Colombo, former capital of Sri Lanka, serves as a major port and the largest financial center of the country. It is the backbone of Sri Lankan economic structure.

Colombo has most of the amenities that a modern city possesses. Compared to other parts of the country, Colombo has the highest degree of infrastructure. This destination embraces considerably good stansards of electricity, water, transport,road network, etc.
 
Majority of the city population possess good English language skills, which makes it ideal for financial, telecommunication, and healthcare sectors. Colombo now has the world’s largest pool of UK qualified English-speaking accountants.It has 90,000 graduates, according to Census and Statistics Dept. 2008.
 
This destination offers a rapidly growing niche workforce which is low-cost, highly adaptable and loyal. Currently, over 50,000 are employed in IT and BPO industry and the workforce is growing at over 20 percent year-on-year. The workforce is stable with very low attrition rates ranging from 10 percent to 15 percent. A recent World Bank study revealed that the country’s labor costs ranked the lowest, in comparison to many other outsourcing destinations. Its labor cost is 15 percent to 20 percent lower than India. The total cost per associate can be as much as 30 percent lower in many cases. Also, there is a lower upward wage pressure than many established global sourcing destinations.
 
In addition, this city's geographical location, infrastructural facilities, direct access to Indian market, high quality standard of  workforce, open economy, and various free-trade agreements make this place an attractive outsourcing destination. HSBC, WNS Global Solutions, RR Donnelley, John Keells Computer Services, Just in Time, Virtusa and Astron are some of the companies which have invested in this city. The growing IT-BPO industry in Colombo offers a unique advantage for small and medium enterprises (SME) to enjoy premium access to a high quality talent pool.
 
In September 2010, MphasiS opened their global delivery center in Colombo. “There were three main reasons to select Sri Lanka apart from other countries. One of the main reasons was the educational IT institutions and to build deeper roots with the talent supply chain in Sri Lanka. The other reason was that the Government of Sri Lanka has much enthusiasm for a sustainable economic growth. The keenness of the Board of Investment (BOI) played an important role in redefining the IT landscape in the country. This caused MphasiS to set up the global delivery centre in Sri Lanka,” MphasiS CEO Ganesh Ayyar was quoted.
 
“We want to surprise MphasiS by showing the capabilities of the Sri Lankan talent. The country s exports will be measured in billions of dollars and replace the millions very soon. The employees that joined the company today should also focus on providing their best to prove that Sri Lanka can,” Board of Investment chairman Jayampathi Bandaranayake was quoted.
 
The IT-BPO industry has been identified as a thrust industry by the government of Sri Lanka. Recognizing the potential of this industry, the government has taken a number of positive steps - providing fiscal and other incentives and concessions- to fast track the development of this sector.
 
The national level competency development programs focus on building Sri Lanka as a Center of Excellence (COE) for key domain areas. Software services sector focuses on Telecommunication, Banking Financial Services and Insurance (BFSI) and Software Testing. The BPO sector focuses on financial and accounting services, investment research, engineering services, and UK-based legal services.
 
Earnings from exports of IT-BPO sector of Sri Lanka have shown a steady upward trend during the past decade. The industry has set a target of $ 2B in export revenue from IT-BPO sector by 2012.
 
Foreign direct investment (FDI) into Sri Lanka fell 16.8 percent to $208M in the first six months of 2010, compared to $250M in the first-half of 2009.  In 2008, the country's FDI hit a record $889M, but fell in 2009 to $602M due to the global downturn.

Sirimal Abeyratne, a senior economics lecturer at the University of Colombo was quoted saying,  “War was one part of a problem. Uncertainties are still there, and the economic policies are not favorable to foreign investments. (Foreigners) are not certain about the macro economy in the long run. The reform process has not yet started, and the government policy document itself is against foreign investments, blaming the open economic policies.”
As part of a new FDI policy expected to be included in the country's 2011 budget, Sri Lanka may scrap some tax concessions which had been offered to attract foreign investors during the protracted war.

Sri Lanka had targeted $1B in FDI in 2010, an optimistic aim over the economy after the end of a 25-year war. But the Board of Investment has said it may reach only around $600M, almost the same amount that came in 2009.
 Sri Lanka’s BOI said that it will prioritize approvals of investment into specific sectors, as part of its thrust to revive the country’s economy, after the end of a three-decade war. Foreign investments into IT, outsourcing, tourism, agriculture, fisheries, education, infrastructure, ports, and aviation will take precedence over all others. “For these particular sectors, we will give highest possible importance. We want to develop these sectors,” BOI spokesman Dilip Samarasinghe was quoted.
 
According to World Bank, Sri Lanka's investment climate must be improved and cost of doing business reduced, to attract the private investment needed to speed up growth. Sri Lanka has been ranked at 105 out of 183 countries in the World Bank's latest cost of doing business index. It has been sliding down the ranking scale. So, the country needs to increase private investment to about 27 percent of Gross Domestic Product, from the current 19 percent, to speed up economic growth to the levels needed to improve the lives of most people.