to ease restrictions on foreign investors
The government is considering relaxing restrictions on foreign investments
in key sectors of the economy with the enactment of the new Foreign
Exchange Management Act. The new act, which has been approved by
the Cabinet, will repeal the existing Exchange Control Act through
which foreign investment in several areas of economic activity is
is a possibility to review the negative list presently applicable
to foreign investors once the proposed Foreign Exchange Management
Act is enacted," said a Central Bank official. It was likely
that restrictions on foreign investment in businesses like freight
forwarding might be relaxed under the new law as part of government
efforts to further liberalise and reform the economy.
foreign investment in freight forwarding is allowed only up to 40
percent of ownership, unless otherwise approved by the Board of
Investment. Foreign investment in shipping agencies is also similarly
restricted and the Ports and Shipping Ministry has resisted attempts
to relax the restrictions despite lobbying by foreign shipping lines.
officials acknowledged that the proposed changes are likely to be
welcomed in some quarters and opposed in others. The government
has been gradually relaxing restrictions on foreign investment and
has allowed 100 percent foreign investment in financial and professional
services, infrastructure development, and setting up branch or liaison
offices of companies incorporated overseas in Sri Lanka.
list', where foreign direct investment is barred or only minority
stakes are allowed, has been whittled down to 19 sectors and is
to be reduced further. "We proposed not to have exchange control
as a tool to control these areas," the Central Bank official
said. "We're going to review in a positive way the negative
list with the new Foreign Exchange Management Act under which FDI
will be subject only to the requirements of the regulatory authority."
Exchange Control Act has provisions restricting certain activities
by non-residents and foreigners such as share investments and transferring
controlling stakes in companies to foreigners. Under the current
negative list no FDI is allowed in money lending, pawn brokering,
retail trade with a capital of less than a million dollars, and
FDI is allowed
in other areas such as air transportation, travel agencies, coastal
shipping, tea, rubber and coconut cultivation and processing, mining,
mass communications and education subject to restrictions and approval
on a case-by-case basis by the government.