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Open Economy

Today, Sri Lanka is ranked as the most liberalized economy in South Asia. Investors are provided with preferential tax rates, constitutional guarantees on investment agreements, exemptions from exchange control and 100% repatriation of profits.

Total foreign ownership is welcome in almost all areas of the economy, with only a few areas limited or restricted to foreigners.

Sri Lanka vis-à-vis the World
Quality of Life- Economic Freedom- Business Environment

Quality of Life
Sri Lanka leads the South Asian region in terms of human development indicators, with its high literacy rate of 91% placing it way ahead of other South Asian nations and on par with those of south east Asia. Its national health indicators are comparable with those of the developed world.

This is underscored by the relatively high ranking the country has received in terms of GDP p.c. (PPP), which at US$3,530 is higher than that of India (US$ 2,358), Pakistan (US$ 1,928) and Bangladesh (US$ 1,602).

Sri Lanka was placed 89th (Medium Human Development Category) out of 173 countries in the Human Development Indicators constructed in 2002, ahead of China (96th), Vietnam (109th), Indonesia (110th), India (124th), Pakistan (138th) and Bangladesh (145th).

The Human Development Index (HDI) measures a country's achievements in three areas of human development viz: longevity, knowledge and a decent standard of living. Longevity is measured by life expectancy at birth. A combination of adult literacy and the combined primary, secondary and tertiary gross enrolment ratio is used as a measure of knowledge while GDP per capita (PPP) is used to measure the standard of living.

Economic Freedom
The 2004 Index of Economic Freedom published by the Heritage Foundation has ranked Sri Lanka 76th out of 155 developed and developing countries, in terms of its “economic freedom” and the quality of its overall policy environment.

Business environment
In the EIU's country forecast, Sri Lanka's overall score in the business environment rankings improves from 4.99 for the historical period (1997-2001) to 6.03 for the forecast period (2002-2006). The country's global ranking improves from 49th to 45th and its regional ranking moves from 14th to 13th in comparison to the historical period.

The higher rankings are indicative of the more attractive investment climate in the country, with Sri Lanka's score in most of the categories used to evaluate the business environment improving significantly. For instance, Sri Lanka is ranked highly for its liberal approach to foreign investment, with its global and regional rankings moving from 36th to 27th (out of 60 countries) and 8th to 4th (out of 16 countries) respectively. From a regional perspective, the country's main advantages centre on its open foreign investment regime, its commitment to private enterprise, competition and its liberalized trading environment (where it is ranked 5th).