The island nation of Sri Lanka lies at the southern tip of India, surrounded by Bay of Bengal on the East and North and Arabian Sea on the South and West. The weather in Sri Lanka is a typical tropical weather with a warm climate, moderated by ocean winds and moisture.
Sri Lanka had been a socialist economy from 1948 till 1977. The plantation economy of the socialist era contributed to social inequality than prospering the country. The 1977’s deregulation, privatization and promotion of private enterprises helped country to move towards an industrial economy with the development of food processing, textiles, telecommunications and finance industries.
Today, Sri Lanka has the highest per capita income in the South Asia with population growth rate of 1.3%. Also, a literacy rate of 92% is the best in the developing world. Government and private business schools, the World Bank and private organizations are pushing for increase in entrepreneurship activity. However, the opportunity is not exploited fully because of conflict between the rebel Liberation Tigers of Tamil Eelam (LTTE, Tamil Tigers) and the government. This constant battle has lead to continued distrust and high levels of violence to undermine any development efforts.
The following economic factors and start up costs favor a successful startup in Sri Lanka. But, this could be in a short time frame.
- The budget deficit of Sri Lanka will fall gradually in 2009-12, to stand at 6.3% of GDP in 2012. The Government will favor free markets, try to improve the fiscal situation and also will pursue slow economic liberalization.
- GDP growth will average 5.8% a year in 2008-12. Export growth and the services sector will remain the principal drivers of the economy during the forecast period.
Consumer price inflation will ease from double-digit rates currently (2007-2008) to 4.9% by 2012. The decline in the rate of price rises will be driven by supply-side improvements, easing inflation in global commodity markets and increased local food production.
- Opening and closing a business is pretty easy in Sri Lanka. However, paying taxes, maintaining licenses, getting credit are still a problem. See the following links for detailed information.
Business setting up cost is not a problem.
In a long time frame, the following issues play a big role. So, for any individual, it is very important to consider all the factors (both long term and short term) before starting a business in Sri Lanka.
- Fickle Government policies
- Fluctuating economy ( Susceptible to oil price changes, Tsunami etc)
- Ethnic clashes between Sinhalese and Tamils
- Violation of Human Rights
- Corruption issues