Overview

Telecommunications, computer, and information services are key growth components within the services sector and delivered net inflows worth approximately $1 billion in 2021.  The National Export Strategy of Sri Lanka aims to generate $5 billion in revenue, creating 200,000 direct jobs and establishing 1000 Information Technology and Business Process Management (IT-BPM) startups via the IT-BPM industry by 2025.  Total credits from the ICT sector amounted to approximately $1 billion in 2020.  In 2018, the country initiated the process of adopting fifth generation (5G) technology and mobile companies have conducted 5G trials in the country, however as of August the government has not yet allocated or licensed the necessary frequency spectrum for 5G services to be commercialized.  U.S. software providers have been successful in selling solutions to private customers and to some public sector agencies.  Sri Lanka is building a national fiber optic network linked to numerous international cables.  This 45,000-kilometer network, built and managed by Sri Lanka Telecom, will serve as the backbone for fixed broadband and mobile services, including 5G. 

The Telecommunications Regulatory Commission (TRC) is planning the first 5G spectrum, but no date has been announced.  The market is now preparing to move from 4G to 5G mobile services.  Dialog Axiata and Mobitel conducted pre-commercial 5G trials during 2019 and again in 2022.

Sri Lanka’s information technology and business services sector is the country’s fourth largest export earner with over 300 companies that currently serve several industry verticals.  Broadly, it is segmented as Information Technology (IT) and Information Technology enabled Services (IT/ITeS).  The industry closely adheres to global labor and environmental standards.  The combination of a skilled talent pool and operational capability makes Sri Lanka’s ICT a profitable industry.  However, the current economic crisis has affected this sector with some companies preparing to relocate staff to other countries as contingency plans if the situation worsens.

Currently, Sri Lanka’s active mobile connections have grown from just 5.4 million or 20 percent penetration in 2005 to over 28 million or 131 percent mobile penetration by the end of 2021.  The country is targeting significant usage of shared solutions and digital services by the end of 2024.  Industry experts believe the country will enter another wave of digital transformation, with 750 tech companies, 1,000 IT start-ups, and 500 other technology-related start-ups in place by 2024.  The Ministry of Technology estimates this expansion would enable the industry to reach $3 billion in export revenue.

Sri Lanka is also emerging as a global IT Business Process Outsourcing (BPO) destination of choice in several key areas.  Sri Lanka was ranked 25th among the top 50 global outsourcing destinations in 2019 by AT Kearney.  Sri Lanka’s software industry has grown significantly over the past decade.  The software services sector includes telecommunications, banking, financial services, and insurance (BFSI) and software testing.  The BPO sector includes financial & accounting services, investment research, engineering services, and UK-based legal services.  According to the World Bank, Sri Lanka has relatively low labor costs compared to other BPO destinations.  HSBC, RR Donnelley, Sysco LABS, Astron, 3SG, Hellocorp, Innodata, and WNS Global Services have set up call centers or BPO operations in Sri Lanka.  Numerous U.S. companies, many small or medium sized, are developing software in Sri Lanka.  The government seeks to further develop Sri Lanka as a base for information technology, call centers, and outsourcing.

The telecommunications sector in Sri Lanka is one of the country’s most dynamic sectors, contributing significantly, both directly and indirectly, to investment, employment, productivity, innovation, and overall economic growth.  Sri Lanka’s telecommunication market has five mobile operators serving a population of 22 million.  The telecommunications sector in Sri Lanka is responsible for substantial FDI.  Telecommunications use has been rising, and the total fixed line and mobile telephone density has increased to 142 per 100 persons led by an increase in mobile subscribers.   The mobile telephone operators dominate the sector.  The continued expansion in infrastructure has enabled telecommunication services throughout the whole country.  There is significant competition among three fixed-line operators, five mobile phone operators, and 11 Internet service providers.  The U.S. exported approximately $1.4 million of telecommunications equipment to Sri Lanka in 2021.

Sri Lanka is connected to the South East Asia-Middle East-West Europe 4 (SEA-ME-WE 4) and SEA-ME-WE 5 projects, the submarine cable systems linking South East Asia to Europe via the Indian Sub-Continent and Middle East.  The projects aim to take these regions to the forefront of global communication by significantly increasing the bandwidth and global connectivity of users along its route between Singapore and France.  SEA-ME-WE 4 fiber optic cables provide a bandwidth capacity of 4.26 terabits per second, with a 25-year guaranteed lifespan for the technology.  SEA-ME-WE 5 has an increased bandwidth capacity of 24 terabits per second.  This submarine cable system offers Sri Lanka a competitive regional bandwidth advantage and provides the opportunity for Sri Lanka to become a globally competitive business hub.  The South East Asia–Middle East–Western Europe 6 project is expected to supply an additional 12 terabits per second of bandwidth capacity, bringing more capabilities to Sri Lanka’s IT sector.

Leading Sub-Sectors

• Telecommunications Equipment and Infrastructure
• Software
• Mobile applications

Opportunities

• Opportunities for digitizing the government procurement system.
• There are opportunities for U.S. software and hardware vendors.
• There are opportunities for software application (app) development.
• There are opportunities for telecommunications equipment.

Resources

Information and Communication Technology Agency          

Sri Lanka Association for Software and Services Companies