EMBASSY OF SRI LANKA, WASHINGTON, D.C. COUNTRY INFORMATION UPDATE

Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s economy continued to expand in the four months since government forces defeated the Liberation Tigers of Tamil Eelam (LTTE), ending 25 years of terrorism and conflict. Many sectors have shown signs of quick recovery, especially tourism. Country visits leapt forward in July, and plans to expand hotels and resort facilities, especially in areas once controlled by the LTTE, promise to draw more tourists to the island nation. Despite the worldwide recession, investor confidence in Sri Lanka has remained strong in a number of sectors:

ƒÆ’-¡ƒ”š‚ Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s Gross Official Reserves Reaches Record High

The countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s gross official reserves surpassed the $4 billion mark on Sept. 10, 2009. This level of reserves is equivalent to over 4.4 months of imports and it is Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s highest ever reserves level.

The Central Bank of Sri Lanka reported that renewed investor confidence and the steady increase in foreign exchange inflows means that the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s external reserve position is expected to strengthen further in the coming months.

ƒÆ’-¡ƒ”š‚ Renewed Tourism Pushes Stock Market to Two-Year High

The Colombo Stock Exchange (CSE) surged recently to its highest level since May 2007, with shares in the tourism sector driving demand and outpacing the market’s 2009 growth by more than two-to-one. The hotels and travel index hit an all-time high of 2548.34 points with a three percent gain. It is up 167 % in 2009, more than double the overall market’s noteworthy return of 81.3 %. The CSE reported high on Sept. 8, 2009 was 2724. Turnover was reported at a two-week high of Rs.1.1 billion ($9.61 million), more than twice the 2008 daily average of Rs. 464 million.

The CSE is one of this year’s best performers among AsiaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s recovering economies. It has risen nearly 43 percent since the May conclusion of the 25-year conflict with the LTTE.

The market was buoyed further by several developments: The International Monetary FundƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s July decision to grant Sri Lanka a $2.6 billion standby loan; large scale foreign purchases of government securities; and an improved post-conflict sovereign credit rating.

The Colombo Stock Exchange noted that post-conflict tourist arrivals in June and July had picked up 10 % and 28 % respectively. The tourism industry, which suffered during years of unrest, expects 500,000 tourists this year.

ƒÆ’-¡ƒ”š‚ IMF Delegation Finds Sri Lankan Economy Stronger Than Expected

An IMF mission staff that visited Sri Lanka recently reported that it found economic developments in the island nation better than projected.

The IMF mission staff held discussions with the Sri Lankan authorities as part of the first review of a $2.6 billion stand-by facility, or loan, that was granted to Sri Lanka in July.

During their visit, IMF representatives noted that economic growth is now projected at three and a half percent in 2009, compared to the three percent predicted at the time of the standby agreement’s approval. Inflation remains subdued and is expected to remain in the single digits in 2009, the IMF team reported. Exports have also showed signs of recovery.

IMF representatives met with officials of the Central Bank, the Ministry of Finance, other government ministries and departments, as well as private sector and civil society representatives.

–From the Central Bank of Sri Lanka/IMF

Sri Lankan Government to Lease Northwest Islands for Hotels

Sri Lanka plans to lease islands off the northwest coast for tourist hotels as the travel industry recovers.

The Ministry of Tourism will soon advertise the lease of five islands in the Kalpitiya lagoon region, which is being developed as a new up-scale resort complex. The Ministry of Tourism and Ministry of Investment Promotion are already in talks with international hotel investors on new projects.

The end of the conflict with the LTTE has generated increased interest in Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s tourism among international investors and hotel operators. The international luxury hotel chain Six Senses plans to operate a six-star boutique resort on an island in Kalpitiya, to be built by a foreign investor group, Musthapha said.

–Lankabusinessonline.com

ƒÆ’-¡ƒ”š‚ U.S. Government donates computers to start Jaffna training center

The U.S. Embassy in Colombo reports that the U.S. Agency for International Development (USAID) has provided computers to help establish a computer training center and provide job training to youth in Jaffna in Northern Sri Lanka.

USAID, the development agency of the U.S. Government, provided computers to the All Ceylon Hindu Congress Research and Study Center in Jaffna to establish a computer training facility. The All Ceylon Hindu Congress is a training partner of the Unlimited Potential Partnership program (UPP), a project funded by USAID, Microsoft and Infoshare. With these new resources, the Center will train disadvantaged and internally displaced students from Jaffna and the surrounding rural area in information technology (IT) skills, which are needed to increase job opportunities, especially in media and tourism.

UPP provides IT training across Sri Lanka to support workforce development in the tourism, apparel, media, and agriculture sectors. This project partners with Sri Lankan government and private training institutes to teach basic IT skills to over 11,250 youth from across the country by 2010. The Jaffna project will focus on training for the tourism and media sectors, where employment opportunities are most promising.

–U.S. Embassy, Colombo

Aid builds local project capacity in the Eastern Province

Colombo ƒÆ’‚¢ƒ¢-¡‚¬ƒ¢¢”š¬…” The U.S. Agency for International Development (USAID) sponsored two training programs to strengthen the ability of local Sri Lankan officials to deliver services to Eastern Province residents. The two residential workshops supported by USAID reached over 90% of local authorities in the Eastern Province, providing them with the skills to better plan, prioritize, and budget for local projects.

ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-It is important that local leaders be well prepared to meet the challenges of managing complex development activities in the Eastern Province,ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ said Rebecca Cohn, USAID Mission Director. ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-USAID is pleased that our assistance has provided 100 elected officials and staff from 36 Pradesheeya Sabhas and one urban council with new skills.

ƒÆ’-¡ƒ”š‚ Prime Minister Wickremanayake: Key to Rebuilding is Investment, Preventing LTTE Resurgence

Rebuilding Sri Lanka after 25 years of civil war will require preventing a resurgence of the LTTE, Prime Minister Ratnasiri Wickremanayake told the Asia Society in New York last week. He also responded to allegations of human rights abuses.

ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-Sri Lanka suffered for almost three decades of destruction from terrorism by the LTTE,ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ said Wickremanayake. Despite victory, he said, ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-residual effects and related problems remain.ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚

Speaking at the Asia Society, the prime minister said resettling internally displaced persons (IDPs) is the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s largest post-war challenge. However, he made clear that a full resettlement will take time.

ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-You cannot have a solution overnight,ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ he stressed. Wickremanayake said an estimated 280,000 still remain in internment camps as a result of the conflict.

ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-It is not an easy task to provide welfare to these people all at once… yet we accepted this challenge,” he said. “Today, the [displaced] are being resettled systematically and efficiently.ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚

In an effort to expedite the recovery of the war-torn north and east, Wickremanayake called on the international community to boost investment in the island nation. ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-We need the support and cooperation from nations that can afford to,ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ he said. The prime minister stated that the government has already begun substantial reconstruction projects in the two regions.

Wickremanayake also called on nations to help Sri Lanka clear the large number of mines scattered throughout the countryƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s north. ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-Terrorists have planted landmines in playgrounds, holy sites, farm fields, and roads,ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ he said. ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-We are not ready to push our people onto these death traps.ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚

ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-Accept that we have a big problem,ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚ the prime minister urged, ƒÆ’‚¢ƒ¢-¡‚¬ƒ…- and help us.ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚

In a question-and-answer session moderated by Asia Society Executive Vice President Jamie Metzl, Wickremanayake addressed allegations of human rights abuses by the military and criticism of the governmentƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s treatment of displaced Tamils. The Sri Lankan government and the LTTE have both been criticized by the United Nations over alleged human rights abuses during the conflict. Wickramanayake bluntly denied allegations of human rights abuses, saying ƒÆ’‚¢ƒ¢-¡‚¬ƒ…-no crimes were committed by the army.ƒÆ’‚¢ƒ¢-¡‚¬ƒ”š‚

–Asia Society, New York

ƒÆ’-¡ƒ”š‚ Embassy of Sri Lanka

Washington, D.C.

202-483-4026