Some good signs on the economic front in Lanka

KKS port to be developed by India

Courtesy of the Island, 6 May 2011

Two rival economies, both emerging economic superpowers, will assist the government ofSri Lankadevelop the once conflict-torn island-nation. While China develops the Hambantota Port in the deep-South, the Indians would soon help develop a port in the North, and analysts believe this gesture on the part of the Sri Lankan government would be more meaningful in terms of reconciliation and inclusive economic development.

The government of Sri Lanka said it would sign an MOU with the government of India seeking assistance to develop the Kankasanthurai port (KKS) in the once conflict-torn North. The two-phased development of KKS would involve repairs to the existing break water, jetty and deepening of the harbor while a new breakwater would also be constructed, the government said. The government said the MOU with the government of India would be signed shortly. Operations at KKS were hindered due to the 30-year conflict, but it was once a thriving port.  “The government has declared KKS to be one of the ten entry points, both, sea and air, in to the country that would be developed. The development of KKS harbor would facilitate the transportation of goods from nearby Indian ports.  This is considered as one of the important projects in the context of security of the country and the economic and social development ofNorthernPeninsula,” the government said in a statement issued yesterday (5).

All to benefit — Shipping expert Jayantha Rathnayake speaking to The Island Financial Review said the development of KKS would bring benefits to all communities. Not only would Tamil speaking citizens of the North and East benefit immensely from the development of KKS, but Sinhala speaking people in the North-Central Province, which includes Anuradhapura and Polonnaruwa, would benefit as well. “More than 95 percent of consignments reach the North via the Port of Colombo, so the development of KKS would give the region a big boost. At the moment, smaller consignments come in from KKS, but if the harbour is deepened to allow bigger ships, the benefits would be tremendous,” Rathnayake, Managing Director of the commercial cluster of the Ceyline Group said.

More than 70 percent of volumes handled bySri Lanka’s main port,Colombo, are transshipment of Indian cargo and Rathnayake said the development of KKS with a deeper draft, would have an almost instantaneous success. “Much has been done to develop theHambantotaPort, but by focusing attention on KKS as well, the government is boosting the prospects for better economic dividends of all Sri Lankans,” he said.

Economic benefits — Senior Economist Prof Sirimal Abeyratne said Sri Lanka had a lot to gain by linking up with India’s economy. “India is emerging as a global economic powerhouse so Sri Lanka can benefit by deepening its economic ties with India because it is such a huge market. India’s economy would grow with or without Sri Lanka. But if we are to grow strongly ourselves, then we must deepen our access to Indian markets,” Prof Abeyratne, a senior economics lecturer at the University of Colombo said,

Anushka Wijesinha, Research Officer of theInstituteofPolicy Studies, said the government ofSri Lankashould ensure that the development of KKS incorporated broader industrial development, including the development of industrial zones and parks around the area.

“A good start is the Achchuveli Industrial Zone currently being developed inJaffna. Public-private partnerships could be considered in this regard, as it is done in Hambantota,” he said speaking to The Island Financial Review.

Wijesinha went on to say the development of KKS would ensureJaffnaemerged asSri Lanka’s Northern hub.

FDI flows. — In 2010, foreign direct investments into Sri Lanka declined 14.14 percent to US$ 516 million during the first full year of peace since the thirty-year conflict ended in 2009. In 2009, FDI inflows had amounted to 601 million. India topped the list with FDIs amounting to US$ 110 million in 2010, followed by Malaysia (US$ 72 million) and the UAE (US$ 66 million). Authorities say FDIs would reach US$ 1 billion this year, but the IMF has a more conservative estimate of nearly US$ 900 million.

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Investors pour in to buy land in Sri Lanka

Aya Lowe,  Courtesy of

Dubai:  Investors are pouring in to snap up land onSri Lanka’s east coast which has only recently been opened up to tourists following 30 years of civil war. “Around 100 acres have been given to 13 investors under 99 year leases so we should have another 100 rooms by the end of next year. We have three hotels already operating in that area. “There are also 13 hotel projects in the pipeline,” said Chandra Wickeramasinghe, chairman and managing director of Connaissance de Ceylon, a destination management company. Following a year of peace, Sri Lankais looking to bring back the tourists that were frightened away by the internal conflict.

 Travel agents cater to budding tourists — Pic by Pankaj sharma of Gulf News

More hotels

“The government wants to have more hotels in the east. The area was abandoned for so many years because of the terrorist problem, but it has tremendous potential,” said Anura Lokuhetty, president of Tourist Hotels Association of Sri Lanka. According to Sorath Wijesinghe, ambassador ofSri Lankato the UAE, the biggest number of tourists visitingJaffnaare those in the diaspora, the Sri Lankans who fled during the conflict. “A lot of the affluent people who have been living inEuropefor the last 20 years are going back to see their own country,” he said.

According to the Sri Lankan Tourist Board, 654,000 tourists visited the country in 2010, a number they’re looking to increase to 2.6 million by 2016 and to five million by 2020.

“We’ve identified the Middle East as one of the largest growth markets forSri Lankawith tourist arrivals growing steadily at 46 per cent last year. In order to increase this, we are committed to improving infrastructure, trains, hotel rooms etc…” said Malraj Kriella, managing director of the Sri Lanka Tourism Board.

As part of this plan, they are looking to increase their 15,000 hotel rooms to 45,000 by 2016. Shangri-la recently announced a plan for a 500 room resort hotel inColomboand China National Aero-Technology Import and Export Corporation is planning another hotel near the new Shangri-la hotel. According to Lokuhetty, Movenpick which is expanding across Asia has also earmarkedSri Lankafor future development plans.

Sri Lankahas also been working to making remote areas more accessible to tourists by introducing air taxis or seaplanes. “These flights which are only $99 on average are very popular and are always fully booked. They save time and comfort on going to different places,” said Mohammad Fazeel, head of worldwide sales at Sri Lankan Airlines.

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