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The Sri Lankan capital markets are recovering after a period of great change and a measure of controversy. Stocks boomed when the civil war ended, only to fall back as regulation and regulators were unable to keep up with the surge in activity, and manipulation and unfair dealing were alleged. With a new government in power, the apparent wrongs of the past are being addressed and a roadmap for the future is being drawn. Legislation is changing, with rules updated and key market infrastructure under development. At the same time, an overhaul of the exchange and the regulator is under way. These efforts are seen as vital to the future of the country, as efficient, effective and fair capital markets are needed to attract and deploy the capital Sri Lanka needs. This chapter contains interviews with Rajeeva Bandaranaike, CEO, Colombo Stock Exchange; and Dilshan Wirasekara, CEO, First Capital Holdings.

The Sri Lankan banking sector is well capitalised, well regulated and fast growing. It has faced no collapses in recent years and has benefitted from strong economic growth and relative stability following the end of the civil war in 2009. Financial stability is not seen as a major concern, and any problems related to the health of institutions are regarded as manageable, with the regulators keeping a close watch on the sector. However, Sri Lanka’s banks are more challenged in terms of innovation, efficiency and value added. As strategies to investment shift under the new government, banks will have to adjust, prepare for some instability and take advantage of the opportunities that arise. This chapter contains interviews with Arjuna Mahedran, Governor, Central Bank of Sri Lanka; and Ajay Kanwal, Regional CEO, ASEAN and South Asia, Standard Chartered.

The Sri Lankan economy has been growing well recently despite a degree of political uncertainty and the global slowdown in emerging markets, with GDP expanding on average more than 6% since 2010. The new government inherited an economy with great potential but burdened by debt and lacking the types of investment to see it through to the next stage. Accelerating growth is now necessary, not only in order to pay down its debts but also to avoid the middle-income trap. Sri Lanka has developed new avenues for significant expansion, such as its burgeoning tourism sector, and investments in shipping and infrastructure. If the country can build on the steps it has already taken, there is no reason why it should not continue to prosper. This chapter contains interviews with Ravi Karunanayake, Minister of Finance and Planning; Kabir Hashim, Minister of Public Enterprise Development; Ajit Gunewardene, Deputy Chairman, John Keells Holdings; and Mohan Pandithage, Chairman and Chief Executive, Hayleys.

Sri Lanka is well situated for trade and an attractive target for international investment. Lying on major shipping and air routes, it is close to the markets of Asia, Africa and the Middle East. Moreover, the country has a literate workforce, good infrastructure, a healthy population and relatively low wages. Since the 2009 cessation of a long-running civil war, Sri Lanka has become one of the region’s more stable nations, and following elections in 2015 it has become increasingly open. The new government has indicated it is doing away with the country’s statist past and is embarking on a period of material liberalisation. This chapter contains a viewpoint from Malik Samarawickrama, Minister of Development Strategies and International Trade; and interviews with Harsha de Silva, Deputy Minister of Foreign Affairs; Upul Jayasuria, Chairman, Board of Investment; Samantha Ranatunga, Chairman, Ceylon Chamber of Commerce; Ugo Astuto, Director and Deputy Managing Director for Asia and the Pacific, European External Action Service; and Razeen Sally, Chairman, Institute of Policy Studies.

This chapter contains an overview of the legal framework in which local and foreign investors operate including guidance for firms doing business in the emirate, advice for the establishment of a joint stock company and a rundown of the incentives provided by the emirate’s free zones.