Sri Lanka ban on incorporating foreign firms over security concern

ECONOMYNEXT – Sri Lanka has banned the incorporation of companies with foreign shareholders over a security concern and no legitimate investment will be restricted, Senior Economic Advisor to the Finance Minister Nivard Cabraal said.

“This is a temporary measure until a clear regulation is issued covering a security concern,” Cabraal told EconomyNext.

“It will not restrict any legitimate foreign investments. It will lifted soon.”

Sri Lanka’s Registrar of Companies had said no foreign investor owned company could be incorporated until further notice.

The agency later revised a notice saying investors who already had approval from the Board of Investments could incorporate a company.

Under Sri Lanka’s Board of Investment law, foreign investors can incorporate companies seeking tax concession or without tax concessions on two paths.

Under Sri Lanka’s Foreign Exchange Act, foreign investors are banned from investing in pawnbroking, retail trade with a capital of less than 5 million US dollars and coastal fishing.

There was a blanket 40 percent limit on owning companies in processing tea, rubber, coconut, sugar, spices, timber based industries, deep sea fishing, media, education, freight forwarding, travel agencies and shipping agencies, unless special approval is given.

Special permission was anyway needed for air transport, arms, alcohol, lotteries and mechanized mining.

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The manifesto of President Gotabaya Rajapaksa however mentioned that he intended to “restrict entry of foreign enterprises into industrial areas that are easily handled by domestic businesses.” (Colombo/Jan16/2020)