The World Bank has stated that Sri Lanka’s foreign direct investment (FDI) should ideally stand at 1.5%, but the country has only achieved a very low figure of 0.5%.
Representatives from the World Bank have emphasized the urgent need for structural reforms to raise FDI levels in order to meet the nation’s economic goals. The organization warned that the current inflows — amounting to just 0.5% of the gross domestic product (GDP) — are insufficient to achieve the country’s development objectives.
The remarks were made during a country update session held today, where World Bank officials discussed Sri Lanka’s investment climate and economic prospects.
Speaking at the event, Richard Walker, Senior Economist for Maldives and Sri Lanka, said that Sri Lanka must undertake a “series of changes” to reach the government’s target of attracting US$36 billion in FDI by 2030.
Walker noted that Sri Lanka’s FDI rate, which once stood at around 1%, has further declined, stressing that the figure should ideally be around 1.5%. He added that in comparison, countries such as Malaysia and Vietnam maintain FDI levels of approximately 3%.
Highlighting key challenges, Walker identified land accessibility as a major barrier to attracting investment. He pointed out that 80% of the land is owned by the government, and the bureaucratic processes and control by multiple ministries discourage potential investors — particularly those in the agricultural sector.
He further observed that outdated labor laws, which have remained unchanged for over six decades, limit business flexibility and restrict employment opportunities for women in several sectors.
“If these structural issues are not addressed, Sri Lanka will find it difficult to compete for foreign investment,” Walker cautioned.
The World Bank reiterated that improving land governance, modernizing labor regulations, and creating a more investor-friendly environment are essential steps for Sri Lanka to realize its long-term economic aspirations.
