Sri Lanka is looking to attract potential Indian investors to set up manufacturing facilities in the new Hambantota Pharmaceutical Zone, and is expected to provide a variety of incentives, including tax breaks.
An official tracking the matter told BusinessLine that senior officials from the Sri Lankan Board of Investment and the Pharma Manufacturers Association of Sri Lanka will hold discussions with potential investors from India via an online meeting on the investment opportunities in the zones.
This followed discussions in January in Colombo between Minister of External Affairs S Jaishankar and his Sri Lankan colleague, Dinesh Gunawardena, on prospects for Indian pharmaceutical producers in Sri Lankan special zones.
“Indian investments in the zone will be critical both economically and diplomatically,” the official added.
The Sri Lankan government is establishing the Pharmaceutical Zone at Arabokka, Hambantota, on almost 400 acres, in order to enhance export revenues and successfully address the Covid-19 issues. According to sources, the zone's goal is to fulfill around 40% of local demand for pharmaceutical items while also paving the road to a $1 billion autonomous export vertical by 2025.
The meeting with Sri Lankan authorities is being arranged by the Federation of Indian Export Organizations, and a number of pharmaceutical firms in the nation are expected to participate.
While Sri Lankan authorities may reveal specifics of the tax and other incentives on offer during the meeting, according to sources in Sri Lankan media, discounts would cover corporate income tax, employee income tax, Value Added Tax (VAT), and the Ports and Airports Development Levy.
Imports of capital goods and construction-related products, raw materials, and production/process-related consumables are also likely to be duty-free for businesses.
Sri Lanka is a significant economic and strategic partner for India, with the Indian pharmaceutical sector exporting $245.76 million to the nation in 2020-21. India's total exports to Sri Lanka in 2020-21 were $3.5 billion, a 7.9 percent decrease from the previous year.
“Strong economic connections with Sri Lanka are also a good strategic alternative for India to offset China's rising influence in the region. Investing in Sri Lanka's pharmaceutical zones might help India both economically and diplomatically," according to the source.