Sri Lanka must stop fearing investment

By Milinda Moragoda

Colombo, June 2 (Daily Mirror) - A friend of mine in Bengaluru recently made a remark that stayed with me.

Sri Lankan governments constantly speak about attracting foreign investment. But if someone arrived with a billion dollars to invest, where exactly in Sri Lanka could they invest and obtain a reasonable return?

He had a point.

As I returned from Bengaluru to Colombo, I began reflecting on the contrast between the two economies. Driving through Bengaluru, one encounters infrastructure increasingly built through partnerships between the state and private capital. India is constructing highways at a remarkable pace, many of them through public-private partnerships. Its railway network is expanding rapidly, including high-speed and dedicated freight corridors. Bengaluru’s airport is privately operated, modern, efficient, and globally competitive. I boarded an IndiGo aircraft, a private airline that today commands over 60 per cent of India’s domestic aviation market and has become one of the world’s most valuable airline companies.

Arriving in Colombo, the contrast is stark.

Bandaranaike International Airport remains state-owned and operated. It requires major modernisation, efficiency improvements, and expansion capacity. On the tarmac sit ageing aircraft of SriLankan Airlines, a loss-making national carrier constrained by structural inefficiencies and protected monopolies in areas such as catering and ground handling.

International experience shows that airports are most effectively modernised and expanded through long-term concession arrangements with global operators, which bring in capital, management expertise, and operational efficiency at scale. Airlines in many countries have been successfully restructured through privatisation or strategic equity participation involving private sector partners.

If such approaches were applied in Sri Lanka, the aviation sector alone could attract billions of dollars in investment while transforming tourism, logistics, cargo handling, and associated real estate development around the airport zone.

The same question arises while driving down the Katunayake Expressway. India today is constructing highways at an extraordinary speed, many in partnership with the private sector, while Sri Lanka proceeds at a far slower pace because the state simply lacks capital.

Converting existing state-owned infrastructure into investable long-term assets, meaning leasing or selling mature, operational assets such as highways and airports to long-term investors in order to unlock capital for new development, could raise substantial resources while freeing the state to expand the national infrastructure network.

As one travels from the airport to Colombo, another reality becomes obvious. Nearly 80 per cent of land in Sri Lanka remains under state ownership. Vast amounts of potentially productive land and assets remain economically dormant.

The railway system is a classic example. Sri Lanka’s rail network has seen limited expansion since independence and remains entirely non-electrified. Yet the railway department controls extensive land in commercially valuable locations. If properly developed alongside investors, these assets alone could generate substantial capital for the modernisation of the rail system itself.

From the airport highway, one also observes the storage silos of cement companies that still rely heavily on imported inputs despite Sri Lanka possessing limestone deposits. More broadly, minerals such as graphite, phosphate, ilmenite, and quartz remain significantly underdeveloped despite their potential to attract billions of dollars in foreign investment.

In Colombo Port, the contrast between public and private management is already visible. Private terminals operated by Indian, European, and Chinese investors have demonstrated efficiency, speed, and investment capacity. Further port expansion through private participation could attract billions of dollars in additional investment while strengthening Sri Lanka’s role as a logistics and transhipment hub in the Indian Ocean.

The same logic applies across the economy.

Government-owned hotel assets such as the Hilton, Taprobane, and the unfinished Hyatt project should be sold, generating fresh investment, modernisation, and economic activity while freeing the state from the burden of owning commercial enterprises. State holdings in Sri Lanka Telecom could be privatised. The outdated electricity sector, dominated by a state monopoly, requires restructuring and private investment if Sri Lanka hopes to compete in an era increasingly driven by digital industries and artificial intelligence.

Even institutions such as the Bank of Ceylon could be listed on the stock exchange while remaining nationally significant institutions. India’s State Bank of India itself is publicly listed and integrated into global capital markets.

Within Sri Lanka, pension systems remain overwhelmingly state-driven and largely recycle savings into government debt. As a result, workers receive weak long-term returns while the country lacks deep capital markets and long-term development financing. In many successful economies, pension systems include well-regulated private pension funds alongside public schemes, helping to channel long-term savings into equity markets, infrastructure financing, and national development. Properly designed and regulated, such a system could significantly deepen Sri Lanka’s capital markets and improve returns to savers while supporting investment-led growth.

As I entered Colombo late at night, another contrast became visible.

The brightly lit billboards of competing telecommunications operators and the colourful network of fuel stations belonging to multiple distributors are tangible examples of what competition and private investment can achieve. Both sectors were once heavily state-dominated. Today, consumers enjoy greater choice, better service, modernisation, branding, and technological innovation because competition was allowed to emerge.

These are merely some of the underutilised assets and unrealised economic opportunities visible during a single journey from the airport through Colombo.

No economic system is perfect. Problems and abuses can occur under any model. But a country cannot permanently regulate its economy based only on fear of exceptions. If that mindset prevails, paralysis becomes national policy.

Sri Lanka today faces a deeper problem than debt alone. It is a crisis of underutilised assets, insufficient investment, slow infrastructure development, and fear of scale.

The true potential of Sri Lanka will emerge when Colombo Port, airports, highways, electricity connectivity, industrial zones, and future road and rail links to India, the Middle East, and beyond are viewed not as isolated state assets, but as part of an integrated economic network linking South Asia with global markets.

Such connectivity could fundamentally transform Sri Lanka’s economic geography. The multiplier effects on logistics, tourism, trade, manufacturing, services, energy, and real estate could be enormous.

In today’s world, large global investors have options across dozens of emerging markets. Capital is mobile and impatient. Investors are no longer prepared to spend years navigating bureaucracy, indecision, and institutional hesitation. They expect governments capable of taking timely commercial decisions and implementing them with clarity and confidence.

If Sri Lanka remains afraid to take decisions, investment will simply move elsewhere.

If Sri Lanka undertakes reforms seriously and credibly, dependence on institutions such as the IMF could gradually diminish. Sustainable economic sovereignty ultimately comes not from perpetual borrowing, but from growth, investment, productivity, and confidence.

Yet successive governments have hesitated.

The reason is not merely political weakness. Large sections of the population remain suspicious of privatisation, foreign investment, and market-oriented reform. Governments, fearing public backlash, avoid difficult decisions.

But the reality is unavoidable.

Sri Lanka cannot indefinitely sustain high public debt, inefficient state enterprises, weak growth, high taxation, and currency instability while simultaneously resisting large-scale private investment.

If Sri Lankans want lower taxes, better infrastructure, higher wages, stronger pensions, and a stable currency, then the country must create conditions for major domestic and foreign investment.

Otherwise, Sri Lanka will continue to muddle through from one economic crisis to the next, while increasing numbers of young Sri Lankans conclude that their future lies abroad rather than at home.

No nation has achieved sustained prosperity while keeping vast sections of its economy trapped under inefficient state control and chronic fiscal weakness.

The question Sri Lanka must now answer is simple:

Does the country genuinely want investment and growth, or merely continue talking about them?
(Milinda Moragoda is the Founder of the Pathfinder Foundation. Can be contacted via [email protected])