Sri Lanka’s economy demonstrated strong resilience throughout 2025 and early 2026, recording foreign direct investment inflows of USD 1.06 billion in 2025, a 72% increase from the previous year while gross official reserves stabilised above USD 6 billion, reaching USD 6.8 billion by the end of December 2025. Against this backdrop, a clear trend has emerged – many prominent business groups and high-net-worth entrepreneurs are expanding investments and operations beyond national borders, particularly into the UAE, India, Singapore, and other Southeast Asian markets.
This outward movement is not a full-scale relocation of headquarters but rather strategic diversification. It reflects both the maturing of Sri Lankan enterprises and the search for greater stability, market access, and efficiency. While the scale remains modest, the trend warrants careful examination for its implications on domestic investment, employment, tax revenue, and overall economic confidence. This balanced analysis draws on official data from the Central Bank of Sri Lanka and the Board of Investment to assess short-term challenges and long-term opportunities as the country targets over 5% GDP growth and USD 1.5–2 billion in FDI for 2026.
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The Emerging Trend of Outward Business Expansion
Sri Lankan enterprises have historically maintained international footprints, but policy liberalisation has accelerated diversification. In August 2025, the government raised outward investment limits: listed companies may now commit up to USD 750,000 annually (up from USD 500,000), while unlisted firms can invest up to USD 200,000 (previously USD 150,000). Larger projects can proceed with foreign borrowing up to USD 2 million or special Central Bank approval.
Central Bank data shows direct investment abroad rising by USD 20.8 million in September 2025 alone. Sectors such as financial services, manufacturing, apparel, tourism, and logistics are leading this shift, establishing production bases, distribution networks, and service hubs in more stable or faster-growing markets. High-net-worth individuals are also allocating capital overseas, often in real estate, technology ventures, and logistics, citing advantages in taxation, regulatory predictability, and lifestyle.
This movement coincides with continued skilled migration. The Sri Lanka Bureau of Foreign Employment recorded over 311,000 departures for foreign work in 2025, with projections reaching 350,000 in 2026. Many professionals in engineering, IT, healthcare, and finance are seeking opportunities abroad, adding to the perception of outward momentum. Yet domestic operations remain the core for most groups, with outward steps serving as risk-hedging rather than withdrawal.
Short-Term Economic Headwinds: Capital and Talent Drain
Even partial outward expansion can create immediate pressures on the domestic economy. When capital is directed overseas instead of into local factories, hotels, technology hubs, or infrastructure, the country loses potential multiplier effects on employment and supply chains. Private-sector investment is still recovering from recent crises, and any diversion slows job creation at a time when youth and graduate unemployment remains elevated despite the overall rate hovering between 4% and 5%.
Tax implications are equally significant. Corporate profits and high personal incomes contribute substantially to the 15.9% revenue-to-GDP ratio achieved in 2025. When earnings are generated and retained abroad, or when entrepreneurs shift tax residency, the Inland Revenue Department receives less. This occurs as the 2026 Budget aims for a primary surplus of Rs. 860 billion while funding reconstruction after Cyclone Ditwah and other development priorities.
Public perception also matters. Visible signs of overseas investment such as international property acquisitions or expanded global operations can be interpreted as reduced domestic confidence, potentially influencing smaller investors and slowing fresh FDI inflows despite the Board of Investment’s solid 2025 performance. Currency stability could face mild strain if outflows accelerate, although current reserves (covering approximately 3.8 months of imports at year-end 2025) provide a comfortable buffer.
On the labour front, the departure of skilled workers creates shortages in key sectors, pushing some firms to import foreign labour and raising project costs. While remittances from these migrants reached USD 7.8 billion in 2025, a vital stabiliser for the balance of payments they do not directly replace the long-term productive investment and entrepreneurial activity that remains within the country.
Long-Term Strategic Gains: Global Networks and Risk Diversification
Viewed through a longer lens, outward expansion offers substantial benefits. International operations allow Sri Lankan businesses to access new markets, advanced technologies, and diversified revenue streams, reducing vulnerability to local shocks such as policy changes, climate events, or economic downturns. Profits and expertise generated abroad can eventually be repatriated, strengthening the balance of payments and supporting future domestic growth.
Exposure to global best practices in digital finance, sustainable manufacturing, supply-chain management, and innovation often flows back home, enhancing competitiveness. The launch of the Digital Nomad Visa in 2026 aims to counterbalance talent loss by attracting foreign professionals, while diaspora networks fostered through overseas expansion can channel investments and knowledge back to Sri Lanka.
Remittances and business linkages continue to act as a safety net. In 2025, migrant earnings frequently surpassed tourism receipts in certain periods, underscoring their role in external sector stability. Stronger regional and international ties also open doors for Sri Lankan exports, tourism promotion, and collaborative projects.
Credit rating upgrades by Fitch, Moody’s, and S&P in 2025 reflect improving fundamentals, partly supported by the credibility that globally active Sri Lankan enterprises bring. As the country pursues 3 million tourist arrivals and higher FDI in 2026, these outward networks serve as effective ambassadors for “Sri Lanka Inc.” on the world stage.
Policy Imperatives: Retaining Talent and Capital While Embracing Globalisation
Sri Lanka does not need to discourage outward movement but should manage it strategically to maximise national benefits. Priority actions include:
- Strengthening the domestic investment climate through streamlined regulations, reduced policy uncertainty, and competitive incentives comparable to regional peers.
- Reviewing tax frameworks to remain attractive while preventing artificial relocation, with improved monitoring of outward investment accounts.
- Implementing targeted talent retention programmes, including skills-upgrading initiatives, diaspora return incentives, and investment-matching funds.
- Formalising channels for overseas Sri Lankan businesses to mentor local startups, co-invest in priority sectors, and promote the country internationally.
- Enhancing data collection on outward flows and high-net-worth migration to enable evidence-based policymaking.
With these measures, outward expansion can evolve from a potential risk into a powerful asset, complementing inward FDI and domestic growth.
In conclusion, Sri Lanka’s outward business expansion represents a natural evolution for a maturing economy rather than a damaging exodus. Short-term challenges around capital allocation, talent retention, and tax revenue are real but manageable with proactive policies. Long-term gains from diversified portfolios, global networks, and knowledge transfer can accelerate sustainable development if paired with continued domestic reforms. As the country advances toward its 2026 growth targets, creating an environment where entrepreneurs thrive both at home and abroad will be key to inclusive and resilient prosperity.
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