Ceylonpark.com Sri Lanka Investment

General Information Sri Lanka

Sri Lanka, officially the Democratic Socialist Republic of Sri Lanka; known as Ceylon before 1972, is an island nation in South Asia, located about 31 kilometers (18½ mi) off the southern coast of India. Originally known as Heladiva, it is home to more than twenty million people.

Sri Lanka is a strategic naval link between West Asia and South East Asia and has been a centre of Buddhist religion and culture from ancient times. Today, Sri Lanka is a multi-religious and multi-ethnic nation, with a fifth of the population following faiths other than Buddhism - notably Hinduism, Christianity and Islam. The Sinhalese community forms the majority of the population (around 74%), with Tamils, who are mostly concentrated in the north and east of the island, forming the largest ethnic minority. Other communities include the Muslim Moors and Malays as well as Burghers.

Famous for the production and export of tea, coffee, rubber and coconuts, Sri Lanka boasts a progressive and modern industrial economy. The natural beauty of Sri Lanka's tropical forests, beaches and landscape, as well as its rich cultural heritage make it a world famous tourist destination.

After over two thousand years of rule by local kingdoms, parts of Sri Lanka were colonized by Portugal and the Netherlands beginning in the 16th century, before the control of the entire country was ceded to the British Empire in 1815. During World War II Sri Lanka served as an important base for Allied forces in the fight against the Japanese Empire. A nationalist political movement arose in the country in the early 20th century, with the aim of obtaining political independence, which was eventually granted by the British after peaceful negotiations in 1948. Since then Sri Lanka has enjoyed a stable democracy and continuous economic progress, despite the ongoing conflict between the Sri Lankan government and a separatist militant group known as the LTTE in the northeastern parts of the country.

Economy of Sri Lanka

The World Trade Centre in Colombo.

Sri Lanka's most well-known export: Ceylon tea (black)Main article: Economy of Sri Lanka

In the nineteenth and twentieth centuries, Sri Lanka became a plantation economy, famous for its production and export of cinnamon, rubber and Ceylon tea, which remains a trademark national export. The development of modern ports under British rule raised the strategic importance of the island as a centre of trade. During World War II, the island hosted important military installations and Allied forces. However, the plantation economy aggravated poverty and economic inequality. From 1948 to 1977 socialism strongly influenced the government's economic policies. Colonial plantations were dismantled, industries were nationalised and a welfare state established. While the standard of living and literacy improved significantly, the nation's economy suffered from inefficiency, slow growth and lack of foreign investment.

From 1977 the UNP government began incorporating privatisation, deregulation and promotion of private enterprise. While the production and export of tea, rubber, coffee, sugar and other agricultural commodities remains important, the nation has moved steadily towards an industrialised economy with the development of food processing, textiles, telecommunications and finance. By 1996 plantation crops made up only 20% of export, and further declined to 16.8% in 2005 (compared with 93% in 1970), while textiles and garments have reached 63%. The GDP grew at an average annual rate of 5.5% during the early 1990s, until a drought and a deteriorating security situation lowered growth to 3.8% in 1996. The economy rebounded in 1997-2000, with average growth of 5.3%. The year of 2001 saw the first economic contraction in the country's history, as a result of power shortages, budgetary problems, the global slowdown, and continuing civil strife. Signs of recovery appeared after the 2002 ceasefire. The Colombo Stock Exchange reported the highest growth in the world for 2003, and today Sri Lanka has the highest per capita income in South Asia.

In April 2004, there was a sharp reversal in economic policy after the government headed by Ranil Wickremesinghe of the United National Party was defeated by a coalition made up of Sri Lanka Freedom Party and the leftist-nationalist Janatha Vimukthi Peramuna called the United People's Freedom Alliance. The new government stopped the privatization of state enterprises and reforms of state utilities such as power and petroleum, and embarked on a subsidy program called the Rata Perata economic program. Its main theme to support the rural and suburban SMEs and protect the domestic economy from external influences, such as oil prices, the World Bank and the International Monetary Fund. But this policy of subsidizing imported commodities like fuel, fertiliser and wheat soon unravelled the fiscal sector. In 2004 alone Sri Lanka spent approximately US$ 180 million on a fuel subsidy, as fixing fuel prices had been an election promise. To finance the expanded budget deficit arising from a range of subsidies and a public sector recruitment drive, the government eventually had to print Rs 65 billion (US$ 650 million) or around 3% of GDP. The expansionary fiscal policy, coupled with loose monetary policy eventually drove inflation up to 18% by January 2005, as measured by the Sri Lanka Consumer Price Index.

Source: Wikipedia http://en.wikipedia.org/wiki/Sri_lanka