Sri Lanka Poised to Raise Incomes as War Ends, World Bank Says

By Anusha Ondaatjie, 17th July 2009,Bloomberg.com

Sri Lanka is poised to raise its growth and income levels as the South Asian island rebuilds after the end of a 26-year civil war, the World Bank said.

“Ending the armed conflict definitely is an opportunity for Sri Lanka to graduate from a low-income country to a fully fledged middle-income country,” said World Bank Sri Lanka Director Naoko Ishii.

The island nation needs to strengthen its “business environment” and develop its “educated and skilled labor force” to help sustain higher growth levels, she said in an e- mail today in response to questions from Bloomberg News.

The Central Bank of Sri Lanka this month raised its 2009 growth forecast to as much as 4.5 percent, from an earlier estimate of 2.5 percent, after the government in May crushed the Liberation Tigers of Tamil Eelam separatist rebels. Income per head rose to $2,014 last year from $1,634 in 2007 and $900 in 2000, according to the central bank.

“Reconstruction expenditure will give a short-term boost to the growth process,” said Dushni Weerakoon, deputy director of the Institute of Policy Studies in Colombo. “But if it is combined with a broader reform agenda, it will give the private sector a conducive environment to operate in and make a return on investments.”

Sri Lanka moved up to 29th position in 2008 from 47th place in 2007 for ease of starting a business in the country, according to the World Bank. The island allows 100 percent ownership to foreign investors in all businesses and places no restriction on repatriation of earnings.

Interest Rates

President Mahinda Rajapaksa is seeking aid and investments to help turn the war-ravaged east and north of Sri Lanka into productive parts of the economy.

Central Bank Governor Nivard Cabraal has driven down interest rates this year, taking advantage of inflation at a five-year low, in a bid to spur spending and investment and make up for slowing exports.

The World Bank last year announced a $900 million three- year program for Sri Lanka to help reduce poverty and fund infrastructure development, including in areas affected by the conflict. Heightened violence in the island’s civil war contributed to a 1.1 percentage point “falloff” in economic growth in 2007, the bank said last year.

“The country-assistance strategy emphasizes the importance of our engagement being conflict sensitive and at the same time has chosen development of conflict-affected areas as one of priority,” Ishii said.

“We are in discussion with the government on how our programs can best assist the government’s effort for reconstruction and development of the conflict-affected areas and its people.”

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net.

Sri Lanka highlights opportunities in northern transport

17th July 2009, LankaBusinessOnline

Sri Lanka's private sector has been told a host of investment opportunities have emerged in rebuilding transport infrastucture in the north and east, much of which was destroyed or neglected owing to war.

Transport specialist Rohan Abeywickrema said there were opportunities to create facilities to link farmers and factories in the northern and eastern rgeions with markets elsewhere in the island.

Areas for investment include private-public partnerships such as in setting up cold storage facilities to store and process fish, vegetables and fruit, he told a seminar on reviving the economy of the north-east organised by the Chamber of Construction Industry.

The government and private sector are looking for ways to revive and northern and eastern regions after security forces defeated Tamil Tiger rebels in May.

"Building processing centres and warehouses is another area of investment for the private sector," said Abeywickrema, a member of the Strategic Enterprise Management Agency, which overseas state enterprises.

The private sector could also invest in railwaye terminals and central freight stations, and logistics centres for packing, unpacking, labelling, tagging, and storage.

"We recommend that rail be used as a priority mode of transport provided the railway provides a good service," Abeywickrema said.

"At least a daily goods train running to and from Colombo. And delivery conditions must be smooth, without delay, to ensure for instance that fish harvested in the evening and beached can be transported to Colombo next morning."

Improving transport infrastructure could ensure better revenue for producers while reducing prices for consumers, Abeywickrema said.

"Almost 60 pertcent of perishables produced in the north and east is lost because of the absence of modern logistics managemenent systems,"

"We propose to reduce it to 10 percent which is the world standard."

Better processing in centres of production themselves could help reduce wastage and minimise garbage problems in consumer areas.

"We can also ensure producers do not have problems in selling produce particularly at harvest time," he said.

"We're looking at generating adequate economic actviity and employment by setting up processing and storage centres in the northern and eastern regions."

UK 'impressed' with development in Sri Lanka's east, and a lot of enquiries from UK business community on investing

18th July 2009, DailyMirror.lk

The British government has expressed support for the efforts to resettle displaced and the development in Sri Lanka's north and east.

After a fact finding mission to eastern province, British High Commissioner in Colombo, Dr. Peter Hayes, told BBC Sandeshaya that he was impressed with the improvement in the security situation.

"First thing I noticed was greatly reduced number of check points on the roads, particularly the roads up to Trincomalee from Colombo and around Batticaloa," he said.

The provincial government is the east has an 'ambitious agenda' to develop the region, Dr. Hayes said, but struggling to implement it due to lack of funding.

He added that the British High Commission in Colombo is getting "a lot of enquiries" from UK business community regarding investing in Sri Lanka.

"As a result of improving security situation in Trincomalee town, Arugam Bay and Yala national park, tourists and business people are more likely to come, invest and spend," Dr. Hayes said.

He said the UK government has allocated funding for the displaced in the north and next step for the British government is to help Internally Displaced People (IDPs) to get out of the camps.

However, it does not mean that the UK condone human rights violations and threats to media in Sri Lanka, according to the High Commissioner.

"We expressed concerns about human rights, media freedom consistently. We have been supporting media and human rights defenders. It has not been changed."

President Mahinda Rajapaksa had made pledges to safeguard human rights and media freedom, he said. (BBC Sandeshaya)

"President who won the war can also win the peace" – Indian PM, Manmohan Singh on Sri Lankan President, Mahinda Rajapaksa

17th July 2009, DialyMirror.lk

President Mahinda Rajapaksa had won the war against the LTTE and its terrorism, and can now win the peace. His enormous talent should help solve the long drawn out issue in Sri Lanka permanently, said Indian Prime Minister Dr. Manmohan Singh to the Sri Lankan President yesterday.

These sentiments were expressed when the two national leaders of India and Sri Lanka met for bi-lateral discussions shortly after the conclusion of the 15th Non Aligned Summit at Sharm El Sheik, Egypt, yesterday (16). The Indian Prime Minister said he had the highest confidence in President Rajapaksa’s capability in resolving the tasks presented in the post-conflict situation in Sri Lanka, as he had a clear vision of what had to be done in the current situation.

The discussions between the two leaders covered a wide range of issues of mutual interest such as the IDPS in the North, proposals for devolution of power and a political solution in Sri Lanka, the issue of fishermen in the waters north of Sri Lanka, the current Development in the North and East, and continued cooperation between India and Sri Lanka.

President Rajapaksa assured the Indian Prime Minister that the Government was taking all steps to keep to its target of re-settling the IDPs in 180 days, which programme was first announced to the high level Indian officials who visited Sri Lanka for exchange of views shortly after the defeat of the LTTE. The government was keen to expedite the process of resettlement and rehabilitation, but had to also be conscious of the need to ensure the safety of these citizens, especially from land mines and other dangers, as well as provide them with the necessary infra-structure facilities and new livelihood opportunities.

He also explained the priority being given by the government to development activities in the North and East, with special impetus on development of the North, in the context of the enormous losses suffered by the people of the North under terrorism, and the lack of any progress in development activity in areas that were once held by the LTTE.

Sri Lanka saw both the North and East as new areas for economic development, with the many opportunities available for investment, now that they had been cleared of the grip of terrorism. The possibility of Indian investment in these areas, mutually beneficial to the two countries, was discussed with the objective of further exploring the opportunities that are now being worked out.

Both leaders were agreed on the need to prevent conflict involving the fishermen of the two countries in the waters North of Sri Lanka, and the need for humanitarian approaches in dealing with this matter.

On the issue of a political solution to the current issued in Sri Lanka, President Rajapaksa restated in Lanka’s policy of moving ahead with implementing of the 13th Amendment to the Constitution, which had not been fully implemented so far, mainly due to the obstacles placed by the LTTE, although it had at first agreed to its provisions. The government was looking forward, with a great degree of confidence, to obtaining consensus among all sections on the proposals envisaged in this regard.

In discussing the need for reconciliation among the communities in Sri Lanka, after the separatist terrorist war that lasted thirty years, President Rajapaksa said moves had already been initiated in this regard with his calling an All Party Committee on Development and Reconciliation. He expressed satisfaction that this committee had a very large representation, including that of the Tamil National Alliance, whose representatives had said they are now prepared to be partners in the progress of Sri Lanka. The process of reconciliation was being actively pursued on many fronts, with the need for inclusive policies for political an economic development.

Prime Minister Manmohan Singh said that India would continue to give all support to ensure the early resettlement and rehabilitation of the IDPs in the North.

President Rajapaksa thanked India for the understanding it had shown in the need to defeat the terrorism of the LTTE, the assistance it had already given in bringing relief to the IDPs, the offer of continued support in this regard, and for the strong support extended to Sri Lanka in the Special Session of the UN Human Rights Council in Geneva.

It was also agreed that both countries continue with the periodic contacts at a high level to ensure good understanding between the two countries on matters of mutual interest.

The Indian Prime Minister invited President Rajapaksa to visit New Delhi at the earliest opportunity for the further strengthening of good relations between the two countries, which invitation was reciprocated by President Rajapaksa to Dr. Manmohan Singh.

New scope for Malaysian investment in Sri Lanka

17th July 2009, FirstLanka.com

The defeat of the LTTE and the extended period of terror in Sri Lanka had opened new opportunities for investment in Sri Lanka said the Malaysian Prime Minister Dato Mohamed Abdul Razak in discussions with President Rajapaksa in Egypt yesterday (16). The two leaders met at Sharm El Sheik where they had come to participate in the 15th Non Aligned Summit.

Prime Minister Abdul Razak who congratulated President Rajapaksa on the successful defeat of the LTTE and its terrorism, said that with the dawn of a new era of peace in Sri Lanka, he would recommend to Malaysian investors that Sri Lanka provided good scope for investment in many areas of enterprise.

The two leaders discussed South and South East Asian issues and the responses needed by the countries of these regions to the challenge posed by the global financial and economic crises, and the need to safeguard the people of the developing countries from the harsh effects of these crises.

President Rajapaksa expressed the need for a common position and pragmatic approaches by the Non-Aligned and developing countries to meet the challenges of Climate Change and Global Warming, which would adversely affect both South and South East Asia.

The possibility of improved activity in the areas of economic activity such as Tourism Development was also discussed.

Ambassador outlines Sri Lanka’s plan for lasting peace

17th July 2009, FirstLanka.com

Sri Lanka will ensure peace after 25 years of conflict by holding local elections that will give the Tamil population a voice in its future, Jaliya Wickramasuriya, Sri Lanka’s Ambassador to the U.S., told a group of young Asian leaders here this week.

“We have to bring displaced Sri Lankans into the political process,” Ambassador Wickramasuriya said. “That’s something they have not experienced for a long time. We need to do this on the local level — in town and provincial councils. And we need to do it nationally.

“In other words, we need elections.”

The Ambassador appeared as a guest speaker before the Washington Leadership Program, a group of young Asian-American leaders. Ambassador Wickramasuriya appeared with Dr. Walter Anderson of the South Asia Studies Program at John Hopkins University’s School for Advanced International Studies.

The July 15 forum was moderated by Jasmeet Ahuja, a professional staff member of the House Committee on Foreign Affairs, where her primary responsibility is foreign policy in South Asia. The talk was organized by Harin Contractor, a senior consultant with Booz Allen Hamilton of McLean, Va., and held at the Washington law offices of O’Melveny & Myers.

While the meeting was intended to consider events in India, Pakistan, Afghanistan and Sri Lanka, most of the questions and answers centered on Sri Lanka’s May 18 conclusion of its 25-year-long war against the Liberation Tigers of Tamil Eelam, and future political and economic prospects.

“Right now in Sri Lanka we have begun to rebuild the damage done by our conflict,” Ambassador Wickramasuriya said. “Construction is already underway on roads and water systems. But we have to rebuild more than highways and homes. We have to rebuild trust.”

Ambassador Wickramasuriya explained how Sri Lanka won its conflict with the LTTE, as well as the prospects for lasting peace in Sri Lanka. He outlined the planned elections in the north and the scheduled return of the 280,000 displaced people now living in government welfare centers.

A member of the audience asked Ambassador Wickramasuriya if the U.S. can learn about fighting terrorists from Sri Lanka?

The Ambassador replied that Sri Lanka took up former President George Bush’s refrain that “a terrorist is a terrorist,” and sought to end the conflict after years of failed negotiations.

“The United States was talking about a war against terrorists,” Wickramasuriya said. “We fought that war.”

Sri Lanka cancels $200 million China, Pakistan weapons purchase

16th July 2009, Reuters, www.defence.pk

Sri Lanka has cancelled a $200 million purchase of ammunition from Pakistan and China after the end of its war with the Tamil Tigers, the island nation's new top military commander said on Wednesday.

General Sarath Fonseka, who as army commander was one of the chief architects of the campaign to destroy the separatist Tigers and end a 25-year war, was named to the newly created post of chief of defence staff on Sunday. "We stopped the orders of $200 million worth of ammunition from China and Pakistan with the war's end," Fonseka said at his swearing-in. He is now in overall command of the military.

Tigers no more:
The order would have been enough ammunition to fire guns and heavy weapons at the rate seen during the climax of the war, which ended on May 18, Fonseka said. About 800 members of a breakaway Tiger group have also joined the armed forces, he added. Sri Lanka is currently seeking a $1.9 billion International Monetary Fund loan to bolster foreign exchange reserves and solve a balance-of-payments problem, and diplomats are closely watching to see if the military remains a top government priority. Fonseka's promotion, and that of navy chief Admiral Wasantha Karannagoda to the new post of the president's national security adviser, means the military will still have an influential role in President Mahinda Rajapaksa's administration.

Fonseka was nearly killed by a Tamil Tiger suicide bomber in 2006, but in three months returned to his post as army commander and launched the offensive that would spell the end of the LTTE.

Western diplomats privately have frowned on plans to add 50,000 people to the security services, saying that Sri Lanka should be spending its money on post-war rebuilding. Overall defence spending this year was estimated at up to $1.74 billion, accounting for 17 percent of the country's total estimated expenditure. The forecast came before the end of a war that has always been a drag on Sri Lanka's $40 billion economy.