Why investors are reluctant to come to Sri Lanka despite incredible potential

IN recent months, a striking pattern has emerged at regional investor forums in places like Singapore, New Delhi, and Bangkok: Sri Lanka is consistently on the radar—but often for the wrong reasons.

- By Dr. Rohan Karunaratne

While foreign investors speak warmly about the country’s natural beauty, resilient people, and strategic location, many also voice deep concerns about how difficult and risky it is to do business in Sri Lanka.

This isn’t an old story—these are fresh observations, shared by participants in 2024-2025 investment dialogues and economic revival panels across Asia. The Sri Lankan diaspora, development banks, venture capital firms, and infrastructure investors all echo the same refrain: “We want to invest in Sri Lanka—but we can't, not under current conditions.”

Reasons for investor reluctance

1.Approval/decision-making issues, delays, outdated regulations and red tape

Sri Lanka still operates under a maze of outdated regulations, slow approvals, and inflexible contracts. Foreign companies struggle to navigate licensing procedures, tax rules, and construction permits. An Indian manufacturing group recently pulled out of a joint venture, citing: “Three months to get a basic environmental clearance. Compare that to one week in Gujarat.”

Despite digital advancements elsewhere, Sri Lanka’s permitting and project management remain trapped in slow, paper-based systems.

2.A collapsing construction industry