COLOMBO (Reuters) - Sri Lanka, likely to miss its 2010 target for Foreign Direct Investment (FDI), will introduce new policies in the 2011 budget to spur post-war investment and tax revenues, a senior investment official said on Thursday.

The $42 billion economy had aimed to attract a record $1 billion FDI mainly in tourism and outsourcing after a 25-year war ended in May last year.

Jayampathy Bandaranayeka, the chairman and director general of the country's state-run Board of Investment (BOI) said the aim was ambitious.


"We are unlikely to move beyond $1 billion and investments would be more in line with what was achieved last year," Bandaranayeka said in an interview.

"The real take off will be following the budget in November. We expect 2011 to be much higher than $1 billion," he said.

Foreign direct investment hit a record $889 million in 2008, but fell in 2009 to $602 million due to the global downturn.

The end of the war, since when the stock market had surged over 152 percent, boosted Sri Lanka's growth prospects.

The new FDI policies, expected in 2011 budget, will aim to draw investments into agriculture, fisheries, business outsourcing, education, shipping, aviation, infrastructure and tourism, Bandaranayeka said.

The new policies also will rationalise tax concessions, which were given to attract foreigners due to the prolonged war.


"The government will be looking forward to a different regime of incentives that take into account the special needs of the country. The expectation is both to attract FDIs to increase investments and also to ensure the future tax base of the country is protected," he said.

Future FDI projects would be available for investors across the world in all the selected sectors and the BOI hopes to minimise all bureaucracy for foreigners.

(Editing by Ron Askew)