Sri Lanka - A Hidden Outsourcing Gem

September 21, 2016

Situated on the south east of the Indian Peninsula and probably best known to most Brits as an idyllic holiday destination, Sri Lanka is also gaining recognition as being an interesting and exciting alternative destination for businesses considering offshoring. 

With a population of just over 20 million by most recent surveys, of which maybe 10 million are of working age, Sri Lanka is looking to complement other destinations by offering high skilled and niche professional services, but also be more competitive on quality.

Education and Sector Skills

Sri Lanka has well established legal and financial service sectors among others thanks to its well educated workforce. The country’s 15 state universities and over 20 private educational institutes are creating a highly educated and multi-skilled workforce with close to 100,000 students graduating every year. Already equipped with a fantastic grasp of English having been a former colony until its independence in 1948, Sri Lanka also has a multilingual workforce, capable with many European languages as well as Japanese and Chinese thanks mainly to the growth of the tourism industry. What’s more, the Sri Lankan government is committed to maintaining the fantastic education that the country offers having launched programs to increase IT usage and literacy in schools over the past few years.

The Economy and Government Support

The Sri Lankan economy has been growing at pace since the early 2000s, with GDP growth of 3%-6% a year since 2012. Inflation in Sri Lanka is around 4% - 6% which for an emerging economy is very attractive, the central bank has recently been raising interest rates in an attempt to reduce pressure on the balance of payments.

Since Maithripala Sirisena took office as president in January 2015, the government has been striving to reduce the massive debts after profligate borrowing by the previous government. In 2015 Sri Lanka had a budget deficit of 6.7% of the GDP and has a target to reduce this to 5.4% this year and 4.7% in 2017 with ongoing assistance from the IMF’s Extended Fund Facility.

The government is also building its reputation as a pro-business and pro-investment administration by allowing 100% foreign ownership in almost all sectors, which has seen Sri Lanka ranked appreciatively in the World Bank’s Doing Business Index.  Given its location in the Indian Ocean, Sri Lanka has a strong trading relationship with India, with nearly a quarter of imports (2015) come from its neighbor, whereas Sri Lanka’s key export markets are the United States and the European Union.  This has reinforced Sri Lanka’s desire to act as a complement to the industries that traditionally use India as an outsourcing destination.

Labour costs

The cost of labour in Sri Lanka remains comparatively low when looking at emerging markets. Despite the high skill level, wages remain cheaper than most competing countries offering attractive value for money when it comes to employment. Many positions, such as IT programmers and accountants are much cheaper to employ in Sri Lanka, than say India or China, giving the country an attractive quality. Real estate costs are also low, with offices in Colombo, Sri Lanka’s largest city, being among the cheapest in the region.

After the problems during the conflict, Sri Lanka is now considered a secure country which has boosted tourism and investment in the economy. Terrorism is low threat in Sri Lanka and the political situation is looking stable.

Sri Lanka can provide a skilled and professional workforce and is therefore a popular choice for niche investment. Thanks to its stable economic and political environment, the country is a more prosperous and less risky destination for foreign capital. With a strong investment in infrastructure spending and extensive international air links, the country is competing strongly for investment in the crowded Southern Asian area and with a stable 

economic growth and low costs, the location is emerging as a frontrunner in the outsourcing space.

The NOA (National Outsourcing Association)is co-hosting a Trade Visit by the Sri Lankan Export Development Board in November 2016. If you are interested in finding out more about Sri Lanka as an outsourcing destination, or would like to register your interest in the Trade Visit to explore outsourcing options in the region, you can register here.

(Sourcing Focus)