Sri Lanka is seeking to invite potential investors from India to set up manufacturing operations in the new Hambantota Pharmaceutical Zone and is likely to offer a number of incentives, including tax sops.

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 through an online meeting this week on the investment opportunity in the zones, an official tracking the matter told BusinessLine .

This follows discussions between Minister of External Affairs S Jaishankar and his Sri Lankan counterpart, Dinesh Gunawardena, in Colombo in January on opportunities for Indian pharmaceutical manufacturers in special zones in Sri Lanka.

“Indian investments in the zone will be important both from the economic and diplomatic perspective,” the official added.

The Sri Lankan government is setting up the Pharmaceutical Zone in Arabokka in Hambantota on over 400 acres in a bid to increase export earnings to face the Covid-19 challenges effectively. The zone’s objective is to meet around 40 per cent of the local demand for pharmaceutical products while creating the pathway to a $1-billion independent export vertical by 2025, per reports. The meeting with Sri Lankan officials on August 5 is being facilitated by the Federation of Indian Export Organisations and is likely to be attended by a number of pharmaceutical manufacturers in the country.

Tax concessions

While the details of the tax and other incentives on offer may be shared by Sri Lankan officials at the meet, according to reports in Sri Lankan media, concessions will cover corporate income tax, income tax on employees, Value Added Tax (VAT) and the Ports and Airports Development Levy. Enterprises are also likely to be exempted from Customs duty for importing capital goods and construction-related items, raw materials and production/process-related consumables.

Sri Lanka is an important trade and strategic partner for India and the Indian pharmaceutical industry exported shipments worth $245.76 million in 2020-21 to the country. India’s overall exports to Sri Lanka in 2020-21 was $3.5 billion, which was about 7.9 per cent lower than the previous year.

“Having strong economic ties with Sri Lanka is also a good strategic option for India to counter the growing influence of China in the neighbourhood. Investing in pharmaceutical zones in Sri Lanka could be beneficial for India on both economic and diplomatic fronts,” the official said.

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