In a media release yesterday (17 May), CSF called on the government to urgently revive and accelerate Sri Lanka’s trade competitiveness, export, and foreign direct investment (FDI) reform agenda, warning that delays will be more painful as Sri Lanka faces an unforgiving global economy. One year after CSF published a Policy Note outlining eight priority trade and competitiveness reforms, we reiterated that progress across most areas has been slow, while global economic conditions have worsened, trade volatility has persisted, and pressures on Sri Lanka’s foreign earnings have intensified.

While the diagnosis around problems is well established and widely known, ambition and action continue to remain elusive and urged private and public sector stakeholders to work together proactively to chart an ambitious path forward.

Other Asian economies are adopting very coordinated institutional measures and a very sophisticated policy approach to drive trade resilience and competitiveness and advised the Government to look at these examples to devise stronger mechanisms.

Trade Competitiveness Stuck in Neutral

Opening up new markets through more sophisticated commercial diplomacy and shrewd trade negotiations was highlighted as priorities in CSF’s Policy Note last year, but limited progress seems to have be made. Gaps include the continued vacancy of a Chief Trade Negotiator for the country or a dedicated office tasked with championing international trade.

Sri Lanka’s export structure has seen only modest diversification. While the formulation of a National Export Development Plan for 2026–2030 is welcome, we have cautioned that an announced strategy is not the same as effective implementation. Continual recalibiration may be needed, given the evolving global economic dynamics. The previous National Export Strategy (2018–2022) was a credible document that fell short due to institutional fragility and insufficient budgetary commitment – a failure that cannot be repeated.

The policy and strategy scaffolding exporters need to upgrade, diversify or move up the value chain remains limited, and an ambitious enterprise innovation support programme is needed, the think tank argued. While some lead firms have done – and continue to do – exceptionally well in tough international markets, there are still too few of them, while a majority of others (including medium-sized firms) are struggling to compete.

FDI Without Strategy

CSF is equally concerned about the absence of a coherent strategic framework guiding Sri Lanka’s FDI attraction. Sri Lanka’s FDI performance over the past decade has been disappointing relative to its potential and to regional peers, and the institutional machinery tasked with addressing this has not delivered. This concern was thrown into focus recently when the Board of Investment (BOI) was questioned by the Committee on Public Finance (COPF) in Parliament on the absence of any discernible logic behind how tax incentives for investment are calibrated. The widely circulated exchange exposed what we have long argued: that Sri Lanka lacks a clear strategic vision of what kind of FDI it is seeking and what sectors provide niche opportunities now and into the future. An evidence-based and forward-looking rethink is needed, on what activities and types of investors are most feasible to be attracted to Sri Lanka.

Economic Commission Idea Must Not Be Abandoned

CSF reiterated its call for the government to operationalise the Economic Commission envisaged under the 2024 Economic Transformation Act. The concept of a high-powered, well-resourced body with genuine mandate to coordinate across government on investor facilitation, and take at integrated approach to the trade-investment nexus is now the minimum institutional infrastructure that countries competing seriously for FDI have found necessary. If the Government is averse to implementing the Act in full, at a minimum it should extract and activate the Economic Commission, Invest Sri Lanka, and the Zones authority as standalone priorities.

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