Composite Fabric,bonded fabric,Lamination Fabric Lamination Fabric News Country Risk Analysis Report Edition – Sri Lanka

Country Risk Analysis Report Edition – Sri Lanka



Country Trade Risk Index (ERI): 99.4 Country risk reference rating: 5 (5/9) Country Risk Outlook: Stable Economic and trade risks Sri Lanka’s economy still maintains a high growth rate, the privatization proces…

Country Trade Risk Index (ERI): 99.4

Country risk reference rating: 5 (5/9)

Country Risk Outlook: Stable

Economic and trade risks

Sri Lanka’s economy still maintains a high growth rate, the privatization process will be steadily advanced, foreign exchange reserves are relatively sufficient, the debt service ratio remains basically stable, and the national credit rating has been improved. However, Sri Lanka’s economy is too dependent on exports, with high fiscal and current account deficits and high inflation rates, which have had a large negative impact on its long-term economic growth.

Since 1957, China has provided economic and technical assistance to Sri Lanka. So far, 90% of large-scale projects in Sri Lanka have been constructed with Chinese assistance, and 50% of infrastructure projects have involved Chinese companies. In 1986, China and Sri Lanka signed the “Agreement on Project Promotion and Protection of Investment”; in 2003, they signed the “Agreement on the Avoidance of Double Taxation”; and later signed the “Agreement on the Mutual Exemption of Taxes on International Air Transport and Maritime Income”; in 2007 In 2006, Sri Lanka opened a unique special economic zone specifically for China and provided preferential investment policies. In the next few years, Sri Lanka’s infrastructure construction will continue to be the focus of the government. Due to the limitations of Sri Lanka’s local contracting capacity, projects of more than 10 million US dollars are basically controlled by foreign contractors. Chinese companies are also actively involved and currently occupy about 30% of the Sri Lankan market. % share.

In the development of bilateral trade, China is in a state of absolute surplus. China’s trade surplus with Sri Lanka increased from US$1.5 billion in 2009 to US$2.84 billion in 2012. Textiles, plastics, rubber and precious metals and products are Sri Lanka’s main exports to China. The main commodities imported by Sri Lanka from China are textiles and raw materials, mechanical and electrical products, precious metals and their products. In 2012, China became Sri Lanka’s second largest importer, after India. The two sides agreed to discuss practical measures to improve the trade imbalance and promote economic and trade cooperation between the two countries.

Investment risk

The business environment in Sri Lanka is average. Public financial information of enterprises is difficult to obtain, power infrastructure is insufficient, tax burden is heavy, and contract execution efficiency is low. It ranks 81st among 185 economies in the Business Index released by the World Bank, which is better than the average level of countries in South Asia. It performs particularly well in aspects such as investment protection and bankruptcy handling, which is higher than the average level of countries in this region.

Sri Lanka’s tax system is complex, with variable tax rates, but tax collection management is weak and tax avoidance is common. Government tax revenue mainly comes from indirect taxes. In 2012, the government carried out tax policy reforms to simplify the tax structure, which mainly included expanding the tax base, simplifying the tax process, and improving tax management. Sri Lanka’s transport facilities were severely damaged during the civil war. At present, the country has a total road length of 28,000 kilometers, a railway length of 1,900 kilometers, two international airports, and three major ports. Sri Lanka is a signatory to the Washington Convention and the New York Convention, and has enacted relevant legislation in accordance with the United Nations Model Law on International Commercial Arbitration. Sri Lanka has also signed free trade agreements and general customs unions with India, Pakistan, the European Union and other countries, making it the only country in Asia with such unique advantages. Currently, Sri Lanka has signed bilateral investment protection agreements with at least 26 countries and bilateral personal tax avoidance agreements with 37 countries.

Legal risks

The main laws and regulations applicable to foreign investment in Sri Lanka include the Investment Authority Law, the Company Law, the Transaction Control Law, the Intellectual Property Law, etc. The Constitution of Sri Lanka also clearly states the protection of foreign investment. Article 157 of the Constitution stipulates that investment protection agreements shall be protected by law and shall not be violated by any legislative, administrative or management agency. The investment protection agreement between the two parties is valid for 10 years. The agreement is automatically extended unless terminated by either party. Resolve investment disputes in accordance with the International Convention on the Settlement of Investment Disputes. There are no restrictions on the remittance of profits, free convertibility of capital and foreign exchange under the current account.

According to the standards of the World Bank’s “Doing Business Report 2013”, after a Sri Lankan company files for bankruptcy, it takes creditors an average of 1.7 years to collect related debts, which is lower than the average level in South Asia. The cost of bankruptcy-related litigation is relatively high. The proportion of creditors recovering debt through legal actions such as restructuring, liquidation or debt enforcement is higher than the regional average.

Overall risk

Generally speaking, Sri Lanka’s domestic political situation is stable and national reconstruction work continues to advance. The ruling party, the United People’s Liberation Alliance, has strong control. However, the living conditions of Tamils ​​in Sri Lanka are poor and they are aloof from the current government. Ethnic conflicts are on the rise, the domestic process of national reconciliation is extremely difficult, and the possibility of large-scale unrest cannot be ruled out. On the economic front, the short- and medium-term growth prospects are promising, the economy will still maintain a high growth rate, and the privatization process will be steadily advanced. Foreign exchange reserves are relatively sufficient, the debt service ratio remains basically stable, and the country’s credit rating has improved. However, Sri Lanka’s economy is greatly affected by external influences, and problems such as fiscal deficit, current account deficit and inflation rate remain high, which will restrict its long-term development.

Based on the analysis and assessment of the current overall situation, Sri Lanka’s country trade risk index (ERI) is 99.4, the country risk reference rating is 5 (5/9), the country risk level is medium to high, and the country risk outlook is stable. (Issuing agency: China Export and Credit Insurance Corporation)

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Author: clsrich

 
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