US investment outlook flags Sri Lanka’s stalled SOE privatisation, labour laws

Stalled CEB privatisation blocks cost-effective energy for industries Investors cite high costs, policy shifts and opaque procurement Rigid labour rules, emigration and weak protections limit flexibility US firms eye ICT, energy, aviation and defence

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SRI Lanka’s stalled privatisation of State-owned enterprises, rigid labour laws and restrictions on foreign participation continue to weigh on investment prospects, the US State Department said in its 2025 Investment Climate Statement.

The report noted that 527 State-owned enterprises, including 55 designated as strategic, remain a major burden on public finances.

“The previous Government initiated a program aimed at comprehensive SOE reform, including potential privatisation of several major entities. However, the current Administration suspended these privatisation efforts upon taking office,” the report noted.

“Tt has instead announced alternative restructuring approaches focused on improving management practices, reducing operational costs, and enhancing efficiency within the existing state ownership structure,” it added.

“The stalled privatisation of deficit-ridden State-owned enterprises, notably the Ceylon Electricity Board, hinders development of cost-effective energy supplies crucial for industrial operations. Foreign investors consistently report high transaction costs, unpredictable policies, and opaque procurement procedures”.