The research which ranked 178 countries around the world on trade, taxation, business start-up costs, labour laws and legal procedures placed Sri Lanka at 101, a worsening of its position from 89th in the past two years.
Some South Asian neighbours did better in their overall rankings, with the Maldives ranked 60 and Pakistan 76.
Sri Lanka however, scored ahead of Bangladesh (107), Nepal (111), Bhutan (119), India (120) and Afghanistan (159) in the "Doing Business 2008" report by the IFC, a World Bank member that promotes private sector investment in developing countries.
"The obstacles to doing business in Sri Lanka are linked to the licensing and tax procedures regimes," Melissa Johns, Investment Policy Specialist in the Doing Business team told AFP.
The report authors also ranked countries in individual problem areas.
Sri Lanka was the 111th most expensive country in the world to employ workers, as restrictive labour laws make it costly to dismiss staff. Companies must pa