Peace perks up Sri Lanka's economy
By Amantha Perera
COLOMBO - The Taj Samudra, the flagship property here of Taj Hotels India, sits
on what is arguably the best location in Sri Lanka's capital. Overlooking the
Indian Ocean, it is the only five-star hotel in this city from which guests can
walk out straight into the largest sea-fronted green esplanade in the country.
Yet up until recently, this and its elegant rooms failed to keep the Taj
Samudra's cash registers ringing. Rooms at the hotel went at bargain rates just
to attract guests - without much success. The reason: the recently ended
25-year separatist conflict scared away tourists and investors alike, causing
this island state's economy to hemorrhage.
The war finally came to an end in May 2009, with the Sri Lankan
military's defeat of the Liberation Tigers of Tamil Eelam (LTTE). Today, Taj
Samudra is not only doing well, Taj Hotels is also among the many foreign
investors that are taking a renewed interest in Sri Lanka.
An official of a multilateral donor based in Sri Lanka observes that foreign
investments have been much more pronounced in the Colombo stock market in the
last 10 months. Confirms Taj Hotels chief executive officer Raymond Bickson:
"This is a very vibrant market, we are very excited."
Just in August, the European Union (EU) formally suspended Sri Lanka's
participation in the Generalized System of Preferences (GSP Plus) concessionary
tariff scheme, which has helped give this country's goods an extra edge in the
The EU is Sri Lanka's single largest export market, especially for apparel.
In 2010, Sri Lanka's garments exports, of which more than 50% went to
Europe, reached US$3.1 billion.
The export of apparels is the country's third-largest source of foreign
revenues, after workers' remittances and tourism. Indications are the
suspension has already affected Sri Lanka's export growth, which slowed down in
July - the first time in four months - because of an 11% decline in apparel
Worrisome too is the news that Bangladesh's apparel exports were performing
better than expected because some of Sri Lanka's customers were shifting to
Sri Lanka's suspension from the GSP Plus was already delayed by six months,
after the EU was persuaded to wait for Sri Lanka to present "tangible and
sustainable progress" of its compliance with three human rights conventions.
When it became evident that Colombo was not budging, EU announced in February
that it was going ahead with the suspension of the country's trade privileges.
An EU investigation report released in October 2009 had said that Sri Lanka had
fallen short of full implementation of the International Covenant on Civil and
Political Rights, the Convention against Torture, and the Convention on the
Rights of the Child.
This allegation stems largely from the human rights abuses committed by both
the military and the LTTE at the close of the civil war that have yet to be
investigated by the government, as well as from the reported violation of the
rights of those suspected of having been LTTE sympathizers.
According to Amnesty International, some 12,000 displaced people "suspected of
links with the LTTE have been arbitrarily arrested and detained incommunicado
by the \authorities in irregular detention facilities" since the end of the
The Sri Lankan government, however, has remained defiant in the face of
international criticism of its human rights record. In response to Sri Lanka's
suspension from the GSP Plus, the government has pledged to strengthen trade
ties with "friendlier" countries such as India and China.
Indian High Commissioner in Sri Lanka Ashok Kantha reports that these days,
trade relations between the two neighboring nations could not be any better.
"Sri Lanka's exports to India have increased by 45% during the first seven
months and India's exports to Sri Lanka have also increased by 41%," he says.
"If the current trend continues, 2010 will be an all-time high record in trade
relations between the two countries."
And there are the likes of Taj Hotels, which is looking to invest over $30
million in Sri Lanka, and is acquiring a new property near the Colombo
international airport, among other things. Its parent company, India's Tata
Group, meanwhile, is negotiating to take control of the local
telecommunications firm Suntel, which holds about 20% of this country's total
India's Mahindra Group, which is introducing new vehicle models into the Sri
Lankan market, also plans to set up an assembly plant with a local
India is Sri Lanka's second-largest source of development aid, pledging $800
million in 2009 for projects in the country's northeast. Only Japan has been
able to top that assistance; Tokyo committed a total of more than $1 billion in
aid in 2009.
China, too, has become a major assistance provider. It has pledged over $500
million for infrastructure projects, mainly in the south of the island nation.