority Act No. 9 of 2003 concerning 
provisions on mergers and monopolies have been finali zed and are expected to come into force by 
the end of the year.  
3.92.   The Public Utilities Commission of Sri Lanka Act No. 35 of 2002, which applies only to 
regulated industries (electricity, petroleum, and water), grants the Public Utilities Commission 
competit ion enforcement powers, as well as power to authorize mergers of entities within its 
jurisdiction and to conduct merger investigations.  
3.3.2.1   Price regulation  
3.93.   Under the provisions of the CAA Act, any item of goods or services may be "specified" as an 
essential commodity by the Minister of Industry and Commerce in consultation with the Consumer 
Affairs Authority. Any increase in the price of a “specified” essential commodity requires the CAA's 
prior written approval.  
3.94.   Products currently subject to price regulation  include: chicken and chicken meat, rice, milk, 
wheat flour, white sugar, dried chillies, some types of onions, dhal, dried sprats, gram, green 
moong, canned fish, cement, liquefied petroleum gas (LPG) and all drugs registered with the 
                                                
39 Consumer Affairs online information. Viewed at: http://www.consumeraffairs.gov.lk/aboutus.php . WT/TPR/S/ 347 • Sri Lanka  
 
- 62 - 
 
  National Medicines R egulatory Authority (Table 3.8).40 These products are subject to price 
regulation indefinitely.  
Table 3.8 Products subject to price regulation, May 2016  
Product description  Maximum retail price (Rs)  
Chicken me at, frozen; broiler chicken meat with skin 1 kg  380.00  
Broiler chicken meat with skin 1 kg (without skin)  480.00  
Ordinary portland cement SLS 107  870.00  
Portland limestone cement SLS 1253  870.00  
Masonry cement SLS 515  870.00  
Full cream milk powder 400  g 325.00  
Full cream milk powder 1 kg  810.00  
Local milk powder 400 g  295.00  
Samba rice, cleared (excluding Keeri Samba and Suduru 
Samba) 1 kg  77.00  
Nadu red rice 1 kg  66.00  
Nadu white rice 1 kg  68.00  
Red and white raw rice 1 kg  66.00  
White sugar (un packed) 1 kg  87.00  
Full cream milk powder 400 g  325.00  
Full cream milk powder 810 g  810.00  
Sustagen 400g  1,500.00  
Wheat flour (unpacked) 1 kg  87.00  
Green gram (unpacked) 1 kg  265.00  
Canned fish (imported) 425 g  140.00  
Canned fish (imported) 155 g  70.00 
Seeds of coriander (unpacked) 1 kg  350.00  
Black gram (unpacked) 1 kg  300.00  
Maldive fish (unpacked) 1 kg  1,740.00  
Turmeric – crushed or ground (unpacked) 1 kg  800.00  
Chillies – crushed or ground (unpacked) 1 kg  400.00  
White sugar (packed) 1 kg  95.00 
Sprats 1 kg  410.00  
Dahal 1 kg  169.00  
Dried fish “katta” 1 kg  1,100.00  
Dried fish “salaya” 1 kg  425.00  
Chickpea 1 kg  169.00  
Source:  Consumer Affairs Authority online information. Viewed at: http://www.caa.gov.lk/web/index.php?  
 option=com_content&view=article&id=74&Itemid=495&lang=en . 
3.3.3   State trading, state -owned enterprises, and privatization  
3.95.   Sri Lanka has not notified any state trading enter prises within the context of Article XVII of 
the GATT 1994 to the WTO.  
3.96.   At the time of the last review, government policy was to restructure state -owned 
enterprises (SOEs) and improve their performance, and not to privatize them. To this end, the 
Government  invited private sector investment to rehabilitate non -functional SOEs. However, the 
Government retained majority ownership of these SOEs.  
3.97.   SOEs are monitored by the Department of Public Enterprises, which is part of the Ministry of 
Finance. All SOEs are ex pected to be solvent and not rely on the Government for funding; as such 
they are required to enter into performance contracts with the treasury. Currently , there are 245 
state-owned enterprises41 in Sri Lanka, of which 55 are state-owned business enterpris es 
                                                
40 The National Medicines Regulatory Authority was created in 2015 under the National Medicines 
Regulatory Authority Act No. 5 of 2015 ; it replaced the Cosmetics, Devices and Drug Act No. 27 of 1980.  
41 State -owned enterprises are those incorporated under an Act of Parliament or the Companies Act. 
They could be c lassified as commercial, regulatory or promotional entities.  WT/TPR/S/ 347 • Sri Lanka  
 
- 63 - 
 
  (SOBEs).42 These represent a substantial share of the country’s economic activity. Although some 
SOEs are profitable and performing well, collectively they represent a risk to public finances. The 
authorities have calculated that the outstanding obligati ons of the central government and SOEs 
total Rs 1.36 trillion (12.2% of GDP).  
3.98.   The authorities recogni ze the need for reform. In this regard, as an initial step, the Ministry 
of Public Enterprise  Development was established in 2015 , so as to facilitate the  introduction of 
appropriate reforms aimed at strengthening the legal framework for the governance and oversight 
of SOEs, including through the establishment of coherent financial regulations for SOEs on 
governance, accountability, and funds management , which will result in commercially viable 
SOBEs. In this regard, the Ministry is expected to focus on restructuring the management model of 
SOBEs, introducing market -based pricing mechanisms in public utilities on a selective basis, 
rationalizing recruitment while adopting measures to improve productivity of the existing 
workforce and exploring ways to improve the efficiency of SO BEs through various mechanisms 
including public –private partnership (PPP). Furthermore, the Government intends to bring all SOEs 
under a government -owned holding company, whose shares will be passed onto a Public Wealth 
Trust. A new Public Enterprise Act is to be enacted to provide the necessary legal framework to 
this effect.  
3.3.4   Government procurement  
3.99.   Government procurement in Sri Lanka is fragmented , as this is done by decentralized 
agencies. The value of government expenditure on goods, services, works and public investment 
represented some 6.3% of GDP in 2014. Expenditure on goods and services was Rs 187 billion , or 
1.9% of GDP , and on  public investment and infrastructure works  it was  Rs 429 billion , or 4.4% of 
GDP.43 
3.100.   Government procurement in Sri Lanka continues to be an important instrument of 
economic policy, to promote domestic suppliers and products. Since 2003 , Sri Lanka has 
partic ipated in the WTO Plurilateral Agreement on Government Procurement (GPA) as an observer.  
3.101.   The Department of Public Finance in the Ministry of Finance continues to be the principal 
authority for formulating and amending the procurement guidelines , and for issuing manuals, 
evaluation methodologies, standard contracts, and specifications. The Department of Public 
Finance is also the reference point for providing procurement information, technical expertise, and 
training to streamline and improve procurement pro cedures, and is in charge of monitoring the 
tendering process. According to the authorities, the Department is a facilitating body and not a 
central procurement agency. Responsibility for procurement lies with the Secretaries and Heads of 
Departments of th e respective line ministries, who act as their Chief Accounting 
Officers/Accounting Officers. The Department of Public Finance appoints technical evaluation 
committees (TEC s), as well as Cabinet -level procurement committees  (PCs) ; other committees are 
appointed by the line ministries. These different committees are responsible for the procurement 
process.  
3.102.   The main regulations on the procurement process are contained in the Procurement 
Guidelines and the Procurement Manual, which must be followed by ministri es and departments, 
as well as by state -owned enterprises, statutory boards, and all other government institutions and 
agencies, including provincial councils and local authorities.44 Procurement guidelines for goods 
and works issued in 2006 (as amended) co ntinue to be used.  
3.103.   The guidelines contain provisions to ensure confidentiality, prevent corruption and deal 
with situations where there may be conflicts of interest. They explicitly mandate: (a) maximizing 
economy, timeliness and quality, resulting in lowest cost together with high quality; (b) adhering 
to prescribed standards, specifications, rules, regulations, and good governance; (c) providing fair, 
                                                
42 State -owned business enterprises are those entities incorporated as commercial entities under an Act 
of Parliament or the Companies Act.  
43 Information provided by the authorities.  
44 Procurement  Guidelines  2006. Viewed at: http://www.treasury.gov.lk/documents/57687/174939/ 
ProcurementGuidelines2006_amded 12June.pdf/4417f549 -2a8d-45d1-b3a6-0560db79a87f ; and Procurement 
Manual. Viewed at: http://www.treasury.gov .lk/documents/57687/174939/ProcurementManual2006_ 
20060817_with_Sup8.pdf/5d0563ed -05b1-4629-9937-db8e160aac29 . WT/TPR/S/ 347 • Sri Lanka  
 
- 64 - 
 
  equal, and maximum opportunity for eligible interested parties to participate in procurement; 
(d) the exp editious execution of works and delivery of goods and services; (e) compliance with 
local laws and regulations and international obligations; (f) ensuring transparency and consistency 
in the evaluation and selection procedure; and (g) retaining confidentia lity of information provided 
by bidders. The guidelines are applicable to all procurement, irrespective of the source of funding. 
However, in the case of a foreign -funded project, if the funding agency mandates the use of its 
own procurement guidelines, th ese will prevail over the national guidelines to the extent 
applicable.  
3.104.   Procurement committees and TECs take the procurement decisions, with respect to review, 
and choice and approval of bids. Procur ement  committees may be appointed at the project (PPC), 
department (DPC) or ministry (MPC) level, according to the value of the procurement.45 In the 
case of high -value procurement, a procurement committee may be appointed by the Cabinet . 
Furthermore, in the case of high -value procurement that needs expeditious a ction, a standing 
procurement committee may be appointed by the Cabinet.46 Subsequently, the TEC examines the 
bid and prepares a bid evaluation report and submit s it to the relevant procurement committee. 
The procurement committee recommends the lowest eval uated bid. Awards are published on the 
Department of Public Finance's website . 
3.105.   As per the procurement guidelines, Sri Lanka grants price preferences to locally  
manufactured goods. In the case of works and contracts, the margin of preference is 7.5% for 
contracts funded by the World Bank and the Asian Development Bank, and 10% for contracts 
funded by the Government of Sri Lanka. The margins of preference apply to: (a) Sri Lankan 
individuals/sole proprietors; (b) partnerships where more than 50% of the member s are Sri 
Lankans; and (c) individual firms registered in Sri Lanka that have more than 50% ownership by 
Sri Lankans and do not sub -contract more than 10% of the contract price. Additionally, 
preferences for locally  manufactured goods are granted at 15% fo r contracts funded by the World 
Bank and the Asian Development Bank, and 20% for contracts funded by the Government. To 
benefit from the preferential margin, the bidder must satisfy the PC that labour, raw materials, 
and components from within Sri  Lanka ac count for 30% of the ex -works price of the product 
offered, and that their production facility has been manufacturing/assembling such goods at least 
since the time of bid submission.  
3.106.   Calls for tenders must be published in an abridged form in local newspape rs and at least 
once in the Gazette . In the case of international tenders, the procuring entity (PE) is required to 
advertise in one widely circulated national newspaper and relevant websites where possible, as 
well as in international procurement gateways . 
3.107.   According to the procurement guidelines, 13 different procurement methods (including 
open competitive bidding) have been specified.47 These are dependent on the threshold and the 
type of good/service or work to be procured. Works, services, and supplies m ust, as far as 
possible, be procured through the open competitive procedure. However, exceptions from this 
procedure may occur under specific circumstances. Exceptions, as specified in the procurement 
methods, include: entrusting contracts to "approved soc ieties"; emergency purchases; or 
procurement below certain thresholds.  
3.108.   In accordance with the procurement guidelines, the basic principle for selection is to 
maximize value for money. However, bids may be evaluated on the basis of other factors, which 
must be specified in the bid documentation. These include: technical factors such as the efficiency 
and reliability of the equipment; the construction method to be used; the time of completion or 
delivery; and the availability of after -sales service and spare parts. The operating cost may also be 
taken into account. Procurement procedures leave some room for discretion.  
                                                
45 Supplement 28 to the Procurement Manual, 4 July 2014. Viewed at: 
http://www.treasury.gov.lk/documents/57687/174433/ProcuManSupple28E%281%29.pdf/49f052ae -e7eb-
4cd8-9ab5-f0d5af41afe6 . 
46 According to the guidelines, the use of a standing  cabinet -appointed procurement c ommittee (SCAPC ) 
may be justified where: (a) expeditious processing of procurement is necessary; (b) extraordinary speedy 
decisions have to be taken; (c) supplies are immediately required to avoid acu te shortages in the market; 
(d) bids have a very short v alidity period; (e) the prices of goods fluctuate frequently; (f) items need to be 
purchased very frequently without significant changes in specifications; (g) security consideration warrants; 
and (h) a project contains a large number of bid packages over a long time span.  
47 For details please see WTO document WT/TPR/S/237/ Rev.1,  30 November 2010.  WT/TPR/S/ 347 • Sri Lanka  
 
- 65 - 
 
  3.109.   Complaints with regard to procurement need to be lodged with the Procurement Appeal 
Board (PAB). The PAB is mandated to review complaints regar ding awards recommended by the 
PCs. The Secretary of the line ministry must inform the unsuccessful bidders in writing within one 
week of being informed of the recommendation of the cabinet -appointed procurement committee  
(CAPC). These bidders may then, wi thin one week, appeal against the decision of the CAPC to the 
PAB. The unsuccessful bidders are requested to deposit a non -refundable fee of Rs 50,000 in a 
deposit account maintained at the Presidential Secretariat with their appeal.48 The PAB conducts an 
investigation and submits its report to the Cabinet of Ministers. The decision of the Cabinet of 
Ministers is final.  
3.110.   The authorities have indicated that the Government Procurement Guideline s 2006 are in 
the process of being updated and would reflect policy decisions of the Cabinet and circular 
instructions on procurement issued by the Department of Public Finance. The revised guideline s 
are expected to be issued in 2017 and would contain : guidelines on procurement of works, goods 
and services ; guidelines on selection and employment of consultancy services ; guidelines on 
procurement of pharmaceuticals and medical devi ces; and guidelines on projects financed by 
private investors including PPP. Additionally, the Government envisages the establishment of a 
Centra l Procurement Agency, as proposed in the 2016 Budget.  
3.111.   In 2010, the Government started implementing a system for electronic tendering 
(e-procurement). Certain aspects of the procurement process were being carried out online, such 
as the general advertising process, the publication of procurement invitations, and the inspection 
of pre -qualification applications and bidding documents. However, the electronic submission of bids 
was not allowed. The Government recognizes the usefulness and importance of the 
implementation of an electronic government procurement (e -GP) system , which could help to 
increase transparency, provide easier access to information, increase competition and lower costs. 
The World Bank, ADB and USAID are willing to provide technical assistan ce to implement e -GP in 
Sri Lanka.  
3.112.   Under the 19th Amendment to the Constitution in 2015, an independent National 
Procurement Commission was created. The functions of the commission are to: monitor and report 
to the appropriate authorities whether  the procu rement of goods and services, works, consultancy 
services and information systems by government institutions are in accordance with previously 
approved action plans; monitor and report to the appropriate authorities if all qualified bidders are 
afforded an  equal opportunity to participate in the bidding process; monitor and report to the 
appropriate authorities whether  the procedures for the selection of contractors, and the awarding 
of contracts are fair and transparent; report on whether members of procur ement committees and 
technical evaluation committees relating to the procurements, appointed by government 
institutions are suitably qualified; and investigate reports of procurements made by government 
institutions outside established procedures and guide lines, and to report the officers responsible 
for such procurements to the relevant authorities for necessary action.  
3.3.5   Intellectual property rights  
3.113.   During the period under review, there have been no change s to the intellectual property 
legislation in Sri La nka. The Intellectual Property Act No. 36 of 2003 and the Intellectual Property 
Regulations No. 1 of 2006 continue to be the main legislation governing the sector. The Act covers 
copyright and related rights, industrial designs, patents, marks and trade na mes, layout designs of 
integrated circuits, unfair competition and undisclosed information, and geographical indications. 
At the time of Sri Lanka's last review, legislation on plant varieties was in the process of being 
drafted.  Such legislation has not y et been adopted. Sri Lanka is a party to the Convention 
Establishing the World Intellectual Property Organization (WIPO) and to other international 
conventions on intellectual property.49 It has not acceded to the WIPO Performances and 
Phonograms Treaty (WP PT); the WIPO Copyright Treaty (WCT); or the Information Technology 
                                                
48 Supplement 24 to the Procurement Manual, 21 March 2012. Viewed at: http://www.treasury.gov.lk/ 
document s/57687/174433/ProcuManSupple24E.pdf/d9e0bfa0 -b1f9-468e-81e4-a1b7ed221893 . 
49 These include: the Patent Cooperation Treaty; the Berne Convention for the Protection of Literary and 
Artistic Work s; the Paris Convention for the Protection of Industrial Proper ty; the Madrid Agreement for the 
Repression of False or Deceptive Indications of Source on Goods; the Nairobi Treaty; the Universal Copyright 
Convention; the Convention Establishing the World Intellectual Property Organization (WIPO); and the 
International  Convention for the Protection of Performers (WIPO).  WT/TPR/S/ 347 • Sri Lanka  
 
- 66 - 
 
  Agreement. In 1991, Sri  Lanka signed a bilateral agreement with the United States to protect 
intellectual property rights. Furthermore, in conjunction with WIPO, Sri Lanka has initiated an  IP 
action plan which , inter alia , seeks to: improve the efficiency of the National Intellectual Property 
Office (NIPO), establish a coherent IP strategy, establish an IP hub for education and 
development, build IP capacity, and increase awareness about IP  issues and dissemination of 
information.  
3.114.   NIPO, which was established under the Intellectual Property Act No. 36 of 2003, 
administers the intellectual property system in Sri Lanka. NIPO's responsibilities include 
registration and post registration of intel lectual property rights covered by the Act, collecting and 
disseminating information relating to intellectual property, ensuring Sri  Lanka meets its 
international intellectual property obligations, promoting international and regional cooperation, 
proposin g IP policies, and facilitating the enforcement of IP rights, such as dispute resolution in 
copyright and related rights. Enforcing intellectual property rights in Sri Lanka is the joint 
responsibility of NIPO, Customs, the police, and the Attorney General 's Office.  
3.3.5.1   Copyright and related rights  
3.115.   Under the provisions of the Intellectual Property Act and its regulations, copyright 
protection is provided for original literary, artistic, and scientific works. The owner of the copyright 
has exclusive rights with respect to the reproduction, translation, adaptation, public distribution 
(sale, rental, or export), importation, public display, broadcasting or public performance of the 
work. This right does not extend to works of architecture, databases or computer pro grams.50 The 
expression of folklore is protected under a sui generis  set of provisions.  
3.116.   The term of protection ranges from life of the author plus 50  years to life plus 70  years. In 
the case of work s of applied art, the economic and moral rights are protect ed for 25 years from 
the date of the making of the work. The copyright owner may grant a licence to a physical person 
or legal entity to carry out all or any of the acts relating to his/her economic rights, or assign or 
transfer in whole or in part an econ omic right. The Act also contains provisions for the protection 
of related rights. Copyrights do not need to be registered to be protected. The authorities stated 
that amendments to the IP Act to introduce a voluntary registration system for copyrights are  
being prepared. Additionally, a draft amendment to the IP Act to introduce limitations and 
exceptions to the copyright provisions to facilitate access to printed materials by the visually 
impaired has been approved by the Intellectual Property Advisory Co mmission and a Cabinet 
Memorandum to this effect has been finalized. However, according to the authorities, the 
Government has not given its approval for this yet. Sri Lanka has not ratified the Marrakesh Treaty 
to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise 
Print Disabled . 
3.3.5.2   Patents  
3.117.   Patents are granted if an invention is new, involves an inventive step and is industrially 
applicable. Inventions may be or may relate to a product or a process. Patent applicati ons must be 
accompanied by a novelty search report. Certain inventions are not patentable in Sri Lanka. The 
patent owner has the exclusive right to exploit the invention, assign or transmit the patent, and 
conclude licence contracts. Patents need to be reg istered and are published in the Gazette  once 
the Director  General of NIPO considers that the necessary conditions have been met.  
3.118.   Patents are valid for 20 years from the date of application and are not renewable. 
However, annual fee needs to be paid to kee p the patent valid. In the case of non -payment of the 
annual fee, a grace period of six months is given after which the patent expires. In the case of a 
dispute or if the conditions of granting a patent have not been met, an application to invalidate or 
revoke a patent can be made in court.  
                                                
50 The Act allows the reproduction in a single copy or the adaptation of a computer program by the 
lawful owner of a copy of that computer program without the authorization of the owner of copyright, prov ided 
that the copy or adaptation is necessary: (i) for use of the computer program for the purpose and extent for 
which the computer program has been obtained; (ii) for archival purposes and for replacement of the lawfully 
owned copy of the computer progra m in the event that the said copy of the computer program is lost, 
destroyed or rendered unusable.  WT/TPR/S/ 347 • Sri Lanka  
 
- 67 - 
 
  3.119.   The law also allows the Government to grant compulsory licences to manufacture certain 
patented products in situations such as a national emergency. A compulsory licence may also be 
granted in case of lack of commercial exploitation of the patent. Applications must be made to the 
Director  General of NIPO with evidence that the applicant has made efforts to obtain approval from 
the right holder on reasonable commercial terms and conditions , and that such efforts have not 
been successful within a reasonable period of time. The issuance of a licence is non -exclusive and 
subject to the payment of adequate remuneration to the owner of the patent taking into 
consideration the economic value as determined by NIPO and , where appli cable, the need to 
correct anti -competitive practices. Licences may also be granted voluntarily, through contracts, 
which must be recorded in the Register.  
3.120.   If the use of a patent licen ce is considered anti -competitive, the Director  General may 
authorize an y person, body of persons, government department or statutory body to exploit the 
patent without a licence from the owner of the patent.  
3.121.   Parallel imports of pharmaceutical produc ts are permitted under the Act.  
3.122.    Patent applications take a few weeks to proce ss. Between 2010 and 2015, 1,663 patents 
were granted (Table 3.9).  
Table 3.9 Industrial property statistics, 2010 -15 
Year Applications   Registrations  
Resident  Non-
resident  Total   Resident  Non-
resident  Total  
Marks         
2010 3,942 2,302 6,244  570 469 1,039 
2011 4,732 2,925 7,657  394 985 1,379 
2012 5,938 3,178 9,116  660 689 1,349 
2013 5,481 3,344 8,825  1,485 559 2,044 
2014 5,207 3,346 8,553  403 735 1,138 
2015 5,995 3,420 9,415  882 1,390 2,272 
Patents        
2010 225 235 460  220 284 504 
2011 194 235 429  45 227 272 
2012 242 297 539  37 89 126 
2013 328 188 516  71 165 236 
2014 314 222 536  43 220 263 
2015 218 263 481  38 224 262 
Industrial designs        
2010 233 51 284  228 37 265 
2011 387 56 443  88 21 109 
2012 365 29 394  60 28 88 
2013 260 99 359  100 30 130 
2014 245 47 292  471 58 529 
2015 390 67 460  179 67 246 
Source:  NIPO online information. Viewed at: http://www.nipo.gov.lk/sati stic.htm . 
3.3.5.3   Industrial designs  
3.123.   With regard to industrial designs, protection is granted for a period of five years from the 
date of receipt of the application for registration; it is renewable for two consecutive five -year 
terms subject to payment of the pr escribed fee.  
3.124.   To be protected, designs need to be registered. The registered owner of an industrial 
design has the exclusive rights to: (a) reproduce and embody such industrial design in making a 
product; (b) import, offer for sale, sell or use a product e mbodying such industrial design; (c) 
stock for the purpose of offering for sale, selling or using, a product embodying such industrial WT/TPR/S/ 347 • Sri Lanka  
 
- 68 - 
 
  design; (d) assign or transmit the registration of the industrial design; and (e) conclude licence 
contracts. Licences ar e not exclusive, unless so provided in the contract, and must be registered. 
There are no provisions for compulsory licensing. The Director  General of NIPO, following 
consultation with the Governor of the Central Bank, may cancel the registration of a lice nce if he 
has cause to believe that any licence contract that involves the payment of royalties abroad is 
detrimental to the economic development of Sri Lanka.  
3.125.   Design applications are published before registration. Any person is entitled to apply to the 
relevant c ommercial high court to have the registration declared null and void on grounds specified 
in the Act.  
3.3.5.4   Trademarks  
3.126.   Under the Act, marks, trade names, certification marks, collective marks and well -known 
international marks are protected through regi stration. To register a mark, the applicant needs to 
be the first to submit a valid application and make a valid claim of priority for the application. A 
mark may consist of, inter alia , designations, names, pseudonyms, geographical names, slogans, 
letters , numbers, emblems, and combinations or arrangements of colours, and shapes of goods or 
containers.  
3.127.   If the Registrar considers the application admissible for registration, it is published in the 
Gazette  and the applicant is notified. Any person may oppose the registration within three months 
of its publication. If no such notice is received, the mark is registered. Registration is valid for ten 
years and can be renewed for consecutive periods of ten years each on payment of the prescribed 
fee. The owner of a mark has the exclusive right to use it, to assign or transmit the registration of 
the mark, and to conclude licence contracts.  
3.128.   A registration may be cancelled if the owner has failed to use the mark within Sri Lanka 
without valid grounds for five consecu tive years, or has transformed the mark into a generic name 
so that in the eyes of the public the significance of the mark has been lost. The authorities stated 
that proposals were being prepared to access the Madrid Agreement Concerning the International 
Registration of Marks. 
3.3.5.5   Geographical indications  
3.129.   Geographical indications (GI s) are protected under the Act. Any interested party may 
prevent the use of any means in the designation or presentation of goods that indicates or 
suggests that the goods, includi ng an agricultural product, food, wine or spirit , originate in a 
geographical area other than the true place of origin in a manner that misleads the public as to the 
geographical origin of goods. The Act also prevents the use of a GI that constitutes an ac t of unfair 
competition, and the use of a GI misrepresenting the origin of the goods, even where the true 
origin of the goods is indicated or the GI is used in translation or accompanied by an expression 
such as kind, type, style , imitation , or the like. I n the case of similar GIs, protection is accorded to 
each indication. The Act gives courts the power and jurisdiction to grant an injunction and any 
other relief deemed appropriate to prevent any inappropriate use of a GI. Sri Lanka is an advocate 
of exten ding the protection of geographical indications to products other than wines and spirits.51 
The authorities stated that draft amendments to the IP Act to introduce a registration system for 
GIs, namely Ceylon Tea and Ceylon Cinnamon , are being prepared.  
3.3.5.6   Unfair competition and undisclosed information  
3.130.   Unfair competition and undisclosed information are also addressed under the Act. Unfair 
competition is defined  as "any act or practice carried out or engaged in, in the course of industrial 
or commercial activiti es, that is contrary to honest practices, and/or causes, or is likely to cause, 
confusion with respect to another's enterprise or its activities or the products or services offered by 
such enterprise, or that may damage its reputation ". Practices that misl ead the public or discredit 
an enterprise or its activities or its products or services, such as false advertising , are also 
considered an unfair practice. Any act or practice that results in the disclosure, acquisition or use 
by others of undisclosed info rmation without the consent of the person lawfully in control of that 
                                                
51 WTO document IP/C/W/353, 24 June 2002.  WT/TPR/S/ 347 • Sri Lanka  
 
- 69 - 
 
  information is also forbidden under the Act. Under the Act, "undisclosed information" is defined as 
information that: is not, wholly or partly, generally known among, or readily accessib le to, persons 
within the circles that normally deal with the kind of information in question; has actual or 
potential commercial value because it is secret; and has been subject to reasonable steps under 
the circumstances by the rightful holder to keep it  secret. The use of such information is also 
considered to be an unfair practice and is thus forbidden.  
3.131.   Parties affected by unfair competition or undisclosed information may institute proceedings 
in court to prohibit the continuance of the act or practice and obtain damages for losses. The wilful 
disclosure of any undisclosed information without lawful authority is an offence under the Act, 
liable to a fine of up to Rs 500,000 and/or imprisonment for a term not exceeding six months.  
3.3.5.7   Layout designs of integr ated circuits  
3.132.   To be protected, a design must be original and registered. Protection of a layout design 
lasts for ten  years and is non -renewable. Protection commences on the date of the first 
commercial exploitation or on the filing date accorded to the app lication. Any application for 
registration must be made within two years from the starting date of exploitation. Registrations 
are published in the Gazette . The right holder may grant a licence to another person or enterprise 
authorizing it to exploit the design; the licence contract must be registered to be valid. The owner 
of a design has the exclusive right to authorize its reproduction, importation, sale, and distribution. 
However, layout designs may be reproduced to be used for evaluations, analysis, r esearch or 
teaching.  
3.3.5.8   Enforcement  
3.133.   IPR infringement is punishable under both criminal and civil law. Penalties include prison of 
up to six months and fines of up to Rs 500,000. Penalties can be doubled for a second offence. 
Aggrieved parties may seek redress  through the courts. Sri Lanka Custom s is authorized to 
prohibit the exportation and importation of goods in violation of intellectual property rights. The 
Director  General of NIPO conducts dispute resolution involving copyright and related rights. With 
regard to enforcement, the authorities stated that there was an anti -piracy unit in the Sri  Lankan 
police and that C ustoms was also actively involved in anti -piracy and anti -counterfeit operations. 
Furthermore, the authorities also stated that two IPR -relate d cases were in court and being 
investigated.  WT/TPR/S/ 347 • Sri Lanka  
 
- 70 - 
 
  4  TRADE POLICIES BY SE CTOR  
4.1  Agriculture and Fisheries  
4.1.1   Agriculture  
4.1.  The Sri Lankan agricultural sector (includ ing fishing and forestry) remains an important 
contributor to the economy; in 2015, it accounted for 8.7 % of GDP1 and about 28% of total 
employment.2 The agricultur al sector grew at a rate averaging 3.8% per year during the period 
2010-13; growth declined to 0.3% in 2014 due to unfavourable weather conditions that negatively 
impacted many commodities.  
4.2.  A num ber of ministries and departments are responsible for policies concerning agriculture, 
although the scope of their responsibilities may not be clearly defined (Chart 4.1).  There are 
four main ministries involved in various agricultural sectors, and several  departments underneath 
them. The main entity in charge of agricultural policy is the Department of Agriculture under the 
Ministry of Agriculture. Different ministries are also involved in  the oversight of several 
state owned enterprises that operate in th e sector.  
                                                
1 Agriculture, forestry, and fishing (Table 1.1) . 
2 Central Bank of Sri Lanka online information. Viewed at: http://www.cbsl.gov.lk/pics_n_docs/10_ 
pub/_docs/efr/annual_report/AR2015/English/17_Appendix.pdf  and 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/statistics/other/econ_&_ss_2015_e.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 71 - 
 
  Chart 4.1 Ministries responsible for policies on agriculture, 2016  
Source:  .....Chart 4.XX Flow chart sri lanka
Ministry of 
Plantation IndustriesMinistry of Rural 
Economic AffairsMinistry 
of Agriculture
Development of the 
plantation industry
(tea, rubber, coconut)Organization, promotion of 
cultivation, and processing 
of minor export crops 
(e.g. cinnamon, cardamom, 
clove, nutmeg, etc.)
Milco
Department of Rubber Development
Coconut Cultivation BoardSriLanka Tea BoardDepartment of Animal Production and Health
Paddy Marketing BoardNational Livestock  Development BoardMinistry of Primary 
IndustriesDepartment of Agrarian DevelopmentDepartment of Agriculture
Ceylon Fertilizer Company
Agriculture and Agrarian Insurance Board-RiceResearch and 
Development Institute
-Horticulture Crops Research and 
Development Institute
-Seed Certification and 
Plant Protection Centre
-Field Crops Research and 
Development Institute
Department of Export AgricultureFood Research and Development Institute
 
Source:  Compiled by the WTO Secretariat from various sources.  
4.1.1.1   Policy and programmes  
4.3.  The Government has focused its attention on fo rmulating a new agricultural policy. The policy 
aims to make the country self -sufficient in maize, soya beans, chil lies, onions, and potatoes by 
2018 through crop diversification and productivity improvements, and to move forward from 
subsistence farming t o agribusiness with a view to access ing export markets by 2020.3 
4.4.  Sri Lanka's Ministry of Agriculture is developing a number of key strategies for the sector for 
the next ten years; the strategies are expected to be issued in 2017. The main focuses of the 
current strategies are increased production, food safety, enviro nmental friendliness, and 
socio-economic aspects (Table 4.1). In addition, the Ministry had a number of development 
programmes for 2015 such as: Youth Agri Entrepreneurship Program me; Commercia l Farm 
Program me; Supplementary Food Crop Production Program me; Establishment of Soil 
Conservation, Organic Fertilizer Production and Use Promotion program me; Agri Crop Production 
Forecasting Program me; Rice Exporting Program me; and the Skills Development Program me. 
There is also a National Food Production Programme, 2016 -18, and Production of Food without 
Poison Programme of the Presidential Secretariat.  
                                                
3 The Nation online information. Viewed at: http://nation.lk/online/2015/11/20/summary -of-2016-
budget -proposals.html . WT/TPR/S/ 347 • Sri Lanka  
 
- 72 - 
 
  Table 4.1 Key agricultural strategy areas identified by the Ministry of Agriculture, 2015  
Increased production and productivity  
1. Production and productivity  • Appropriate ( good) agricultural practices  
• Land productivity and land use planning  
• Crop zoning and diversification  
• Integration with other sector s (plantation crops, 
 fisheries, animal husbandry , etc.) 
• Urban agriculture and home gardening  
2. Input management  • Seed and planting material  
• Mechanization  
• Fertilizer (use efficiency) and pesticides  
• Energy  
3. Technological advancement  • National  and international collaborations  
• Research and development  
• Technology exchange and knowledge sharing  
• Cooperation and partnerships  
• Information management (e -based agriculture)  
• Adaptation of new technology  
Ensured food safety  
4. Food safety  • Organic agriculture/ natural agriculture  
• GAP ( good agricultural practices)  
• Plant protection  
• Safe use of agrochemicals  
• White revolution  
Environmental friendliness  
5. Natural resource management and 
climate change adaptation  • Soil conservation  
• Water management  
• Agriculture climate forecast  
• Disaster risk reduction  
6. Affordability, marketability, and 
profitability  • Farmer's profit margin  
• Supply chain  and value chain management  
• Post-harvest technology  
• Value addition  
• Planned cultivation  
• Market -oriented production  
• Agro-based employment opportunities  
• Strengthen linkages  
• Agro-based industries  
• Price fluctuation  
• Seasonality  
7. Public –private partnership  • Growers  
• Input suppliers  
• Supply and value chain  
• Industry  
• Exporters  
Socio-economic aspects  
8. Farmer empowerment and consumer 
 health and satisfaction  • Social security/ agricultural insurance/agricultural
 credits  
• Integration  
• Diversification  
• Dignity and self-respect  
• Farmer companies/ bargaining power/SME divisional 
 level 
9. Youth and women in agriculture  • Entrepreneur s 
Knowledge management  
10. Education, extension and capacity 
building  • Technology transfer  
11. Traditional knowledge and practices  • Agricultural heritage systems  
• Agro-tourism  
General statements  
12. Legal and regulatory framework ( acts 
and orders/ regulations/ circulars )  
Source:  Information provided by the authorities.  
4.5.  The Government imposes price controls on basic foods; each year it provides subsidies for 
price support on a number of basic foo d items with a view to controlling the cost of living and to WT/TPR/S/ 347 • Sri Lanka  
 
- 73 - 
 
  maintain food security for the poor.4 The main items subject to price controls during the review 
period were wheat flour, sugar, sprats, lentils, potatoes, milk powder, chicken, rice, dried chi lli, 
and canned fish. Reference prices are set based on the cost of imports plus marketing/processing 
costs, or cost of production plus marketing/processing costs.  
4.1.1.2   Production  
4.6.  Agricultural production in Sri Lanka is dominated by the main plantation crops, wit h tea and 
rubber being the largest in value (Table 4.2). Production of most agricultural goods remained 
stable over the review period, and certain yearly fluctuations can be attributed to unfavourable 
weather conditions. There has been no significant trend  in crop size or amount of cultivated land, 
but crop yields are gradually being improved with better farming techniques and fertilizers. 
Production of manioc and maize gradually increased during the period, but from a low base. Other 
minor crops include mo stly spices, i.e. cinnamon, cocoa, ginger, pepper, cloves, etc.  
Table 4.2 Agricultural production, 2009 -15 
 2009  2010  2011  2012  2013  2014  2015  
Production of main agricultural products ('000 tonnes, unless oth erwise indicated):   
Paddy/rice  3,651.7  4,300.6  3,894.9  3,845.9  4,620.7  3,380.8  4,819.0  
Tea, processed  291.0  331.4  327.5  328.4  340.0  338.0  329.0  
Rubber  136.9  153.0  158.2  152.0  130.4  98.6 88.6 
Manioc  .. 282.8  292.7  291.4  301.1  302.5  324.1  
Maize  129.8  161.7 137.8  202.3  208.3  240.6  261.1  
Coconuts (million)  2,762.0  2,317.0  2,808.0  2,940.0  2,513.0  2,870.0  3,056.0  
Minor export crops  112.3  124.1  118.4  120.6  129.8  117.0  133.8  
Gross production of main agricultural products (US$ 
million):      
Paddy/rice  1,075.1 1,132.5  1,030.9  909.5  1,125.3  .. .. 
Tea 15,285.9  19,424.5  21,234.8  18,552.5  20,217.6  .. .. 
Rubber  24,258.3  30,345.2  34,711.0  28,651.2  26,226.1  .. .. 
Cassava (manioc)  6,729.5  6,820.2  8,881.7  8,916.6  9,669.3  .. .. 
Maize  4,601.6  5,600.9  5,364.4  7,125. 8 6,580.4  .. .. 
Coconuts  458.5  599.8  573.1  641.5  987.7  .. .. 
Minor export crops  622.6  700.9  833.9  775.5  814.2  840.2  1,096.8  
Average monthly production of certain 
livestock:       
Milk (million litres)  19.4 20.6 21.5 24.9 27.4 27.8 31.2 
Cow milk  15.3 16.0 17.0 19.8 22.1 22.7 25.4 
Buffalo milk  4.1 4.6 4.6 5.1 5.3 5.1 5.8 
Eggs (number in million)  95.2 95.0 98.8 121.4  136.4  143.4  158.2  
.. Not available.  
Source:  Data provided by the authorities; Department of Census and Statistics Sri Lanka; and FAO onlin e 
information.  
4.1.1.3   Trade  
4.7.  Agriculture remains an important component of Sri Lanka's exports and imports; as it is a net 
exporter of agricultural products, and agriculture typically accounts for about one  fourth of 
Sri Lanka's total exports. Its main export earn er, accounting for more than half of all agricultural 
exports, is tea. Other main export items include cinnamon and pepper (Table  4.3). While the 
majority of exported agricultural products remained stable during the period 2010-15, there was 
significant gr owth in coconut oil exports, from US$2.2 million in 2010 to US$121 million in 2015.  
                                                
4 Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/English/13_PolicyBox.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 74 - 
 
  4.8.  In terms of imports, agricultural goods accounted for about 12% of Sri Lanka's total imports 
in 2015; its main agricultural imports comprise foods needed for domestic cons umption purposes 
such as wheat, raw sugar, and milk products. Although Sri Lanka produces significant amounts of 
rice, it has been increasingly importing rice of different varieties, often used in hotels and 
restaurants for the tourist industry (Table 4.4) . 
Table 4.3 Exports of main agricultural products, 2010 -15 
(US$ million)  
HS code  2010  2011  2012  2013  2014  2015  
 Total exports  8,304.1  10,011.3  9,369.8  10,004.9  11,295.5  10,439.7  
 Total agricultural exportsa 2,103.8  2,439.9  2,270.9  2,471.0  2,720.0  2,514.3  
   of which:        
0902 Tea 1,366.8  1,475.0  1,403.2  1,528.5  1,609.3  1,321.9  
0801 Coconuts, brazil and cashew 
nuts, fresh or dried  60.9 135.3  76.8 69.8 151.6  103.7  
0906 Cinnamon and cinnamon 
tree-flowers  82.8 121.1  130.5  133.1  132.2  132.0  
0904 Pepper, fruit of the genus 
Capsicum/ Piment a 43.3 31.5 70.6 128.4  70.1 144.6  
0802 Other nuts, fresh or dried  2.2 2.5 3.4 16.8 64.7 69.9 
2008 Fruit, nuts and other edible 
parts of plants, otherwise 
prepared or preser ved 26.1 41.8 39.3 45.5 60.4 70.5 
1513 Coconut, palm kernel and 
babassu oil  7.3 7.7 10.0 17.2 58.4 120.6  
0907 Cloves, whole fruit, cloves 
and stems  37.4 35.4 18.3 49.2 13.9 47.0 
2403 Other manufactured tobacco 
and tobacco substitutes; 
tobacco extracts a nd 
essences  19.0 32.5 35.8 40.9 43.0 48.8 
2309 Preparations of a kind used 
in animal feeding  44.1 36.3 46.6 38.7 41.8 53.1 
2401 Unmanufactured tobacco; 
tobacco refuse  32.6 38.3 42.2 47.6 41.3 32.0 
3301 Essential oils  9.8 18.1 17.4 23.3 26.1 33.8 
a WTO definition.  
Source:  WTO calculations based on figures taken from the UNSD Comtrade database.  
Table 4.4 Imports of main agricultural products, 2010 -15 
(US$ million)  
HS code  2010  2011  2012  2013  2014  2015  
 Total imports  12,353.7  19,696.5  17,884.9  17,930.8  19,244.5  18,967.2  
 Total agricultural importsa 1,792.9  2,438.7  1,949.7  2,014.1  2,448.2  2,338.7  
   of which:        
1001 Wheat and meslin  236.5  448.9  327.9  324.2  370.9  330.6  
1701 Cane or beet sugar and 
chemica lly pure sucrose, in 
solid form  359.1  419.7  332.2  281.2  247.7  243.4  
0402 Milk and cream 
concentrated/containing 
sugar  247.4  329.9  290.8  277.2  324.7  234.0  
0713 Dried leguminous 
vegetables, shelled  179.9  184.0  126.4  155.6  176.9  231.0  
1006 Rice 59.7 18.4 24.2 17.8 281.8  131.9  
0703 Onions, shallots, garlic, 
leeks, etc., fresh or chilled  95.8 85.5 51.5 99.7 65.3 122.1  
1511 Palm oil and its fractions  68.1 160.6  67.2 81.3 123.0  110.7  
2304 Oil cake and other solid 
residues resulting from the 
extraction of soy bean oil  50.9 72.7 84.9 88.5 101.6  92.3 WT/TPR/S/ 347 • Sri Lanka  
 
- 75 - 
 
  HS code  2010  2011  2012  2013  2014  2015  
0904 Pepper, fruit of the genus 
Capsicum /Pimenta  44.4 82.6 38.3 49.4 62.2 78.0 
2401 Unmanufactured tobacco; 
tobacco refuse  30.9 45.7 65.6 56.4 65.2 77.6 
a  WTO definition.  
Source:  WTO calculations based on figures  taken from the UNSD Comtrade database.  
4.1.1.4   Tariffs and special levies  
4.9.  In 2007, Sri Lanka introduced a Special Commodity Levy on certain agricultural products 
upon importation. The Special Commodity Levy Act was enacted to encourage local industries.5  
4.10.   The lev y, when it is applied to a number of selected essential commodities, replaces all 
other import duties, taxes and levies on the commodities concerned. The Ministry of Finance has 
the authority to introduce, amend or remove the levy on particular commodities . In recent years, 
the list of commodities subject to the Levy has been revised from time to time based on demand 
and supply in the local market; the levy is typically applied on a selected group of agricultural 
commodities such as fish, potatoes, peas, oi ls, onions, and sugar, which are subject to the effect 
of seasonality (Table A4.1). The revenues increased substantially from Rs 10 billion in 2010 to 
Rs 52 billion in 2015 (Table 4.5). The increase in imported commodities has been the main reason 
for the increased revenue during the review period. However, as a percentage of government 
revenue, the revenue from the Special Commodity Levy has declined since 2014. The revenues 
collected from the levy are credited to the Consolidated Funds, which are used to finance part of 
the cost of purchasing agriculture products for distribution among the poor in the country.  
Table 4.5 Special Commodity Levy (SCL) revenues, 2010 -15 
 2010  2011  2012  2013  2014 2015  
Tax revenue (Rs million)  10,173  15,622  33,666  46,705  47,953  52,276  
Tax revenue as a % of GDP  0.2%  0.2%  0.4%  0.5%  0.5%  0.47%  
As a % of government 
revenues  .. .. 3.7%  5% 4.5%  3.6%  
Number of commodities subject 
to the SCL (at end of year)  15 30 31 36 37 39 
.. Not ava ilable.  
Source:  Ministry of Finance of Sri Lanka online information. Viewed at: 
http://www.treasury.gov.lk/images/depts/fpd/docs/reports/annualr eport/2013/chapters/Chapter5.p
df, http://www.treasury.gov.lk/reports/annualreport/2012/5 -FiscalDevelopments.pdf , and 
http://www.treasury.gov.lk/images/depts/fpd/docs/reports/annualreport/2014/full/annualReport -
2014E.pdf ; and information provided by the authorities.  
4.11.   During the review period, Sri La nka occasionally waived the import duties on certain 
agricultural products with a view to maintaining the cost of living. These include milk powder, 
wheat grains, cashew nuts, meat, fish, maize, malt extract, and milk.6 
4.12.   In 2016, applied tariffs on agricult ural products (WTO definition) average about 25.3% with 
the highest tariffs on HS section 4, prepared foods ( Section 3.1.4). Many agricultural products 
have specific duties or combined duties, e.g. tobacco products , resulting in very high ad valorem  
equiva lents. For a number of agricultural products, applied MFN rates exceed the corresponding 
bound rates, the highest applied MFN rate being 1,225% ( ad valorem  equivalent of a specific duty) 
on cigars (Table A3.1).  
4.13.   Sri Lanka applies an export cess on its major  export -earning crops, i.e. tea, rubber, and 
coconut; and also on a number of other products pursuant to the Export Development Board 
                                                
5 Special Commodity Levy Act No. 48 of 2007. Viewed at: 
http://www.documents.gov.lk/Acts/2007/Special%20 Commodity%20Levy%20 -
%20Act%20No.%2048/Act%2048E.pdf . 
6 For milk powder, 23 July 2015, http://www.customs.gov.lk/tariff/ wai150723.pdf ; wheat grain, 
30 January 2015, http://www.customs.gov.lk/tariff/wheat2015i.pdf ; milk powder, 3 February 2014, 
http://www.customs.gov.lk/tariff/milk140203.pdf ; and information provided by the authorities.  WT/TPR/S/ 347 • Sri Lanka  
 
- 76 - 
 
  (EDB) Act  (Section 3.2. 2). The amount of revenues from the cess is proportional to the value of 
exports; thus tea generate s the highest export cess revenues (Table 4.6). The export cess is 
refunded by the EDB in certain circumstances and channelled back to the industry.  
Table 4.6 Export cess revenue, by major crop, 2010 -15 
(Rs million) 
 2010  2011  2012  2013  2014  2015a 
Tea – under Tea (Tax and Control of Export) 
Act, and Sri Lanka Tea Board Act 1,194  690 737 747 700 640 
Rubber  – under Rubber Replanting Subsidy 
Act 215 58 30 50 33 12 
Coconut  – under Coconut Development Act  180 119 119 100 121 127 
EDB Cess – under Sri Lanka Export 
Development Board Act 141 1,918  2,254  2,175  2,230  1,934  
 Total export cess  1,730  2,785  3,140  3,087  3,085  2,713  
a Provisional.  
Source:  Ministry of Finance online information. Viewed at: 
http://www.treasury.gov.lk/images/depts/fpd/docs/reports/annualreport/2014/full/annualReport -
2014E.pdf , and http://www.treasury.gov.lk/documents/10181/12870/2011/cb78179a -fa8f-4ef6-
89ef-4cbcfb95125f?version=1.1 ; and information provided by the authorities.  
4.14.   Sri Lanka does not have any tariff -rate quotas (TRQs) bound in its WTO schedule of 
concessions, nor does it apply any global TRQs. However, it maintains TRQs on rice under the 
Pakistan –Sri Lanka FTA.  
4.1.1.5   Legal and institutional framework  
4.15.   There are a number of laws that form the basic legal fra mework for the agricultural sector 
(Table 4.7). These have not undergone any major revision during the review period.  
Table 4.7 Main agricultural laws, 2016  
Law Reference  Overview  Viewed at:  
Soil Conservation  
Act Act No. 24 of 
1996 For the enhancement and productive 
capacity of the soil and to prevent erosion 
and damage from floods  
 
Action has been initiated to repeal the Act 
and bring forward a new act to remove 
existing deficiencies; a draft of the new 
act has been submitted to the Ministry of 
Agriculture for obtaining cabinet approval  
 Department of 
Agriculture. Viewed at: 
http://www.doa.gov.lk /im
ages/stories/site/PDF/Act
s/soil%20conservation%2
0act%20no.24%20of%20
1996.pdf  
Plant Protection 
Act Act No. 35 of 
1999 To make provisions against the 
introduction and the spreading of any 
organism harmful to or destructive of 
plants, and for the sanitat ion of plants  
 
Action has been taken to update and 
implement a new set of regulations under 
the Act. At present, the Department of 
Agriculture is preparing a list of quarantine 
pests of concern to Sri Lanka to be 
declared under the Act  FAOLEX. Viewed at: 
http://faolex.fao.org/docs
/pdf/srl37310.pdf  
Seed Act  Act No. 22 of 
2003 To regulate the quality of seed and 
planting materials  Department of 
Agriculture. Viewed at: 
http://www.doa.gov.lk/im
ages/stories/site/PDF/Act
s/seed%20act.pdf  WT/TPR/S/ 347 • Sri Lanka  
 
- 77 - 
 
  Law Reference  Overview  Viewed at:  
Control of 
Pesticide s Act Act No. 33 of 
1980, Act No. 6 
of 1994  To regulate the import, packing, labelling, 
storage, transport, sale and u se of 
pesticides  Department of 
Agriculture. Viewed at: 
http://www.doa.gov.lk/im
ages/stories/site/PDF/Act
s/control%20of%20pestic
ides%20act%20no.%203
3%20of%201980.pdf  
Fertilizer Act  Act No. 68 of 
1988 To regulate the importation, formulation 
and distribution of fertilizer  FAOLEX. Viewed at: 
http://faolex.fao.org/cgi -
bin/faolex.exe?database=
faolex&search_type=quer
y&table=result&query=LE
X-
FAOC028846&format_na
me=@ERALL&lang=eng  
Export 
Agriculture 
Development Act  Act No. 46 of 
1992 Regist ration of persons engaged in the 
processing, sale and transport of 
agricultural crops  FAOLEX. Viewed at: 
http:// faolex.fao.org/cgi -
bin/faolex.exe?rec_id=02
3080&database=faolex&s
earch_type=link&table=r
esult&lang=eng&format_
name=@ERALL  
Agrarian 
Development Act  Act No. 46 of 
2000 For matters relating to landlords and 
tenant cultivators of paddy lands, for the 
utiliza tion of agricultural lands in 
accordance with agricultural policies, and 
for the establishment of agrarian 
development councils  Department of 
Government Printing . 
Viewed at: 
http://documents.gov. lk/
actspg/act2011 -2.html  
Source:  Compiled by the WTO Secretariat from the laws indicated . 
4.1.1.6   Domestic support  
4.16.   Sri Lanka has numerous domestic support programmes for agriculture, including subsidies 
on main export crops. The main support programme remains th e fertilizer subsidy programme, 
which benefits all crop subsectors (Table 4.8). There are also a number of specific domestic 
support programmes accorded to specific products (Table 4.9). Other programmes that provide 
support to the agricultural sector incl ude the New Comprehensive Rural Credit Scheme (NCRCS), 
the Supplementary Food Crop Promotion Programme, and the Commercial Farm Programme.  
Table 4.8 Agricultural subsidies, 2010 -15 
(Rs million)  
 2010  2011  2012 2013  2014  2015  
Subsidies for agriculture  
Fertilizer subsidy  23,028  29,802  36,456  19,706  31,858  49,570 
Interest subsidy for agricultural 
loans 683 750 172 282 178 .. 
Paddy purchasing  1,805  1,629  1,440  1,789  228 .. 
Subsidy for commercial crops develop ment: 
Tea 190 171 182 272 331 7,224  
Rubber  370 484 435 587 763 2,871  
Coconut  269 293 353 403 485 471 
Cashew  24 28 27 49 40 35 
Minor crops (cinnamon, cocoa, 
coffee, pepper , etc.) 180 220 184 254 254 318 
.. Not available.  
Source:  Ministry of Finance on line information. Viewed at: 
http://www.treasury.gov.lk/images/depts/fpd/docs/reports/annualreport/2014/full/annualReport -
2014E.pdf ; and information provided by the authorities.  
4.17.   Sri Lanka made two notifications on domestic support to the WTO Committee on Agriculture 
during the review period.7 Both notifications classify research expenditures and training services as 
                                                
7 WTO documents G/AG/N/LKA/3, G/AG/N/LKA/4, and G/AG/N/LKA/4/Corr.1.  WT/TPR/S/ 347 • Sri Lanka  
 
- 78 - 
 
  "green box" measures, an d investment subsid ies and the fertilizer subsidy as special and 
differential treatment " development programmes".  
4.1.1.6.1   Fertilizer subsidy  
4.18.   Sri Lanka has had subsidized fertilizer for its farmers for more than four decades through 
the National Fertilizer Subsidy Scheme; the subsidy has been one of the country's key agricultural 
policies. The fertilizer subsidy has grown , as has its  share of the federal budget and GDP, 
representing 2% of total government recurrent expenditures in 2014.8 
4.19.   The fertilizer subsidy has t raditionally been provided to paddy farmers in order to improve 
agricultural sector growth, reach self -sufficiency, reduce the costs of production, and obtain the 
desired level of soil conservation. Since 2005, the three main fertilizers used in paddy prod uction 
(urea, TSP, and MOP) have been made available at a subsidized price of Rs 350 per 50 kg bag, in 
straight form. In 2011, the Government made the fertilizer subsidy available to all crops.  
4.20.   The two state -owned fertilizer companies, Ceylon Fertilizer Co mpany and Colombo 
Commercial Fertilizer Company, play an important role in the fertilizer subsidy scheme as 
importers, blenders, and distributors of fertilizer ( Section 4.1.1.10. 5). Nonetheless, during  the 
period  2011-13, the two state -owned fertilizer com panies accounted for around 10% of the total 
sales in the domestic fertilizer market, as the private sector was the major supplier. In 2014, the 
Government decided to increase the market share of the state companies to 40% in the provision 
of fertilizer fo r "other crops".9 The state -owned Lanka Phosphate Limited (LPL) also has a role in 
the excavating, processing, and supply of phosphates used as inputs for fertilizers.  
4.21.   The fertilizer subsidy generally rose during the period 2010 -15, although there was a 
significantly lower level in 2013 and a large increase in 2015 (Table 4.8). The authorities attribute 
it to the changes in the way the subsidy has been provided to farmers.  
Table 4.9 Specific domestic support programmes, 2015  
Crop  Support  Ministry  Overall 
spending 
2015  Reference  
Tea Rs 400,000 for new tea planting 
(per hectare)  Ministry of Plantation 
Industries  Rs 127.42  
million  1, 4 
Tea Rs 500,000 for tea re -planting 
(per hectare)  Ministry of Plantation 
Indust ries Rs 16 million 
(2014)  1, 3, 4  
Rubber  Rs 150,000 for new rubber 
planting (per hectare)  Ministry of Plantation 
Industries  Rs 2.79 million  1 
Rubber  Rs 175,000 for rubber re -planting 
(per hectare)  Ministry of Plantation 
Industries  Rs 7.82 million  1, 3 
Tea Rs 25 per tea plant for infilling  Ministry of Plantation 
Industries  .. 1 
Tea Rs 5,000 per acre for soil and 
water conservation for 
productivity improvement of tea 
small holdings  Ministry of Plantation 
Industries  Rs 325 million  1, 3 
Tea Subsidy for guaranteed prices, 
Rs 80 per kg of green leaves  Sri Lanka Tea Board  Rs 6,674 
million  2 
Rubber  Subsidy for guaranteed prices, 
Rs 300-350 per kg  Department of Rubber 
Development  Rs 2,049 
million  2, 4 
Paddy  Guaranteed prices for paddy 
purchasing, Rs 45-50 per kg Paddy Marketing Board  Rs 9.9 billiona 2, 4 
Tea Modernization of tea factories  Tea Shakthi Fund  Rs 100 million  3 
Tea 50 kg sack of mixed fertilizer is 
Rs 1,300 and a 50 kg sack of 
unmixed fertilizer is Rs 1,200 
under the National Fertilizer 
Subsidy Programme  .. Rs 5 billion  1, 3 
                                                
8 Ministry of Finance of Sri Lanka online information. V iewed at: http://www.treasury.gov.lk/documents/ 
10181/12870/2014/23cd697c -85b6-4ad6-8ba3-2a007be8b56e?version=1.0 . 
9 Ceylon Fertilizer Company  (2014).  WT/TPR/S/ 347 • Sri Lanka  
 
- 79 - 
 
  Crop  Support  Ministry  Overall 
spending 
2015  Reference  
Rubber  50 kg sack of mixed fertilizer is 
Rs 1,300 and a 50 kg sack of 
unmixed fertilizer is Rs 1,200 
under the National Fertilizer 
Subsidy Programme  .. Rs 5 billion  3 
EAC ( export 
agricultural 
crops)b New planting and replan ting of 
EAC. Cash grant ranging from 
Rs 5,000 to Rs 40,000 per 
hectare after 2 -3 years successful 
completion and certified planting 
material provided free of charge  Department of Export 
Agriculture  Rs 252.7 
million  5 
EAC 
(cinnamon , 
pepper, 
coffee, 
cocoa, 
cardamom , 
clove, 
nutmeg)  Productivity improvement 
program me provides planting 
material free of charge and 
fertilizer or a financial reward 
ranging from Rs 6,000 to 
Rs 15,000 per hectare  Department of Export 
Agriculture  Rs 53.97 
million  6 
EAC Post-harvest assistance scheme 
provides three schemes 
depending on the type of 
processing centre establishment. 
Provides cash grants, free loans, 
or investment costs for 
processing equipment. Cash 
grants vary significantly 
depending on the crop processed 
and type of eq uipment  Department of Export 
Agriculture  Rs 11.3 million  7 
.. Not available.  
a Budgeted amount.  
b Includes: cinnamon, pepper, coffee, cocoa, cardamom, clove, nutmeg, vanilla, lemongrass and 
citronella.  
1 Ministry of Plantation Industries online informatio n. Viewed at: 
http://www.plantationindustries.gov.lk/web/images/pdf/publications/part_1_english_progress_repor
t.pdf. 
2 Ministry of Plantat ion Industries online information. Viewed at: 
http://www.plantationindustries.gov.lk/web/images/pdf/publications/part_1_english_progress_re por
t.pdf. 
3 Ministry of Plantation Industries online information. Viewed at: 
http://www.plantationindustries.gov.lk/web/images/pdf/publica tion/part_2_english_progress_report.
pdf. 
4 Ministry of Finance  online information. Viewed at: 
http://www.treasury.gov.lk/images/depts/fpd /docs/reports/annualreport/2014/full/annualReport -
2014E.pdf . 
5 Department of Export Agriculture online information. Viewed at: 
http://w ww.exportagridept.gov.lk/web/index.php?option=com_content&view=article&id=91&Itemid 
=132&lang=en . 
6 Department of Export Agriculture online information. Viewed at: 
http://www.exportagridept.gov.lk/web/index.php?option=com_content&view=article&id=92&Itemid
133&lang=en . 
7 Department of Export Agriculture online information. Viewed at: 
http://www.exportagridept.gov.lk/web/index.php?option=com_content&view=article&id=93&Itemid
=134&lang=en . 
Source:  Compiled from various sources listed in the reference column.  
4.1.1.7   Financing  
4.22.   Sri Lanka  has two main agricultur al insurance schemes: the Farmers' Trust Fund and the 
Agricultural and Agrarian Insurance Board (AIB). The AIB, operating pursuant to the Agricultural 
Insurance Act No. 27 of 1973, is mainly involved in issuing insurance schemes to reduce the risks WT/TPR/S/ 347 • Sri Lanka  
 
- 80 - 
 
  for local agriculture; these include crop insurance, livestock insurance, and agricultural equipment 
insurance. Crop insurance takes three forms: crop insurance under the fertilizer subsidy, loans by 
the Government and commercial banks, an d cultivation carried out under direct investment.10 
Underwriting activities and computation and payment of compensation are the major functions of 
the Insurance Board. Taking out insurance is a pre -condition for obtaining loans; this allows banks 
to take o n riskier agricultural investments. If the agricultural investment fails due to a risk, the AIB 
pays compensation to the bank and reduces the investors' liability. Agricultural loans enjoy 
preferential rates, and there is condition for banks under the Cent ral Bank to complete a 
compulsory quota of lending to agricultural entities. In addition to crop insurance, the Insurance 
Board implements a social insurance and a pension scheme for farmers. In some years, the 
Government provides a grant to cover operatin g expenses.  
4.23.   The Farmers' Trust Fund, established in 1994 to empower small -scale farmers, is 
particularly aimed at : agricultural development and the welfare of small -scale farmers t hrough 
access to  credit facilities ; input supply ; providing  relief from farm  indebtedness ; grant ing credit to 
improve marketing facilities ; improving  technological  awareness through communication projects ; 
assist ing in agro -processing ; and launch ing special agricultural projects. The main income for this 
fund comes from the Nation al Lottery Board; about 10% of the lottery income is diverted to this 
fund through the state consolidated fund/treasury. In addition to that, the Farmers' Trust Fund has 
fixed deposits, treasury bills, and interest gained against credit facilities granted to small farmers. 
Farmers have to submit project proposals through agricultur al authorities to the Secretary to the 
Ministry of Agriculture for evaluation and approval.  
4.1.1.8   Export subsidies  
4.24.    In 2015, Sri Lanka notified the WTO Committee on Agriculture that it did not grant or 
maintain any export subsidies within the meaning of the WTO Agreement on Agriculture for the 
period 1998 -2014.11 
4.1.1.9   Key subsectors  
4.1.1.9.1   Tea 
4.25.   Sri Lanka is one of the world's leading exporters of tea, which has been the backbone of the 
Sri Lankan econ omy for decades as it contributes to foreign exchange earnings, employment, and 
prosperity for the country. Most tea grown in Sri  Lanka is black tea; it is grown on both large 
plantations and small -holder estates. The majority of tea is grown by the privat e sector since 
privatization of the plantations in the 1990s.  
4.26.   The tea sector generally gr ew over the review period, with growth in production and 
exports. The industry experienced an impressive year in 2014 with the highest ever earnings from 
tea exports, at US$1.63 billion, though there was a marginal decline in production recorded at 
338,000 kg. In 2015, the sector faced many challenges in major markets such as the Middle East, 
the Russian Federation, and Ukraine. The revenue generated in 2015 declined to  US$1.43 billion. 
Total exports of 307,000 kg in 2015 showed a decrease from the previous year.  
4.27.   The Sri Lanka Tea Board was established on 1 January 1976, under the Sri Lanka Tea Board 
Act No. 14 of 1975; the Act has been amended by Act s No. 17 of 1985, No . 44 of 1990, No. 29 of 
2003, and No. 44 of 2006. The objectives of the Board are development of the tea industry in 
Sri Lanka and promotion of Sri Lanka Tea (Ceylon Tea) globally. It is the authority responsible for 
regulating the activities of the tea in dustry, including production, cultivating new areas and 
replanting, rehabilitating old gardens, and the establishment of factories and their operation. It 
also regulates the conduct of auctions, monitors quality standards and regulates sales, engages in 
export brokerage, and directs and controls institutions and organizations in the management of tea 
estates, warehousing and shipping of tea.  
                                                
10 AIB online information.  Viewed at: www.aib.gov.lk . 
11 WTO document G/AG/N/LKA/5.  WT/TPR/S/ 347 • Sri Lanka  
 
- 81 - 
 
  4.1.1.10   State agricultural entities and agricultural marketing boards  
4.28.   As a part of the Government, or as state -owned companie s, a number of agricultural 
entities or marketing boards exist in many agricultural sub sectors. A number of such entities or 
boards are involved in distribution or marketing of agricultural products, both domestically and 
internationally. In addition to th e entities and boards specified in this section, there are the 
Sri Lanka Tea Board ( Section 4.1.1.9 .1), Sri Lanka Poultry Development Company, Galoya 
Plantation Co. Ltd., Sugarcane Research Institute, Food Promotion Board, Colombo Commercial 
Fertilizer Com pany, and Hingurana Sugar Co. Ltd.  
4.1.1.10.1   National Livestock Development Board (NLDB)  
4.29.   Established in 1973 , pursuant to the State Agricultural Corporation Act No. 11 of 1972, the 
National Livestock Development Board is mainly concerned with producing quality breed ing stocks 
and livestock and agricultural products (mainly coconut), to improve socio -economic standards.12 
The NLDB is the largest government organization in Sri Lanka, which aims to provide quality 
breeding materials, mainly dairy cattle, goat, sheep, swi ne and day -old chicks to local farmers at 
affordable prices with the objective of making the country self -sufficient in livestock and dairy 
products. For this purpose, the Board maintains pure breeding stocks that are imported from other 
countries in order  to maintain certain production outputs. T he NLDB maintains around 
10,400  acres of coconut plantations and produces 20 million nuts annually.  
4.1.1.10.2   Milco  
4.30.   Milco, originally established in 1956 as the National Milk Board, under the Ministry of 
Agriculture, was tra nsformed  into a state -owned company in 2000.13 It aims to strengthen the 
local dairy industry by helping it reach certain target s for the  production of fresh milk. It is 
involved in the production, distribution, and marketing of milk and milk products. Milc o collects 
about 35% of milk collected by all processors. It holds a 40% share of the yoghurt market, 15% of 
the ice cream  market , 70% of the bottled sterilized milk  market , 30% of the liquid milk  market , 
and 8% of the powdered milk  market . Milco does not import dairy products; it exports them 
occasionally.  
4.1.1.10.3   Paddy Marketing Board  
4.31.   The Paddy Marketing Board (PMB), under the Ministry of Rural Economic Affairs and 
established pursuant to the PMB Act No. 14 of 1971, is involved in the purchasing, processing, 
selling, supplying, and distribution of paddy and rice.14 It purchases paddy from farmers at 
guaranteed prices to maintain a higher market price for paddy during the harvesting season with 
the aim of  enhanc ing the livelihood of farmers. In addition, it sells st ored paddy to rice millers 
during the off-season to maintain a reasonable price for rice in the market for consumers. Further, 
the Paddy Marketing Board processes rice and sells it to consumers through Lanka Sathosa sales 
outlet s at reasonable prices. It a lso maintains a buffer stock for food security reasons. The security 
stock is replace d with newly harvested paddy every season. The guaranteed price and the quantity 
purchased during the review period fluctuated significantly. Guaranteed prices ranged from  Rs 28 
to Rs 50/kg, and purchase quantities ranged from 3,479 to 175,267 mt. In 2015 and the first half 
of 2016, the highest prices were paid and the largest quantities were purchased.  
4.1.1.10.4   Sri Lanka Cashew Corporation  
4.32.   The Sri Lanka Cashew Corporation was estab lished in 1973 , pursuant to the State 
Agricultural Corporation Act No. 11 of 1972, to undertake the activities pertaining to cashew  
cultivation, processing , value addition, and marketing , as well as research on cashew and cashew 
products. It provides many services to the sector, such as implementing a subsidy scheme for 
growers introducing new varieties, assisting in pest and disease control, introducing fertilizer 
mixtures and other agronomic techniques for growers, processing technology and machinery 
development, b y-product processing development, providing import and export facilities for 
processors, and entrepreneurship development training  for exporters.  
                                                
12 NLDB online information.  Viewed at: http://www.nldb.gov.lk/service.html . 
13 Milco online information. Viewed  at: www.milco.lk . 
14 PMB online information. Viewed at:  www.pmb.gov.lk . WT/TPR/S/ 347 • Sri Lanka  
 
- 82 - 
 
  4.33.   The Cashew Corporation has its own plantations and seed gardens to provide high quality 
planting mat erial to growers. It operates cashew processing centres to produce high -quality 
value -added products to market at its own sales outlets and franchise shops. The Cashew 
Corporation provides opportunities for processors and exporters to import raw cashews fo r 
processing, value addition, and re -export.  
4.1.1.10.5   Ceylon Fertilizer Company  
4.34.   The Ceylon Fertilizer Company operates under the Ministry of Agriculture as a state -owned 
company for the importation, mixing, marketing, and distribution of fertilizer in Sri Lanka.15 The 
company has a well distributed dealer network across the country and its stores are available at 
district level. Prices for fertilizer are set by the Government ( Section 4.1.1.6. 1). While it has an 
established network, there are 13 other fertilizer comp anies operating in importation, storage, 
processing and distribution.  
4.1.1.11   Lanka Sugar Company Limited  
4.35.   Following  the nationalization of the sugar industry in 2014 , pursuant to the Underperforming 
Enterprises and Underutilized Assets Act No. 43 of 2011, the Gove rnment created the Lanka Sugar 
Company Limited under the Ministry of Plantation Industries to expand the sugar sector towards 
self-sufficiency.16 The mission of the company involves achieving certain targets of production, 
employment, profitability, foreign  exchange, and support to farmers.17 In 2015, a 12% 
concessionary income tax rate was granted to the sugar industry by the Government.18 
4.1.2   Fisheries  
4.36.   The fishing sector is considered important to the economy and well -being of Sri Lanka as it 
provides a liveliho od for many coastal communities and is a major source of animal protein for 
much of its population. Sri Lanka's fish sector can be divided into two subsectors : marine (both 
coastal and offshore) and inland freshwater (including aquaculture)  fishing. The se ctor is 
dominated by small -scale fishermen operating small motorized craft. Coastal fishing dominates as 
the main type of fishing, as offshore and inland fishing have remained relatively static in recent 
years.  
4.1.2.1   Production and trade  
4.37.   Sri Lanka saw significan t growth in the fishing sector during the review period, with the 
annual growth rate averaging 10%. It maintained a positive trade balance in fish until 2015, when 
exports declined and imports increased, thus leading to the negative trade balance for the y ear 
(Table  4.10).  
Table 4.10 Fish production and trade, 2010 -15 
  2010  2011  2012  2013  2014  2015  
Total fish production (metric tons)  384,670  444,830  486,170  512,840  535,050  520,190  
Annual growth rate (%)  13.2 15.6 9.3 5.5 4.3 -2.8 
 (of total production)  
Total marine  86.4 86.6 85.8 87.0 85.8 87.1 
Offshore/deep sea  33.8 36.6 32.8 34.7 33.7 35.3 
Coastal  52.6 50.0 53.0 52.3 52.1 51.7 
Inland and aquaculture  13.6 13.4 14.2 13.0 14.2 12.9 
Inland capture  11.5 11.3 12.1 10.7 12.9 11.0 
                                                
15 Ceylon Fertilizer Company online information. Viewed at: http:// www.lakpohora.lk/web/ . 
16 IHS online information. Viewed at: https://www.ihs.com/country -industry -
forecasting.html?ID=1065989237 . 
17 Lanka Sugar Company Limited online infor mation. Viewed at: 
http://www.lankasugar.lk/index.php/about -us/our -objectives . 
18 Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/English/13_PolicyBox.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 83 - 
 
    2010  2011  2012  2013  2014  2015  
Inland culture  1.2 1.2 1.4 1.5 0.3 0.6 
Shrimp farms  0.9 0.9 0.7 0.9 1.0 1.4 
Memorandum:        
Total fish exports (US$ million)a 175.4  197.9  206.6  246.3  266.5  181.9  
Total fish imports (US$ million)a 125.3  146.9  136.4 163.6  144.5  226.2  
a WTO definition.  
Source:  WTO calculations based on data provided by authorities and UNSD Comtrade database.  
4.1.2.2   Legal and regulatory framework  
4.38.   There have been two main developments in the legal framework for the fish sector during 
the review period; t hese include the Fisheries and Aquatic Resources (Amendment) Act No. 35 of 
2013 and the Fisheries and Aquatic Resources (Amendment ) Act No. 2 of 2015. The first was 
introduced to incorporate international obligations and the second to increase the sanction s under 
the Act . 
4.39.   The Ministry of Fisheries and Aquatic Resources Development is the main regulator for the 
sector; it produced a "Fisheries Sector Development Strategy" for the period 2010 -13 that focused 
on the following elements: fish production enhancem ent; fisheries social community development; 
fishery inputs; training and extension; research, development and capacity building; infrastructure 
development; fish marketing; trade and investment; resources conservation; and fisheries 
development in the Nor thern Province.19 The authorities expect that a new policy for the sector will 
be published in 2017.  
4.40.   In the event of the introduction of new technologies in large -scale fisheries for the high 
seas, it is expected that they will be given financial and techni cal assistance.  
4.1.2.3   Structure  
4.41.   There are 15 fisheries harbours in operation around Sri Lanka's coastline. In addition to 
marine resources, it has extensive freshwater and brackish water resources to sustain fishing.  
4.42.   There are a number of government entities inv olved in the sector (Table 4.11).  
Table 4.11 Government entities in the fish sector, 2016  
Entity  Role 
Ceylon Fisheries Corporation (CFC)  Purchasing and sale of fish, price stabilization, 
distribution, provisi on and maintenance of cold 
storage facilities, and production and sale of fishery 
by-products  
 
Ceylon Fishery Harbours Corporation (CFHC)  Maintain ing fisheries infrastructure facilities such as 
landing facilities, and maintenance and management 
of harbour s and anchorages  
 
National Aquatic Resources Research and 
Development Agency (NARA)  Conduct ing research and conservation activities on all 
living and non -living aquatic resources in Sri Lanka  
 
National Aquaculture Development Authority (NAQDA)  Developmen t and management of all freshwater 
aquatic resources including aquaculture and sea 
farming  
 
Department of Fisheries and Aquatic Resources 
(DFAR)  Management, regulation, conservation and 
development of fisheries and aquatic resources  
 
                                                
19 Ministry of Fisheries and Aquatic Resources Development online information. Viewed a t: 
http://www.fisheries.gov.lk/doc_files/130625062842.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 84 - 
 
  Entity  Role 
Cey-Nor Foundation L imited  Building, manufacturing and selling of fishing crafts, 
engines, and gear 
Source:  Ministry of Fisheries and Aquatic Resources Development online information. Viewed at: 
www.fisheries.gov.lk . 
4.2  Mining and ene rgy 
4.2.1   Mining  
4.43.   Sri Lanka has a variety of mineral resources including its high purity graphite and mineral 
sands; many of them are exported. Mineral resources produced in Sri Lanka include both industrial 
and precious minerals, e.g. calcite, clay, dolomite, fe ldspar, gems, graphite, ilmenite, kaolin, 
limestone, mica, mineral sands (ilmenite, rutile, and zircon), phosphate rock, quartzite, and salt.20 
The Government has a significant role in the sector as producer through SOEs, licensor of mines 
and mining, and in the control of exports.  
4.44.   The gemstone mining subsector (e.g. sapphires, spinel, garnet, tourmaline, topaz, beryl, 
and chrysoberyl) has been a traditional industry in Sri Lanka, and is an important contributor to 
the economy through exports in particular.  There are about 12,500 gem mines in operation, and 
about 40,000 gem miners employed in the industry. Over 6,500 gem mining licen ces were issued 
in 2015.21 Gem mining has been centred around the Ratnapura District in Sabaragamuwa Province 
for several decade s, mainly as small -scale mines. According to the authorities, the Government 
policy for the sector discourages mechanical mining and encourages traditional mining to sustain 
better prices , resulting in higher quality gemstones and relatively lesser output.  
4.2.1.1   Developments  
4.45.   The mining sector did not undergo any significant changes in its legal framework during the 
review period. However, there have been a number of developments impacting the sector. The 
Government introduced a temporary ban on the export of scra p metal in 2010 with the objective 
of ensuring a sufficient supply for its own small industries, as the country does not produce these 
metals.22 The ban impacted aluminium, brass, bronze, copper, cast iron, special iron, and lead. In 
2013, the Government pr ohibited new foreign investment in steelmaking and cement 
manufacturing, including their retail trade.23 
4.46.   In 2015, Sri Lanka prohibited foreign firms from mining gems in the country.24 As a result, 
the licen ces of 16 foreign firms operating in the gem mining sector were cancelled.25 The ban 
applies to foreign companies, companies with foreign partnerships, companies with foreign 
investment, and foreign individuals. In addition, for raw mineral sands, the Government decided 
not to issue export licen ces so as to utilize the products in downstream industries in Sri Lanka, 
thus encouraging value addition.  
4.47.   Also in 2015, the Ministry of Mahaweli Development and Environment and the Geological 
Survey and Mines Bureau (GSMB) issued a circular to prevent illegal soil mini ng and the misuse of 
licences. Thus, pursuant to Environment Circular 02/2015, licences for non -commercial purposes 
would be issued for only up to 35 cubes of soil and gravel min ing. For mining of more than 
                                                
20 Sri Lanka Export Development Board online information. Viewed at: 
http://www.srilankabusiness.com/ceramic -and-porcelain/industrial -minerals -in-sri-lanka.html ; and USGS, 
2013 Minerals Yearbook: The Mineral Industry of Sri Lanka . 
21 Sri Lanka Export Development Board online information. Viewed at: 
http://www.srilankabusiness.com/blog/gem_industry.html . 
22 USGS, 2010 Minerals Yearbook : The Mineral Industry of Sri Lanka . 
23 The Straits Times , "Sri Lanka bans f oreign investments in steel, cement ", 13 June 2013.  Viewed at: 
http://www.straitstimes.com/business/sri -lanka -bans-foreign -investments -in-steel-cement .  
24 President of Sri Lanka online information. Viewed at: http://www.president.gov.lk/news/will -not-
allow-foreign -comp anies-to-enter-into-gem-mining -industry -in-sri-lanka -president/ . 
25 Sri Lanka Export Development Board online information. Viewed at: 
http://www.srilankabusiness.com/blog/gem_industry.ht ml. WT/TPR/S/ 347 • Sri Lanka  
 
- 85 - 
 
  35 cubes, further decisions on issuing the licenc e would need to be taken by a number of other 
authorities.26 
4.48.   Also during the review period, there was the introduction of welfare schemes and insurance 
policies by the National Gem and Jewellery Authority (NGJA). Compensation in times of accidental 
death was also introduced.  
4.2.1.2   Legal and regulatory framework  
4.49.   Mining in Sri Lanka is governed by the Mines and Minerals Act No. 33 of 1992 , which 
provides the main framework for mining and establishes the GSMB; it however specifically 
excludes gems and petroleum minin g. The GSMB is responsible for issuing mining licences as well 
as for geological mapping and mineral exploration, mining titles and mining regulation, mineral 
resource surveys, laboratory services, geophysical and drilling contracts, and geo -science 
inform ation. Pursuant to the Mines and Minerals Act, there are four main types of licence  for 
mining and related issues: exploration, mining, trading, and transport. The GSMB also issues 
licences  to export the resulting minerals. Mining licences  come in three fo rms: artisanal, for mining 
in small areas and without machinery; industrial, for larger areas whereby certain machinery and 
methods are authorized; and reserved, requiring special authority from the Minister. Trading 
licences  are also issued in three forms  depending on the type of trading, i.e. for export, for local 
consumption, or for bricks and lime produced manually.  
4.50.   Based on the statistics of mining licences issued by the GSMB, there is a general increase in 
mining activity in Sri Lanka. There are gener ally more artisanal mining licences issued each year, 
reflecting the preference for small -scale manual mining. In recent years there has been a general 
decline in the issuance of trading licences, in part to encourage value  addition in Sri Lanka. There 
are large volumes of transport licences issued each year as all exploration, mining, and trading 
licences  require transport licences  to transport mineral -bearing substances or minerals. For trading 
licences, the vast majority are issued for local trading and only about 10 -20 per year are to trade 
in minerals for export (Table  4.12).  
Table 4.12 Mining licences  issued, 2010 -15 
 2010  2011  2012  2013  2014  2015  
GSMB licences        
Exploration licences  9 21 18 .. .. .. 
Artisanal mining licences  3,766  4,339  4,781  .. .. .. 
Industrial mining licences  2,570  2,941  3,091  .. .. .. 
Trading licences  944 881 763 .. .. .. 
Transport licences  279,214  374,039  370,466  .. .. .. 
Export licences  601 582 492 .. .. .. 
NGJA licences        
Gem mining licences  4,061  4,687  5,956  6,565  5,928  5,151  
Gem dealer licences  4,195  4,422  4,382  4,429  4,714  4,619  
Gem lapidary licences  168 179 177 192 199 204 
Gem auction licences  262 277 365 624 578 543 
.. Not available.  
Source:  GSMB , Annual Repo rt 2012 . Viewed at: 
https://www.parliament.lk/uploads/documents/paperspresented/annual_report_geological_survey_a
nd_mines_b ureau_2012.pdf ; and GSMB , Annual Report 2011 . Viewed at: 
https://www.parliament.lk/uploads/documents/paperspresented/annua l_report_geological_survey_a
nd_mines_bureau_2011.pdf . 
4.51.   The National Gem and Jewellery Authority Act No. 50 of 1993 created the NGJA to develop, 
regulate, and promote the Sri Lankan gem and jewellery industry. Its regulatory role stems from 
Section 15 of th e Act where it is vested with the power to issue gem mining licences  and has 
overall responsibility for the gem subsector. It issues licences  to mine as well as for dealers who 
wish to export gems; and operates a gem testing laboratory and a jewellery test ing laboratory. 
                                                
26 Ministry of Mahaweli Development and Environment online information. Viewed at: 
http://www.environmentmin.gov.lk/web/index.php?op tion=com_content&view=article&id=248&Itemid=326&la
ng=en . WT/TPR/S/ 347 • Sri Lanka  
 
- 86 - 
 
  It also has a role in the import of rough diamond stock, for which an official licence  is necessary in 
order to import or re -export. This is in accordance with the Kimberley Process, as the NGJA is the 
nominated authorized body in Sri Lanka . 
4.52.   The State also participates in the sector through a number of state -owned enterprises for 
the production of minerals, e.g. Lanka Mineral Sands Co. Ltd., Lanka Phosphate Co. Ltd., Sri  Lanka 
Cement Corp. (SLCC) and its subsidiary Lanka Cement Plc., Kahatag aha Graphite Lanka Ltd ., and 
Lanka Salt Ltd. For these operations, the Government has exclusive rights to mine these minerals.  
4.2.1.3   Incentives  
4.53.   Sri Lanka's gem industry includes downstream cutting, polishing and processing of gems 
before turning them into finish ed goods, i.e. jewellery for export. For industrial minerals, there is 
the processing of clay, quartz, silica, and feldspar in the ceramics and glassware industries. The 
Government aims to encourage value  added in the sector by the use of measures on expor ts; 
these include regulating the exportation of minerals by imposing floor prices, imposing an export 
tax, and entering into investment agreements.27 
4.54.   The Government considers exportable minerals to be  non-renewable resources, and has 
adopted various fiscal measures, which have been  revised from time to time. At present , there is a 
7% royalty on mineral exports, a 20% export tax, as well as a floor price.  
4.55.   Import processes and regulations were modified in order to reduce the prohibitive import 
duties on rough minerals, thus allowing Sri Lankan traders and craftsmen to remain competitive 
and obtain raw materials anywhere in the world.28 For the gemstone sector, there was the removal 
of export taxation previously applied, an export service fee waiver encouraging e xhibition 
participation, and the provision allowing the  import of any carat of rough gemstone for a payment 
of US$200.29 
4.2.1.4   Production and trade  
4.56.   Most sectors of the mining industry showed gradual growth in output during the period 
2010-15. The most significant  sector in terms of production and contribution to the economy is the 
gemstone sector. In terms of exports, the largest mineral export is the re -export of diamonds; 
there is no production in Sri Lanka, thus exports are re -exports of diamonds that have been  
further cut or processed in Sri Lanka. The gemstone sector is the next largest, and its exports  
more than doubled during the review period (Table  4.13). In recent years , the main export 
markets for Sri Lankan gems were the United States, Thailand, and Hon g Kong, China; these 
altogether accounted for over 60% of exports.  
Table 4.13 Mining production and trade, 2010 -15 
 2010  2011  2012  2013  2014  2015  
Production (1,000 mt)        
Cement  2,600  2,400  2,200  3,000  .. .. 
Clays:        
 Ball clay  47,826  50,000  52,000  54,000  .. .. 
 For cement manufacture  1,000  1,100  1,200  1,200  .. .. 
 Kaolin  8,207  8,000  8,500  10,000  .. .. 
Feldspar  75,405  53,000  55,000  57,000  .. .. 
Gemstones:        
 Precious and semi -precious 
(US$ thousand)  150,000  180,000  220,000  260,000  .. .. 
 Cat's eye (carats)  54,000  55,000  56,000  57,000  .. .. 
 Ruby (carats)  31,336  35,000  38,000  41,000  .. ..  
 Sapphire (carats)  1,491,698  1,600,000  1,500,000  1,500,000  .. .. 
 Other (carats)  2,500,000  2,400,000  2,500,000  2,500,000  .. .. 
Graphite  3,437  3,357  4,071  4,200  .. .. 
Mica 2,095  2,100  2,142  2,200  .. .. 
Phosphate rock  49,680  50,674  52,000  53,000  .. .. 
                                                
27 Information provided by the authorities.  
28 GIA online information. Viewed at: http://www.gia.edu/gia -news-research -sri-lanka-mining -part1 . 
29 Information provided by the authorities.  WT/TPR/S/ 347 • Sri Lanka  
 
- 87 - 
 
   2010  2011  2012  2013  2014  2015  
Salt 10,400  11,000  12,000  13,000  .. .. 
Stone:        
 Limestone  1,192  1,200  1,300  1,400  .. .. 
 Quart zite 34,437  36,600  37,000  38,000  .. .. 
Zirconium  9,200  30,000  35,000  30,000  .. .. 
Ilmenite  .. .. .. 38 29 .. 
Exports ( Rs million)       
Gems  7,489  10,028  14,245  14,245  18,652  18,530  
Diamond re -exports  36,030  45,381  52,893  37,885  25,633  19,790  
Natural graphite  .. 479 561 569 615 531 
Natural sands  .. 157 28 9 3 .. 
Ilmenite  .. .. 2,970  9 0 .. 
Quartz  .. 477 1,075  1,235  1,361  1,173  
Other  .. 2,518  6,169  4,914  5,786  2,121  
.. Not available.  
Source:  Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/English/17_Appendix.
pdf; NGJA online information. Viewed at: http://www.ngja.gov.lk/en/statistics ; USGS, 2013 Minerals 
Yearbook : The Mineral Industry of Sri Lanka ; Central Bank of Sri Lanka online information. Viewed 
at: http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/English/17_ 
Appendix.pdf ; Department of Census and Statistics, National Accounts of Sri Lanka 2014 . Viewed at: 
http://www.statistics.gov.lk/national_accounts/Annual2014/Annual2014.pdf ; and information 
provided by the authorities.  
4.2.2   Energy  
4.57.   Sri Lanka has mainly relied on domestic indigenous biomass and hydro as the major source s 
of its energy needs  – they account for approximately 55%, followed by imports of fossil fuels  – 
and has been pursuing new alternative energy sources such as solar and wind. Since its last 
review, Sri  Lanka has diversi fied its energy sources and commenced using coal, mostly for 
electricity generation. As a developing country with increasing infrastructure and development 
needs, Sri Lanka faces many development challenges including increasing energy demand. 
State-owned e nterprises are substantially involved in the production or distribution of energy.  
4.2.2.1   Production, consumption, and trade  
4.58.   Pursuant to Sri Lanka's  energy policies, the country is emphasising more sources of 
renewable energy in lieu of fossil fuels. Slightly mor e than half of the count ry's primary energy 
demand was met by indigenous sources (e.g. biomass and hydro) in 2014. Imports of petroleum 
(including petroleum products) were significant and generally trended upward during the review 
period. Crude petroleum i mports reached a peak in 2014. Sri Lanka also recently commenced 
using coal as an alternative energy source, mainly in electricity generation , and particularly since 
2011 when infrastructure was adapted to its use. Thus, coal imports generally rose during the 
period 2011-15. New alternative sources of energy, mainly solar and wind have increased steadily, 
but only account for 10% of Sri Lanka' s electricity generation. Biomass remains the most 
important source of energy, and is domestically sourced, accounti ng for 42% of Sri Lanka 's 
primary energy demand in 2014 (Table 4.14). Sri Lanka mainly imports crude petroleum from the 
United Arab Emirates and petroleum products from Singapore and India.  WT/TPR/S/ 347 • Sri Lanka  
 
- 88 - 
 
  Table 4.14 Energy s tatistics, 2010 -15 
 2010  2011  2012  2013  2014  2015  
Primary energy (ktoe)        
Biomass  4,954.0  4,944.4  4,861.7  4,814.3  4,911.2  .. 
Petroleum  4,420.5  4,914.8  5,219.6  4,102.5  4,556.8  .. 
Coal 59.9 324.0  455.9  479.7  920.7  .. 
Hydro  1,197.2  964.2  654.4  1,442. 4 875.9  .. 
New renewable  179.7  178.4  180.6  286.7  301.2  .. 
 Total 10,811.4  11,325.8  11,372.2  11,126.7  11,565.8  .. 
Imports (value Rs million)        
Crude oil  120,180  183,056  157,758  182,064  187,760  100,578  
Refined products  223,629  347,333  467,058  352,98 4 391,651  244,148  
Coal .. .. 15,381  20,882  20,739  21,613  
LP gas 16,049  20,296  27,939  26,915  25,876  22,326  
Exports (value Rs million)  29,761  61,170  58,902  55,128  44,132  50,461  
.. Not available.  
Source:  Sri Lanka Sustainable Energy Authority online infor mation. Viewed at: 
http://www.info.energy.gov.lk/content/pdf3/2014%20Energy%20Balance.pdf ; Central Bank of 
Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/English/content.htm . 
4.2.2.2   Policy framework  
4.59.   In 2008, the National Energy Policy and Strategies of Sri  Lanka was implemented to address 
the many challenges faced by the sector, in particular to ensure its ability to meet future demand 
and manage the balance between domestic and imported energy resources.30 The Policy, which is 
currently in operation, contai ns twelve specific targets and milestones to be achieved when 
implementing the energy sector strategies : electrification of households ; targeted subsidies ; fuel 
diversity and security ; non-conventional renewable energy (NRE) -based electricity in the grid ; 
electricity pricing ; petroleum subsector regulation and product pricing ; oil and gas exploration ; 
bunkering; supply -side energy efficiency ; demand -side energy efficiency ; national energy 
database and integrated national energy planning ; and rural electrifi cation.  
4.60.   In 2015, the "Energy Empowered Nation", a ten -year development plan for the sector, was 
launched with an emphasis on eight thrust areas with a direct impact on energy for the country.31 
It also contains 14 specific energy sector targets (Box 4.1).  
Box 4.1 Energy sector targets in the Energy Empowered Nation development plan  
To make Sri Lanka an energy self -sufficient nation by 2030  
Increase the share of electricity generation from renewable energy sources  from 50% in 2014 to 60% by 
2020 and finally to meet the total demand from renewable and other indigenous energy resources by 2030  
Increase the electricity generation capacity of the system from 4,050 MW to 6,400 MW by 2025  
Generate a minimum 1,000 MW of  electricity using indigenous gas resources discovered in Mannar basin by 
2020 
Increase generation capacity of low cost thermal power plants fired by natural gas and biomass to 2,000 MW 
to reduce the generation costs and to diversify generation mix by 202 0 
Provide affordable electricity coverage to  100% of the people of the country on a continuous basis before end -
2015 
Reduce the technical and commercial losses of the electricity transmission and distribution network from 11% 
to 8% by 2020  
Reduce annual  energy demand growth by 2% through conservation and efficient use  
Reduce petroleum fuel use in the transport subsector by 5% by introducing alternative strategies such as 
efficient modes of transport and electrification of transport by 2020  
Produce the total petroleum product demand of the country through its own refinery by 2025  
Upgrade quality of gasoline and diesel to EURO IV and EURO III respectively by 2018  
                                                
30 Gazette  No. 1553/10 of 10 June 2008.  
31 Ministry of Power and Renewable Energy online information. Viewed at: 
http://powermin.gov.lk/englis h/?p=3502 . WT/TPR/S/ 347 • Sri Lanka  
 
- 89 - 
 
  Further enhance the quality and reliability of electricity and fuel supply  
Broadening ener gy sector investment windows to include bonds, debentures, public –private partnerships and 
other such novel financial instruments  
Reduce the carbon footprint of the energy sector by 5% by 2025  
Source:  Ministry of Power and Renewable Energy online informa tion. Viewed at: 
http://powermin.gov.lk/english/?p=3502 . 
4.61.   Sri Lanka's Sustainable Energy Authority (SEA), created pursuant to the Sri Lanka 
Sustainable Energy Authority Act No. 35 of 2007, established a  target to reach 100% countrywide 
electrification by 2015; this has been achieved. At the same time, the mix of energy generation 
was to be altered to reduce energy generation from crude oil from 54% to 8% by 2015, while at 
the same time introducing coal a nd increasing non -conventional renewable energy to 10%.32 This 
was also achieved.  
4.62.   The Ministry of Power and Renewable Energy has mandates with respect to the formulation 
of power and renewable energy policies, projects, and monitoring. It also has roles in overseeing 
rural electrification, development of renewable energy, and energy efficiency. Under its 
responsibility are the Lanka Coal Company, Sri Lanka Sustainable Energy Authority, Sri Lanka 
Atomic Energy Board, and the Sri Lanka Atomic Energy Regulatory  Council.  
4.63.   The electricity supply industry is dominated by the State, with the Ceylon Electricity Board 
(CEB) and Lanka Electricity Company (LECO) providing the electric power distribution to the 
country. In terms of regulation, the Public Utilities Commiss ion of Sri Lanka (PUCSL) is responsible 
for regulation of the electric subsectors and setting tariff rates.  
4.64.   For the fossil fuel sector, the Ministry of Petroleum Resources Development is responsible 
for programmes and policies for both down - and up -stream petroleum activities. The liquefied 
petroleum gas (LPG) sector is mainly owned and operated by the private sector, whereas 
petroleum is in the hands of the state -owned Ceylon Petroleum Corporation (CPC), which operates 
the petroleum refining sector, includ ing importation, blending, distributing, and retailing activities 
for Sri Lanka. Although it is now partially open to competition, it has certain exclusive rights. Also 
under the Ministry are: Ceylon Petroleum Storage Terminals Limited (CPSTL), which is re sponsible 
for storing and distributing petroleum products; the Petroleum Resources Development Secretariat 
for matters relating to petroleum resources agreements; and Pol ypto, for making petrol from 
waste plastics.  
4.2.2.3   Legal developments  
4.65.   Changes to the legal f ramework for the energy sector during the review period include the 
enactment of the Sri Lanka Atomic Energy Act No. 40 of 2014 for the promotion and 
encouragement of nuclear science for national development purposes.33 The Act also establishes 
the Sri Lank a Atomic Energy Board and the Sri Lanka Atomic Energy Regulatory Council.  
4.66.   In addition, the Sri Lanka Electricity Act was amended by the Sri Lanka Electricity 
(Amendment) Act No. 31 of 2013, which introduced changes to: the delegation of powers, duties 
and functions of the Public Utilities Commission of Sri Lanka; the provision to exempt from 
licensing community -based electricity generating projects operating on a non -commercial basis; 
and use of mediators in disputes. The amendment also included new provis ions regarding the 
approval of new generation plants or expansions of existing generation plants.34 
4.2.2.4   Electricity  
4.67.   Electricity in Sri Lanka is generated from a number of sources, but the majority is generated 
by thermal power plants and conventional hydro plan ts, accounting for about 72% and 33%, 
                                                
32 Sustainable Energy Authority online information. Viewed at: 
http://www.energy.gov.lk/sub_pgs/energy_renewable_intro_policy.html . 
33 Sri Lanka Atomic Energy Act  No. 40 of 2014 . Viewed at: 
http://documents.gov.lk/Acts/2014/Act%20No.%2040/Act%20No.%2040E.pdf . 
34 PUCSL online information. Viewed at: http://www.pucsl.gov.lk/english/wp -
content/uploads/2013/09/Act -31E.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 90 - 
 
  respectively, of electricity generation in 2014. The remainder is comprised of small hydro plants, 
wind power plants, biomass power plants, and solar power plants, accounting for about 10% of 
electricity generation.35 Sri Lanka has achieved a national electrification level of 100%, and the 
demand for electricity continues to grow at about 4 -6% per year.36 
4.68.   The sector is mainly controlled by a state entity, the Ceylon Electricity Board (CEB), which is 
responsible for genera ting, transmitting, distributing, and marketing electrical energy in Sri Lanka. 
It is the only licensee for electricity transmission and also generates most of the power in the 
country. It was established pursuant to the Ceylon Electricity Board (CEB) Act No. 17 of 1969. In 
1983, the Lanka Electricity Company (Private) Limited (LECO) was created under the CEB and 
Ministry of Power and Renewable Energy in order to acquire the assets of local authorities to 
create a comprehensive electricity distribution netw ork. The sector is regulated by the Public 
Utilities Commission of Sri Lanka (PU CSL), which operates pursuant to the Public Utilities 
Commission of Sri Lanka Act No. 35 of 2002, and the Sri Lanka Electricity Act No. 20 of 2009 and 
its amendments. Its main role is performing  licensing, regulatory and inspection functions for the 
sector, including regulating tariffs and mediating disputes. All these bodies operate under the 
State. The private sector is involved in the operation of some thermal (oil) power pla nts and the 
renewable sector.  
4.69.   The electricity sector is guided by the 2009 General Policy Guidelines on the Electricity 
Industry for the Public Utilities Commission of Sri Lanka. The guidelines give high priority to: 
improving access to electricity by hous eholds in rural areas; fuel diversity and security; electricity 
tariffs that are supplied to all categories of consumers at reasonable prices; ensuring adequate and 
effective generation, transmission, and distribution systems; and energy conservation and s afety 
issues.37 
4.70.   Developments during the review period mainly involved establishing new power generation 
facilities pursuant to the CEB 's Long -Term Generation Expansion Plan (2013 –32). Competitive 
bidding was also introduced for the state enterprises in the sector.  
4.71.   In recent years, electricity tariffs, as set by the PU CSL, were often not sufficient to cover the 
cost of electricity production. However, this was influenced by the price of oil, and fluctuates 
accordingly. In 2014 , there was an Rs 5 billion loss,  whereas in 2015 there was a similar gain.  
4.2.2.5   Petroleum  
4.72.   Sri Lanka does not have any commercial production of crude petroleum or natural gas, 
although exploration continues since natural gas was found in the Mannar basin after seismic 
studies by an Indian comp any in 2011. Consequent to an internal change of ownership and control 
coinciding with the industry downturn, the company relinquished all international acreage they 
held, exiting from Sri Lanka in 2015. In July 2015, the Government decided to proceed with  an 
international competitive licensing round to take the discoveries to commercial production, as it 
was acknowledged that Sri Lanka did not possess the required technology and knowledge 
internally. Prior to this next licensing round, scheduled for early 2017, several essential initiatives 
such as additional data acquisition over both the Mannar and Cauvery basins, legal and fiscal 
reforms, and formulation of a natural gas policy are currently in progress. Thus, Sri Lanka is 
expected to resume its first ex ploration activities in more than 25 years.  
4.73.   As there is currently no production of fossil fuels, Sri Lanka is dependent on imported 
petroleum for part of its energy needs. Crude oil as well as refined products are the main products 
imported ; imports are si gnificant and mostly for the transport sector. There has been a gradual 
increase in fuel demand of about 5% per annum in the country in recent years. Thus, imports are 
significant and account for about 25% of total imports, having an important overall impa ct on the 
balance of trade and the economy.38 
                                                
35 Sri Lanka Energy Balance online information. Viewed at: http://www.info.energy.gov. lk/. 
36 Ministry of Power and Renewable Energy online information. Viewed at: http://powermin.gov.lk/ 
sinhala/wp -content/uploads/2016 /01/Performance_2015_and_Programmes_2016_english.pdf . 
37 Information provided by the authorities.  
38 Ministry of Petroleum Resources Development, Progress Report – 2015 and Action Plan – 2016. WT/TPR/S/ 347 • Sri Lanka  
 
- 91 - 
 
  4.74.   The Petroleum Resources Act No. 26 of 2003 is the main legislation for petroleum 
exploration and development in Sri Lanka. The downstream petroleum sector has been partially 
liberalized for competition from stat e entities since 2002 , and other companies were established in 
certain subsectors beyond the main state -owned enterprises: the Ceylon Petroleum Corporation 
(CPC) for import ation, export ation, stor age, distribut ion and refining; the Petroleum Storage 
Termin als Limited (CPSTL) for storage and distribution; and the Lanka Indian Oil Company (LIOC) 
for import ation, export ation, stor age, and distribut ion. The CPC and LIOC are the only importers of 
transportation petroleum fuel into Sri Lanka; thus state enterpris es have a dominant or monopoly 
position in this subsector. However, the lubricant subsector is the area in which the private sector 
mainly participates, with 13 private firms operating, as this sector has been gradually liberalized 
since 1994, reaching ful l openness in 2006.39 
4.75.   Activities including importing, refining, blending, wholesaling, storing, distribution, 
transport, and retailing of petroleum and petroleum products require a licence . At present, the 
lubricant subsector is governed by the Ministry of Petroleum Resources Development for the 
issuance of operator licences . Since 2012, there has been a legal lacuna with respect to the 
regulation of the downstream petroleum industry, as the regulatory function is pursuant to the 
Petroleum Products (Special Provisions) Act No. 33 of 2002 and Ceylon Petroleum Corporation Act 
No. 28 of 1961. Thus, the CPC, while being a market participant also retains regulatory functions 
over itself. Consequently , in order to create an independent regulatory environment provid ing for 
non-discriminatory competition, the Government is working towards legal amendments that would 
give the PUCSL the authority to regulate the sector.40 The upstream sector is governed by the 
Petroleum Resources Act No. 26 of 2003, giving the  Petroleum Resources Development Secretariat 
(PRDS), Ministry of Petroleum Resources Development  the authority to issue tenders and licensing 
for exploration and drilling activities.  
4.76.   The Treasury is the government entity that currently regulates prices of petroleum fuels. 
During the review period, prices of petroleum products were revised many times but often still 
lagged  behind  changes in world oil prices. Thus, the CPC was often put in a difficult financial 
situation and had to sell products at prices lower than th e import price of crude oil.  
4.77.   Other developments during the period include the issuance of the " Sri Lanka Upstream 
Petroleum Local Content Guidelines " in 2013, which were necessitated after the oil and gas 
exploration activities recommenced. The objectives  of the Guidelines provide for maximum 
employment opportunities for Sri Lankan nationals, improve local capacity building, and increase 
the competitiveness of the local business community in the sector.41 Thus, the PRDS  requires that 
every contractor, opera tor, sub -contractor, alliance partner and other foreign entity involved in oil 
or gas projects:  
 Consider local content as an important element of their overall project development and 
management philosophy;  
 Submit an annual Local Content Development (LCD) Plan, for review and approval by the 
Ministry of Petroleum Resources Development, outlining planned local goods and services 
sourcing, employment, education, training, and R&D opportunities earmarked for Sri Lankan 
nationals;  
 Submit a verifiable Local Cont ent Report outlining the progress in utili zing Sri Lankan 
resources during the preceding financial year; and  
 Under specific terms of a Bid Inviting Document, develop and submit a conceptual Local 
Content Development Plan based on the Guidelines as part of the bid package.42 
                                                
39 PUCSL online information. Viewed at: http://www.pucsl.gov.lk/english/wp -
content/themes/pucsl/pdfs/Lubricant_Ind -Regulation -present -future -Raja_Amaratunga.pdf . 
40 PUCSL online informa tion. Viewed at: http://www.pucsl.gov.lk/english/industries/english -petroleum/ . 
41 Ministry of Petroleum Resources Development , Sri Lanka Upstream Petroleum Local Content 
Guidelin es. Viewed at: http://www.prds -srilanka.com/pdfs/Guidelines2014.pdf . 
42 PRDS, M inistry of Petroleum Resources Development , Sri Lanka Upstream Petroleum Local Content 
Guidelines . Viewed at:  http://www.prds -srilanka.com/pdfs/Guidelines2014.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 92 - 
 
  4.78.   Polypto Lanka (Pvt) Ltd. was incorporated as a limited liability company under the 
Companies Act No. 7 of 2007 for the waste plastic into fuel conversion project. Initially a pilot 
project was started and successfully completed by the end  of 2010. A plant was commissioned in 
September 2015 and it is expected to produce 2,000 litres of fuel per day.  
4.3  Manufacturing  
4.79.   Sri Lanka encourages development of its manufacturing sector, particularly as it has 
traditionally relied heavily on agricultural  output for growth of its economy and trade. Moving to 
value -added goods, capitalizing on its relatively low labour costs, benefitting from its connectivity, 
and improving linkages through value chains have all played a part in developing its manufacturing  
sector. In 2012, the most recent year for which data were available, the manufacturing sector had 
2,554 establishments.43 In 2015, manufacturing accounted for about 18.3% of employment, 
19.5% of GDP (Table 1.2), and 70.1% of exports.  
4.80.   The manufacturing sect or is dominated by food products and beverages (account ing for 
Rs 522.5 billion of output  in 2013) , followed by the textiles and clothing, and dressing and dying of 
fur sector  (Rs 456 billion ), and the rubber and plastics products sector  (Rs 150.7 billion ) 
(Chart  4.2). According to the Factory Industry Production Index of major industries, the fastest 
growing sectors that have consistently exceeded the overall index in the last three years include 
wearing apparel and rubber and plastic products. The basic m etal products sector has more 
recently exhibited high growth rates.44 In terms of the number of establishments, of the 2,554 in 
manufacturing, the food and beverage product sector accounts for the largest share with 33.7%, 
followed by the textiles and clothing, and dressing and dying of fur sector, 25.5%, and the rubber 
and plastic products  sector  with 10%.45 
Chart 4.2 Manufacturing output value, by ISIC sector, 2013  
(Rs billion)  
Chart 4. [output]    Manufacturing output by ISIC industry division, 2012
Source:  Department of Census and Statistics, Annual Survey of Industries, 2013.  Viewed at .....Food products and beverages, 
522.5Other , 398.1
Tobacco products, 68.8
Chemicals and chemical
products, 68.7Textiles , 91.4Rubber and plastic products, 
150.7
Clothing , dressing and 
dyeing of fur, 364.6Other non metallic mineral 
products , 96.0(Rs billion)
 
Source:  Department of Census an d Statistics, Annual Survey of Industries, 2013 . Viewed at: 
http://www.statistics.gov.lk/industry/ASI%202013%20report.pdf . 
4.81.   There are many government bodies at the national or pro vincial levels involved in 
manufacturing policy or the actual manufacturing of goods in Sri Lanka. The Ministry of Industry 
and Commerce is the main ministry providing support for the manufacturing sector. It is 
responsible for promoting industrial develop ment within the wider policy framework of the 
Government; its recent policy formation has put an emphasis on having a diversified 
high-value -added industrial base and promoting high economic growth and environmentally 
sustainable industrial development. Th e Industrial Development Board (IDB), which operates 
                                                
43 The figures do not include Sri Lanka's state -owned enterprises in the manufacturing sector.  
44 Central Bank of Sri Lanka, Monthly B ulletin January 2016 . Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/statistics/monthly_bulletin/Monthly_B ulletin_2016/bulletin_
January_16e.pdf . 
45 Department of Census and Statistics, Annual Survey of Industries, 2013 . Viewed at: 
http://www.statistics.gov.lk/industry/ASI%202013%20rep ort.pdf ; and Central Bank of Sri Lanka online 
information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_report/AR2015/ English/17_Appendix.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 93 - 
 
  under the Ministry of Industry and Commerce, is tasked with encouraging and promoting the 
development of the industrial sector pursuant to the Industrial Development Act No. 36 of 1969.  
4.82.   Sri Lanka's Depar tment of Government Factory, under the Ministry of Construction and 
Engineering Services, produces heavy and light metal fabrication works and products and 
carpentry products; it also provides maintenance, repair, and related services. The State 
Pharmaceut icals Manufacturing Corporation, established under the Industrial Corporation Act 
No. 49 of 1957, is the largest manufacturer of pharmaceuticals in Sri Lanka and produces essential 
medicines and drugs for the healthcare sector. Other significant state ente rprises involved in the 
manufacturing sector include the National Paper Company, State Printing Corporation, Sri Lanka 
Ayurvedic Drugs Company, and State Timber Corporation.46 
4.83.   At the provincial level, the Provincial Ministry/Department of Industries is resp onsible for the 
development of the industrial sector in each province. Under some Provincial Ministries/ 
Departments of Industries an Industrial Development Authority has been established by the 
Provincial Council. For example, the Industrial Development A uthority  – Western Province provides 
for the promotion, development, expansion and encouragement of industries in the province 
pursuant to the Industrial Development Authority Statute No. 02 of 1994. In particular, it is 
involved in giving assistance to lo cal and foreign investors by providing marketing information and 
organizing trade fairs, and with respect to financial assistance by preparing business plans for 
banks, providing funding for machinery and tools, and establishing the Industrial Development 
Fund for funding purposes.  
4.84.   As part of Sri Lanka's 2010 government development policy, " Mahinda Chint hana – Vision 
for the Future", the Government set priorities for the industrial sector in which it planned to 
promote diversification and encourage high -value-added production for the sector. However, due 
to financial and technological constraints, the progress has been too slow to make a significant 
change in the industrial structure of the country. Sri Lanka continues to promote value addition, 
diversificat ion and shifting from resource -based to technology -based industries.  An industrial 
policy was initiated by the Ministry of Industry and Commerce recently but has yet to come to 
fruition; however a separate policy for SME development was recently launched.  
4.85.   Programmes under the IDB during the period included  development of leather and footwear 
industry competitiveness, a banana fibre extraction project, construction of an accredited 
laboratory, and training to adopt best practices in the processed food and be verage sector. The 
IDB provides training for SMEs in several areas (e.g. footwear and bags, foundry, and leather) and 
technology/machinery/R&D services , as well as information to the manufacturing sector. 
Sri Lanka's  Ministry of Science, Technology and Res earch has been working on building a 
regulatory framework for nanotechnology development in the country with the aim of promoting 
nanotechnology research, development, and applications.  
4.86.   The simple average applied MFN tariff on manufacturing (ISIC) in 2016  is 10.2% (including 
ad valorem  equivalents of non -ad valorem  duties). In 2015, the Government introduced 
concessionary income tax rates for certain manufacturing enterprises.47 New undertakings, with an 
investment of not less than US$2 million and engaged in the manufacture of products for export, 
were granted a frontloaded depreciation allowance and the dividend from the profits was exempt 
for a period of five years. For existing enterprises outside the Western Province and manufacturing 
products other tha n liquor or tobacco, the income and profit tax was reduced by 50% (not 
exceeding Rs 500 million) for a period of five years. All manufacturing enterprises with a 
committed investment in excess of Rs 500 million were entitled to a 50% reduction in the 
applicable tax rate for a period of seven  years.  
4.87.   Sri Lanka's BOI has specifically targeted the manufacturing for export sector as one of its 
priorities for investment during the review period. The subsectors specifically targeted included: 
rubber, polyvinyl chl oride (PVC) products, cement, minerals, metal, transport equipment, gem s 
and jewellery, electrical and electronics, ceramic s, paper, leather, chemicals, pharmaceuticals, 
boats, food, tea, wood, tyres and tubes, motor spare parts, furniture, glassware, cosm etic 
                                                
46 Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/annual_ report/AR2015/English/17_Appendix.pdf . 
47 Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_d ocs/efr/annual_report/AR2015/English/13_PolicyBox.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 94 - 
 
  products, construction materials, and coir.48 Incentives specific to the manufacturing sector were 
dependent upon the size of the enterprise and amount invested (Table 4.15). The incentives were 
amended periodically during the review period but ceased to be offered to new investments as of 
31 October 2014 . However, those incentives in effect before that date remain active and in place 
(see Section 2.4.4 for an overview of investment incentives). Some of the incentives were 
dependent upon minimum export requirements. The manufacturing sector typically accounts for 
about one  fourth of FDI into Sri  Lanka, behind infrastructure projects, and sometimes surpassing 
the FDI of the services sector.49 
Table 4.15 Invest ment incentives for manufacturing, 2010 -31 October 2014  
Type  Activity  Qualifying criteria  
 Tax exemption 
(number of years)  Min. export 
requirement  (% 
of output)  Amount of 
investment  
(Rs million)  
Medium -scale  
new enterprises  Manufacture of any article  
(including processing) 
other than liquor or 
tobacco products  n.a. ≥50 and <100  4 
Large -scale new 
enterprises  Manufacture, production or 
processing of non -
traditional goods for 
export, including deemed 
exports  90% (60% for 
apparel and 
ceramic s) >500 and 
≤700 7 
Large -scale new 
enterprises  Manufacturing for 
domestic and/or export 
market  of boats, 
pharmaceuticals, tyres and 
tubes, motor spare parts, 
furniture, ceramics, 
glassware or other 
mineral -based products, 
rubber -based products, 
cosmetic products, edible 
products manufactured out 
of locally cultivated 
agricultural products, 
construction materials,  
and electrical/ electronic 
items  None >500 and 
≤700  8 
Strategic import 
replacement  
new enterprises  Manufacture of:  
Fabric  
Pharmaceuticals  
Milk powder  
Cement  n.a.  
5 
10 
30 
50 5-year tax holiday 
followed by a 
concessionary tax rate 
of 12% thereafter  
Expansions by 
small-, 
medium - and 
large-scale 
enterp rises Any existing enterprise  As applicable to the 
original enterprise  50 Not exceeding 25% of 
such investment in 
that year of 
assessment and the 
75% balance to be 
apportioned in equal 
amount s over 3 year -
period immediately 
succeeding that year 
of assessme nt 
                                                
48 BOI online information. Viewed at: 
http://www.investsrilanka.com/key_sector/manufacturing/manufacturin g_sub_sectors  and 
http://www.investsrilanka.com/key_sector/manufacturing/manufacturing_overview . 
49 Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/statistics/other/econ_&_ss_2015_e.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 95 - 
 
  Type  Activity  Qualifying criteria  
 Tax exemption 
(number of years)  Min. export 
requirement  (% 
of output)  Amount of 
investment  
(Rs million)  
Expansions by 
strategic import 
replacement 
enterprises  Manufacture of:  
Fabric  
Pharmaceuticals  
Milk powder  
Cement  n.a. 5 
10 
30 
50 Concessionary tax 
rate (12%) for 5 
years; coupled with 
qualifying payment 
relief of the 
investment made 
subject to not 
exceeding 25% of 
such investment in 
that year of 
assessment and the 
75% balance to be 
apportioned in equal 
amount s over 3 -year 
period immediately 
succeeding that year 
of assessment  
All Manufacturing  n.a. n.a. Reduced corporate 
income tax rates  –  
Export -oriented: 12%  
Other:  
Taxable inco me ≤  Rs 
5 Mn: 12%  
Taxable income >  Rs 
5 Mn: 28%  
n.a. Not applicable.  
Source:  BOI online information. Viewed at: http://www.investsrilanka.com/setting_up_in/tax_incentives . 
4.3.1   Key sub sectors  
4.3.1.1   Processed food  
4.88.   The processed food industry is the largest manufacturing subsector in terms of 
manufacturing output, value addition, and number of establishments.  
4.89.   The Government has identified certain processed food categories such as vegetables and  
fruits, concentrates and juices, semi -cooked food, confectionery and bakery products, 
ready -to-serve food, rice and cereals, non ‐alcoholic beverages, and animal feed , as subsectors to 
concentrate on for development and export promotion. The sector, including manufacture, 
distribution, and export, is dominated by a few large -scale companies with established brand 
names. On the other  hand, there are many SMEs involved in the sector, although they tend to 
produce more for the local market.  
4.90.   In terms of trade, exports of the sector had some fluctuations over the period 2010 -14, in 
particular during 2012 -13 for rice and cereals and the an imal feed sub -categories. The sector 
exported the largest amount in 2011  (Table 4.16). Major markets differ by subsector, but the 
majority are exported to developed countries.  
Table 4.16 Processed food exports , 2010 -14 
(US$ million)  
 2010  2011  2012  2013  2014  
Rice and cereals  80 157 104 47 51 
Processed food  67 95 73 67 90 
Animal feed  67 58 82 59 56 
Confectionary and bakery products  35 45 39 33 32 WT/TPR/S/ 347 • Sri Lanka  
 
- 96 - 
 
   2010  2011  2012  2013  2014  
Processed vegetables, fruits and 
juices 6 6 9 13 17 
Total  255 361 307 219 246 
Source:  Export Development Board, Industry Capability Report: Food & Beverage Sector . Viewed at: 
http://www.srilankabusiness.com/pdf/ industry_capability_reports/food_and_ beverages.pdf . 
4.91.   The Ministry of Industry and Commerce has a Processed Food Industry Development 
Programme in order to promote the sector, in particular as regards trade and investment.50 The 
processed food sector has be en identified as one of the thrust areas for development. Credit 
facilities are offered under the "SMILE III Loan Scheme " of the Ministry to several industrial 
sectors including the food sector. A dditionally,  the annual "Profood Propack " exhibition is 
supported by the Ministry through cost sharing. Under the Ministry's food safety and hygiene 
certification programme, the Ministry covers the cost of obtaining certification in order to 
encourage upgrading of the standards to export quality.51 
4.92.   In terms of other  government support, the sector also benefits from the investment 
schemes of the BOI, R&D facilities at research institutions, technical assistance to SMEs, and 
government training programmes for updating the skills of technical staff.  
4.3.1.2   Clothing and garment s 
4.93.   The clothing and garment sector is among the most important industrial sectors for Sri 
Lanka, as it ranks second in terms of foreign exchange earnings, after worker remittances . It is 
the largest sector contributing to exports, accounting for 4 6% of tota l exports in 2015, and 
accounts for approximately 50% of Sri Lanka' s manufacturing employment. Sri Lanka is not a 
larger exporter of clothing and garments than China, Bangladesh, or Viet Nam.  However, 
regarding a per capita level of apparel exports, it ran ks second behind Cambodia in Asia.52 The 
early growth and success of the sector took place against the background of BOI incentives for the 
sector, which encouraged foreign firms to set up operation pursuant to the Garment Factory 
Programme, and the textile  quota regime, in which Sri Lanka benefited from preferential access 
conditions, offered by the United States and the EU in particular.  
4.94.   The sector has three major sub -categories: apparel companies that manufacture for export ; 
textile mills and finishing pl ants that supply apparel exporters or export directly ; and companies 
engaged in accessory manufacture for the export apparel industry. However, it does not have an 
extensive industrial base for producing textile raw materials for the sewing operations, and  thus it 
imports textile fabrics and other raw materials from many sources; the main suppliers are China 
and India.  
4.95.   Despite its continued growth and positive contributions to the economy, there are 
nevertheless a number of concerns or challenges that have been identified:  
 Lack of diversification in export destinations;  
 Lack of product diversification;  
 Heavy reliance on imported raw materials;  
 Highly concentrated around a few large producers; and  
 Competitor countries have become an important challenge.53 
4.96.   The Government has taken a number of steps to address these issues. The Export 
Development Board and the Department of Commerce have conducted research/studies on 
diversification of the export market for garments; the stud ies explored new markets such as BRIC 
countries, Eastern Europe, South East Asia  and East Asia, the Middle East, and African countries. 
                                                
50 Ministry of Industry and Commerce online information. Viewed at: 
http://www.industry.gov.lk/web/index.php?option=com_content&view=article&id=79&Itemid=178&lang=en . 
51 2013 Republic of Korea Knowledge Sharing Progr am with Sri Lanka online information. Viewed at: 
http://www.ksp.go.kr/publication/policy.jsp . 
52 HKTDC Research online information. Viewed at: http://economists -pick-research.hktdc.com/business -
news/article/Research -Articles/Sri -Lanka -s-Apparel -Sector -Hong-Kong-
Opportunities /rp/en/1/1X000000/1X0A28DZ.htm . 
53 Central Bank of Sri Lanka, News Survey , Volume 34, No. 4, Oct ober-December  2014.  WT/TPR/S/ 347 • Sri Lanka  
 
- 97 - 
 
  However , significant progress in diversification has not been achieved , except  for an increase in 
exports to China. With regard to reliance on imported mate rials, the large manufacturers have 
moved upstream into textile and ancillary inputs manufacturing, and it is estimated that about 
60% of the fabric used in apparel production and the majority of the ancillary inputs54 are 
produced domestically. Several mea sures have been taken by the Government and industry, to 
maintain a competitive edge over the increasing competition. Sri Lanka has focused on "value " 
rather than "volume " production, and it has moved towards innovative technologies such as 
wearable electr onics and eco -friendly fabric treatment to remain competitive. By catering to a 
niche market for ethical products, Sri Lanka has maintained its competitiveness and ensured 
higher returns.  
4.97.   In addition to the Ministry of Industry and Commerce, which supports  all industries 
including clothing, and the BOI, which maintains many incentive programmes (see manufacturing 
above and Section 2.4.4), the Government maintains the Sri Lanka Institute of Textile and Apparel 
(SLITA) to train and educate persons in the sect or. The SLITA also maintains a testing laboratory 
for accreditation and services for the sector, and conducts market sur veys and feasibility studies. 
A Textile Quota Board (TQB) has existed for many years to control the exports to certain markets. 
The liqu idation process of the TQB commenced in 2012, and concluded in 2015. As such, export 
quotas or licences  are not required for the exportation of clothing , except for those subject to 
TRQs under the India and Pakistan FTAs. The TQB issued Tariff Rate Quota C ertificates under the 
FTAs until it was liquidated, and these functions have now been taken over by other institutions. 
The Government had undertaken initiatives to establish textile processing zones, but these have 
not been established. The Ministry of In dustry and Commerce has several initiatives to support the 
sector such as the apparel -based cottage industry programme that imparts skills or training to the 
apparel sector; provision of infrastructure facilities for textile weaving centres and handloom 
villages; and promotional activities such as the annual handloom exhibition.  
4.98.   In terms of trade, the sector had a significant growth in exports during the review period, 
and thus captured a higher share of Sri Lanka' s total exports, i.e. 4 6% in 2015, up from 42% in 
2010. Imports grew over the period as well but are very minimal, accounting for about 1% of total 
imports  on average . Exports of clothing are very concentrated and benefit significantly from 
preferential trade schemes. The majority of exports are de stined for the United States and the EU, 
which accounted for about 88% of 2015 exports. Exports to the EU continued to grow over the 
period despite the fact that Sri Lanka lost GSP+ provisions in 2010 (Table 4.17).  
Table 4.17 Clothing trade and production, 2010 -15 
(Rs million)  
 2010  2011  2012  2013  2014  2015  
Production  346.2  361.9  364.6  .. .. .. 
Total exports  8,304.1  10,011.3  9,369.8  10,004.9  11,295.5  10,439.7  
Clothing: HS Chapters 61 -63 3,360.0  4,037.0  3,828.2 4,322.0  4,739.3  4,614.1  
% of total exports  40.5 40.3 40.9 43.2 2.0 44.2 
61 Articles of apparel and 
clothing accessories, knitted or 
crocheted  1,700.2  2,110.5  1,968.6  2,366.7  2,624.3  2,562.4  
62 Articles of apparel and 
clothing accessories, not 
knitte d or crocheted  1,612.1  1,873.7  1,812.2  1,904.1  2,057.1  1,985.3  
63 Other made up textile 
articles; sets; worn clothing 
and worn textile articles; rags  47.7 52.8 47.5 51.2 57.8 66.5 
Total imports  12,353.7  19,696.5  17,884.9  17,930.8  19,244.5  18,967.2  
Clothing: HS Chapters 61 -63 94.5 138.9  144.2  159.6  233.7  311.7  
% of total imports  0.8 0.7 0.8 0.9 1.2 1.6 
61 Articles of apparel and 
clothing accessories, knitted or 
crocheted  40.6 49.5 53.3 42.5 55.2 79.9 
                                                
54 Embroidery, hangers, labels, buttons, etc.  WT/TPR/S/ 347 • Sri Lanka  
 
- 98 - 
 
   2010  2011  2012  2013  2014  2015  
62 Articles of apparel and 
clothing accessories, no t 
knitted or crocheted  47.8 74.1 81.7 107.3  159.7  205.6  
63 Other made up textile 
articles; sets; worn clothing 
and worn textile articles; rags  6.2 15.2 9.3 9.8 18. 26.2 
.. Not available.  
Source:  WTO calculations based on figures taken from the UNSD Comtr ade database.  
4.4  Services  
4.4.1   Tourism services  
4.4.1.1   Overview  
4.99.   Sri Lanka's  tourism sector is an important contributor to the economy and a major foreign 
exchange earner for the country. In 2015,  tourism  ("travel" in the balance of payments data) 
contributed to 12.4% of the foreign exchange earned, and ranked third overall, after workers ' 
remittances and exports of textiles and garments. The growth of the sector has been impressive, 
with tourist arrivals reaching a 14.2% compound average growth rate since the end of the 
domestic conflict, although achieving the government target of 2.5 million arrivals by 2016 will 
likely fall short.55 According to the World Economic Forum's Travel & Tourism Competitiveness 
Index, Sri Lanka ranked 63rd in 2015, a rise from 74th in 2013, and  81st in 2011.56 The strong 
points noted in the most recent ranking were with respect to safety and security, health and 
hygiene, and prioritization of travel and tourism; while the weaknesses were identified as cultural 
resources and business travel, air t ransport infrastructure, and international openness.57 According 
to the authorities, it was unclear why Sri Lanka ranked low for cultural resources, as many tourists 
came for cultural reasons and there were many such tourist attractions.  
4.4.1.2   Statistical overvie w 
4.100.   Tourism indicators showed significant increases in growth of the sector during the review 
period. Tourist arrivals more than doubled during the period and , since 2013 , have surpassed 
Sri Lankan nationals ' departures. There was a 130% increase in tourist nights and an improvement 
in the occupancy rate to 74%, while at the same time an increase in the accommodation capacity. 
Furthermore , tourism receipts increased almost five fold, and direct employment in tourism more 
than doubled58 (Table 4.18). According to the authorities , the significant increase in receipts and 
employment in 2013 is likely the result of the completion of new accommodation infrastructure.  
4.101.   Sri Lanka attracts tourists from all over the world, but main sources are Western Europe, 
South Asia , and North -East Asia. Among these markets, India, the United Kingdom, China, 
Germany, and the Maldives were the top five markets in 2014 for tourist arrivals. In recent years, 
Sri Lanka has maintained growth from traditional markets, such as Western Europ e, but has seen 
significant growth from new markets such as China and certain Middle East countries. As an island, 
nearly all tourist arrivals are by air (98.3%) and very little are by ship (1.7%).59 The national 
carrier, Sri  Lankan Airlines , has a dominant  position in providing air travel to tourists, in part due 
to charter flights and bundled tourist packages ( Section 4.4.4.4).  
                                                
55 TKS, Sri Lanka Tourism Industry; In Perspective , August 2013.  
56 World Economic Forum online i nformation. Viewed at:  http://reports.weforum.org/travel -and-
tourism -competitiveness -report -2015/economy -rankings/ . 
57 World Economic Forum online in formation. Viewed at: http://reports.weforum.org/travel -and-
tourism -competitiveness -report -2015/economies/#economy=LKA . 
58 Sri Lanka Tourism Dev elopment Authority online information. Viewed at: http://www.sltda.lk/sites/ 
default/files/Annual_Statistical_Report -2014.pdf . 
59 Sri Lanka Tourism Development Autho rity online information. Viewed at: http://www.sltda.lk/sites/ 
default/files/Annual_Statistical_Report -2014.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 99 - 
 
  Table 4.18 Tourism indicators, 2010 -15 
 2010  2011  2012  2013  2014  2015  
Tourist arri vals 654,476  855,975  1,005,605  1,274,593  1,527,153  1,798,380  
Sri Lankan nationals ' 
departures  1,122,212  1,239,290  1,268,792  1,261,711  1,311,063  1,356,411  
Average duration of 
stay 10.0 10.0 10.0 8.6 9.9 10.1 
Tourist nights 
(1,000)  6,548  8,560  10,056  10,909 15,119  18,163  
Accommodation 
capacity (rooms)  14,714  14,653  15,510  16,655  18,510  18,954  
Occupancy rate  70.1%  77.1%  71.2%  71.7%  74.3%  74.5%  
Tourism receipts ( Rs 
million)  65,018  91,926  132,427  221,147  317,502  405,063  
Direct employment 
in tourism  55,023  57,786  67,862  112,550  129,790  135,930  
Foreign visitors 
visiting museums  22,061  31,096  37,305  44,751  57,604  56,387  
Source:  Sri Lanka Tourism Development Authority, Annual Statistical Report 2014 , 
http://www.sltda.lk/sites/default/files/Annual_Statistical_Report -2014.pdf ; and information provided 
by the authorities.  
4.4.1.3   Framework  
4.102.   Sri Lanka's  Ministry of Tourism Development and Christian Religious Affairs is involved in 
the formulation of policies, programmes and projects, and monitoring and evaluation in regard to 
the subjects of tourism development. Established by the Tourism Act (2005)60, the Sri Lanka 
Tourism Development Authority (SLTDA) is the main tourist body respon sible for the overall 
development of tourism in Sri Lanka. Other bodies also established by the Tourism Act include the 
Sri Lanka Institute of Tourism and Hotel Management for training of persons for the sector, the 
Sri Lanka Tourism Promotion Bureau for p romoting and marketing Sri Lanka as a tourist 
destination, and the Sri Lanka Convention Bureau for the promotion of meetings, incentives, 
conferences, and exhibition (MICE) tourism.  
4.4.1.4   Policy and strategy  
4.103.   Sri Lanka's  Ministry of Economic Development issued it s first strategic tourism plan for 
2009-12 and the second for the period 2011 -16 in order to address issues related to the industry 
including government policy, capacity and manpower build -up requirements, infrastructure 
development, improving service stan dards, marketing and promotion, regulations, guidelines, 
public relations, tourist safety, and improvements to domestic tourism. While recognizing the 
surge in tourism after the internal conflict, the policy sets out to concentrate on the sector as one 
of the main contributors to Sri Lanka's  economic growth.  
4.104.   As such, it sets out seven key objectives (Box 4.2) for the sector to be achieved through 
emphasis on five main areas: creating an environment conducive for tourism, attracting the right 
type of tourist s to the country, ensuring that departing tourists are happy, improving domestic 
tourism, and contributing towards improving the global image of Sri Lanka. Some of the specific 
elements envisioned include increasing accommodation capacity, improving the re gulatory 
framework, simplifying the tax system, finding transport solutions, and improving service 
standards. From the data available as of 2014, Sri Lanka had made advances in reaching the 
targets. The policy also puts an emphasis on sustainable tourism, eco-tourism, and diversification 
of tourist offerings as Sri Lanka moves ahead with tourism sector development.  
Box 4.2 Key objectives in the Tourism Development Strategy  
Objectives  
Increase tourist arrivals fr om 650,000 in 2010 to 2.5 million by 2016.  
Attract US$3,000 million as foreign direct investment to the country within 5 years.  
Increase the tourism -related employment from 125,000 in 2010 to 500,000 by 2016 and expand tourism -
based industry and services  all over the island.  
                                                
60 Act No. 38 of 2005.  WT/TPR/S/ 347 • Sri Lanka  
 
- 100 - 
 
  Objectives  
Distribute the economic benefits of tourism to a larger cross section of the society and integrate tourism into 
the real economy.  
Increase the foreign exchange earnings from US$500 million in 2010 to US$2.75 billion by 2016.  
Contri bute towards improving the global trade and economic linkages of Sri Lanka.  
Position Sri Lanka as the world's most treasured island for tourism.  
Source:  Tourism Development Strategy, 2011 -16. 
4.4.1.5   Legal and regulatory framework  
4.105.   Sri Lanka's 2005 Tourism Act pr ovides the main legal framework for the sector. There are 
also several regulations in place that provide minimum requirements for registration, licensing, 
and fees for certain tourism activities including tourist water sports establishments, tourist diving  
centres/schools/establishments, tourist shops, spice garden shops, tourist guest houses, and 
tourist restaurants.61 The regulations generally provide minimum requirements for the provision of 
the service but do not discriminate regarding  who may provide th e service.  
4.106.   Tourist hotels in Sri Lanka are required to be classified pursuant to the Tourist Act 
Regulations (Tourist Hotels Code 2010), following a 5 -star tourist hotel ranking system.62 
According to the authorities, pursuant to the most recent ly updated classification system of April 
2016, the ranking system is based on international standards.  The ranking of tourist hotels is 
based on a set of mandatory requirements for each star level and a minimum number of points 
based on another list of criteri a. Different fee structures exist for the registration and licensing of 
hotels, ranging from Rs 2,000 (1 star) to Rs 10,000 (5 stars) for licensing, and Rs 5,000 (1 star) 
to Rs 25,000 (5 stars) for registration.63 To operate a tourist hotel in Sri Lanka,  registra tion is 
necessary  and based on compliance with minimum criteria in the Gazette of the Democratic 
Socialist Republic of Sri Lanka ; thereafter an annual licence is issued to operate after a control 
check.  
4.107.   In contrast to hotels, tourist restaurants do not hav e a classification system and operate 
under the local authorities. Licences need to be obtained  to operate restaurants.  
4.108.   The SLTDA regulates and provides licences to travel agents, i.e. those that sell 
travel -related products and services, in particular pac kage tours, business travel, etc. The main 
requirements are: a minimum paid -up capital of not less than Rs 500,000 for a limited liability 
company (LLC) or Rs 600,000 for a sole proprietorship; the sole proprietorship or majority shares 
of an LLC should be  held by Sri Lankan citizens, although certain exceptions may apply64; a 
current account at a Sri Lankan bank and a guarantee of not less than 10% of the paid -in capital; 
adequate business facilities; employ ing a minimum of three professionally qualified st aff; and 
employ ing tour guides that are trained and licensed by the SLTDA.65 Licensing of tour guides and 
chauffeurs follows after a training course at the tourism training centre.  
4.109.   Travel agency licences for air travel are issued by the Civil Aviation Autho rity (CAA)  
pursuant to the Air Navigation (Special Provisions) Act No. 55 of 1992. Any person, partnership, or 
company that is an air transport service provider must be issued such a licence to operate. There 
are two types of licences, "A" or "B" depending  on the stated capital/capital contribution : 
Rs 500,000 or higher  for type "A" , and Rs 250,000 to Rs 500,000  for type "B" , thus a minimum of 
Rs 250,000 is necessary to establish a travel agency in Sri Lanka. Other requirements for the 
licence are an appoin tment letter from an airline or similar designating the agent, two IATA/UFTA A 
qualified staff members, sufficient office space, business registration certificate, and certification 
letter of bank guarantee if required.66 
                                                
61 Gazette  of 6 September 1999 , No. 1096/6.  
62 Gazette of 20 April 2016,  No. 1968/28.  
63 Sri Lanka Tourism Development Authority online information. Viewed at: http://www.sltda. lk/sites/ 
default/files/registration/Guidelines_Marksheet -Tourist%20Hotels.pdf . 
64 If in business longer than 10 years, the SLTDA may waive this requirement.  
65 Sri Lanka Tourism Development Authority online information. Viewed at: 
http://www.sltda.lk/sites/default/files/Guidelines -MINIMUM_REQUIREMENTS.pdf . 
66 CAA online information. Viewed at: 
http://www.caa.lk/index.php?option=com_content&view=article&id=492&Itemid=1078&lang=en . WT/TPR/S/ 347 • Sri Lanka  
 
- 101 - 
 
  4.110.   Pursuant to Sri Lanka's  Tourism Deve lopment Strategy 2011 -16, Sri Lanka planned to 
issue new regulations or guidelines to bring certain aspects of the tourism sector in line with 
international standards or best practices. These include new regulations/guidelines on: adventure 
sports centres,  apartment hotels, camping sites, cruise liners/luxury vessels, eco lodges, elephant 
safari, guest houses, heritage hotels, house boats, home stay units, boutique hotels and villas, 
Ayurvedic hotels/centres, professional event organizer s, restaurants, safa ri tours by vehicles, spa 
and wellness centres, spice gardens, tourist bungalows, tourist hotels, tourist shops, travel 
agencies, and whale and dolphin watching.67 As of June 2016, these new regulations were in the 
process of being finalized.  
4.111.   The Government  imposes price controls in the form of minimum room rates for star 
classed Colombo hotels in 2016.68 According to the authorities, there are no other prices controls 
in the sector.  
4.4.1.6   Incentives  
4.112.   In order to attract investment into the sector, Sri Lanka has est ablished a "One Stop Unit " 
(OSU) for national investment in tourism. The Unit is a specialized unit set up under the Sri Lanka 
Tourism  Development Authority which  has specialized staff from various government agencies that 
coordinate activities such as app rovals, submitting applications, obtaining licences , and identifying 
projects. The OSU provides fast -track government approvals, liaises with  the BOI on incentive 
schemes, recommends visas, and coordinates building plan approvals69 (see Section 2.4.4 for 
investment incentives).  
4.113.   Sri Lanka Customs provides duty waivers on goods imported for construction or 
refurbishing of tourist hotels, subject to the approval of the Secretary to the Treasury.70 These are 
pursuant to tourism projects through BOI incentive sche mes. 
4.114.   Sri Lanka has established five tourism zones to help encourage investment and 
development of the tourism sector.71 These zones concentrate development in certain areas for 
environmental and other reasons, and provide infrastructure and facilitate paper work.  
4.115.   Tourist establishments that are registered with the SLTDA are exempt from the 3% Nation 
Building Tax (NBT).72 
4.4.1.7   GATS commitments  
4.116.   Sri Lanka has undertaken some GATS commitments in the sector, in particular for hotel 
and lodging services, and for travel a gencies and tour operators. For hotel and lodging services, 
limitations on market access exist for mode 4, as regards labour, immigration, and customs laws. 
Modes 1 and 2 remain unbound and there are no other limitations listed for the subsector. The 
travel agency and tour operator subsector has similar limitations for mode 4 pursuant to labour, 
immigration, and customs laws, while only mode 2 remains unbound; other modes have no 
limitations.  
                                                
67 Sri Lanka Tourism Development Authority online information. Viewed at: http://www.sltda.lk/sites/ 
default/files/English.pdf . 
68 Economynext online information. Viewed at: 
http://www.economynext.com/news_details_print.php?id=4228 . 
69 Sri Lanka Tourism De velopment Authority online information. Viewed at: 
http://www.sltda.lk/Tourism_Investment . 
70 Sri Lanka Customs online information. Viewed at: www.customs.gov.lk/highlights/NPCfi.pdf . 
71 Sri Lanka Tourism Development Authority online information. Viewed at: 
http://www.sltda.lk/tourism_zones . 
72 Sri Lanka Tourism Development Authority online info rmation. Viewed at: 
http://www.sltda.lk/Benefits_of_registering_at_sltda . WT/TPR/S/ 347 • Sri Lanka  
 
- 102 - 
 
  4.4.2   Financial services  
4.4.2.1   Overview  
4.117.   Sri Lanka's financial sector has cont inued to show improved performance, reflecting the 
underlying economic performance and supportive prudential regulatory measures undertaken in 
recent years. There has been further strengthening and stability compared to relatively higher 
volatility emanati ng from domestic and global developments.  
4.118.   There were several developments in the sector since the last review. The rate of income 
tax applicable to profits of any branch of a commercial bank was amended and as of June 2016 
was 28%.73 There was a repeal of t he DFCC Bank Act 74 and amendments to the Recovery of Loans 
by Banks Act75 and Prevention of Money Laundering Act.76 The DFCC Bank Act was repealed to 
facilitate a proposed merger among three banks; however only the merger of DFCC and DFCC 
Vardhanda has taken  place. Amendments to the Recovery of Loans by Banks Act included changes 
to the interpretation of the term Bank within the meaning of the Banking Act and amending the 
parate execution provisions to apply to loans of an amount higher than Rs 5 million. The  National 
Payment Platform and National Digital Identity initiatives were launched as part of the 2016 
Budget.77 
4.119.   Total assets of major financial sectors of the economy increased steadily over the period to 
Rs 13.6 trillion in 2015, thus the sector more than  doubled in size since 2010. The banking sector 
remains the largest, accounting for about 70% of the total financial sector. The next largest sector 
is contractual savings institutions and other deposit taking financial institutions (Table  4.19).  
Table 4.19 Overview of the financial sector, 2010 -15 
(Rs billion)  
 2010  2011  2012  2013  2014  2015  
Banking sector  4,527  5,376  6,377  7,188  8,442  9,503  
Other deposit taking financial institutions  295 427 621 756 857 1,042 
Specialized financial institutions  354 339 310 378 441 544 
Contractual savings institutions  1,179  1,299  1,430  1,633  1,854  2,108  
Insurance companies  219 271 323 366 421 465 
 Total  6,574  7,712  9,061  10,320  12,015  13,662  
Source:  Insurance Board of Sri Lanka,  Statistical Review , 2014 and 2015.  
4.4.2.1.1   Banking  
4.120.   Sri Lanka's banking sector comprises licensed commercial banks (LCB) and licensed 
specialized banks (LSB); together they dominate the financial system and LCBs in particular 
account for more than half of Sr i Lanka's financial system (Tables 4.19 and 4.20). About half of 
LCBs are foreign banks, although the number of branches of foreign banks is considerably l ower 
than the number of branches of domestic banks; i.e. 220 versus 2,694 (Table  4.20). Increased 
demand for credit increased the asset growth and improved the financial performance of banks in 
recent years.  
4.121.   The banking sector is highly concentrated, thus the stability of the financial system is 
primarily dependent on the performance and strength of the s ix largest LCBs, i.e. two state banks 
and the four largest domestic commercial banks.  
4.122.   A number of regulatory policies were introduced in 2015 to further strengthen the risk 
management and public confidence in the banking sector. Banks were required to impl ement the 
Liquidity Coverage Ratio under Basel III Liquidity Standards, and a maximum loan -to-value ratio 
of 70% for loans for motor vehicles was invoked. Further, a consultation paper on the 
implementation of Basel III minimum capital requirements and lev erage ratio was issued to banks 
                                                
73 Inland Revenue (Amendment) Act No. 8 of 2012.  
74 Viewed at: http://www.srilankalaw.lk/D/dfcc -bank-repeal -and-consequential -provisions -act.html . 
75 Viewed at: http://documents.gov.lk/actspg/act2011 -1.html . 
76 Viewed at: http://documents.gov.lk/actspg/act2011 -2.html . 
77 Viewed at: http://nation.lk/online/2015/11/20/ summary -of-2016-budget -proposals.html . WT/TPR/S/ 347 • Sri Lanka  
 
- 103 - 
 
  and the final standard on the same will be issued in due course, in line with the international 
timeline.  
4.123.   A Direction on Supervisory Review Process (Pillar 2 of Basel II) was issued requiring banks 
to implement an Internal C apital Adequacy Assessment Process and to maintain adequate capital 
above the minimum regulatory capital requirement under Pillar 1 to cover their exposure to all 
risks. Starting from 1 July 2014, banks were given the option to move to the Standardized 
Approach or the Alternative Standardized Approach to compute the capital charge for operational 
risk. In addition, the risk management framework of banks was further strengthened in areas such 
as integrated risk management, outsourcing of business operations,  exposure to the stock market, 
foreign exchange trading activities, stress testing, and information security management.  
4.124.   In mid -2015, the supervisory approach for banks was improved to be more risk sensitive 
and proactive. The new approach focuses on banki ng business models to identify potential risks 
that may affect the efficiency and sustainability of banks.  
4.125.   The Sri Lanka Deposit Insurance and Liquidity Support Scheme was established in 2010 
and covers deposits of both banks and licensed finance companies . With effect from 1 January 
2015, the deposit insurance coverage per depositor per institution was increased from Rs 200,000 
to Rs 300,000.  
4.126.   At present, the Central Bank of Sri Lanka focuses on creating an enabling environment to 
encourage market -driven fi nancial sector consolidation to enhance financial system stability. In 
addition, the 2016 Budget has proposed to merge a few small government -owned banks.  
Table 4.20 Overview of the banking sector, 2010 -15 
 2010 2011  2012  2013  2014  2015  
Total assets ( Rs billion):  
Central bank  977 1,123  1,279  1,246  1,471  1,426  
Licensed commercial banks (LCB)  2,975  3,578  4,356  5,022  5,884  6,974  
Licensed specialized banks (LSB)  576 674 743 919 1,087  1,103  
Distribution of bank s and branches:  
No. of LCBs  22 24 24 24 25 25 
 Domestic  11 12 12 12 13 13 
 Foreign  11 12 12 12 12 12 
No. of LCB branches  2,365  2,601  2,719  2,792  2,893  2,914  
 Domestic  1,424  1,533  2,510  2,582  2,672  2,694  
 Foreign  46 48 220 221 221 220 
No. of LSBs  9 9 9 9 9 7 
No. of LSB branches  600 624 637 645 652 624 
Source:  Central Bank of Sri Lanka, Annual Report 2015 . 
4.4.2.1.2   Insurance  
4.127.   The insurance sector has undergone substantial liberalization and deregulation over the 
last decade and has exhibited continued expansio n, reaching a growth of 16.12% in total 
premiums in 2015. As of 2015, the insurance sector had 30 insurance companies, 57 insurance 
brokers, and over 45,000 insurance agents.78 The insurance market is highly concentrated with the 
two largest companies accou nting for about 60% of total assets. While the sector has expanded, 
with total premium income increasing from Rs 66 billion in 2010 to Rs 122 billion  in 2015, the 
sector remains small, accounting for only 3.4% of total financial sector assets (Tables 4.19 and 
4.21).  
4.128.   Limits on foreign equity participation in insurance firms and brokers were removed in 2002 
and the State ceased operation in the market until a Supreme Court challenge annulled the 
privatization of Sri Lanka Insurance Corporation (SLIC)  – thus t his entity is owned and operated by 
the State (Ministry of Public Enterprise Development) and has a dominant position as the largest 
and strongest insurance provider for life, motor, and general insurance in Sri Lanka.  
                                                
78 Insurance Board of Sri Lanka,  Annual Report 2014 . WT/TPR/S/ 347 • Sri Lanka  
 
- 104 - 
 
  4.129.   The Insurance Board of Sri Lanka (IB SL) is the sector's regulator. Both domestic and 
foreign insurers must be locally incorporated under the Companies Act (2007) and be registered 
with the IBSL. Minimum capital requirements and solvency margins apply equally to domestic and 
foreign insurers. Sri Lanka does not allow cross -border supply of insurance, except for health, and 
employer's liability insurance. The IBSL allows registered insurers to obtain insurance cover for 
their directors and other employees from foreign insurers not registered in Sri Lanka.  
4.130.   The IBSL has introduced a risk -based supervision system and has proposed a 
comprehensive revision of the regulations of the Insurance Industry Act in order to enhance its 
supervisory framework. The proposed changes to the regulations involve: st rengthening the 
powers to issue directions on enhanced capital requirements; making rules and determinations; 
engaging in dispute resolution; prescribing criteria for board of director s' members; and requiring 
that life and general insurance businesses be conducted in separate incorporated entities. Most of 
the provisions under the risk -based supervision system became operational in 2016.  
4.131.   In 2011, the Regulation of Insurance Industry Act was amended. The main element was 
the requirement for insurance compan ies to segregate their life and non -life insurance businesses 
into separate legal entities.79 
Table 4.21 Insurance sector statistics, 2010 -15 
(Rs million)  
 2010  2011  2012  2013  2014  2015  
Long-term insurance  31,152 35,162  37,477  41,676  44,596  53,575  
General insurance  35,101  46,929  53,213  58,284  60,803  68,815  
Total premium income  66,253  82,091  90,690  99,960  105,399  122,390  
Growth rate in total premium (%)  15.12  17.62  10.48  10.22  5.44 16.12  
Penetration % (total  industry premium as 
a % of GDP)  1.18 1.14 1.04 1.04 1.01 1.09 
Insurance density (total premium income/ 
population) Rs  3,208  3,934  4,440  4,857  5,074  5,838  
Source:  Insurance Board of Sri Lanka,  Statistical Review , 2014 and 2015.  
4.132.   Also, as part of the insur ance sector, the Sri Lanka Export Credit Insurance Corporation 
(SLECIC) was established by Act No.  15 of 1978 as a government organization providing export 
credit insurance and export credit guarantee facilities for Sri Lankan exporters and presently 
functions under the Ministry of Finance. The SLECIC offer s a variety of export credit insurance 
policies based on the requirements of exporters to reduce repayment risks on foreign receivables 
resulting from political or commercial events (see also Section 3.2. 5). 
4.4.2.1.3   Capital markets  
4.133.   Securities market regulation in Sri Lanka is established pursuant to the Securities and 
Exchange Commission of Sri Lanka (SEC) Act No. 36 of 1987,  as amended, to develop the 
Sri Lankan capital market to complement the banking sector as a mode of fundraising and 
investment. The objectives of the SEC, as the regulator of the securities market, are to protect 
investors, ensure that markets are fair, efficient and transparent, and reduce systemic risk. The 
SEC regulates registered market int ermediaries and licensed stock brokers, stock dealers, and 
management companies of unit trusts. Sri Lanka's capital market is still developing as its market 
capitalization to GDP ratio was 26.3% at the end of 2015 (Table 4.22).  
4.134.   In 2012, the SEC, Colombo St ock Exchange (CSE), and other key industry stakeholders 
launched a Capital Market Development Road  Map to help develop the sector. The road map 
included the following initiatives: attract ing more funds (both local and foreign); increas ing 
liquidity; develo ping the corporate debt market; develop ing new products ( i.e. derivatives and 
commodities); grow ing the unit trusts' market; promot ing education and awareness; 
strengthen ing risk management; demutualiz ing the stock exchange; and develop ing a trading 
                                                
79 Regulation of Insurance Industry (Amendment) Act No. 3 of 2011.  WT/TPR/S/ 347 • Sri Lanka  
 
- 105 - 
 
  infras tructure.80 Furthermore, as part of this initiative, the SEC was working toward amending the 
SEC Act to accommodate the changes from the road map as well as to introduce other changes. 
Upon passage, the amendments will align SEC governance with IOSCO (Inter national Organization 
of Securities Commissions) standards; introduce civil and administrative penalties; extend the 
jurisdiction of the SEC to all public offers of securities including to the unlisted securities market; 
incorporate legal provisions to reg ulate a demutualized stock exchange, govern a clearing house 
and dis -apply insolvency laws to provide bankruptcy remoteness to the clearing house; impose 
mandatory reporting duties to the SEC on auditors if they detect financial irregularities in their 
audits of companies within the purview of the SEC; and introduce provisions on the protection of 
whistle -blowers and sha ring of information. As of June  2016, the amendments were consolidated 
into a draft law and were being refined with an enactment target of end-2016.  
Table 4.22 Capital market indicators, as of June 2016  
  
Market (Colombo Stock Exchange)   
Market capitalization  Rs 2,775.3 billion  
Listed companies  294 
Market turnover  Rs 261,707,673  
Share volume  15,670,888  
Number of investors  604,826  
Foreign participation  Rs 85 billion  
Net foreign out flowa Rs 2,157.7 million  
Licensing and registration  Number of entities licensed, as of Feb. 2016  
Stock exchanges  1 
Stockbroking companies  35 
Stock dealing companies  15 
Managing companies of unit trusts 14 
Unit trust funds 79 
Investment managers  34 
Margin providers  32 
Underwriters  9 
Credit rating agencies  2 
Clearing houses 1 
a As of March 2016.  
Source:  SEC online information. Viewed at: http://www.sec.gov.lk/wp -content/uploads/SEC -AR-2014-
English -Final_2 -2.pdf; CSE online information. Viewed at: https://www.cse.lk  and 
https://www.cse.lk/pdf/CSE_Annual_Report_2014.pdf ; and information provided by the authorities.  
4.135.   In 2013, the CSE launched "Invest Sri Lanka – Investor Forums " in order to attract more 
foreign investors;  subsequently, foreign purchases reached a record level of Rs 104.7 billion in 
2014, falling slightly to Rs 85 billion in 2016. For share  investments,  institutions incorporated 
outside Sri Lank a and individuals resident outside Sri Lank a may buy or sell up  to 100% of the 
issued shares of a listed company subject to certain restrictions; the SEC grants approvals subject 
to compliance with exchange control regulations, the Prevent ion of Money Laundering Act No.  5 of 
2006, the Financial Reporting Transactions Act No. 6 of 2006, and the laws relating to securities. 
For ordinary shares, permission is granted for the issuance of shares by companies incorporated in 
Sri Lanka by persons resident outside Sri Lanka subject to certain exclusions, limitations and 
condit ions.81 
4.136.   Other developments during the review period include establishment of a central 
counterparty (CCP) for financial stability by addressing asset commitment and settlement risks in 
the market. The CCP is expected to significantly minimi ze the risk of se ttlement failure and 
counterparty risk while enabling the introduction of new products to the capital market. There are 
five phases for the project to establish the CCP ; it entered the second phase in late 2015 and is 
expected to be operational at the end of 2016. The CSE is  in the process  of demutualization by 
                                                
80 SEC online information. Viewed at: http://www.sec.gov.lk/wp -content/uploads/LBR -CEO-Forum -
Final5.pdf . 
81 The exclusions relate to firms conducting money lending, pawn broking, retail trade of a capital of less 
than US$1 million , personal services other than export or tou rism, and coastal fishing. Limitations are imposed 
on the per cent of issued capital of the company, generally at 40% , but it can be higher in the case of  a 
BOI-approved investment. Furthermore,  limitations for certain sectors, e.g. air transport, coastal shipping, 
industrial undertaking s, large -scale gem mining, and lotteries , are only up to the per cent of issued capital on 
which approval has been granted by the Government of Sri Lanka.  WT/TPR/S/ 347 • Sri Lanka  
 
- 106 - 
 
  converting the CSE from a mutual company owned by its members into a company owned by 
shareholders. The proposed demutualization will segregate ownership and management from the 
trading rights of the  members, and draw a distinction between the CSE's commercial and 
regulatory functions. The draft law is due to be presented to Parliament after passage of the SEC 
Act amendments.  
4.4.2.1.4   GATS commitments  
4.137.   Sri Lanka made a number of GATS commitments in the financia l and insurance sectors. 
According to the authorities, the applied regime for insurance remains the same, and thus the 
GATS commitments reflect the current situation in Sri Lanka. Total foreign participation in the 
share capital of a licensed bank incorpor ated or established in Sri Lanka is permitted up to 100%. 
Regulatory requirements exist for the employment of expatriate staff in banks.  
4.4.3   Telecommunications services  
4.138.   Sri Lanka's  telecommunication sector continued to experience  significant growth during the 
review period, mainly due to growth in the mobile telephone subsector, which has also contributed 
to economic progress in the country. The sector has been described as mature compared to others 
in the region due to  a high level of saturation. It is noted t hat the sector has attracted a significant 
amount of FDI for telecom infrastructure development in recent years, thus contributing to its 
technological advancement.82 Although there are a number of foreign participants, the national 
telecom operator, Sri La nka Telecom, in which the majority of shares are owned by the State, 
remains a significant market player in telecom services.  
4.4.3.1   Statistical overview  
4.139.   Sri Lanka's  telecommunication sector continued to follow global trends during the review 
period, with increas ed growth in the cellular and internet spheres, while payphones and wireless 
local loop services declined. Wireline telephone services showed modest growth, as did the overall 
telephone penetration rate. The penetration rate for cell phones reached ov er 10 0 per 
100 persons, and internet penetration more than doubled during the review period (Table  4.23).  
Table 4.23 Telecommunications indicators, 2010 -15 
 2010  2011  2012  2013  2014  2015  
Fixed access services (1,0 00) 3,578           3,608  3,449  2,707  2,710  2,601  
Wireline telephones in service  897 942 999 1,062  1,123  1,128  
Wireless local loop telephones  2,638  2,667  2,450  1,645  1,587  1,473  
Cellular phone subscribers (1,000)  17,267  18,319  20,324  20,315  22,123  24,38 5 
Other services        
Public payphones  6,958  6,458  6,983  6,788  6,642  5,809  
Internet connections (1,000)  502 844 1,366  2,009  3,396  4,091  
Telephone penetration 
(connections per 100 persons)  99 106.1  117 112.4  119.6  128.7  
Fixed telephones  17 17.5 17 13.2 13.1 12.4 
Cellular phones  82 88.6 100 99.2 106.5  116.3  
Internet penetration  2.38 4.09 6.7 9.8 16.4 19.5 
Source:  Ministry of Finance of Sri Lanka online information. Viewed at: 
http://www.treasury.gov.lk/images/depts/fpd/docs/reports/annualreport/2013/chapters/Chapter5.p
df, http://www.treasury.gov.lk/ reports/annualreport/2012/5 -FiscalDevelopments.pdf , and 
http://www.treasury.gov.lk/images/depts/fpd/docs/reports/annualreport/2014/full/a nnualReport -
2014E.pdf ; Central Bank of Sri Lanka, Annual Reports ; Central Bank of Sri Lanka online information . 
Viewed at: 
http://www.cbsl.gov.lk/pics_n_d ocs/10_pub/_docs/statistics/other/econ_&_ss_2015_e.pdf ; and 
information provided by the authorities.  
                                                
82 Telecommunications Regulatory Commission of Sri Lanka, Annual Repor ts. WT/TPR/S/ 347 • Sri Lanka  
 
- 107 - 
 
  4.4.3.2   Framework  
4.140.   Sri Lanka's  main regulatory body continued to be the Telecommunications Regulatory 
Commission of Sri Lanka (TRCSL). It has a broad mandate with respect to issuance of licences  to 
operate telecommunication systems in Sri Lanka, issuance of licences  for the use of radio 
frequency and radio frequency emitting apparatus, issuance of vendor licences  and licences  to 
operate private networks, determining  tariffs, formulating pricing policies, responding to customer 
complaints and conducting investigations, and monitoring and ensuring compliance with 
telecommunications laws and regulations. It maintains policies on frequency allocation, towers, 
and numberi ng. 
4.141.   The TRCSL operates pursuant to the Sri Lanka Telecommunications Act No. 25 of 1991, its 
amendments, and regulations. The main elements of the Act include the provision of granting 
licences  to operate, the authority to maintain technical standards, and the ability to enforce and 
issue penalties.  
4.142.   The Information and Communication Technology Agency (ICTA) of Sri Lanka works on 
development aspects of the ICT sector by increasing accessibility and facilitating communication, 
in particular in rural communitie s. The ICTA is working towards a d igitally inclusive Sri Lanka by 
2018 through the e -Sri Lanka programme as sponsored by the World Bank. It aims to improve 
access to ICT in the country to improve economic and social development.  
4.143.   Sri Lanka's  newly created Ministry of Telecommunication and Digital Infrastructure is 
tasked with formulating and implementing national policy on telecommunications and digital 
infrastructure. The Ministry is working on a Road Map 2017 -20 to provide for new scenarios and 
developmen t of the telecommunications sector.  The last telecommunications policy of the 
Government is from 2010 and its main aim was to have well established telecommunications 
facilities for the country.83 It also strived to strengthen private sector partnerships, u pgrade 
telecommunications services, and minimize regional disparity.  
4.144.   The importation of telecommunications equipment and cellular telephones requires an 
import control licence  pursuant to the Import s and Export s (Control ) Act No. 1 of 1969. All such 
equipm ent requires a recommendation letter from the Telecommunication Regulatory Commission  
to be attached to the documentation submitted for the issuance of the import control licence . Such 
licensing is for type approval.  
4.145.   In 2015, Sri Lanka became the first cou ntry in South Asia to join the Budapest Convention 
on Cybercrime.  
4.4.3.3   Developments  
4.146.   Developments during the period include the introduction of the Telecommunications Levy 
in 2011, which was further revised in 2013 and 2014.84 The levy was introduced to have one 
composite tax applied to telecommunications services. The levy replaced all other taxes, including 
VAT, NBT, Environment Conservation Levy and Mobile Subscribers ' Levy, in order to simplify the 
tax structure for telecom. The rates applied were modified dur ing the period to have a lower rate 
for internet services compared to telecommunications services and to further raise the rate on 
telecommunications services; the rates are currently 10% on the value of supply of internet 
services, and 25% on the value of  supply of telecommunication services.  
4.147.   During the period, the TRCSL launched an E-Agriculture Strategy with the Ministry of 
Agriculture in order to address challenges that impact the ICT sector regarding  development of the 
agricultural sector and to harnes s the ICT potential of Sri Lanka in achieving its agricultural goals. 
This strategy was developed following a fram ework proposed by the FAO -ITU E -Agriculture 
Strategy Guide. To date, an e –agriculture task force has been  set up comprising various 
                                                
83 TRCSL online information. Viewed at: http://www.trc.gov.lk/images/pdf/PolicyFramework.pdf . 
84 Telecommunications Levy Act of 2011 . Viewed at:  http://www.srilankalaw.lk/Volume -
VIII/telecommunication -levy-act.html ; Telecommunications Levy Amendment Act 2013 . Viewed at: 
http://documents.gov.lk/Acts/2013/Telecommunication%20Levy%20(Amendment)%20Act%20No.%2008%20
0f%202013/Act%20No.%2008%20E.pdf ; and Telecommunications Levy Amendment Act 2014 . Viewed at: 
http://www.srilankalaw.lk/gazette/2014_pdf/11.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 108 - 
 
  government  departments and the project is receiving technical assistance from the FAO and  the 
ITU. 
4.148.   Developments in 2012 included a new FM broadcast frequency plan that improved 
reception and increased accessibility . In 2013, the TRCSL established regulations for the quality of 
fixed and mobile voice services. More recently, in December 2015, the TRCSL commenced review 
of the telecommunication sector licensing framework with the help of the ITU. The operators also 
upgraded cabling systems and offered new 4G internet s ervices.85 
4.4.3.4   Structure  
4.149.   Up until 2002, Sri Lanka's  international and voice telecommunication services were 
controlled by the state monopoly Sri Lanka Telecom (SLT); it still operates as a government 
provider of telecommunications services under the Ministry of  Telecommunication and Digital 
Infrastructure. During the last decade, the telecommunications service sector has opened up to 
several providers in most subsectors (Table 4.24). However, most of these remained static or were 
reduced during the review period ; for example, the mobile sector continued to have  five operators, 
and the number of fixed access providers decreased from four to three. There are fewer providers 
of internet services and external gateway operators.  
Table 4.24 Cumulative licences  granted under Section 17 of the Sri Lanka 
Telecommunications Act No. 25 of 1991, as of December 2015  
Category of service  Number of licences  
Fixed access telephone service  3 
Cellular mobile phones  5 
Data communicat ions (facility based)  3 
Data communications (non -facility based) and ISPs 9 
Trunk mobile radio  1 
External gateway operators  7 
Direct -to-home satellite broadcasting service  4 
Cable TV distribution network  3 
Satellite services  1 
Leased circuit provide rs 1 
Licensed payphone service providers  1 
Total  38 
Source:  TRCSL online information. Viewed at: http://www.trc.gov.lk/2014 -05-13-03-56-46/statistics.html . 
4.4.3.5   GATS commitments  
4.150.   In 199 7, Sri Lanka made additional commitments in basic telecom in the post -Uruguay 
Round negotiations.86 For international voice services, limitations on market access were in place 
until 1999 with a monopoly guaranteed for SLT. Thereafter, an additional licence  was previewed 
dependent upon satisfactory progress on tariff rebalancing. Investment restrictions were with 
respect to a 35% foreign equity limit in SLT. For mobile cellular and wireless local loop services, 
limitations were with respect to operator licences, in which four and two were previewed 
respectively, however the matter was to be reviewed at a later date. For public payphone services, 
five service providers were scheduled, for radio paging services, five operator licences , and for 
data communicatio n services, six operator licences. For GMPCS services supplied through own 
gateways, the issuing of licences  was under consideration. Since the scheduling of these 
commitments, Sri Lanka has proceeded with liberalizing many of its telecom subsectors, thus the 
applied regime is more liberal than its GATS commitments.  
                                                
85 Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/statistics/other/econ_&_ss_2015_e.pdf . 
86 GATS/SC/79/Suppl.1.  WT/TPR/S/ 347 • Sri Lanka  
 
- 109 - 
 
  4.4.4   Transport services  
4.151.   Sri Lanka's geography and strategic location contribute to its growth as a trading hub, with 
its ports and related infrastructures serving to promote economic development  and international 
trade, and enhance Sri Lanka as a transhipment point for Asian trade. In contrast, the domestic 
transport sector is dominated by road transport, which provides the main infrastructure for the 
internal transport of goods and persons. The road  sector has unique challenges with intensified 
demand and what has been described as inadequate infrastructure. Sri Lanka has continued to 
invest heavily in recent years in both ports and roads so as to be a world -class hub for 
merchandise and to develop a nd repair its road infrastructure. Air and rail transport in Sri Lanka 
are dominated by national carriers. The railway network is in need of investment and 
rehabilitation, as it suffers from aging rolling stock and obsolete equipment, and operates with 
large losses that are then covered by state subsidies.87 
4.152.   The transport sector continues to be an important part of the economy and accounted for 
12.5% of GDP in 2015 (Table 1. 2). The Government has developed a strategy for the further 
development of the sector  that includes ensuring the availability of mode choices in transportation; 
providing efficient movement of passengers and goods to their final destination in a cost effective 
way; integrating transport planning with land use development of the country; in troduction of 
information technology to improve efficiency of transport sector operations and administration 
procedures; improving quality and reliability of the transport system; promoting multi -modal 
connectivity; ensuring qualified human resources for t ransport development; and proper regulation 
of para -transit. The sector remains important for economic growth and trade, as it facilitates the 
movement of inputs and goods, and an efficient transport network improves specialization and 
widens markets.  
4.4.4.1   Lega l framework  
4.153.   There are many laws and regulations impacting the transport sector and transport services 
in Sri Lanka (Table 4.25).  
Table 4.25 Main transport laws and regulations, 2016  
Law Overview  Viewed at:  
Ports and Airports Development 
Levy Act No. 18 of 2011  
 Creates an import levy on all articles 
originating outside Sri Lanka  http://www.srilankalaw.lk/Volu
me-VI/ports-and-airports -
development -levy-act.html  
 
Ports and Airports Development 
Levy (Amendment) Act No. 10 of 
2012 Defers the payment of the levy on 
imports of items for certain specified 
projects  
 http://www.srilankalaw.lk/gazet
te/2012_pdf/10.pdf  
National Thoroughfares Act No. 40 
of 2008  Provides for the planning, design, 
construction, development, 
maintenance and administration of 
the public road network  
 http://www.rda.gov.lk/supporte
d/aboutrda/RDA%20act.pdf  
Road Development Authority Act 
No. 73 of 1981  Provides for the establishment and 
function of the Road Development 
Authority  
 http://www.rda.gov.lk/supporte
d/aboutrda/act73.pdf  
Motor Traffic (Fees) Regulations 
2011 Fees for registration of vehicles  http://www.motortraffic.gov.lk/
web/index.php?option=com_co
ntent&view=article&id=175&Ite
mid=157&lang=en  
 
Ports and Airports Development 
Levy (Amendment) Act No. 5 of 
2013 Amends the 2011 Act so that certain 
processing, exportation, and re -
export activities are exempt from the 
levy 
 http://www.srilankalaw.lk/gazet
te/2013_pdf/05.pdf  
                                                
87 Institute of Policy Studies of Sri Lanka online information . Viewed at: 
http://www.ips.lk/images/Publication/policy_insight/2015/PI%20 -%20JWSJ.pdf .  WT/TPR/S/ 347 • Sri Lanka  
 
- 110 - 
 
  Law Overview  Viewed at:  
Motor Traffic Act No. 14 of 1951, 
and Motor Traffic (Amendment) Act  
No. 8 of 2009  Registration o f vehicles, drivers 
licences , licensing of driving schools 
and instructors  http://www.motortraffic.gov.lk/
web/index.php?option=com_co
ntent&view=article&id=167&Ite
mid=156&lang=en  
 
National Transport Commission Act 
No. 37 of 1991  Established the National Transport 
Commission  http://www.commonlii.org/lk/le
gis/num_act/ntc a37o1991396/  
 
Civil Aviation Act  No. 14 of 2010 Governs all civil aviation activities in 
Sri Lanka  http://www.srilankalaw.lk/Volu
me-II/civil -aviation -act.html  
 
Air Navigation ( Special Provisions) 
Act No.  55 of 1992  Repealed , except part II (Sec. 126 of 
CA Act No. 14 of 2010)  http://www.commonlii.org/lk/le
gis/num_act/anpa55o1992398/  
Source:  Compiled by the WTO Secretariat from the laws  indicated.  
4.4.4.2   Ports  
4.154.   Sri Lanka has long served as an important port in Southeast Asia due to its geographical 
location and proximity to trade routes. The Government has committed itself to continue to 
develop Sri Lanka as a region al and global shipping hub with further emphasis on port 
infrastructure and services as part of its development agenda.88 Colombo port ranked as the 
26th port in the world according to Alphaliner Research.89 Growing transhipment demand, in 
particular to neig hbouring India, Bangladesh, and Myanmar,  has provided growth to the sector as 
it remains competitive in terms of time and cost as a significant transhipment hub for the region.90 
4.155.   The Colombo Port expansion project improved facilities at the South Container Terminal 
and the East Container Terminal so as to allow for the new generation mega container ships. The 
Magam Ruhunupura Mahinda Rajapaksa (Hambantota) Port Project commenced operations in 
2010. Hambantota Port phase 2 is almost completed and will add sev en quays and a handling 
yard. The Oluvil Port commenced operations mainly as a fishing harbour. The Galle Port 
Development Project and Colombo Port City Project are other significant port development projects 
that have occurred during the review period. However, Colombo Port City project now comes 
under the Megapolis Development Plan. Furthermore, Sri Lanka's Hambantota and Colombo Ports 
were designated as free ports in mid -2013; this has helped enhance port sector activities. Foreign 
direct investment is p ossible under BOI concessions to generate port -related cargo and value 
addition within the port sector.  
4.156.   The Sri Lanka Ports Authority (SLPA)91 owns and manages all commercial ports in 
Sri Lanka92; it also operates bonded warehouses and container freight stat ions. Its main functions 
are to formulate, implement, and monitor policies on ports sector development and improvement 
of shipping services in Sri Lanka. Foreign operators can invest and operate in terminal facilities on 
a build-operate -transfer (BOT)/publ ic–private partnership (PPP) basis. Two private terminal 
operators are operating in Port of Colombo with the BOT/PPP model , and the Government of Sri 
Lanka encourages more private operators to operate container terminals on this basis. Despite the 
growing number of ships and increase in volume, SLPA has to re -pay large loans for infrastructure 
development. In an effort to attract more ships and improve Sri Lanka's  attractiveness, and make 
use of its strategic location, the SLPA and the Government invested b illions of rupees in port 
infrastructure development and new port development projects.  Despite the increasing volume of 
traffic, the SLPA ports reportedly operate with increasing financial losses and have certain 
inefficiencies.93 
                                                
88 Ministry of Highways, Ports, and Shipping , Annual Performance Report 2014 . Viewed at: 
https://www.parliament.lk/uploads/documents/paperspresented/performance -report -ministry -of-highways -
ports-and-shipping -2014.pdf . 
89 March 2016 Edition.  
90 JOC online information. Viewed at: http://www.joc.com/port -news/asian -ports/port -
colombo/colombo -breaks -through -south -asia%E2 %80%99s -next-big-transshipment -port_20151020.html . 
91 SLPA Act No. 51 of 1979.  
92 These include the ports of Colombo, Hambantota, Galle, Trincomalee, Kankasanturai, Oluvil, and Point 
Pedru.  
93 Economy next online information. Viewed at: http://www.economynext.com/news_details_print.php 
?id=1512 . WT/TPR/S/ 347 • Sri Lanka  
 
- 111 - 
 
  4.157.   Port statistics show an o verall increase in port activity during the period. While there have 
been small fluctuations in the numbers of ships arriving in Sri Lanka, the gross tonnage and 
container throughput figures showed a marked increase in port activity since 2010, thus in par t 
indicating the arrival of larger ships. New port developments in certain ports have allowed for 
more varied ships, i.e. oil tankers, ro -ro traffic, etc. in recent years. However, the vast majority of 
vessels remain container ships and Sri Lanka relies he avily on transhipment container throughput 
which accounts for around 75% of its traffic (Table 4.26).  
Table 4.26 Port statistics, 2010 -15 
. 2010  2011  2012  2013  2014  2015  
Port of Colombo        
Ship arrivals        
  Cargo ships        
  Container  3,076  3,187  3,092  3,142  3,239  3,643  
  Conventional  56 0 52 38 28 45 
  Other cargo  616 680 591 354 366 388 
  Ships for repairs  47 30 35 36 38 43 
  Ships bunkering  68 65 51 50 25 30 
  Other ships  47 94 49 47 46 48 
Total ships arrived  3,910  4,124  3,870  3,667  3,742  4,197  
Container throughput (TEUs)       
Imports  461,648  523,790  508,046  516,102  567,580  608,200  
Laden  415,291  487,901  466,661  476,982  518,951  573,518  
Empty  46,357  35,889  41,385  39,120  48,629  34,682  
Exports 470,596  523,096  512,209  515,875  559,405  609,771  
Laden  244,268  260,047  265,039  256,396  269,931  263,363  
Empty  226,328  263,049  247,170  259,479  289,474  346,408  
Transhipment  3,095,589  3,123,828  3,064,767  3,208,117  3,699,710  3,888,321  
Re-stowing  109,608  92,173  102,098  66,112  81,220  79,175  
Total TEUs  4,137,441  4,262,887  4,187,120  4,306,206  4,907,915  5,185,467  
Total cargo discharged 
(tonnes)  34,306,691  36,642,398  36,720,621  37,453,003  41,540,086  43,270,861  
Total cargo loaded 
(tonnes)  24,460,952  25,372,9 47 24,948,933  26,028,949  29,254,103  30,446,762  
Total cargo handled 
(tonnes)  58,767,643  62,015,345  61,669,554  63,481,952  70,794,189  73,717,623  
Vehicles handled by ro -ro ships       
No. of car carriers arrived  131 144 66 25 36 48 
No. of vehicles handled        
Domestic  45,779  90,824  38,886  6,651  21,296  71,738  
Transhipment  2,455  993 183 466 0 13 
Total  48,234  91,817  39,069  7117  21,296  71,751  
Port of Trincomalee        
Ship arrivals        
Cargo ships  96 114 139 113 120 158 
Ships for repairs  9 1 3 3 1 1 
Ships bunkering  0 3 6 6 1 2 
Other ships  4 8 13 12 5 3 
Total ships arrived  109 126 161 134 127 164 
Total cargo discharged 
(tonnes)  1,959,676  2,336,672  2,645,965  2,275,794  2,620,593  2,648,615  
Total cargo loaded 
(tonnes)  194,030  236,979  213,362  159,460  126,950  378,791  
Total cargo handled 
(tonnes)  2,153,706  2,573,651  2,859,327  2,435,254  2,747,543  3,027,406  
Port of Galle        
Ship arrivals        
Cargo ships  35 52 52 31 46 62 
Ships for repairs  6 5 3 1 0 1 
Ships bunkering  3 2 8 0 5 1 
Other ships  4 14 6 4 9 8 
Total ships arrived  48 73 69 36 60 72 
Total cargo discharged 
(tonnes)  317,633  463,519  421,665  199,848  393,607  539,957  
Total cargo loaded 
(tonnes)  410 253 8 6,692  370 1,820  
Total cargo handled 
(tonnes)  318,043  463,772  421,673  206,540  393,977  541,777 
Ports of Kankasanturai, Myliddy, Point Pedro and Karainagar     
Ship arrivals        
Cargo ships  8 26 44 48 34 32 
Ships for repairs  0 0 0 0 0 0 WT/TPR/S/ 347 • Sri Lanka  
 
- 112 - 
 
  . 2010  2011  2012  2013  2014  2015  
Ships bunkering  0 0 0 0 0 0 
Other ships  0 0 0 0 0 0 
Total ships arrived  8 26 44 48 34 32 
Total cargo d ischarged 
(tonnes)  11,387  28,414  59,814  49,347  21,204  31,685  
Total cargo loaded 
(tonnes)  0 0 0 0 0 0 
Total cargo handled 
(tonnes)  11,387  28,414  59,814  49,347  21,204  31,685  
Port of Magam Ruhunupura Mahinda Rajapaksha (Hambantota)   
Ship arrivals        
Cargo ships  0 6 33 136 269 278 
Ships for repairs  0 0 0 1 0 2 
Ships bunkering  0 0 0 0 63 7 
Other ships  0 3 1 2 3 8 
Total ships arrived  0 9 34 139 335 295 
Total cargo discharged 
(tonnes)  0 5,058  17,081  89,870  315,563  195,061  
Total cargo loaded 
(tonnes)  0 10,330  2,635  28,709  158,449  97,520  
Total cargo handled 
(tonnes)  0 15,388  19,716  118,579  474,012  292,581  
Vehicles handled by ro -ro ships       
No. of car carriers arrived  0 0 31 134 253 276 
No. of vehicles handled        
Domestic  0 0 6,511  26,458  37,92 3 69,195  
Transhipment  0 0 4,338  38,064  160,502  116,257  
Total  0 0 10,849  64,522  198,425  185,452  
All ports        
No. of ships  4,075  4,358  4,178  4,024  4,298  4,760  
Cargo discharged 
(tonnes)  36,595,387  39,476,061  39,865,146  40,067,862  44,891,053  46,686,179  
Cargo loaded (tonnes)  24,655,392  25,620,509  25,164,938  26,223,810  29,539,872  30,924,893  
Total cargo throughput  61,250,779  65,096,570  65,030,084  66,291,672  74,430,925  77,611,072  
Note:  Number of ships exclud es sailing crafts, naval vessels, fishing trawl ers, barges and dredgers etc.  
Source:  Information provided by the authorities.  
4.4.4.3   Air 
4.158.   Sri Lanka's  air transport sector has seen continual growth in recent years, in large part due 
to an increase in tourism and trade. Passenger arrivals and departures have gro wn at nearly the 
same rate, with an overall growth of over 50% between 2010 and 2015. Cargo transport has seen 
irregular  growth , but an overall increase during the review period, with the cargo discharge growth 
rate outpacing cargo uplifts (Table 4.27). Th e national carrier, Sri Lankan Airlines, continued to be 
the dominant player in both air passenger and cargo markets during the period; in 2014 , 
Sri Lankan Airlines accounted for 50% of all cargo traffic and 53% of passenger traffic.94 Many of 
Sri Lanka's  codeshare partners significantly increased their operations to Sri Lanka pursuant to 
their air service agreements in recent years, thus reflecting the growth in the passenger transport 
subsector, especially with respect to increasing the diversity of connec ted cities.  
Table 4.27 Air Transport, 2010 -15 
 2010  2011  2012  2013  2014  2015  
Passengers:        
Arrivals  2,657,532  3,095,089  3,590,122  3,690,047  3,893,400  4,273,959  
Departures  2,609,237  3,079,126  3,554,969  3,621,822  3,926,447  4,252,619  
Total 5,266,769  6,187,683  7,145,091  7,311,842  7,819,847  8,526,578  
Cargo (metric tons):        
Uplift  101,207  95,411  108,043  119,447  115,400  116,585  
Discharge  59,631  63,161  66,602  71,776  77,040  98,446  
Total 160,838  158,667  174,645  191,224  192,440  215,031  
Source:  CAA, Annual Report 2014 . Viewed at: http://www.caa.lk/images/ stories/pdf/annual_report 
 /AR2014.pdf ; CAA, Annual Report 2012 . Viewed a t: http://www.caa.lk/images/stories 
 /pdf/annual _report/caa_annual_report_2012.pdf ; and information provided by the authorities.  
                                                
94 CAA, Annual Report 2014 . Viewed at: 
http://www.caa.lk/images/st ories/pdf/annual_report/AR2014.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 113 - 
 
  4.159.   During the review period, Sri  Lanka improved its air transport capacity with investments in 
infrastructure, and has more plans for expansion in the future. Through the government -owned 
enterprise, Airport and Aviation Services (Sri Lanka) Ltd . (AASL), the Government manages and 
develo ps the civil airports in Sri Lanka. Its main airport, Bandaranaike International Airport (BIA), 
has been operating over its stated capacity of 6 million passengers per annum (PPA), and has 
plans to increase capacity by 9 million PPA by 2019 with the help o f an international loan from 
Japan.95 In 2013, commercial operations commenced at Sri Lanka's second international airport, 
Mattala Rajapaksa International Airport (MRIA), although due to low demand the airport is served 
by only two airlines. AASL also prov ides air cargo services for Sri L anka with a capacity of 
250,000  metric tonnes at its main airport, BIA.  
4.160.   Sri Lanka's  Civil Aviation Authority, created in 2002 as a result of the Civil Aviation Act96, is 
Sri Lanka's  main regulatory authority for aviation in the country. It has many roles in addition to 
its main role in air transport safety, including certification of new training schools, surveillance of 
flying schools, licensing, registration, and aviation security. The Ministry of Transport and Civil 
Aviati on is responsible for the overall policy of the sector.  
4.161.   Establishment and registration of airlines in Sri Lanka can be done only in terms of the 
provisions of Section 87 of the Civil Aviation Act No. 14 of 2010. These provide that airline licences  
for dom estic or international commercial air transportation in Sri Lanka are only available to : 
Sri Lankan citizens ; a registered body of persons having its principal place of business in Sri Lanka 
and in which at least 51% of the share capital is owned by Sri La nkan citizens ; or any person or 
body of persons approved by the Cabinet of Ministers. However, foreign airlines may operate  
flights to Sri  Lanka in respect of the terms of a bilateral air services agreement.  
4.162.   For computer reservation services, marketing and  selling of air transport services, aircraft 
repair and maintenance, ground handling services, and airport management services, Sri Lanka 
does not have any restrictions or limitations on foreign participation in these subsectors but they 
are subject to obt aining the required licensing and approvals. However, Sri Lanka does have 
licensing requirements for travel agents ( Section 4.4.1).  
4.163.   Since its last review, Sri Lanka has signed 83 new or updated bilateral air service s 
agreements. These agreements mainly con tain provisions for the granting of rights, designation 
and authorization, revocation or suspension of operating authorization, capacity, tariffs, taxes, 
customs duties and other charges, currency conversion and remittance of earnings, aviation 
safety, avi ation security, and settlement of disputes.  
4.4.4.4   Rail 
4.164.   Sri Lanka Railways (SLR), a 100% government -owned entity, is the sole authority in 
respect of the administration, operation and maintenance of the rail transport service sector in the 
country ; the establishm ent of any operations in the rail sector by any other institution would have 
to be authorized by the relevant ministry and be approved by higher authorities. The current policy 
of the SLR is to provide an improved passenger and freight transport service to  the public by 
increasing the present fleet of locomotives, diesel multiple units, passenger coaches and other 
rolling stock to provide additional trains; expand the existing network of tracks to encompass 
major towns, ports and airports; provide modern si gnalling/telecommunication systems; and 
improve passenger facilities in trains and at stations. Sri Lanka is currently relying on foreign 
grants and loans to improve the rail network and services. For the rail service, passenger usage 
has increased in rece nt years from 4.6 billion passenger -kilometres  in 2011 to 7.4 billion 
passenger -kilometres  in 2015 , while freight traffic has declined, from 153 million ton -kilometres  in 
2011 to 130 million ton-kilometres  in 2015. Freight traffic faces competition from th e road 
transport sector. Inefficiencies of integration with other forms of transport, especially 
loading/unloading facilities, and lack of investment have hindered the sector in recent years.  
                                                
95 Airport and Aviation Services (Sri Lanka) Ltd ., Annual Report 2014 . Viewed at: 
http://www.airport.lk/aasl/business_info/2014_annual_rpt.pdf . 
96 Act No. 34 of 2002.  WT/TPR/S/ 347 • Sri Lanka  
 
- 114 - 
 
  4.4.4.5   Roads  
4.165.   As an island nation, Sri Lanka's  road network is self -contained and there is no international 
transport by road. However, the country is highly dependent on the road network for its internal 
transport needs, in particular freight movements where it accounts for about 97% of this traffic, 
and for the movement of persons, both in public and private transport.97 Although there is a 
relatively high road density, especially in comparison to other developing countries, Sri Lanka's 
roads are characterized as having overdue maintenance, being poorly planned and not up to 
today's standards, having safety and congestion issues, and not being able to keep up with 
growing demand.98 Thus, Sri Lanka has recognized the need for further investment in the road 
transport sector, and the BOI has targeted the sector for additiona l inve stment promotion 
(Section  2.4.4).99 
4.4.4.5.1   Infrastructure and policy  
4.166.   The road sector has many entities involved in its organization, development, and provision 
of transport services; sometimes without clear demarcation. The Ministry of Higher Education and 
Highway s is responsible for programmes and policies regarding highways, including the rural road 
development programme; between 2010 -15 the Ministry of Highways, Ports, and Shipping  (now 
the Ministry of Ports and Shipping)  was responsible. The Road Development Au thority (RDA) has 
responsibilities for the maintenance and development of the national highways and for the 
planning, design, and construction of new highways, bridges and expressways to augment the 
existing network.  
4.167.   Overall, the Ministry of Transport over sees the Motor Traffic Act and National Transport 
Commission Act, and the Department of Motor Traffic is responsible for vehicle registration and 
licences . Since its establishment in 2010, the Ministry of Private Transport Services promotes 
efficient and c omfortable passenger transport services, and oversees the National Transport 
Commission which has the main oversight of inter-provincial  private passenger transport. The 
Sri Lanka Transport Board (SLTB) continues to operate public passenger bus services th roughout 
the country. In the road construction sector, there continue to be three state -owned enterprises  – 
Maganeguma Construction Company, Maganeguma Consultancy Company, and Maganeguma 
Emulsion Company  – responsible for road construction and rehabilitat ion in Sri Lanka; they 
operate under the Ministry of Higher Education and Highways.  
4.168.   In 2007, Sri Lanka created a "National Road Master Plan, 2007 -17" (NRMP  2007-2017), for 
the first time creating a long -term plan for the network and also addressing in deta il the long 
neglected rehabilitation due to lack of adequate resources.100 It also emphasized the importance 
that an efficient road network played in terms of trade competitiveness, especially as Sri Lanka's 
manufacturing industry was increasingly integrated  in international value chains and was moving 
towards greater containerized cargo on Sri Lanka's roads. However, the NRMP was formulated 
during the internal conflict  and the requirements of the north-eastern provinces have not been 
considered adequately. Furthermore , since 2010, the Government has implemented many projects 
outside the Master Plan while some of the interventions identified were not implemented. At 
present , the RDA is in the process of preparing the "National Road Master Plan, 2017 -27" (NRMP  
2017-2027) and due consideration will be given to address all the requirements in a sustainable 
manner within the prevailing policy framework.  
4.169.   The highway development plan is comprised of two main points  – rehabilitation of the 
existing network and develop ment of a high mobility network  – with the overall objective of 
sustaining and enhancing general welfare, promoting economic growth, eradicating poverty, and 
strengthening social cohesion. In addition to the six main elements considered in the previous 
NRMP (namely, construction of expressways and highways, widening of highways to three different 
standards, reduction of traffic congestion, road maintenance and rehabilitation, bridge 
                                                
97 Asian Development Bank  (2012) , Sector Assistance Program Evaluation:  The Asian Development 
Bank's Support for the Transport Sector in Sri  Lanka . Viewed at: http://www.oecd.org/d erec/50582596.pdf . 
98 World Bank  (2013) . 
99 BOI online information. Viewed at: 
http://www.investsrilanka.com/images/publications/pdf/Investment_Guide_2014.pdf . 
100 Road Development Authority online information. Viewed at: 
http://www.rda.gov.lk/supported/noticeboard/publications/nrmp_executiveSummary.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 115 - 
 
  rehabilitation and reconstruction, and land acquisition and resettlement ), road safety and 
facilitating public transport requirements will be given top priority. However , it is noted that 
construction of expressways and widening of highways are the two principal areas accounting for 
over 65% of expected investments.  
4.170.   At the time of its drafting in 2006, the NRMP  2007-2017 had an expected total cost of 
Rs 670 billion, or an average annual funding level of Rs 61 billion, with expected contributions of 
the Government of 45%, international financial institutions, 49%, and public –private partnerships, 
6%.101 In 2014 , new initiatives were introduced with the Intelligent Transport System (ITS) as a 
modern electronic messaging system to improve highway service, and the Integrated Road 
Investment Programme (iROAD) to improve the accessibility  of roads in rural areas. Projects were 
ongoing to connect major cities in the south with the construction of the Southern Expressway, 
Colombo with the airport through the Colombo –Katunayake Expressway, and the recently 
completed section of the Outer Circu lar Highway from Kottawa to Kadawatha. There was also 
implementation of the JICA Major Bridges Construction Project of the National Road Network, 
commencing construction of the extension of the Southern Highway from Matara to Hambantota, 
and starting const ruction for the Outer Circular Highway from Kadawatha to Kerawalapitiya.  
4.171.   Sri Lanka has so far relied heavily on foreign loans and credit to help build and rebuild its 
road network, as there is limited private investment in the sector. The Government of Sri  Lanka 
also contributes from 15% to 20% of the construction cost in addition to the land acquisition and 
resettlement costs. However, during the period 2007 -13, the budgetary allocation for routine 
maintenance and rehabilitation was chronically underfunded .102 The Asian Development Bank 
(ADB) has been involved in several road development projects for many years, and since 2005, 
the World Bank has provided financing to create an efficient national road system under the Road 
Sector Assistance Project (RSAP). An  initial credit of US$100 million was approved by the Bank for 
the project. RSAP Phase I and Phase II projects had been completed by 2016.  
4.172.   As of 2015, RSAP has rehabilitated and maintained 800 km of national roads and 160 km 
of rural roads, reduced the nat ional highways in poor condition from 52 % to 35%, and reduced 
average vehicle operating costs on highways from Rs 23.9/km to Rs 14.21/km.103 Between 
2010-13, the ADB has built or upgraded 634 km of expressways and national highways in 
Sri Lanka.104 The Export -Import Bank of China, Japan International Cooperation Agency (JICA), 
Economic Development Corporation Fund of Korea, Saudi Fund for Development, Kuwait Fund for 
Development, OPEC Fund for Development, UK Government financial assistance,  and French 
Governme nt financial assistance have also been involved in the financing or development of the 
road sector in Sri Lanka in recent years.  
4.173.   According to the authorities, Sri Lanka has developed the following strategies for the 
subsector:  
 managing the capacity and inv esting in capacity enhancements of roads to ensure a high 
level of service and user -friendly roads in each level of road administration (national, 
provincial and rural) to facilitate free flow of people and goods;  
 providing efficient mobility linking district capitals, key economic centres, and agro -
processing zones, industrial zones, ports and airports;  
 linking rural hubs to the closest urban centres;  
 improving mobility in urban areas while ensuring more space for walking and non -motorized 
transports; and  
 ensuring a sustainable road maintenance system.  
                                                
101 Road Develop ment Authority online information. Viewed at: 
http://www.rda.gov.lk/source/highway_development_plan.htm . 
102 World Bank online information. Viewed at: http://www -
wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/09/23/090224b0830fbf88/2_0/Render
ed/PDF/Di rections0and00transport0200502015.pdf . 
103 World Bank online information. Viewed at: http://www -
wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2015/09/23/090224b0830fbf88/2_0/Render
ed/PDF/Directions0and00transport0200502015.pdf . 
104 Asian Development Bank online information. Viewed at: http://www.adb.org/results/roads -and-
highways -sri-lanka . WT/TPR/S/ 347 • Sri Lanka  
 
- 116 - 
 
  4.174.   The road network of Sri Lanka is categorized as national, provincial, urban or rural , 
depending on function and ownership. National roads (Classes A and B) are under the purview of 
the RDA, provincial roads are the responsibility of the relevant Provincial Councils (Classes C and 
D), and Pradeshiya Saba and other local government roads are the responsibility of local 
governments. Since the last review period, the road network has remained relatively constant 
except for the development of expressways. In 2011 , the first expressways were built  and they are 
generally toll paying roads, but they account for less than 1% of the road infrastructure. 
Sri Lanka's  national highways (Class es A and B) make up about one  third of Sri Lanka's  road 
network but are responsible for about 70% of the traffic; however the majority of roads are local 
roads (Class C) (Table 4.28).105 
Table 4.28 Road network, 2011 -15 
(Kilometres)  
 2011  2012 2013  2014  2015  
Class Aa 4,219  4,219  4,219  4,215  4,215  
Class Bb 7,800  7,945  7,949  7,993  7,995  
Class Cc 11,424  11,304  11,669  11,837  .. 
Class Dd 6,356  6,287  6,726  7,193  .. 
Expressways  95 95 121 161 170 
Total  29,895  29,850  30,684  31,398  .. 
.. Not avai lable.  
a All roads within the network of trunk roads connecting the national capital with the provincial 
capitals and also connecting these capitals with one another. Also included are other major roads (all 
roads paved and bitumen surfaced with carriage w ay between 24  ft and 36 ft and platform width of 
36 ft to 56  ft). 
b Main roads connecting other important towns and also providing important links within the trunk 
route system (metalled and bitumen with a small percentage gravelled).  
c Other roads such as  agricultural roads and local roads (single carriage way of 12  ft width and a 
platform width of 22  ft, mostly metalled but with a small percentage gravelled).  
d Gravelled road with 8  ft to 10 ft width surface generally motorable during dry weather only.  
Source: Central Bank of Sri Lanka online information. Viewed at: 
www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/statistics/other/econ_&_ss_2015_e.pdf . 
4.4.4.5.2   Services  
4.175.   Traditionally, public passenger road transport was under the sole responsibility of the 
Ceylon Transport Board , until 1978 whereupon deregulation private buses were allowed to operate 
and compete with the public transport network. The Ceylon Transport Board was transformed 
several times before becoming the Sri Lanka Transport Board (SLTB) in 2005. The state owned 
and run SLTB continues to operate in rural and urban areas, often providing services in 
unprofitable areas; it also operates bus depots. The SLBT do es not cover its costs and receives 
subsidies or aid from the Government for about 30% of its operations.  
4.176.   The private sector has long competed with the SLTB and is an important supplier of 
passenger transport services in Sri Lanka. Pursuant to the National  Transport Commission Act 
(NTC), inter -provincial private omnibus transport has been regulated by the National Transport 
Commission, and provincial private omnibus transport by the respective provincial passenger 
transport authorities. The NTC regulates th e sector by establishing bus timetables, determining 
fares, issuing passenger service permits, setting standards, conducting inspections, and providing 
training.106 
4.177.   In 2013 , there were discussions to extend the reach of the National Transport Commission 
Act beyond the regulation of buses to other forms of transport, a process which is still ongoing.107 
Also, in 2011, amendments changed the legal structure of the private bus services by, for 
example, converting individual bus operators to limited liability compa nies, and converting 
                                                
105 World Bank online information. Viewed at: http://www -wds.worldbank.org/external/default/WDS 
ContentServer/WDSP/IB/2015/09/23/090224b0830fbf88/2_0/Rendered/PDF/Directions0and00transport02005
02015.pdf . 
106 National Transport Commission online information.  Viewed at: http://www.ntc.gov.lk/ . 
107 Ministry of Private Transportation Services online information. Viewed at: 
http://www.ptsmin.gov.lk/ind ex.php/en/downloads/publications . WT/TPR/S/ 347 • Sri Lanka  
 
- 117 - 
 
  individual route permits to omnibus management contracts, with expected benefits in improved 
services, safety, and work conditions.108 
4.178.   Other forms of passenger transport, such as taxis, three -wheelers, etc., are currently not 
regulated, although planned future changes would include them. According to the authorities, 
there are no restrictions in the Motor Traffic (Amendment) Act No. 8 of 2009 or other laws for 
foreigners or foreign companies to establish operations in the transportation s ervice sector.  
4.179.   As of 2010,  buses accounted for 68% of passenger transport services (in terms of total 
number of passengers), of which 55% was through the SLTB and 45% through private bus 
services.109 Passenger bus transport is increasingly dominated by priva te transporters, with an 
increase in the fleet, buses operated, operated kilometres, and passenger -kilometres during the 
period 2010 -15. Private transporters accounted for nearly 80% of passenger -kilometres in 2014. 
In contrast, the SLTB bus fleet steadily  declined during the period under review, as did the number 
of buses operated; operated kilometres and passenger -kilometres increased slightly (Table 4.29). 
SLBT buses tend to operate in more rural areas and on less economical routes, and they also 
provide  a higher per cent of the school bus services.110 
Table 4.29 Bus operations, 2010 -14 
 2010  2011  2012  2013  2014  
Private (inter - and intra -provincial)      
Bus fleet  19,805  19,699  20,444  19,651  20,421  
Buses oper ated 15,884  16,602  17,129  17,067  18,534  
Operated km (million)  765.3  799.9  825.3  847.2  1,041.8  
Passenger -km (million)  40,178  41,993  43,327  44,478  48,130  
SLTB       
Bus fleet  8,352  7,790  7,745  7,603  7,003  
Buses operated  5,407  5,333  5,191  5,081  5,222  
Operated km (million)  .. 339.5  337.8  342.8  371.2  
Passenger -km (million)  11,815  11,907  11,909  12,201  12,717  
.. Not available.  
Source:  Ministry of Private Transport Services online information. Viewed at: 
http://www.ptsmin.gov.lk/index.php/en/information/statistics ; Ministry of Transport online 
information. Viewed at: 
http://www.transport.gov.lk/web/index.php?option=com_content&view=article&id=175&Itemid=11
4&lang=en ; Ministry of Transport online information. Viewed at: 
http://www.transport.gov.lk/web/index.php?option=com_content&view=article&id=310&Itemid=18
0&lang=en ; and Central Bank of Sri Lanka online information. Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/statistics/other/econ_&_ss_2015_e.pdf . 
4.180.   In contrast to passenger transport, Sri Lanka's road freight transport is handled by private 
companies and is not regulated. It is a subsector that h as traditionally had very little regulation or 
oversight, except with respect to vehicle registration and size limitations. There has been a steady 
growth in the registration of motor lorries over the review period, from 282,033 lorries registered 
in 2010 to 319,001 in 2016, thus reflecting the growth in Sri Lanka's freight transport sector.111 
Sri Lanka's  National Transport Policy 2009 set out to improve mobility within the country, including 
that for the transport of goods.  
                                                
108 NTC, Annual Report 2011 . Viewed at: 
https://www.parliament.lk/uploads/documents/papersprese nted/annual_report_national_transport_commissio
n_2011.pdf . 
109 Ministry of Private Transport Services, Progress Report 2013 . Viewed at: 
http://www.ptsmin.gov.lk/index.php/en/downloads/publications . 
110 Ministry of Private Transport Services, Progress Report 2013 . Viewed at: 
http://www.ptsmin.gov.lk/index.php/en/downl oads/publication . 
111 Department of Motor Traffic online information. Viewed at: 
http://www.motortraffic.gov.lk/web/images/stories/document/pop2015.pdf . WT/TPR/S/ 347 • Sri Lanka  
 
- 118 - 
 
  4.4.4.6   GATS and FTA commitments  
4.181.   Sri Lan ka has not undertaken any GATS commitments in the transportation services 
sector. Under the SAARC Agreement on Trade in Services  (SATIS ), Sri Lanka has undertaken 
commitments to liberalize the space transport subsector.  WT/TPR/S/ 347 • Sri Lanka  
 
- 119 - 
 
  REFERENCES  
Airport and Aviation Ser vices Limited (2014), Annual Report . Viewed at: 
http://www.airport.lk/aasl/business_info/2014_annual_rpt.pdf  
 
Asian Development Bank  (2012) , Sector Assistance Program Evaluation:  The Asian Development 
Bank's Support for the Transport Sector in Sri  Lanka . Viewed at: 
http://www.oecd.org/derec/50582596.pdf . 
 
Central Bank of Sri Lanka, Annual Report 2015 . Viewed at: 
http://www.cbsl.gov.lk/pics_n_docs/10_pub/_docs/efr/ 
annual_report/AR2015/English/content.htm . 
 
Ceylon Fertilizer Company  (2014), Annual Report . Viewed at: 
http://www.lakpohora.lk/web/images/stories/pdf/anunuals/anu12014.pdf . 
 
Civil Aviation Authority (2014) , Annual Report . Viewed at: http://www.caa.lk/images/stories/pdf/ 
annual_report/AR2014.pdf . 
 
Department of National Planning, Ministry of Finance and Planning  (2010), Mahinda Chint ana – 
Vision for the Future . Viewed at: http://www.adb.org/sites/default/files/linked -documents/cps -sri-
2012-2016-oth-01.pdf . 
 
Ministry of Finance of Sri Lanka (2014), Annual Report . Viewed at:  
http://www.treasury.gov.lk/web/guest/home/ -
/search/view?_3_redirect=%2F&_3_keywords=annual+report&x=0&y=0 . 
 
Ministry of Fisheries and Aquatic Resources Development, Fisheries sector development strategy, 
2010-2013. Viewed at: http://www.fisheries.gov.lk/doc_files/130625062842.pdf . 
 
Ministry of Private Transport Services, Progress Report 2013 . Viewed  at: 
http://www.ptsmin.gov.lk/index.php/en/downloads/publications . 
 
National Transport Commission ( NTC), Annual Report  2011. Viewed at: https://www.parliament.lk/ 
uploads/documents/paperspresented/annual_report_national_transport_commission_2011.pdf . 
 
Price Waterhouse Coopers. Viewed at: http://www.pwc.com/lk/en/pwc -budget -2016-
summary.html . 
 
Sri Lanka Customs information. Viewed at: http://www.customs.gov.lk/tariff/xid160527 .pdf. 
 
United Nations Economic and Social Commission for Asia and the Pacific, Asia Pacific Trade 
Agreement . Viewed at: 
http://www.unescap.org/sites/default/files/01 _APTA%20Brochure_20140820.pdf . 
 
World Bank  (2013) , Investing in Infrastructure: Harnessing its Potential for Growth in Sri Lanka . 
Viewed at: http://documents.worldbank.org/curated/en/2013/06/17836301/investing -
infrastructure -harnessing -potential -growth -sri-lanka . 
 
World Shipping Council (2016), Top 50 world container . Viewed at: 
http://www.worldshipping.org/about -the-industry/global -trade/top -50-world -container -port. 
 
 WT/TPR/S/347 • Sri Lanka  
 
- 120 - 
 
  5  APPENDIX TABLES  
Table A1. 1 Merchandise exports by group of products, 20 10-15 
  2010  2011  2012  2013  2014  2015  
Total exports (US$ million)  8,304.1  10,011.3  9,369.8  10,004.9  11,295.5  10,439.7  
 (% of total)  
Total primary products  31.9 30.8 30.3 30.1 31.6 29.9 
   Agriculture  30.8 29.8 29.2 29.1 28.4 27.6 
    Food 26.9 25.7 25.9 26.5 25.8 25.1 
     0741 Tea  16.5 14.7 15.0 15.3 14.2 12.7 
     0752 Spices (except pepper and pimento)  1.7 1.9 1.8 2.1 1.5 1.9 
     0577 Edible nuts fresh  or dried 0.8 1.4 0.9 0.9 1.9 1.7 
     0751 Pepper of the genus Piper; fruits of the 
genus Capsicum/Pimenta  0.5 0.3 0.8 1.3 0.6 1.4 
   Agricultural raw material  3.9 4.0 3.3 2.6 2.6 2.5 
   Mining  1.0 1.1 1.1 0.9 3.2 2.3 
    Ores and other minerals  0.4 0.3 0.5 0.3 0.3 0.3 
    Non-ferrous metals  0.4 0.3 0.2 0.4 0.3 0.3 
   Fuels 0.2 0.4 0.4 0.3 2.6 1.8 
Manufactures  66.5 69.2 69.4 69.7 68.2 70.1 
   Iron and steel  0.0 0.0 0.1 0.0 0.0 0.0 
   Chemicals  1.2 1.4 1.5 1.5 1.5 1.6 
   Other semi -manufactures  12.0 13.3 13.3 13.0 11.1 9.6 
      6259 Other tyres , tyre  flaps and inner tubes, 
etc. 2.4 3.6 3.6 3.5 3.2 2.9 
      6672 Diamonds (excl. industrial, sorted) not 
mounted/set  3.6 3.8 3.5 3.1 1.7 1.3 
   Machinery and transport equipment  5.3 5.3 6.1 4.5 5.6 6.4 
   Power generating machines  0.0 0.0 0.3 0.1 0.1 0.1 
   Other non -electrical machinery  0.7 0.9 1.2 1.0 1.1 0.9 
     Agricultural machinery and tractors  0.0 0.0 0.0 0.0 0.0 0.0 
      Office machines and  telecommunication 
equipment  0.2 0.1 0.2 0.1 0.5 0.3 
    Other electrical machines  2.3 2.1 2.0 1.9 2.1 1.9 
    Automotive products  0.1 0.1 0.2 0.2 0.2 0.1 
    Other transport equipment  2.1 2.0 2.1 1.2 1.6 3.1 
   Textiles  2.1 2.0 2.4 2.4 2.4 2.7 
   Clothing  42.0 42.1 42.7 45.1 43.5 45.7 
     8448 Underwear, nightwear, etc., 
knitted/crocheted  4.9 4.8 4.7 5.1 4.8 5.4 
     8455 Brassieres, gir dles, corsets, braces, etc.  3.9 4.0 4.5 4.9 4.7 5.3 
     8454 T -shirts, singlets and other vests, knitted 
or crocheted  4.2 4.1 3.8 4.0 4.4 4.3 
      8442 Suits, ensembles , jackets, dresses, etc.  2.9 3.3 3.5 4.3 4.0 4.2 
      8414 Trousers, bib and brace  overalls, breeches 
and shorts  4.2 4.1 3.9 3.8 3.6 3.4 
      8426 Trousers, breeches, etc., women 's/girls ', 
not knitted/crocheted  4.6 3.9 4.0 3.6 3.2 3.1 
      8469 Other made -up clothing accessories  2.0 2.1 2.1 2.3 2.1 2.2 
      8415 Shirts  1.6 1.5 1.7 1.8 1.9 2.0 
      8451 Babies ' garments and clothing accessories  1.2 1.2 1.4 1.6 1.7 2.0 
      8453 Jerseys, pullovers, cardigans, etc., 
knitted/crocheted  1.7 1.4 1.2 1.5 1.7 1.9 
      8482 Articles of apparel and clothing 
accessories, of plastics/vulc anized rubber  1.7 1.9 2.0 2.0 1.7 1.7 
      8427 Blouses/shirts, women' s/girls ', not 
knitted/crocheted  1.2 1.3 1.2 1.4 1.4 1.6 
      8438 Underwear, nightwear, bathrobes, etc.  1.1 1.3 1.4 1.7 1.5 1.6 
   Other consumer goods  3.9 5.1 3.2 3.2 4.0 4.0 
Other 1.6 0.0 0.4 0.3 0.3 0.0 
 
Source : UNSD, Comtrade database (SITC Rev.3).  WT/TPR/S/347 • Sri Lanka  
 
- 121 - 
 
  Table A1. 2 Merchandise imports by group of products, 2010 -15  
  2010  2011  2012  2013  2014  2015  
Total imports (US$ million)  12,353.7  19,696.5  17,884 .9 17,930.8 19,244 .5 18,967 .2 
 (% of total)  
Total primary products  35.2 36.1 35.5 38.1 39.1 30.7 
  Agriculture  16.7 14.5 12.7 13.2 14.8 15.3 
    Food 15.2 12.9 11.4 11.9 13.2 13.1 
      0412 Other wheat (including spelt) and meslin, unmilled  1.9 2.3 1.8 1.8 1.9 1.7 
     0222 Milk and cream, concentrated or sweetened  2.0 1.7 1.6 1.5 1.7 1.2 
     0542 Leguminous vegetables, dried, shelled  1.5 0.9 0.7 0.9 0.9 1.2 
     0612 Other beet or cane sugar and chemically pure sucrose, 
in solid form  2.7 2.0 1.8 1.4 1.2 1.2 
    Agricultural raw material  1.4 1.6 1.3 1.3 1.6 2.2 
  Mining  18.5 21.6 22.8 24.9 24.3 15.3 
    Ores and other minerals  0.5 0.5 0.5 0.5 0.5 0.5 
    Non-ferrous metals  1.3 0.9 0.9 1.0 1.0 0.9 
    Fuels 16.7 20.2 21.4 23.4 22.8 14.0 
      3330 Crude oils of petroleum and bituminous minerals  6.1 6.9 7.2 7.5 7.0 4.0 
      3442 Gaseous hydrocarbons, liquefied, n.e.s.  1.0 0.9 1.2 1.1 1.0 0.8 
      3212 Other coal, whether or not pulverized, not 
agglomerated  0.1 0.6 0.7 0.7 0.8 0.8 
Manufactures  64.1 60.8 62.9 60.5 60.8 69.1 
   Iron and steel  3.0 2.8 3.9 3.1 3.4 3.5 
      6726 Semi -finished iron/steel products <0.25% carbon  0.6 0.7 1.4 1.1 1.3 1.4 
   Chemicals  11.2 9.9 10.1 10.1 10.5 11.6 
      5429 Medicaments, n.e.s.  1.2 1.3 1.5 1.6 1.5 1.8 
      5621 Mineral or chemical fertilizers, nitrogenous  1.1 1.2 1.0 0.8 1.0 0.9 
   Other semi -manufactures  10.2 9.4 10.0 10.7 9.6 10.0 
      6612 Portland cement and similar hydraulic cements  1.5 1.8 2.2 2.9 2.7 2.6 
      6911 Structures (excluding prefa bricated buildings of group 
811) and parts of structures  0.3 0.3 0.4 0.8 0.5 0.8 
   Machinery and transport equipment  21.4 23.7 22.4 21.1 21.1 27.2 
    Power generating machines  1.1 1.1 1.7 1.1 1.0 0.9 
    Other non -electrical machinery  5.3 5.6 5.9 6.3 5.5 6.4 
      Agricultural machinery and tractors  0.7 0.7 0.6 0.5 0.3 0.6 
    Office machines and  telecommunication equipment  3.0 3.6 3.8 3.9 3.4 4.3 
      7643 Transmission apparatus for radio -telephony, 
television, etc.  0.3 0.6 0.5 0.6 0.7 1.2 
    Other electrical machines  2.5 2.1 2.6 2.5 2.0 2.2 
    Automotive products  6.6 8.6 6.4 5.2 6.4 10.3 
      7812 Motor vehicles for the transport of persons, n.e.s.  3.6 4.7 2.8 3.3 4.2 6.8 
      7821 Goods vehicles  1.7 2.8 2.4 1.0 1.1 2.0 
    Other transpor t equipment  2.9 2.7 2.0 2.2 2.8 3.0 
      7851 Motorcycles and side -cars, etc.  1.2 0.9 0.7 0.6 1.1 1.3 
   Textiles  13.9 11.3 12.2 10.9 11.6 11.5 
      6552 Other knitted/crocheted fabrics, not 
impregnated/coated, etc.  3.8 3.4 3.7 3.4 3.7 3.6 
      6524 Other fabrics, of 85% finished cotton >200  g/m2  2.0 1.7 1.5 1.3 1.2 1.1 
      6532 Fabrics ≥85% synthetic fibres, excl. pile/ chenille  0.7 0.6 0.8 0.7 0.8 0.9 
   Clothing  0.9 0.8 1.0 1.0 1.3 1.8 
   Other consumer goods  3.3 2.9 3.3 3.4 3.3 3.5 
Other  0.7 3.1 1.6 1.4 0.1 0.3 
Source:  UNSD, Comtrade database (SITC Rev.3).  WT/TPR/S/347 • Sri Lanka  
 
- 122 - 
 
  Table A1. 3 Merchandise exports by destination, 2010 -15  
  2010  2011  2012  2013  2014  2015  
Total exports (US$ million)  8,304.1  10,011.3  9,369.8  10,004.9  11,295.5  10,439.7  
 (% of total)  
  America  24.6 25.1 26.7 29.3 28.2 31.3 
    United States  21.3 21.4 22.6 24.9 24.1 26.8 
    Other America  3.3 3.7 4.1 4.4 4.1 4.5 
      Canada  1.1 1.3 1.5 1.5 1.5 1.7 
      Mexico  0.7 1.0 1.1 1.0 1.0 1.0 
Europe  38.0 38.2 36.8 36.2 35.0 32.1 
  EU-28 35.0 35.6 34.1 32.8 31.2 29.1 
       United Ki ngdom  12.3 11.1 11.3 10.8 9.9 9.8 
       Germany  4.8 5.1 4.9 4.7 4.5 4.6 
       Italy 5.6 6.1 5.5 5.1 5.4 4.2 
       Belgium  4.7 5.5 5.0 4.6 2.8 2.7 
       Netherlands  2.2 2.0 1.8 1.9 2.2 2.1 
       France  1.9 1.8 1.9 1.9 2.5 1.9 
  EFTA 1.0 1.1 1.2 1.4 1.4 1.2 
       Switzerland  0.8 0.9 1.0 1.2 1.3 1.0 
   Other Europe  2.0 1.5 1.6 2.0 2.4 1.8 
    Turkey  2.0 1.5 1.5 1.9 2.3 1.7 
  Commonwealth of Independent States (CIS)  4.5 4.3 4.3 4.2 3.6 2.7 
      Russian Federation  2.9 2.8 2.8 2.8 2.4 1.9 
  Africa 1.6 1.9 2.4 2.1 2.2 2.6 
  Middle East  9.8 9.4 9.3 9.4 8.8 8.8 
    United Arab Emirates  3.0 3.0 2.4 2.4 2.6 2.7 
    Iran, Islamic Rep ublic of  1.8 1.8 2.1 2.0 1.6 1.5 
    Israel  0.6 0.6 0.8 1.0 1.1 1.0 
    Iraq 0.6 0.9 0.9 0.9 0.8 1.0 
Asia 19.9 20.9 20.3 18.4 20.7 21.3 
  China  1.1 1.0 1.3 1.2 1.6 2.9 
  Japan  2.0 2.2 2.3 2.2 2.1 2.1 
  Other Asia  16.8 17.6 16.7 15.0 17.0 16.3 
       India 5.6 5.2 6.4 5.4 6.5 6.8 
       Australia  1.2 1.3 1.4 1.6 1.5 1.5 
       Hong Kong, China  1.4 1.1 1.2 1.3 1.3 1.2 
       Bangladesh  0.4 0.5 0.7 0.8 1.0 0.9 
  Other  1.6 0.1 0.2 0.3 1.6 1.2 
Source:  UNSD Comtrade database.  WT/TPR/S/347 • Sri Lanka  
 
- 123 - 
 
  Table A1. 4 Merchandise imports by origin, 2010 -15  
 2010  2011  2012  2013  2014  2015  
Total imports (US$ million)  12,353.7  19,696.5  17,884.9  17,930.8  19,244.5  18,967.2  
 (% of total)  
America  4.4 3.8 3.9 4.5 5.1 4.9 
   United States  1.4 1.5 1.3 2.0 2.6 2.5 
   Other America  3.0 2.3 2.5 2.5 2.6 2.4 
     Canada  2.0 1.7 1.7 1.6 1.6 1.5 
Europe  13.9 13.6 11.7 11.0 9.3 10.5 
   EU-28 12.4 9.8 10.0 9.3 8.3 9.5 
    United Kingdom  2.2 1.6 1.7 1.6 1.5 2.5 
    Germany  2.0 1.8 1.8 2.1 1.7 1.8 
    Italy 1.6 1.5 1.6 1.4 1.4 1.1 
    Belgium  2.1 2.1 2.0 1.2 0.5 0.8 
   EFTA 1.3 3.5 1.4 1.4 0.7 0.7 
   Other Europe  0.2 0.3 0.3 0.3 0.3 0.3 
  Commonwealth of Independent States 
(CIS)  0.2 0.6 1.2 1.3 1.5 1.5 
     Russian Federation  0.2 0.4 0.5 0.8 1.4 1.3 
  Africa  0.5 0.5 0.5 0.6 0.4 0.7 
  Middle East  11.3 14.5 17.3 13.9 12.7 8.4 
    United Arab Emirates  2.7 4.1 7.2 6.8 9.1 5.7 
    Oman  0.7 1.1 2.0 4.3 1.8 1.3 
Asia 69.7 66.8 65.1 68.4 71.0 73.9 
  China  10.1 10.8 14.4 16.5 17.7 19.7 
  Japan  4.7 5.2 3.1 3.7 4.9 7.3 
  Other Asia  54.9 50.8 47.6 48.1 48.3 46.9 
     India 20.6 22.1 19.7 17.4 20.7 22.5 
     Singapore  13.1 7.8 7.2 10.0 6.6 4.9 
     Malaysia  3.1 3.8 3.1 3.2 3.7 2.7 
     Thailand  2.6 2.5 2.6 2.4 2.4 2.6 
     Chinese Taipei  2.1 1.8 2.1 2.5 2.3 2.4 
     Indonesia  1.7 1.8 2.3 2.5 3.1 2.3 
     Hong Kong, China  4.7 3.6 3.3 2.4 1.8 2.0 
     Korea, Republic of  1.6 2.0 1.8 1.7 2.2 1.6 
     Pakistan  2.3 1.7 2.0 2.1 1.5 1.6 
     Australia  1.5 1.4 1.2 1.2 1.2 1.4 
     Viet Nam  0.4 0.5 0.6 1.0 1.0 1.3 
     New Zealand  0.6 1.4 1.4 1.2 1.3 1.0 
  Other  0.1 0.3 0.3 0.3 0.0 0.1 
Source:  UNSD, Comtrade database.  WT/TPR/S/347 • Sri Lanka  
 
- 124 - 
 
  Table A2. 1 Selected notifications to the WTO, 1 January 2010 -1 July 2016  
WTO 
Agreement  Description  Document symbol  Date  
Agreement on Agriculture  
Article s 10 and 
18.2; ES:1  Export subsidy commitments  G/AG/N/LKA/5  26/08/2015  
Article 18.2;  
DS:1 Domestic support  G/AG/N/LKA/3  
G/AG/N/LKA/4  
G/AG/N/LKA/4/Corr.1  11/07/2014  
25/06/2015  
05/11/2015  
Agreement on the Implementation of Article VII of the GATT 1994 (Customs Valuation)  
Article 22  National legislation  G/VAL/N/1/LKA/1  11/05/2015  
Article  22 Checklist of issues  G/VAL/N/2/LKA/1  11/05/2015  
Decision A.3  Notification of the treatment of interest 
charges  G/VAL/N/3/LKA/2  11/05/2015  
Decision A.4  Notification of valuation of carrier media  G/VAL/N/3/LKA/1  11/05/2015  
GATT 1994  
Article XXVIII:5  Invocation of paragraph 5 of Article XXVIII  G/MA/296  01/09/2014  
Agreement on Import Licensing  
Article 1.4(a) 
and/or 8.2(b)  Publication  G/LIC/N/1/LKA/2  19/02/2014  
Articles 5.1 -5.4 Notification of import licensing procedures  G/LIC/N/2/LKA/1  12/01/2015  
Article 7.3  Replies to the questionnaire  G/LIC/N/3/ LKA/2  19/02/2014  
Agreement on Sanitary and Phytosanitary Measures  
Article 7 
Annex  B Sanitary and phytosanitary regulations  Approximately 28 
notifications received, 
please see: 
http://www.wto.org/  
english/t ratop_e/sps_e/wor
k_and_doc_e.htm   
Agreement on Technical Barriers to Trade  
Article 2.9  Technical regulations  G/TBT/N/LKA/32  
G/TBT/N/LKA/33  21/01/2010  
29/01/2014  
Article 15.2  Implementation and administration of the 
Agreement  G/TBT/2/Add.27/Rev.1  01/04/ 2015 
Agreement on Trade -Related Aspects of Intellectual Property Rights  
Article 63.2  Checklist of issues  IP/N/6/LKA/1  15/01/2015  
Article 63.2  Laws and regulations  IP/N/1/LKA/2  
IP/N/1/LKA/C/2  
IP/N/1/LKA/I/2  26/08/2010  
31/08/2010  
Article 69  Members ' contact points  IP/N/3/LKA/1  15/01/2015  
Agreement on Trade -Related Investment Measures  
Article 6.2  Publications on TRIMs  G/TRIMS/N/2/Rev.24  
G/TRIMS/N/2/Rev.24/Add.3  
 15/09/2014  
23/12/2014  
Source:  WTO Secretariat.  WT/TPR/S/347 • Sri Lanka  
 
- 125 - 
 
  Table A2. 2 Inves tment protection agreements  
Partner  Date of entry into force  
Australia  14/3/2007  
Belgium -Luxembourg Economic Union  26/4/1984  
China  25/3/1987  
Denmark  4/6/1985  
Egypt  10/3/1998  
Finland  25/10/1987  
France  19/4/1982  
Germany  16/1/2004  
India 13/2/1998  
Indonesia  21/7/1997  
Italy 20/3/1990  
Japan  7/8/1982  
Republic of Korea  15/7/1980  
Malaysia  31/10/1995  
Netherlands  1/5/1985  
Norway  13/6/1985  
Pakistan  5/1/2000  
Romania  3/6/1982  
Singapore  30/9/1980  
Sweden  30/4/1982  
Switzerland  12/2/1982  
Thailand  14/5/1 996 
United Kingdom  18/12/1980  
United States  1/5/1993  
Source:  Information provided by the authorities.  WT/TPR/S/347 • Sri Lanka  
 
- 126 - 
 
  Table A3. 1 HS codes for which the MFN rate exceeds the bound rate  
    MFN rate  AVE Bound 
rate 
04079000  Other  Rs 100/= per  kg 73.4%  50.0%  
07031020  B' onions  Rs 20/= per k g 55.3%  50.0%  
10061000  Rice in the husk (paddy or rough)  Rs 35/= per kg  100.7%  50.0%  
10062000  Husked (brown) rice  Rs 35/= per kg  51.5%  50.0%  
10063000  Semi-milled or wholly milled rice, whether or not poli shed or glazed  Rs 35/= per kg  56.9%  50.0%  
10064000  Broken rice  Rs 35/= per kg  623.0%  50.0%  
22030000  Beer made from malt  Rs 500= per l  232.4%  50.0%  
22042100  In containers holding 2 l or less  Rs 400= per l  67.6%  50.0%  
22042900  Other  Rs 400= per l  55.6%  50.0%  
22051000  In containers holding 2 l or less  Rs 400= per l  75.3%  50.0%  
22060000  Other fermented beverages (for example, cider, perry mead); 
mixtures of fermented beverages and mixtures of fermented 
beverages and non -alcoholic beverages, not elsewhere specified or 
included  Rs 400= per l  119.0%  50.0%  
22071000  Undenatured ethyl alcohol of an alcohol ic strength by volume of 
80% or higher  Rs 400= per l  378.1%  50.0%  
22072010  Spirits denatured in accordance with regulations framed under the 
Excise Ordinance  Rs 400= per l  118.8%  50.0%  
22072090  Other  Rs 400= per l  157.1%  50.0%  
22082000  Spirits obtained by distilling grape wine or grape marc  Rs 2500/= per l  146.7%  50.0%  
22083000  Whiskies  Rs 2500/= per l  120.6%  50.0%  
22084010  Rum Rs 2500/= per l  210.0%  50.0%  
22084090  Other  Rs 2500/= per l  98.3%  50.0%  
22085000  Gin and Geneva  Rs 2500/= per l  207.8%  50.0%  
22086000  Vodka  Rs 2500/= per l  176.3%  50.0%  
22087000  Liqueurs and cordials  Rs 2500/= per l  179.5%  50.0%  
22089010  Coconut base arrack  Rs 2500/= per l  250.8 % 50.0%  
22089090  Other  Rs 2500/= per l  141.5%  50.0%  
24012000  Tobacco, partly or wholly stemmed/stripped  75%  50.0%  
24013000  Tobacco refuse  75%  50.0%  
24021000  Cigars, cheroots and cigarillos, containing tobacco  Rs 1,600/= per 
kg net weight  1225.2%  50.0% 
24022010  Beedies  75% or Rs 4,000 
per kg   50.0%  
24022020  Cigarettes  125%   50.0%  
24022030  Cigarettes  125%   50.0%  
24022040  Cigarettes  125%   50.0%  
24022050  Cigarettes  125%   50.0%  
24022060  Cigarettes  125%   50.0%  
24029000  Other  250% or 
Rs 1,600/= per 
kg gross weight   50.0%  
24031100  Water pipe tobacco  250% or 
Rs 1,600/= per 
kg gross weight   50.0%  
24031910  Pipe tobacco  250% or 
Rs 1,600/= per 
kg gross weight   50.0%  
24031920  Beedi tobacco  85%  50.0%  
24031990  Other  250% or 
Rs 1,600/= per 
kg gross weight   50.0%  
24039110  Pipe tobacco  250% or 
Rs 1,600/= per 
kg gross weight   50.0%  
24039190  Other  250% or 
Rs 1,600/= per 
kg gross weight   50.0%  
24039910  Pipe tobacco  250% or 
Rs 1,600/= per 
kg gross weight   50.0%  WT/TPR/S/347 • Sri Lanka  
 
- 127 - 
 
      MFN rate  AVE Bound 
rate 
24039990  Other  250% or 
Rs 1,600/= per 
kg gross w eight  50.0%  
48021000  Hand-made paper and paperboard  30%  25.0%  
53050011  Twisted  30%  25.0%  
53050012  Not twisted  30%  25.0%  
53050013  Bleached  30%  25.0%  
53050014  Dyed 30%  25.0%  
53050021  Mixed with animal hair and not twisted  30%  25.0%  
53050022  Other twisted  30%  25.0%  
53050023  Other not twisted  30%  25.0%  
53050030  Raw mixed fibre of coconut (coir) twisted  30%  25.0%  
53050041  Twisted  30%  25.0%  
53050042  Not twisted  30%  25.0%  
53050050  Raw fibre pith of coconut (raw format not processed)  30%  25.0% 
53050061  Twisted  30%  25.0%  
53050069  Other  30%  25.0%  
53050071  Moulded products for use in horticulture  30%  25.0%  
53050072  Tow, noils and waste  30%  25.0%  
53050079  Other  30%  25.0%  
53050081  Raw 30%  25.0%  
53050082  Tow, noils and waste  30%  25.0% 
53050089  Other  30%  25.0%  
53050094  Other tow and waste  30%  25.0%  
53050099  Other  30%  25.0%  
54072000  Woven fabrics obtained from strip or the like  15%  10.0%  
56012110  Wet cleansing tissues  30%  5.0%  
56012210  Wet cleansing tissues  30%  5.0%  
5601291 0 Wet cleansing tissues  30%  5.0%  
56072100  Binder or baler twine  30%  25.0%  
56072900  Other  15%  10.0%  
56074100  Binder or baler twine  30%  25.0%  
56074910  Imported for the manufacture of fishing nets  15%  10.0%  
56074990  Other  30%  25.0%  
56075010  Import ed for the manufacture of fishing nets  15%  10.0%  
56075090  Other  30%  25.0%  
56079020  Coir twine  30%  25.0%  
56079030  Coir rope  30%  25.0%  
56079040  Of jute or of other textile bast fibres of heading 53.03  30%  25.0%  
56079090  Other  30%  25.0%  
56081110  Of monofilament  15% or 
Rs 250/= per kg  10.0%  
56081190  Other  15% or 
Rs 250/= per kg  10.0%  
56081900  Other  30%  25.0%  
56089000  Other  30%  25.0%  
56090000  Articles of yarn, strip or the like  15%  10.0%  
57011000  Of wool or fine animal hair  15%  10.0%  
57019010 Coir carpets and rugs  15%  10.0%  
57019020  Jute carpets  15%  10.0%  
57019090  Other  15%  10.0%  
57021000  "Kelem", "Schumacks", "Karamanie" and similar hand -woven rugs  15%  10.0%  
57022010  Mats and rugs  15%  10.0%  
57022020  Mattings  15%  10.0%  
57022090  Other  15%  10.0%  
57023100  Of wool or fine animal hair  15%  10.0%  
57023200  Of man -made textile materials  15%  10.0%  WT/TPR/S/347 • Sri Lanka  
 
- 128 - 
 
      MFN rate  AVE Bound 
rate 
57023910  Jute carpets  15%  10.0%  
57023990  Other  15%  10.0%  
57024100  Of wool or fine animal hair  15%  10.0%  
57024200  Of man -made textil e materials  15%  10.0%  
57024900  Of other textile materials  15%  10.0%  
57025010  Of wool or fine animal hair  15%  10.0%  
57025020  Of man -made textile materials  15%  10.0%  
57025090  Of other textile materials  15%  10.0%  
57029100  Of wool or fine animal hair  15%  10.0%  
57029200  Of man -made textile materials  15%  10.0%  
57029900  Of other textile materials  15%  10.0%  
57031000  Of wool or fine animal hair  15%  10.0%  
57032000  Of nylon or other polyamides  15%  10.0%  
57033000  Of other man -made textile materials  15%  10.0%  
57039010  Jute carpets  15%  10.0%  
57039090  Other  15%  10.0%  
57041000  Tiles, having a maximum surface area of 0.3 m2 15%  10.0%  
57049010  Jute carpets  15%  10.0%  
57049090  Other  15%  10.0%  
57050000  Other carpets and other textile floor coverin gs 15%  10.0%  
58030000  Gauze, other than narrow fabrics of heading 58.06  30%  10.0%  
58041011  Of monofilament  15% or 
Rs 200/= per Kg   10.0%  
58041090  Other  15%  10.0%  
59031000  With poly(vinyl chloride)  15%  10.0%  
59080000  Textile wicks, woven, plaited  or knitted, for lamps, stoves  15%  10.0%  
84521010  Completely knocked -down, excluding furniture and stands  15%  5.0%  
84521090  Other  30%  25.0%  
85256000  Transmission apparatus incorporating reception apparatus  15%  5.0%  
85271900  Other  30%  25.0%  
85351000  Fuses  15%  5.0%  
85352100  For a voltage of less than 72.5 kV  15%  5.0%  
85352900  Other  15%  5.0%  
85353000  Isolating switches and make -and-break switches  15%  5.0%  
85354000  Lightning arresters, voltage limiters and surge suppressors  15%  5.0%  
85359000  Other 15%  5.0%  
85362000  Automatic circuit breakers  15%  5.0%  
85365030  Main switches of 24 a mp and over  15%  5.0%  
85365090  Other  30%  5.0%  
92093000  Musical instrument strings  15%  5.0%  
Note:  List might not be exhaustive as for some non -ad valorem  rates no AVEs is provided.  
Source:  Data provided by the authorities.  WT/TPR/S/347 • Sri Lanka  
 
- 129 - 
 
  Table A4. 1 Summary of the Special Commodity Levy, 2011 -15 
Date  Number of 
tariff lines  Products  Amount of levy  
22/09/2015  15 Soya 
bean/palm/sunflower/coconut/palm 
kernel/other oils  Rs 110 -145 per kg  
22/09/2015  1 B' onions  Rs 20 per kg  
08/09/2015  24 Potatoes  
B' onions  
Peas (whole)  
Peas (split)  
Chickpeas (whole)  
Chickpeas (split)  
Cowpeas  
Red and yellow lentils  
Seeds/grains  
Margarine/ other margarine  
Sugar  Rs 40 per kg  
Rs 10 per kg  
Rs 15 per kg  
Rs 18 per kg  
Rs 7 per kg  
Rs 10 per kg  
Rs 70 per kg  
Rs 2 per kg  
Rs 70 per kg  
Rs 175/275 per kg  
Rs 30 per kg  
21/07/2015  46 Maldive fish, sprats, green  gram, black 
gram, chillies, seeds of coriander, 
turmeric, black gram flour, soya bean 
oil, palm oil, sunflower oil, coconut oil, 
palm kernel oil, prepared fish, sugar  Ranging from Rs 10 to 360 p er 
kg, depending on the product   
18/06/2015  18 Red and yello w lentils  
Soya 
bean/palm/sunflower/coconut/other 
oils Rs 0.25 per kg  
Rs 105 -125 per kg  
06/06/2015  2 Potatoes  
B' onions  Rs 30 per kg  
Rs 10 per kg  
02/04/2015  37 Fresh/frozen fish  
 
Other dried fish  
Yogurt/buttermilk, cream  
Butter/dairy spreads/fats and oils  
Red onions  
Garlic  
Fresh fruit  
Seeds of cumin  
Seeds of fennel or mathe  
Kurakkan  
Ground nuts  
Mustard seeds  
Oils from 
soya/palm/sunflower/coconut/  
other  
Salt 10% or Rs 10 per kg, whichever 
is higher  
Rs 102 per kg  
Rs 625 per kg  
Rs 880 per kg  
Rs 5 per kg  
Rs 40  per kg  
Rs 45 -130 per kg  
Rs 162 per kg  
Rs 50 -52 per kg  
Rs 150 per kg  
Rs 112 per kg  
Rs 62 per kg  
Rs 90 -125 per kg  
 
Rs 40 per kg  
18/03/2015  1 Mackerel  Rs 6 per kg  
25/02/2015  3 
15 Maize/sorghum  
Peas (whole)  
Peas (split)  
Chickpeas (whole)  
Chickpeas (split)  
Cowpeas  
Lentils  
Seeds/grains  
Margarine/other margarine  Levy removed  
Rs 15 per kg  
Rs 18 per kg  
Rs 7 per kg  
Rs 10 per kg  
Rs 70 per kg  
Rs 2 or 5 per kg  
Rs 70 per kg  
Rs 175/275 per kg  
15/02/2015  2 Frozen fish  
Potatoes  Rs 10 per kg  
Rs 40 per kg  
22/01/2015  4 Rice Rs 20 per kg  
01/01/2015  1 B' onions  Rs 10 per kg  WT/TPR/S/347 • Sri Lanka  
 
- 130 - 
 
  Date  Number of 
tariff lines  Products  Amount of levy  
05/09/2014  13 Rice 
Sugar  Rs 1 per kg  
Rs 33 per kg  
23/08/2014  2 Potatoes  
B' onions  Rs 40 per kg  
Rs 35 per kg  
15/08/2014  1 Potatoes  Rs 15 per kg  
12/08/2014  2 Red onions  
B' onions  Rs 5 per kg  
Rs 25 per kg 
26/07/2014  17 Peas (whole)  
Peas (split)  
Chickpeas (whole)  
Chickpeas (split)  
Green gram  
Cowpeas  
Lentils  
Maize/sorghum  
Seeds/grains  Rs 15 per kg  
Rs 18 per kg  
Rs 7 per kg  
Rs 10 per kg  
Rs 70 per kg  
Rs 70 per kg  
Rs 2 or 5 per kg  
10% 
Rs 70 per kg  
16/07/2014  10 Potatoes  
Sugar  Rs 5 per kg  
Rs 28 per kg  
24/05/2014  4 Lentils  Rs 5 per kg  
10/04/2014  4 Rice Rs 5 per kg  
08/03/2014  2 Red lentils  
Yellow lentils  Rs 10 per kg  
Rs 10 per kg  
07/02/2014  3 Potatoes  
Red lentils  
Yellow lentils  Rs 25 per kg  
Rs 5 per kg  
Rs 5 per kg  
17/11/2013  3 Potatoes  
Red onions  
B' onions  Rs 10 per kg  
Rs 5 per kg  
Rs 10 per kg  
02/08/2013  1 B' onions  Rs 30 per kg  
12/07/2013  9 Sugar  Rs 27 per kg  
8/06/2013  75 Fish, onions, garlic, peas, chickpeas, 
gram, dhal, fresh fruit, chillies, seeds, 
spices, grains, flour, oils, processed 
fish, sugar  Ranging from Rs 10 to 500 per 
kg, depending on the product. 
10% or Rs 10 per kg, whichever 
is higher , for fresh and frozen 
fish.  
08/02/2013  76 Fish, potatoes, onions, garlic, peas, 
chickpeas, gram, dhal, f resh fruit, 
chillies, seeds, spices, grains, flour, 
oils, processed fish, sugar  Ranging from Rs 10 to 500 per 
kg, depending on the product. 
10% or Rs 10 per kg, whichever 
is higher , for fresh and frozen 
fish.  
18/09/2012  10 Potatoes  
B' onions  
Processed fi sh Rs 50 per kg  
Rs 50 per kg  
Rs 75 per kg  
13/08/2012  2 Potatoes  
B' onions  Rs 30 per kg  
Rs 50 per kg  
20/07/2012  8 Sugar  Rs 20 per kg  
14/07/2012  14 Fresh/frozen fish  
 
Fish 10% or Rs 10 per kg, whichever 
is higher  
Rs 10 per kg  WT/TPR/S/347 • Sri Lanka  
 
- 131 - 
 
  Date  Number of 
tariff lines  Products  Amount of levy  
Fish 
Potatoes  
B' onions  
Processed fish  Rs 75 per kg  
Rs 10 per kg  
Rs 25 per kg  
Rs 50 per kg  
12/05/2012  64 Fresh/frozen fish  
 
Maldive fish  
Dried sprats  
Other dried fish  
Potatoes  
Red onions  
Garlic  
Peas (whole)  
Peas (split)  
Chickpeas (whole)  
Chickpeas (split)  
Gram and cowpea  
Dhal 
Fresh oranges  
Fresh grapes  
Fresh appl es 30% or Rs 35 per kg, whichever 
is higher  
Rs 250 per kg  
 
 
 
22/03/2012  3 Green gram  
Fresh mandarins  
Kurakkan flour  Rs 75 per kg  
Rs 50 per kg  
Rs 100 per kg  
Source:  Sri Lanka Customs.  
__________