While national security considerations when developing foreign investment regulation isn’t new, it is becoming a greater consideration when assessing investment into sectors and companies that play a critical function to society or are of strategic importance to a country. Some countries have begun to specifically identify and delineate ‘sensitive sectors’ in the context of investment regulation. There are varying degrees of intervention countries have taken on this issue which demonstrates that there isn’t a formulaic approach as a country’s national priorities and risk appetite should guide policy development. Australia, Canada, Japan and Singapore have made policy decisions on how to balance the need to safeguard their national security while maintaining their attractiveness as an investment destination.
A recently published Discussion Paper by CSF serves to introduce this emerging area to Sri Lankan trade and investment stakeholders, provide some country examples, and to inform further deliberation on the topic. The Paper tackles:
As the international environment continues to become more complex, Sri Lanka will have to contend with these issues and develop its own approach, while balancing its development and foreign capital attraction needs. The Economic Transformation Act passed in 2024 – particularly section 33(2) – provides a legislative hook for Cabinet to introduce “new entry requirements or restrictions for foreign investments” if they are deemed necessary for “national security, public emergency, public safety and environmental protection”. Given the shifts in the international environment, Sri Lanka may want to consider using this provision to develop foreign investment regulation that balances economic and national security concerns.
In October 2024, CSF hosted a multi-stakeholder roundtable to present these ideas and seek constructive feedback. Officials from the Presidential Secretariat, Ministry of Foreign Affairs, think tanks, chambers of commerce, diplomatic missions, civil society, and independent experts participated in the discussion.
