The idea of turning Sri Lanka into a regional data centre hub is an attractive one, particularly in the context of growing global demand for digital infrastructure and AI-driven services. However, it raises important economic questions, especially whether this is a viable and high-return investment strategy for a small, fiscally constrained economy like Sri Lanka.
In an article published in the Daily FT on 24 February 2026, LIRNEasia Chair Professor Rohan Samarajiva questions the feasibility of this proposal, highlighting the significant infrastructure requirements and fiscal implications involved. He notes that data centres are not simple digital investments, but highly resource-intensive facilities that depend on reliable electricity, adequate land, water for cooling, and strong digital connectivity, including undersea cable networks.
He brings Viet Nam as a comparison to illustrate the scale of commitment required, discussing how Viet Nam has pursued policies that allow full foreign ownership of data centres, enable direct access to renewable energy sources, and support large-scale infrastructure expansion. This underscores the gap between Sri Lanka’s current capacity and the level of investment needed to compete regionally.
He also raises concerns about the economic returns of such investments. Data centres are capital-intensive but generate relatively limited direct employment, and the fiscal benefits through taxation remain uncertain. At the same time, they place pressure on scarce national resources such as electricity and water, raising important opportunity cost considerations.
Finally, he also discussed that there is significant uncertainty around long-term technological trajectories. The current wave of investment is driven by silicon-based computing architectures that power large language models, but these could become obsolete in the future. Emerging technologies, such as quantum or biological computing, could fundamentally change infrastructure requirements, potentially reducing the relevance of today’s large-scale data centre investments.
Read the full article on the Daily FT.
