Promoting and facilitating private sector investment remains a priority in Sri Lanka’s economic recovery, and medium-term growth trajectory. At the core of this investment-driven growth strategy is the Economic Transformation Act No. 45 of 2024 (ETA), which contains key provisions governing investment in Sri Lanka. Introduced by the previous administration, the ETA repeals earlier national investment laws and establishes a new legal and institutional framework, effectively serving as Sri Lanka’s investment law. While the future of the ETA was uncertain post-election, the 2025 Budget Speech confirmed the government’s intent to implement the act, but with amendments. At the time of writing, it is unclear what those amendments of revisions will be.
Anchored to global investment policy trends identified by the UNCTAD in a recent report, this Policy Brief authored by Senith Abeyanayake (Research Associate) and Anushka Wijesinha (Co-founder/Director) presents seven (7) observations stemming from a comparison of these global trends against the investment-related provisions of the ETA.
The seven comparative observations are:
1. The ETA may be unique in its inclusion of quantitative targets for FDI
2. The ETA governs both domestic and foreign investments, with qualified applicability
3. The investment-related provisions of the ETA do not prominently feature environmental considerations and sustainability
4. The ETA places more emphasis on investor rights than obligations
5. The ETA provides limited coverage on investment incentives
6. The ETA emphasizes investment facilitation, mirroring the global trend
7. The ETA does not prioritize domestic-centric dispute settlement
As Sri Lanka’s new government looks to revise the country’s investment framework, understanding current global trends and best practices will be crucial. This Policy Brief provides useful reference points from the comparative analysis to help inform these revisions. Sri Lankan policymakers and private sector stakeholders would need to carefully consider the global trends alongside Sri Lanka’s own investment climate realities and government policy imperatives. The government should seek to engage expert domestic and external stakeholders when revising the ETA, to ensure that changes to the investment sections of the law are sensible, in sync with global market realities, and truly advances Sri Lanka’s competitive position in the FDI landscape.
Download and read the Policy Brief here.
