Report of the Political Economy Analysis for Skills for Inclusive ( S4IG) Program SITUATIONAL ANALYSIS FOR S4IG PROGRAM. FINAL VERSION

Table of Contents Acronyms ...... 4 1. Overview ...... 5 2. Approach and Methodology ...... 6 3. Key National Trends in Tourism – Post 2009 ...... 9 3.1 Volume and Value of Tourism ...... 9 3.2 Market Profile ...... 9 3.3 Purpose of Visit ...... 10 3.4 Availability of Rooms and Occupancy Rates...... 10 3.5 Employment ...... 10 3.6 Access to the country ...... 11 3.7 Infrastructure...... 11 3.8 Domestic Tourism ...... 12 4. Key Trends in Tourism in Eastern Province and Polonnaruwa ...... 12 5. National Level Policy Developments in the Tourism After 2009 ...... 14 5.1 Structure of tourism administration in ...... 14 5.2 Post war promotional activities at the national level...... 15 5.3 Outlook for the Tourism Sector in the next 5 Years...... 16 5.4 Geographical areas having the best potential ...... 17 5.4 Tourism themes gaining prominence ...... 17 5.5 Investments in the four S4IG districts ...... 17 5.6 Investor feedback ...... 18 5.7 Investing in S4IG districts – Perspectives from key national-level stakeholders ...... 19 5.8 Policy intentions Vs implementation capacity: A critical summary ...... 19 6. Tourism Policy Developments in the Eastern Province – Post 2009 ...... 20 6.1 Financing the Tourism Sector in the Eastern Provincial Council ...... 23 6.2.1 Opportunities and Challenges particular to Eastern Province from the perspective of the Eastern Province Tourism Promotion Bureau ...... 26 6.2.2 Constraining gaps in skills and capacities from the perspective of the Eastern Province Tourism Promotion Bureau...... 27 6.2.3 Crosscutting challenges across the S4IG districts identified by multi-stakeholder consultations...... 29 6.2.4 How enabling is the business environment for micro and small enterprises (MSEs) in the four S4IG districts? ...... 30 6.2.5 Perspectives from existing and potential investors ...... 31 6.2.6 Perspectives from national-level stakeholders...... 32 6.2.7 Locating stakeholders, interests and influences ...... 32 7. Tourism Policy Developments in the North Central Province – Post 2009 ...... 37 7.1 Overview of tourism in Polonnaruwa...... 37 7.3 Key provincial level development in tourism after 2009 ...... 37

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7.4 Policy Scenario for North Central Province post 2009 ...... 38 7.4.1 Constraining gaps in skills and capacities to promote tourism in the North Central Province? ...... 38 8. Institutional Linkages and Arrangements...... 39 8.1 Administration of the Tourism Sector ...... 41 8.2 Mapping coordination structures and processes ...... 42 9. Conflict Mapping ...... 44 9.1 Macro drivers of conflict ...... 44 9.2 Ethnicized politics and state patronage ...... 45 9.3 Mapping of conflicts/contestations at district levels ...... 47 10. Recommendations ...... 53

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Acronyms

ACLG Assistant Commissioner of Local Government BEB Business Environment Barometer BOI Board of Investments CCD Coastal Conservation Department CEA Central Environment Authority DFAT Department of Foreign Affairs and Trade, Australia DWLC Department of Wildlife and Conservation EPC Eastern Provincial Council FGD Focus Group Discussions GoSL Government of Sri Lanka KII Key Informant Interviews LA Local Authority MEPA Marine Environment Protection Authority MPCLG Ministry of Provincial Councils and Local Government MSE Micro and Small Enterprises NARA National Aquatic Resources Research and Development Agency NECCDEP North East Coastal Community Development project PCA Political Context Analysis PC Provincial Council PS Pradeshiya Sabha PSDG Province Specific Development Grant S4IG Skills for Inclusive Growth SDG Sustainable Development Goals SLCB Sri Lanka Convention Bureau SLIHTM Sri Lanka Institute for Tourism and Hotel Management SLTDA Sri Lanka Tourism Development Authority SLTPB Sri Lanka Tourism Promotion Bureau TAC Tourism Advisory Committee TAF The Asia Foundation UC Urban Council UDA Urban Development Authority UNWTO World Tourism Organization

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1. Overview

Skills for Inclusive Growth (S4IG) is an initiative of the Australian Government’s aid program. It is funded by the Department of Foreign Affairs and Trade and implemented by Scope Global in partnership with the Sri Lankan Ministry of Skills Development and Vocational Training. S4IG will support sustainable job creation and business growth along the tourism value chain in Sri Lanka including in the informal sector, by supporting provincial planning for the delivery of targeted and flexible skills and business development programs.

Targeted support will be initiated to encourage participation of women and people living with a disability. The program will also contribute towards the development of cohesive policy and communication links between government, industry and training providers.

Program outcomes:

• Strengthen provincial coordination and planning • Targeted and inclusive skills development • Strengthen skill supply

Role of The Asia Foundation

The implementing partner of S4IG – Scope Global has commissioned The Asia Foundation (TAF) to support the S4IG Program Team to prepare a report which details the political economy of the 4 Districts (, Ampara, and Polonnaruwa) in which the Program will function. This information is expected to guide program implementation and help guide strategic planning across program areas. Specific Terms of References (ToRs) provided to TAF include:

1. Reviewing key developments in the tourism sector post- 2009 with a particular focus on whether development of tourism infrastructure has resulted in disenfranchisement of local people (loss of land, livelihood etc.). 2. Identifying key political formations and alliances in the 4 Districts and providing recommendations on how to mitigate against any potential conflicts amongst these groups or with local constituencies. Given the particular thematic focus of S4IG, this mapping exercise will make particular reference, and identify possible conflict areas amongst different segments and interest groups in the Tourism Sector (e.g., hotels vs fishing rights) or its relationship with local communities and political groups. 3. Mapping in detail governance arrangements between Districts, Provincial Governments and National Government including the identification of key authorities and agencies relevant to the Tourism Sector. This exercise will also include an examination of budget and funds flow to determine policy making and policy implementation capacity. 4. Reviewing and summarizing relevant government policies and plans and develop a matrix of key funded interventions relevant to the Tourism value chain in the 4 districts.

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5. Providing an overview of the current demographic features of the 4 Districts – ethnic, gender, age, urban-rural 6. Providing an overview of the business development and competitiveness environment drawing from the ‘Business Barometer’ developed by the Asia Foundation. Efforts will be made to disaggregate the data relevant to the Tourism sector and draw targeted inferences to inform the S4IG Program. 7. Using PESTEL, or TAF’s own customized Political Context Analysis (PCA) tool or other agreed methodology, TAF will complete an analysis of the key political, economic, socio- cultural, technological, environmental and legal factors/forces that will most likely influence tourism sector development in the 4 Districts over the next 5 years. 8. Drawing inputs and inferences from the above, TAF will prepare a draft report for circulation and comments. A Final Report will be submitted after incorporating the comments.

The rest of the report discusses the methodology and approach adopted for this assignment and key findings and inferences from the situational analysis carried out using multiple methodologies.

2. Approach and Methodology

To carry out this Situational Analysis, TAF mobilized a team consisting of selected internal staff and external consultants. TAF’s senior leadership provided overall supervision, guidance and oversight of the tasks and deliverables. The core implementation team consisted of sector and theme specialists and was led by TAF’s, Director for Economic Governance.

Core Team Members Team Lead Dr. Gopa Kumar Thampi, Director – Economic Governance (TAF) Experts – Tourism Ms. Nimalka Morahela – Consultant (Former Project Manager, Sri Lanka Sector Tourism Development Authority) Dr. R. Gnanasegar – Consultant (General Manager, Eastern Province Tourism Bureau) Dr. Iraj Ratnayake – Consultant (Dean, Sabaragamuwa University) Experts – Policy & Mr. V.M. Mahendra Rajah – Consultant (Deputy Chief Secretary- Planning, Planning Eastern Provincial Council) Mr. K. Kunanathan – Consultant (Divisional Secretary, Batticaloa) Experts – Political Mr. Hibathul Careem – Consultant (Registrar, Sabaragamuwa University) Analysis and Conflict Mr. Mowlana Marsoom – Consultant (Legal & Political Analyst) Mapping Convenors – Mr. M.I.M. Valleeth – Consultant (TAF) Stakeholder Mr. Rohana Kumara – Consultant (Development Officer, Department of Consultations Local Government, North Central Province) Research & Ms. Priyakala Manoharan, Program Officer (TAF) Documentation Mr. G. Thangeshwaran – Consultant (TAF)

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The core team met in Colombo for a strategy setting workshop to identify specific domains to carry out the Situational Analysis. As a first step, four domains were identified to be critical for the assignment:

Policy

Conflict Situational Politics Drivers Analysis

Institutions

At the next level, each of these domains were profiled in detail through a list of ‘searching questions’:

Domain Searching Questions Policy What is the policy environment at the national and provincial levels? o Post 2009, what steps have been taken at national and provincial levels to promote tourism? o How does the National Tourism Policy affect provincial tourism? Is there any change in trends post-2015? o Who drives the tourism agenda in the two provinces? o Are there any recent policies, regulations or directives (national or provincial) that have or could impact tourism sector in the two provinces? o Who benefits the most from the current policies/practices followed by the two provinces? Who gets adversely affected? o What policy gaps adversely affect the prospects of Tourism in the two Provinces? Politics Mapping key political formations and alliances in the four districts o Is the Tourism sector highly politicized? If yes, why and how? What are the consequences? o Is there any constituency or lobby working against tourism industry? If yes, what are the areas of conflict/disagreement? o Is there any constituency or lobby working for the tourism industry? If yes, what are the areas of common interest?

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Domain Searching Questions Institutions What key institutions play a key role in promoting tourism at national and provincial levels? o Which key institutions are mandated to promote tourism in the two provinces? o How effective are these institutions? What factors hamper their effectiveness? o Which potential institutions could play a critical role in promoting tourism in the two provinces? o What needs to be done to strengthen existing and potential institutions? o What are the main funded interventions in the tourism sector in the four districts? Conflict Are conflicts emerging due to expansion of tourism in the two provinces? Drivers o Has expansion of tourism created new conflicts? Has it heightened old ones? o Where are the conflict faultlines – e.g., fishing spaces taken over by hotels; disenfranchisement of local communities (loss of land, livelihood etc.) o Are there any potential conflict drivers that are presently not visible? o What drives these conflicts – politics, money, power? o How could these conflicts be mitigated?

These searching questions were then converted into specific ToRs (see Annexure 1)for the experts to frame their narratives. A two-pronged approach was followed for collecting data/information:

The list of quantitative and qualitative information sources accessed for this assignment is appended as Annexure 2.

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3. Key National Trends in Tourism – Post 2009

3.1 Volume and Value of Tourism Exhibit 1 In May 2009, the long-protracted war in Sri Lanka finally ended. Sri Lanka Volume and Value of Tourism was extremely fortunate that the end 2,500,000 $4,000 of the global economic recession and $3,500 2,000,000 the end of the war coincided. From $3,000 2010, Sri Lanka has seen a surge in $2,500 tourist arrivals with a peak in 2016 1,500,000 $2,000 culminating in 2 million arrivals. The 1,000,000

$1,500 mn US$ significance of tourism in the Sri

Number of Number ariivals $1,000 Lankan economy increased 500,000 $500 considerably with tourism becoming the third highest foreign exchange 0 $0

earner in 2016, accounting for 41.2%

1970 1995 1975 1980 1985 1990 2000 2005 2010 2015 of foreign exchange receipts. Sri Lanka was able to earn US$3,518 Tourist Arrivals Tourism Earnings (US$mn) million as tourism revenue in 2016, far exceeding the target of US$2,000 million. The spend-per-day amount for a tourist increased from US$81.8 in 2009 to US$168.2 in 2016; the ambition is to see it reach US$210 by 2020. The average duration of stay increased from 9.1 in 2009 to 10.2 days, in 2016.

3.2 Market Profile Exhibit 2 Ten countries account for about 60% of tourism demand in Sri Lanka. An analysis of the Top Ten Source Markets - 2016 top ten markets since 2010 356,729 shows India’s continued 271,577 dominance even though the market share has declined 188,159 from around 20% in 2010 to 133,275 96,44095,167 about 17% in 2016. The 74,496 dominance of India was due to 58,17654,25444,122 aggressive MICE1 Tourism Promotions conducted by Sri Lanka Convention Bureau from 2007 to 2010 in all major cities in India, encouraging Indian companies to use Sri Lanka as a favorite MICE Market. The drop in this sector was due

1 MICE stands for Meetings, Incentives, Conferences and Events.

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to the introduction of the Minimum Rate Structure2 due to which Sri Lanka lost its competitive edge. China, which was not in the top ten in 2010 now, holds second place, having increased its market share from around 4% in 2013 to 13% in 2016.

3.3 Purpose of Visit

Looking at a simple average over the past ten years of the purpose of tourist arrivals, more than 70% have stated their purpose as ‘holiday/pleasure’. Following the end of the war and once peace was established in the country there was an influx of returning diaspora that peaked at 27% in 2014, up from 8% in 2006. In 2016 only 11.5% stated their purpose as visiting relatives. Business travel appears to have declined from around 18% in 2006 to 2% in 2016. Since 2013, a few visitors have come to Sri Lanka for the purpose of health, education and sports.

3.4 Availability of Rooms and Occupancy Rates

With the escalation of violence due to war and unrest in the country, occupancy rates fell to less than 50%. Since the hostilities ended, occupancy rates have increased to 75%. Along with the increase in demand for accommodation the supply of rooms increased by 7,427 rooms from 2009 to 2016. The room availability and occupation rates are monitored by the SLTDA only through registered establishments. However, there has been an increase in the supply of homestays and other unregistered guesthouses especially in the coastal areas.

3.5 Employment Exhibit 3 In line with the increase in tourist arrivals, employment in the sector Direct and Indirect Employment in the Tourism saw considerable growth mostly Sector explained by the increase in hotels, 200,000 guesthouses and restaurants. There 150,000 was also an increase in people working at travel agencies, and as 100,000 tour operators and tourist guides. Indirect employment also increased 50,000 as people got the opportunity to 0 provide numerous auxiliary services to the influx of tourist such as three wheeler, car, bus and van drivers. Direct Indirect (Estd)

2 http://www.sundaytimes.lk/160731/business-times/minimum-hotel-rates-termination-shakes-tourism-industry- 202530.html

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3.6 Access to the country

The main point of entry to Sri Lanka continues to be the Katunayake International Airport, which handled about 98%of the tourist traffic in 20163. Since 2009, Katunayake has gone through many improvements including the complete overhaul of its runway. The Mattala Rajapaksa International Airport commenced operations in 2013 and handled 0.07% of the traffic. Once fully operational, the Southern airport could make a significant contribution to the tourism development in the Southern and Eastern Province by improving accessibility and, as a substitute to Katunayake International Airport in case of any emergency closing down of the only International Airport in the Country. The Colombo Port saw the addition of a completely new jetty but Galle harbor remained the popular entry point for cruise tourists. Cruise Tourism Sector is another area of potential growth for Sri Lanka that could be grown through the operation of Marinas in key areas such as Trinco, Galle, Hambantota and Colombo4.

3.7 Infrastructure

Sri Lanka’s first highway was built in 2011 from Kottawa (in the outskirts of Colombo) to Galle in the Southern Coast of Sri Lanka 115km away. Since then the highway has been extended to Matara where the Exhibit 4 southernmost point of Sri Lanka has become accessible to Colombo in little over an hour. This has resulted in a significant growth in tourism to the Southern Coast from both international and domestic tourists. The highway has now been extended northward to Kaduwela which has made it easier for travelers to and from the South to access the international airport by circumventing the city of Colombo. The second highway was constructed from the Katunayake International Airport to Peliyagoda on the Northern outskirts of Colombo. It has shortened the journey from the airport by at least an hour even though the inner city traffic is still bad. All main roads leading to every district were upgraded and improved. Even though they remain two-lane roadways, the road surface has improved considerably making the journey comfortable and relatively faster than before, despite significant increase in traffic.

3 Annual Statistical Report 2016, Sri Lanka Tourism 4 ibid

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The railway, which was a popular mode of transport to the North, ended in Vavuniya during the period of the conflict due to the destruction of railway lines. The railway line was restored to Jaffna in 2012. There are ongoing improvements to the existing rail networks in other parts of the country. Other than Ampara, most major cities are accessible by train, but intercity connectivity remains poor.

3.8 Domestic Tourism

With the end of the war, regions of the country that were inaccessible for 30 years opened up. Peace brought with it an overwhelming sense of security to all Sri Lankans. With the general increase in income levels among Sri Lankans, and the sense of security in the time of peace saw domestic tourism grow exponentially. In addition to the increase in international visitors to Sri Lanka, there has been an influx of domestic visitors to places of interests, cultural sites, religious sites, beaches and the wildlife parks. An innate sense of curiosity to see areas of the country that were inaccessible for 27 years drove domestic tourists to the North and Eastern regions; it is estimated that around one million local tourists visited Eastern province since 2009.

4. Key Trends in Tourism in Eastern Province and Polonnaruwa

The Eastern Coast of Sri Lanka mirrors the West Coast in terms of the topography and climate but has a much prettier coastline and calm seas that are ideal for tourism. Another advantage is that it rains in the East Coast from October to February and in the West Coast from May to September. Therefore, developing the East gives Sri Lanka the opportunity to enjoy year- round tourism growth. Prior to the start of the war in 1983, Uppaveli and Nilaweli were under development as tourist areas through private sector investment. Later, Pasikudah and emerged as a popular destination. The East was a thriving destination, lucrative enough for hoteliers to ferry their guests by helicopter. However, ravaged by war and the Tsunami, the East Coast has not been able to reach its potential as a tourist destination. Post war, three tourism zones have been established at Kuchchaweli in , Passikuda in and Arugam Bay in to encourage the construction of a minimum of 50 hotels of 100 rooms each to increase accommodation to 5000 rooms from a mere 230 in 2006.

Polonnaruwa, an ancient city capital of Sri Lanka, is a part of the North Central Province. Polonnaruwa is also the agricultural capital of Sri Lanka, producing the largest quantity of rice. Travelers to Batticaloa travel through Polonnaruwa and it is about an hour and half by road from Pasikudah and about two hours from Trincomalee. Traditionally Polonnaruwa has been a transit town where visitors make day trips from Anuradhapura or pass through on their way to the East Coast. The challenge for Polonnaruwa is to make it interesting enough for tourists to want to spend a few days. It would be interesting to look at the option of recreating the experience of an ancient kingdom in Polonnaruwa, while preserving the local culture and traditions.

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Exhibit 5 Occupancy Rates in the Regions

Region 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 East Coast 16.9 18 21.6 37.8 70 75.7 68.2 69.8 73.8 74.1 74.92 Ancient Cities 43.3 40.3 35.2 44.4 62.6 71.7 66.5 73.5 75 75.2 75.46 All Region 47.8 46.2 43.9 48.4 70.1 77.1 71.2 71.7 74.3 74.5 74.76 (Average) Source: Annual Statistical Report 2016, Sri Lanka Tourism

Occupancy rates to the East and Polonnaruwa have increase from about 40% to 75% between 2009 and 2016. The East is a popular destination because of the pristine beaches and the rich diversity it offers. In the peace era, there have been a number of returning diaspora from abroad who have returned to visit family or have returned to see the places they left behind. There has been an influx of domestic tourist who flocked to the region to see areas that were out of bounds for more than two decades. Currently, the peak season for tourism in the East is July and August. The visitors seem to be families from the West that are spending the Summer vacation in Sri Lanka and Australian tourists who spend winter vacation in Sri Lanka.

Overall, the peak season for tourism in Sri Lanka is December. The main target market has been European tourists travelling in the winter months. The focus of marketing has been to this segment of tourist and promotion has been mainly the southern coast. Polonnaruwa being a traditional tourist area is a winter market. The same tourists that come to the south beaches travel to the ancient cities as a part of their tour.

There has been very little tourism promotion of the East at a national level. The East is an undiscovered destination that is accessible from March to September – the dry months. The Eastern Province and Polonnaruwa are rich in culture and diversity. All districts have ancient multiethnic and multi-religious cultures that would excite any cultural tourist and history buff. East has the sun and sand for the leisure tourist with Arugam Bay being one of the most sort after surfing destinations. Polonnaruwa has the water tank and serene beautiful vistas. For the wildlife enthusiast every district has its own wildlife parks, and also elephant safaris and underwater exploration of marine life. A Unique Selling Point for the region is access to the two biggest mammals in the world – elephants and whales - within a distance of a few kilometers. The area offers a number of cycling trails, hikes, camping and eco lodges for adventure and eco tourists. Polonnaruwa and the East Coast have unique cuisine that can be promoted to culinary tourists, through cooking lessons and tasting.

If accessibility improves, Eastern Province has good potential as a MICE destination. In July 2016, SLTDA together with the UNWTO held a conference titled “Tourism – A Catalyst for Development, Peace and Reconciliation” in Pasikudah. While discussing an important issue relevant to Sri Lanka, the conference also served to promote the East to world travelers.

Trincomalee has one of the best natural harbors and has several bays as does Batticaloa and Ampara. These bays can be developed as marinas and a completely new industry can develop

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around these marinas with opportunities for boat chandlers, boat storage, cleaning and repair, recreational activities, water taxis and such. Marinas can also be one way of attracting high-end tourist to Sri Lanka.

5. National Level Policy Developments in the Tourism After 2009

The Tourism Act No. 38 of 2005 came into effect in October 2007, replacing the Sri Lanka Tourist Board Act No 10 of 1966. Under the Act, a Tourism Development Fund was legally constituted, with two main sources of remittances – 1) 1/3 of the Airport Tax collections 2) 1% of the turnover of all Sri Lanka Tourist Board registered establishments - financing the fund. Sri Lanka Tourism Development Authority was setup under the new Act replacing the Sri Lanka Tourist Board.

The apex body under the Act is the Ministry of Tourism and each subsidiary body has its own administration headed by a Chairperson. The SLTDA and the SLTPB have advisory committees, which are comprised of government and private sector stakeholders.

5.1 Structure of tourism administration in Sri Lanka

Exhibit 6

Following the Tourism Strategy for Development 2011-2016, the Government addressed several policy related issues that were affecting the industry such as: (a) The restoration of a simple tax regime, (b) Simplification of licensing procedures,(c) Reduction of the high electricity tariffs, (d) Unification of the regulatory environment and creating a single authority for tourism promotion,(e) Creating opportunities to promote shopping of internationally reputed branded products and entertainment, (f) Simplification of the

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investment approval process by setting up of a “One-Stop-Unit” for tourism related investments, (G) streamlining the process of alienating government land for tourism development projects, (H) Attracting internationally reputed tourist hotels (Shangri-La Hotel, Grand Hyatt, Marriott Hotel and Mövenpick Hotel) and, above all an environmentally friendly, clean-city concept for urban development.

SLTDA set up a One-Stop-Unit in 2010 for tourism investors with the cooperation of Sri Lanka Board of Investment (BOI), Urban Development Authority (UDA), Coast Conservation Department (CCD), Central Environmental Authority (CEA) and other relevant line agencies, to be able to reduce the time spent by investors to obtain necessary approvals. It streamlined the whole procedure making investing in Sri Lanka a positive experience as it minimized the need for investors to deal with different government departments and bureaucracy.

SLTDA and BOI created a land bank of government and private land available to investors. The land alienation process was simplified in addition to SLTDA developing resorts, the lands was made available to potential investors who have the financial capability to pay upfront for a 99-years lease or a 33-years lease. During the last government, leases were awarded at market real estate rates to investors.

The Tourism Promotion Bureau handles all tourism promotions for the country. The SLTPB needs to launch an aggressive Visiting Journalist Program inviting world renowned channels such as Discovery, Animal Planet and National Geographic. The country should seek celebrity endorsements, features in top travel magazines, host international events in addition to participating in regular travel fairs and familiarization tours that have been done for years.

The SLITHM handles the human resource aspect. There are around 300 private hospitality educational institutes set up in the country which needs to be guided and monitored to make sure that suitable courses are conducted to cater to the growing need. SLITHM should explore the possibility of affiliating with an internationally reputed hospitality school, which would gain publicity and reputation on an international platform to produce high quality hospitality trade graduates to meet the growing demand in the sector. The curriculum and courses should be standardized and monitored by the SLITHM which has a great reputation of producing high quality graduates. Motivation of the academic staff through better remuneration packages and perks is extremely important to retain them in government establishments.

5.2 Post war promotional activities at the national level

Based on the historical performance of tourism in Sri Lanka prior to 1983, and the resilience it showed during the 27-years’ war, the insurgencies in the South, and the tsunami, the government at the time (2009) recognized tourism as a key growth industry. The first post- war Tourism Development Strategy 2011-2016 was launched with very ambitious goals for tourism growth.

Crossing the 2 million mark for tourist arrivals in 2016 was a considerable achievement for the industry. Following the launch of the Tourism Development Strategy 2011-2016, the

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SLTDA and the SLTPB launched a marketing campaign under the banner head “Wonder of Asia”. In 2010 the SLTPB showcased Sri Lanka as a preferred destination at Travel and Leisure Fairs, and Road shows in; New York, London, France, Germany, China, Russia, India, Vienna, Italy, Dubai, Malaysia, Netherlands, Sweden, Switzerland, Czech Republic and Japan. The “Visit Sri Lanka 2011” campaign was launched with activities planned for each month of the year highlighting activities for every type of tourism such as beach, adventure, shopping, culture, religious, culinary, wellness and such. The objective was to highlight Sri Lanka’s authenticity, compactness and diversity.

The “Refreshingly Sri Lanka” campaign focused on providing visitors with ‘8 wonderful experiences in 8 wonderful days’.” The eight alphabets in the country name SRI LANKA, shown in 8 different colors symbolized the 8 different product categories that Sri Lanka Tourism promoted: Beaches (Pristine), Sports & Adventure (Thrills), Heritage sites (Heritage), Mind and Body wellness (Bliss), Scenic beauty of the country (Scenic), Wild life and Nature (Wild), People & Culture (Essence) and Year-round Festivals (Festive)5.

Sri Lanka is listed on a number of international booking sites such as Lonely Planet, Trip Advisor, Bookings.com, Expedia and Agoda. Amidst positive and negative reviews, Sri Lanka comes out overall positive and a highly recommended destination. The National Geographic, The New York Times, CNN and The Guardian of UK recommend Sri Lanka as a must visit destination. Sri Lanka is seen as a destination that offers good value for money but the real objective from the perspective of the government is to build a reputation for Sri Lanka as a high-end market, rich in experiences. A key development goal for the future should be sustainable tourism keeping to indigenous culture and aesthetic design blending with local architecture.

5.3 Outlook for the Tourism Sector in the next 5 Years.

Sri Lanka Tourism Strategic Plan 2017 – 2020 lays out the development plan for the next five years.

The key objectives according to the plan are: - Generate US$7 billion in net tourism earnings by 2020, - Generate direct and indirect employment of 600,000 - Increase the daily spend of a visitor to US$210 from the current US$168

Growth will be aligned to the Sustainable Development Goals (SDGs): - SDG8: Promote sustained, inclusive, and sustainable economic growth; full and productive employment; and decent work for all - SDG12: Sustainable consumption and production patterns - SDG14: Conserve and use the oceans, seas, and marine resources for sustainable development

5 Sri Lanka Promotions Bureau, Annual Report 2011

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5.4 Geographical areas having the best potential

Sri Lanka is a small island of 65,000sqkm. The advantage any traveler has is proximity to the sun, sea and sand destinations wildlife parks, hill country and historical and cultural sites is four to seven hours away. At the moment Ella, East Coast, Southern Coast, Kandy and Nuwara Eliya are the most sought after cities. In the future we can see potential in Northern Province, Kalpitiya, Bandarawela and other undiscovered destinations such as Meemure, Panama and Singharaja. There is potential to develop the whole country as it has different tourism offerings in every region.

5.4 Tourism themes gaining prominence

Wellness Tourism - yoga, spa, ayurveda, medical

Eco Tourism - nature trails, cycle tours

Agri Tourism - farms, tea tour, spice tours, organic farms, paddy cultivation

Religious Tourism - pilgrimages, Ramayanaya, Madu Pilgrimage, Siripada, Nallur Festival, Pada Yatra Adventure - white water rafting, ballooning, rock climbing, hiking, para- Tourism motoring Golf Tourism - Royal Colombo Golf Course, Shangrila Hamabantota, Eagles Golf Links Trinco, Digana, Diyatalawa, Koggala Water Sports - diving, snorkeling, fishing, sailing, canoeing, kayaking, kite surfing Culinary Tourism - Tours by famous chefs, cookery lessons

5.5 Investments in the four S4IG districts

According to the SLTDA One-Stop-Unit, 58 Hotel Projects obtained approval in the Eastern Province. A few of these are already in operation. This will increase the number of rooms in the region from 1,121 in 2016 to 2,196 rooms once the projects are completed. It is estimated to add additional revenue of USD 242.58 million to the region. This projection only taking the registered entities into account.

Given below is a break down area wise in the Eastern Province and Polonnaruwa.

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Exhibit 7 Investment Region No of Projects No. of Rooms USD million Ampara 7 123 6.78 Batticaloa 20 1,070 99.48 Polonnaruwa 2 46 0.865 Trincomalee 23 1,003 136.3

KIIs carried out with a select set of influential stakeholders point to certain disablers that currently stifles major tourism development in the four districts. There are strict laws that protect the ancient heritage sites and the tanks because of their importance to agriculture. However, restrictive local laws challenge Polonnaruwa’s tourism development. The water bodies are out of bounds for any kind of recreational activity. People are restricted from spending time near the lakes in the evenings. The armed forces control many of the best beaches in the East like Marble Beach, Lanka Patuna and Panama. To access these beaches one has obtain permission from forces that control the area. Even though there is no restriction to access it is intimidating to go through a checkpoint during peace times. There is no opportunity for the private sector to invest in these areas.

The Nilaweli Beach stretch, which is one of the finest beaches in the Eastern Province, comes under the ambit of the Fauna and Flora Protection (Amendment) Act, No. 22 of 2009 wherein a two-mile buffer zone has been declared. There are almost 400 acres of prime land fit for development, which is restricted due to this wildlife Act. While there is a need to protect the environment and marine parks such as Pigeon Island, one could explore sustainable development options. Hotels owns 100 acres in Nilaweli, but is unable to develop the property and have not been able to resolve this issue since 2013.

5.6 Investor feedback

According to Mr. Harsha De Saram, Chairman ICC Construction (owners of Uga Hotels and ICC Apartments Trincomalee) there is a dearth of skilled staff for construction and operations. However, they are making several investments in the region because they see the potential. They have done their own promotions through their websites and direct marketing internationally and have developed a profitable product in the East.

Mr. Bernard Goonetillake, Managing Director, MBBL Group who was involved in a hotel project in Trincomalee also reiterated the difficulty in finding skilled staff. According to him, investment is costly because the investor has to incur many costs due to the lack of existing infrastructure. Because the area is not sufficiently marketed and not very accessible, and the peak is limited to two months of the year, it takes at least seven years or more to recover the investment. He sees marketing and accessibility as key areas that need attention in order to develop the area.

The other large investor in the area is the Ideal Group who have invested USD40 million in Nilaweli for a hotel with 50 rooms and 60 villas for outright purchase.

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5.7 Investing in S4IG districts – Perspectives from key national-level stakeholders

Hoteliers are investing in the East and Polonnaruwa because they see the long-term potential of the region. Other than the duty free incentive, VAT incentive and PAL incentive there are no other incentives given to those investing in the tourism sector. According to the incumbent Chairman of the BOI, Mr. Duminda Ratnayake, a special study is being done to find out what incentives are offered in competitor countries like Vietnam and Cambodia. Based on the study the BOI will develop an incentive package to attract more investors into the tourism sector. The BOI hopes to work with the Department of Inland Revenue and other related authorities to create an investor friendly environment in Sri Lanka. Tourism is among the five key areas identified for investment in the near term.

Mr. Udaya Nanayakkara, Chairman of the Sri Lanka Tourism Promotion Bureau, state that tourism promotion has concentrated the country as a whole and has not been for specific regions. He feels the private sector needs to take the initiative without waiting for the government, and affirms that the SLTPB will support any activity initiated by the private sector. They hope to recommence the International Surfing Championships and hope to have a Trinco Festival similar to the Hikka Festival in the South.

One such private sector initiative is Cinnamon Hotels promoting Trincomalee as a wedding destination. They are planning a competition to offer a complementary wedding as the winning price to a couple to attract events to the area.

5.8 Policy intentions Vs implementation capacity: A critical summary

While the GoSL has been quite proactive on the policy and promotional fronts, stakeholder consultations and KIIs reveal number of critical gaps that need to be addressed:

1. Government policy needs to focus on targeted marketing and long-term planning to increase the quality and value of the tourism products Sri Lanka has to offer. It has to move beyond the organic growth that has occurred over the years. 2. Policy implementation need to be more inclusive by bringing together all government stakeholders to the same page to minimize conflict, contradiction and impediments to the development of the industry. The industry cannot exist without the private sector involvement and investment and therefore private sector has to be involved in all policy making decisions. Along similar lines, local communities in all areas have to become stakeholders in the development of the industry. They should be positioned and engaged as direct beneficiaries who have a vested interest in preserving the assets, their environment and cultural identity. 3. Create an investor friendly, efficient route for potential investors to come into the country through attractive BOI investment packages in line with other Asian countries like Thailand, Vietnam, Burma, and India etc. A positive move in this direction is the government decision to set up Investor Friendly Tourism Zones (Kuchchaveli, Yala, Bentota, Passikudah) to simplify the approval process for any investor interested in setting up a potential tourism business in Sri Lanka

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4. Allocating higher budgets for tourism promotion activities and a well-planned marketing campaign. The decision to appoint Tourism Promotional Officers in diplomatic missions is a welcome move. 5. Setting up and promoting world class tourism educational institutes to meet the demand of the hospitality industry to leverage opportunities opened up by the influx of new international hotel chains into the country. (Shangri-La, Hyatt, Sheraton etc.).

6. Tourism Policy Developments in the Eastern Province – Post 2009

The first tourism strategy for the East Coast was formulated in 1969 - Ceylon Tourism Plan/Pre-Investment Study – Hendala and Trincomalee (late 1969). Since then there have been many: Ocean City Development in Trincomalee (NARA), Strategic Tourism Development Plan for Eastern Coast of Sri Lanka (NECCDEP) – 2009, and the Eastern Province Tourism Development Plan (Ministry of Eastern Provincial Council - 2010-2012). Under the 13th Amendment the Eastern Provincial Council (EPC) has concurrent responsibilities with central government with respect to tourism development. The EPC has the authority to plan, promote, manage and guide tourism development both at individual project level and regional planning level.

Overall, the Eastern Provincial Council (EPC) has responsibility for regional tourism policy and planning development control, design and implementation of action plans and projects and undertaking regional promotion. The Eastern Provincial Council (EPC) plays a largely proactive role of ‘making things happen’ and are is the main drive of tourism development in Eastern Province. To enable Eastern Provincial Council (EPC) to fulfill its tourism development role an institutional structure is required and this structure is provided for under current legislation. The Eastern Province Tourism Bureau (EPTB) was established vide Statute No 2/2015 of Eastern Provincial Council and would be under the direct control of the Eastern Provincial Council and depending on its charter will undertake a wide range of tourism related functions.

The purposes for which Eastern Province Tourism Bureau is established is as follows: o To act as the “Regional Tourism Body” for the Eastern Province of Sri Lanka focusing on the development and growth of the tourism industry in the province, strategic tourism development and advocacy for the province. o To consolidate the strategic direction of the tourism industry in consultation with the central government institutions for the entire Eastern Province and communicate with key partners such as Sri Lanka Tourism Development Authority, Sri Lanka Tourism Promotion Bureau, Sri Lanka Convention Bureau, Local Government Institutions, Central Environment Authority, Department of Coast Conservation and other relevant tourism industry stakeholders. o To perform the following functions in consultation with the central institutions for the Eastern Province: tourism industry development, tourism product development, regional marketing, strong advocacy and united voice for the region, effective

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coordination and communication, skills training, identifying investment/infrastructure opportunities, and managing tourism sustainability. The Eastern Province Tourism Bureau functions under the Ministry of Local Government and Tourism; currently plans are underway to establish three district offices. The Management Services Department at present has approved 12 cadre positions of development officers. Action needs to be taken to create specialized positions as per needs of the industry and to obtain the approval of the Management Services Department. The structure and role of the Eastern Province Tourism Bureau is presented below:

Exhibit 8

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Exhibit 9

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SITUATIONAL ANALYSIS FOR S4IG PROGRAM. FINAL VERSION

6.1 Financing the Tourism Sector in the Eastern Provincial Council An examination of the Province Specific Development Grant (PSDG)6 for the years 2010 to 2017 reveals the following trend:

Exhibit 10 Trends in PSDG (2010-2017).

52

40 33.5 29 25 26 22 22.5

2010 2011 2012 2013 2014 2015 2016 2017

The volume of PSD Grant released by the Central Government through the Finance Commission for promoting tourism-related activities in the Eastern Province has accelerated post 2015. This sudden spurt in the PSDG is attributed to the ability of the present Chief Minister to successfully lobby for a higher Central Government allocation.

District-wise allocation and status of PSDG allocation and use for the year 2016 is depicted below:

6 Province Specific Development Grants (PSDG) are intended to finance development projects paying particular attention to infrastructure development projects under different devolved subjects. After receiving the provincial development plans, the Finance Commission holds discussions with the respective provincial authorities and agree to ensure that these plans address the provincial needs and are in line with the National Development Policy Framework of the Government.

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SITUATIONAL ANALYSIS FOR S4IG PROGRAM. FINAL VERSION

Exhibit 11

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SITUATIONAL ANALYSIS FOR S4IG PROGRAM. FINAL VERSION

6.2 Policy and Operational Challenges in the Tourism Sector in S4IG Sites The primary obstacle to rapid short term expansion of international markets is lack of access and to a lesser degree investment in higher quality tourism related services. The pace of tourism related FDI is likely to be relatively slow until access can be improved. The only functioning international airport into Sri Lanka is the Katunayake International Airport. From the airport, the major cities in the East are about 200-300km away and takes anywhere between 6-8 hours by road and Polonnaruwa is about 200km away and takes about five hours. There is no expressway to the East. The roads are improved and widened with smooth road surfaces, but they are two-lane roadways that can be congested around major towns. The interconnectivity between the cities has improved due to rebuilding of damaged roads and construction of new roads. According to the Board of Investment of Sri Lanka (BOI) website, there are plans for highways from Katunayake to Anuradhapura in the Cultural Triangle, Colombo to the hill capital Kandy and from Anuradhapura to Jaffna at the northern tip of the country. These will improve accessibility to the East and to Polonnaruwa by reducing travel time considerably.

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Train access is available to Polonnaruwa, Trinco, and Batti but not Ampara. There is an overnight train and another that leaves and arrives in the areas during the day. However, the train journey is about nine hours long. There is no convenient interconnectivity between Tricomalee and Batticaloa. The Millennium Challenge Corporation has identified Sri Lanka as eligible for compact development and will invest USD700 million for improving infrastructure and logistics. Their focus is to develop the railway as an alternative means of transport to ease road congestion. Railway is one of the best and scenic modes of transport for tourism if the standards and quality of the product is improved and professionally marketed.

Helitours operated by Sri Lanka Air Force flies to China Bay Trincomalee three times a week. Currently the airports at Batticaloa and Ampara are closed for refurbishment. Flights leave from the Ratmalana domestic airport located South of Colombo. It costs about USD120 round trip per person and the journey is one hour. The aircrafts used are old have possibly outlived their useful life. Cinnamon Air is a private airline company that works as the air taxi arm of Sri Lankan Airlines. They have daily flights leaving Katunayake International Airport and takes 50 minutes to reach Trincomalee and costs about USD500 (round trip per person).

6.2.1 Opportunities and Challenges particular to Eastern Province from the perspective of the Eastern Province Tourism Promotion Bureau

The following set of enablers and disablers were identified by the Eastern Province Tourism Promotion Bureau: a) Opportunities 1. Major infrastructure investments are planned and being implemented in Eastern Province. 2. Potential for linkages exist for agriculture, and fishery sectors that will increase market prices and raise incomes of workers in these sectors 3. Public investment in training and workforce development will help tourism and other sectors 4. Current low levels of tourism provide an opportunity to avoid past mistakes and develop a new high quality/high value sustainable tourism paradigm. 5. Development of a tourism industry in the Eastern Province that reflects the cultural diversity and enhances benefits to local communities through equitable use of local natural resources 6. Integration of conservation and tourism through relevant departments including the Department of Wildlife Conservation (DWLC), the Department of Archaeology and the Coastal Conservation Department (CCD).

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b) Challenges 1. Weak linkages between Eastern Provincial Council(EPC) and the Central Government Poor coordination is observed between the EPC and the Central Authorities. Land allocation, human resource development, developing places of tourist attractions, and providing information to tourists or tour facilitators can only be carried out with the coordination of agencies of the Central Government. 2. Land allocation for tourist development Land specially beach fronts are valuable resource for tourist development. Encroachments of state lands are an obstacle in using valuable beaches for tourism. 3. Essential infrastructure weaknesses • Poor Access (Inter & Intra) • Interruptions to power supply • Scarcity for skilled and professional staff • Problems in waste disposal • Water supply to the required level 4. Seasonality of foreign tourist arrivals 5. Shorter period of tourist’s stay in hotels 6. Un-registered motels, guest houses etc. directly competing with registered accommodation and undermining profitability 7. Enclave Tourism Development • Resource conflict with community (fishing, beaches, sand mining, farming) • Exclusion of local people from employment • No outsourcing of the community • A rising perception that the community which is the owner of the resources does not receive anything in return for the use of their resources.

6.2.2 Constraining gaps in skills and capacities from the perspective of the Eastern Province Tourism Promotion Bureau. Tourism sector has the potential to provide direct and indirect employment for large sections of people across various social strata, including part time and seasonal job opportunities. Tourism can also provide supplemental income to people who already have other jobs. Taken as a whole, this large web of employment opportunities could generate income enhancing opportunities. However, critical deficiencies in certain skills and capacities continue to act as major constraints in expanding the tourism sector in Eastern Province.

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a) Hospitality Industry Sector Skills Required • Adequate problem solving skills • Good communication skills • Ability to maintain guest liaison and network with guests • People management skills • Sales promotion skills

Skill Gaps

• Inadequate communication skills • Inadequate customer orientation • Lack of knowledge about various service offerings in the hospitality industry. • Inadequate knowledge of information communication technology skills. b) Tourism Services Sector Skills required • Ability to interact with airport and ticket staff and coordinate travel • Good Communication skills • Verbal fluency and familiarity with international languages • Decision making and problem solving skills.

Skill gaps • Poor interpersonal skills • Inadequate communication skills • Insufficient knowledge of tourist places. • Inadequate skills to manage crises. c) Tourism Travel Sector Skill required • Ability to build relationship with the clients, especially institutional. • Ability to effectively handle all the customer complaints. • Ability to promote various travel and tour products of the province. • Ability to present tour itineraries and tourism products. • Establishing tie ups with various downstream tourism service providers. • Ability to liaison with airline, hotels and local community.

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SITUATIONAL ANALYSIS FOR S4IG PROGRAM. FINAL VERSION

Skill gaps • Inadequate ability to handle customers with wide range of needs. • Inadequate ability to handle complaints • Lack of adequate IATA qualified personnel • Lack of adequate presentation skills. • Insufficient people management skills. • Inadequate time management skills

6.2.3 Crosscutting challenges across the S4IG districts identified by multi-stakeholder consultations.

The four district-level multi-stakeholder consultations identified a set of challenges, many of which are crosscutting in nature:

 Lack of cooperation between government authorities leading to conflicts of interest.  The regulations of the Department of Archeology prevent tourism development in certain locations.  The forces controlling some of the best beaches in the East restrict proper tourism development.  Strict regulations against the use of the tank in Polonnaruwa prevents any development of water-based tourism activity.  Lack of a long-term tourism plan budgets and consistency in administration.  Ensure the preservation of culture and environment through strict implementation of regulations.  No province specific promotions by the SLTPB.  Influence of investors from outside the region where by local community norms and traditions are compromised.  Unequal distribution of income and benefits resulting in pockets of poverty in some areas, especially in the Batticaloa district.  Due to poor accessibility the numbers of tourists visiting the areas is limited.  No proper destination management.  No tourism friendly ticket pricing at places of interest (VAT, Service Charge and other fees separately listed).  Need for skills development and formal training of personal directly and indirectly engaged in the tourism industry.  Need to set standards for all tourist lodging in the region and have only registered establishments that could be monitored.  Urgent need of a system to manage garbage and waste disposal.  Better internet connectivity

Another key challenge, quite pertinent from S4IG’s perspective is the human resource factor. In a region surfacing from a conflict that disrupted normal life for more than two decades, the people seem to find it difficult to adjust to conventional norms of employment. They are used to agricultural labor and have very little experience with formal employment. The

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culture of coming to work at an appointed time, working an eight-hour day, and showing up for work every day are disciplines that have been hard to instill in them. Even workers that go through training quit employment quickly. There is a stigma attached to women working in the hotel sector in the local areas. This makes it difficult for hotels to find female workers locally. Hopefully, as the sector develops and they see tangible benefits, there will be more enthusiasm for local area workers to gain formal training through the SLITHM and become professional hoteliers. Language is also a barrier as it is difficult to find English-speaking people in the regions.

‘Homestays’ is a microenterprise that has developed with the increase of tourist arrivals. There are also guesthouses, restaurants, kiosks, and communication centers that have opened up and provide employment. The demand for tour guides have increased. There are also other service providers such as trishaw, van and bus drivers, boatmen, hair dressers, tailors, masseuse and people who give cookery lessons, do sewing and such that benefit. Others like MSEs have benefitted from being able to engage in cottage industries producing handicrafts, providing local delicacies and meals to tourists.

6.2.4 How enabling is the business environment for micro and small enterprises (MSEs) in the four S4IG districts?

Preliminary findings from the TAF’s flagship product – the Business Environment Barometer (BEB) – reveal some interesting pointers (these findings are still being validated and should not be quoted until published). The BEB Business Barometer looks into the external environment MSMEs operate in. They also study internal factors mainly focusing on business sophistication. These two factors are examined to identify its impact on business performance. Therefore, the index will include an overall score determined by two sub- indices.

The Business Environment Sub-Index refers to a combination of key factors that influence a company’s operating situation. This index looks into six such key factors, namely: 1) Institutions 2) Infrastructure (transport, energy, water supply, ICT) 3) Labour and Skills 4) Markets & Competition 5) Access to Finance 6) Climate/Weather. The index is meant to capture perceptions of the MSEs and the critical constraints they face when engaging in business at a sub national level.

The Business Outlook Sub-Index captures two critical elements: business sophistication and business performance. Business sophistication refers to how individual firms operate and the strategies they adopt. These strategies include, but is not limited to, the use of ICT, investing in training and skill development, and marketing and advertising. Business performance is an assessment of how well the company performs at present and what its future outlook is, in terms of turnover and employment.

The scores obtained from the indexed questions should be interpreted as follows (except for the scores for climate – adverse effects, where the interpretation is inverse: higher the

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score, the more adverse are condition):

81-100 = Conditions for doing businesses are very positive• 61-80 = Conditions for doing businesses are positive• 41-60 = Conditions for doing businesses are average• 21-40 = Conditions for doing businesses are negative• 00-20 = Conditions for doing businesses are very negative•

Exhibit 12

Though there aren’t much differences between the overall scores among the four districts, there is considerable variation in the relative ranks. Polonnaruwa and Batticaloa leads the pack with overall scores above the national average, while Ampara reports relatively lower overall score and a poor standing among the 25 districts. Business Outlook Sub Index score is alarmingly low for Ampara; Trincomalee also scores below the national average. Batticaloa reports robust scores for transport, infrastructure, ICT and market competition. On labor skills, barring Polonnaruwa all other three districts report scores below the national average.

6.2.5 Perspectives from existing and potential investors

A few selected investors were interviewed to get their perspectives on the prospects of investing in the Eastern province. According to Mr. Harsha De Saram, Chairman ICC Construction (owners of Uga Hotels and ICC Apartments Trincomalee) there is a dearth of skilled staff for construction and operations. However, they are making several investments in the region because they see the potential. They have done their own promotions through their websites and direct marketing internationally and have developed a profitable product in the East.

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Mr. Bernard Goonetillake, Managing Director, MBBL Group who was involved in a hotel project in Trincomalee also reiterated the difficulty in finding skilled staff. According to him, investment is costly because the investor has to incur many costs due to the lack of existing infrastructure. Because the area is not sufficiently marketed and not very accessible, and the peak is limited to two months of the year, it takes at least seven months or more to recover the investment. He sees marketing and accessibility as key areas that need attention in order to develop the area.

6.2.6 Perspectives from national-level stakeholders

Hoteliers are investing in the East and Polonnaruwa because they see the long-term potential of the regions. According to the incumbent Chairman of the BOI, Mr. Duminda Ratnayake, a special study is being done to find out what incentives are offered in competitor countries like Vietnam and Cambodia. Based on the study the BOI will develop an incentive package to attract more investors into the tourism sector. The BOI hopes to work with the Department of Inland Revenue and other related authorities to create an investor friendly environment in Sri Lanka. Tourism is among the five key areas identified for investment in the near term.

Mr. Udaya Nanayakkara, Chairman of the Sri Lanka Tourism Promotion Bureau, states that tourism promotion efforts focus on the country as a whole and not necessarily for specific regions. He feels the private sector needs to take the initiative without waiting for the government, and affirms that the SLTPB will support any activity initiated by the private sector. They hope to recommence the International Surfing Championships and hope to have a Trinco Festival similar to the Hikka Festival in the South. One such private sector initiative is Cinnamon Hotels promotion of Trincomalee as a wedding destination. They are planning a competition to offer a complementary wedding as the winning price to a couple to attract events to the area.

The complete list of national level stakeholders consulted for this assignment is presented as Annexure 3.

6.2.7 Locating stakeholders, interests and influences

A focused stakeholder analysis was carried out based on interviews with the KIIs, both at the national and provincial levels. In the first instance, the list of all stakeholders in a particular level (national and provincial) was mapped, alongside their influence and interests in promoting tourism in the Eastern Province. This matrix was then mapped along an Influence-Interest quadrant. The results are depicted separately for national and provincial levels.

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Exhibit 13 How influential or What interests do they powerful is the have? stakeholder? H – Very powerful player ++: Very positive attitude M- Not a significantly and actively promotes powerful or influential tourism player +: More or less positive in Key stakeholders (National) L – Not at all powerful or attitude and promotes significant tourism -: Mostly negative attitudes towards the sector - -: Very negative or hostile attitudes towards tourism 1. Ministry of Tourism H ++ 2. National Aquatic Resource Agency M + 3. Marine Environmental Protection M + Authority 4. Central Environmental Authority H ++ 5. Coast Conservation Department H ++ 6. Wildlife Department H + 7. Forest Department M + 8. Archeology Department M -: 9. Large Hotel Chains H ++ 10. Large Tour Operators H ++ 11. Sri Lanka Tourism Development H ++ Authority 12. Sri Lanka Tourism Promotion Bureau H ++ 13. Sri Lanka Convention Bureau M ++ 14. Sri Lanka Institute of Tourism Hotel L ++ Management 15. Civil Aviation Authority M + 16. Arugam Bay Tourist Association M ++ 17. Urban Development Authority H ++ 18. Wildlife Conservation Department M - -: 19. Sri Lanka Land Reclamation M -: Development Corporation 20. Fisheries Corporation H -: 21. Coconut Cultivation Board L -:

• As evident from the quadrant analysis, a large number of influential national-level stakeholders exhibit highly positive interests towards the development of tourism in the Eastern province. However, influential stakeholders like Wildlife Conservation Department, Fisheries Corporation and the Department of Archeology are seen to be inimical to the promotion of tourism.

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Exhibit 14

High A B 1,4,5,9, 10,11, 12,17 20

2,3,7, 15

13, 16

C D

Influence 19, 18

14

21

Low High Interest

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Exhibit 15 Key stakeholders How influential or powerful is What interests do they have? the stakeholder? Provincial H – Very powerful player ++: Very positive attitude and actively M- Not a significantly powerful or promotes tourism influential player +: More or less positive in attitude and L – Not at all powerful or promotes tourism significant -: Mostly negative attitudes towards the sector - -: Very negative or hostile attitudes towards tourism 1. Ministry of Local H ++ Government and Tourism-Eastern Province 2. NARA M ++ 3. MEPA M ++ 4. CEA H + 5. CCD H +/-: 6. Wildlife H + 7. Forest H + 8. Archeology M -: 9. Large hotel chains H ++ 10. Large tour operators H ++ 11. Local Authorities H + ✓ Municipal Council ✓ Urban Councils ✓ Pradeshiya Sabah 12. Sri Lanka Police M + 13. Local Community H -: Based Organizations 14. Tourism associations H + 15. Religious groups H - -: 16. Fishing Communities H - -: 17. Informal businesses L + +

• Contrary to the profile emerging at the national level, a significant mass of critical stakeholders has evinced only medium interest to promote tourism in the Eastern Province. From the government’s side, the key driver seems to the Chief Minister. Given the fact the term of the current government expires on September 20, 2017, there is a need to broaden the interest and ownership across other influential stakeholders as well.

Exhibit 16

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High A D 1,9,

10

15,16 5,13 4,5,6,7, 11,14

2,3

8 12

C D

Influence

17

Low High Interest

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7. Tourism Policy Developments in the North Central Province – Post 2009

7.1 Overview of tourism in Polonnaruwa

In 2016, the total foreign guest nights for Polonnaruwa (including Gritale) was 216,861 compared to 646,533 nights recorded for Habarana (including Sigiriya and Dambulla) (SLTDA, 2016). This shows the relatively low rate of overnight stays of foreign tourists in Polonnaruwa and is largely due to the nature of the popular round-tour route tourism packages usually offered to low-cost, low-value market segment. The current tourism development in the North Central Province in general is demand driven and mass tourism constitutes a significant segment. Tourism development has been extensively based on heritage which is confined to a small geographical area in Polonnaruwa District which corresponds with ancient city of Polonnaruwa.

7.3 Key provincial level development in tourism after 2009

• Government intervention in education, infrastructure (roads, electricity, drinking water, irrigation etc.) and health sectors has appreciated considerably which has positively impacted on tourism sector. Rapid urbanization and increased private sector participation in tourism related services are other noticeable developments post-2009. • There are instances of institutional (state, private, and non-governmental) involvement in providing training in tourism (area and local guiding, life-saving, hospitality, homestay etc.). Lodging sector (especially supplementary) including home stays have shown a considerable growth. • Since last five years, tourists are increasingly preferring to stay overnight in Polonnaruwa even though the situation still needs considerable improvement. • Political landscape does not have any significant impact on tourism in the District as stakeholders pointed out but tourism stakeholders are now becoming more politically influential. • Interestingly, tourism is seen to be impacting positively on local culture. Local residents are now more conscious of their own cultural traditions and historical legacies. • The spurt in tourism related activities are seen as spurring local economic growth with clear benefits accruing to hotel owners, hotel employees, small scale industries, transport service providers (safari jeep operators, three-wheeler drivers, car-bike rental etc.), tourist guides and informal traders. There is a clear evidence of new entrants in to the industry; for example, homestay unit owners and small scale lodging operators. • A major critique voiced during the stakeholder consultations is the lack of a coherent policy or vision to capitalize on the tourism boom. Institutional responses are largely seen as adhoc.

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7.4 Policy Scenario for North Central Province post 2009

Most stakeholders also feel that the Provincial Government is yet to recognize tourism as a priority sector for development; current priorities are on education, health, and agriculture. The non-existence of a proper coordinating or liaison structure at the provincial level which could effectively coordinate the stakeholders of the Province and work collaboratively with national level tourism authorities has been identified as a major shortcoming by stakeholders. The Provincial Ministry of Tourism had initiated the process of establishing the North Central Provincial Tourism Bureau, but it does not show any noticeable progress.

Primarily it seems that decisions related to tourism have been taken in a policy vacuum. Stakeholders emphasised that land use planning for recreation and tourism development requires total co-operation of the state sector, private sector organisations and the local community. Further, no effort has been taken to promote potential tourist spots like Somawathiya Temple, Wasgomuwa National Park, hot springs in Boruvila and Nelumwewa, caves of Puleegoda and ecosystems of the Mahaweli river basin as well as agro-based traditional rural lifestyle. The tourist traffic (both local and foreign) has been largely concentrated in Polonnaruwa and confined mainly to the ancient city. Tourists prefer staying overnight in Habarana and hence, the local economy suffers from poor value chain linkages that exists at present. An improved value chain with new tourist products, destination marketing, better facilitation and more importantly, effective management of visitor traffic within the area would be critical for the province to leverage gains from the existing and potential surge in tourism.

7.4.1 Constraining gaps in skills and capacities to promote tourism in the North Central Province?

• Lack of innovative tourist product development (e.g. activates currently offered are limited to a day’s worth site visits; there are no incentives for tourists to say overnight in the district). • Lack of skilled labour and lack of awareness on opportunities in tourism sector. • Facilities are not sufficient in tourist places (poor visitor facilities at places such as Archaeological Museums, transport terminals etc.). • Lack of effective mechanism for disseminating tourist information in Polonnaruwa.

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8. Institutional Linkages and Arrangements

The Sri Lankan governance system is an interesting hybrid of a colonial deconcentrated system coexisting alongside a relatively new devolved system. The deconcentrated system continues as a vestige of the colonial administrative system with more authority by the central government towards grassroots level. For instance, the closest government functionary to the citizenry is the Grama Niladhari – a staff of the deconcentrated arm and not a functionary of the locally elected government. The figure below depicts the different tiers under the deconcentrated and devolved levels:

Exhibit 17

While, on paper the distinction between the deconcentrated and devolved levels are quite clearly defined, in reality the political economy operates in a more complex and inter-related manner as the following political economy mapping reveals:

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Exhibit 18

While the bold lines depict de jure lines of authority, the dotted ones are de facto. This blurring of authority and responsibility becomes more pronounced and complicated for subjects that fall into the ‘List III (concurrent list)’ of the Constitution – tourism being a case in point. While relations between the deconcentrated and devolved arms were seen to be smooth (primarily due to the strong exercise of central authority) during 2009-2015, post regime change, provinces have become more assertive in claiming their rights and in the process, have exacerbated conflicts with the central government entities. Further, the absence of locally elected Councils has resulted in public officials (Commissioners and Secretaries) operating as proxy Councils for the last two years. Their allegiance is largely interpreted as leaning towards their line ministry than towards the respective provincial councils.

While subnational governance initiatives like the S4IG necessarily focus predominantly on Provincial and district levels, they cannot be designed and implemented in the vacuum of a singular understanding and analysis of local political economy contexts. In Sri Lanka’s challenging and shifting political ecology, particularly at present when the national political arena heavily impacts subnational-level politics and governance, any subnational level intervention must recognize and address the two levels of political economy issues at play: one at the national level and the other at the level of each locality of program intervention. Insight into local political economy contexts is critical for understanding and addressing the micro-dynamics at the level of the intervention site which call for navigating local politics and processes.

The mapping of key stakeholder interests provided in section 6.2.7 is an attempt to nuance out underlying influences, interests and incentives at the two levels – national and provincial.

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8.1 Administration of the Tourism Sector

Tourism is a concurrent subject as per the 9th schedule (13th amendment) of the constitution of Sri Lanka (see table below for a description of the three lists under the Constitution).

Exhibit 19

The Ministry of Tourism Development and Christian Religious Affairs is the national entity in charge of the tourism sector in Sri Lanka. Different agencies operate under this ministry to carry out functions specified under the Tourism Act No 38 of 2005.

• Sri Lanka Tourism Development Authority (SLTDA): The main objective of the authority is to develop Sri Lanka as a tourist and travel destination both in Sri Lanka and abroad. • Sri Lanka Tourism Promotion Bureau (SLTPB): Sri Lanka Tourism Promotion Bureau is established under the Chapter VII of the Act no. 38 of 2005 to promote and market the travel and tourism both within Sri Lanka and aboard and it may maintain its office both within Sri Lanka and abroad. • Sri Lanka Institute of Tourism and Hotel Management (SLITHM): Sri Lanka Institute of Tourism and Hotel Management is established under the Chapter VI, Act no 38 of 2005 to fulfill the requirement of the human resource demand as expected by the industry. It has it provincial college at Anuradhapura district and satellite school at Pasikuda in Batticaloa in the project locations • Sri Lanka Convention Bureau: Sri Lanka Convention Bureau is established under Chapter VIII, Act no 38 of 2005 to promote Sri Lanka as a venue for international, regional and domestic convention, meetings and exhibitions, and as an incentive travel destination. • Tourism Advisory Committee (TAC): A Tourism Advisory Committee can be appointed under Chapter V, Act no. 38 of 2005 to advise the minister and the authority on any matter in relation to the travel and tourism industry.

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8.2 Mapping coordination structures and processes

An attempt is made here to map different coordinating mechanisms relevant to the tourism sector at different tiers of governance.

• Geographical scale of administrative structure: The scale of authority or responsibility is delegated or distributed among different administrative tiers or levels. In Sri Lanka, the territorial hierarchy is divided across three levels – central, Provincial and local. Since the tourism sector is a concurrent subject, all the three levels have responsibility to handle the subject, thereby calling for a high degree of collaboration.

• Administrative arrangements: Three types of administrative arrangements can be located:

a. Constitutional arrangement: As per the 13th Amendment of the Constitution and the 9th schedule, the subject of tourism is listed in the concurrent list (central and the provincial government have shared powers and authority) and the local government bodies (functioning as a subject under the provinces) also have their responsibilities in the tourism sector in lover level. b. Institutional arrangement: At the central government level, the lead agency is the Ministry of Tourism Development and Christian Religious Affairs with jurisdiction over the following supporting entities described in section 8.1. Likewise, at the provincial level, the lead ministry is the Ministry of Tourism, coupled with other subjects. In the Eastern Provincial Council, the Ministry of Tourism comes under the Chief Minister’s Portfolio – prior to 2015, this was tagged along with the Ministry of Agriculture, Animal Husbandry & Production, Irrigation and Fisheries. In the North Central Province, tourism is under the Chief Ministry. In the Eastern Province, the newly created Tourism Bureau and in the North Central Province, the Tourism Information Bureau are other institutional arrangements at the provincial level. c. Operational arrangement: Central agencies don’t have any regional or district level sub offices or officers. They mostly work through central channels, such as the District Secretariat and the Divisional Secretariat to identify and implement projects and programmes. In addition, they also work through the Provincial Councils occasionally. Likewise, the Provincial Tourism Bureau also don’t have district or divisional offices; they have placed officers in the district level housed in the office of the Assistant Commissioner of Local Government (ACLG) of the district.

• Coordination: Three types of coordination functions can be located: a. Regulatory coordination: Regulatory processes of service providers are entirely handled by central agencies until a Provincial Statute is passed. For example, Eastern Province is empowered to regulate hotels having not more than five rooms; larger units are regulated by central agencies. There is no mechanism to jointly regulate the processes in order to ensure quality services. Regulatory agencies don not have field level monitoring mechanisms, including field officers. There are several unregistered hotels /

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accommodation providers functioning in the region without facing any consequences. Weather they are comply with the standard or not is questionable. Similarly, regulatory processes for local investors are reportedly cumbersome. The One Stop Unit (OSU) established by the Sri Lanka Tourism Development Authority caters only to high value national-level investors. b. Advisory coordination: The level of advisory coordination among the three tires is from satisfactory. Advisory relationship between the central and provincial governments is very often treated as a formality that needs to be complied with. There is no close relationship between these two levels and no institutional mechanism to share knowledge and experiences. Representation of private sector in advisory forums are most often limited to Colombo-based organizations with weak linkages with regional chambers or associations. c. Financial coordination: Lack of coordination in terms of investments and activities is seen to lead to replication and duplication of interventions by central and provincial agencies. There is also a prevailing view that the lion’s share of resources is appropriated by central agencies.

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9. Conflict Mapping

In this section, an attempt is made to profile existing and emerging political narratives and also, map existing and potential conflict lines. Given the unique demographic character of the Eastern Province and its war and post-war trysts with conflict, this section focuses more on the macro and micro-level analysis of political constellations and conflicts in the Eastern Province. The section first provides a macro (national and provincial) assessment of conflict triggers and faultlines. In the second part, district-wise profiles are discussed.

9.1 Macro drivers of conflict

Sri Lanka experienced a major transition after January 2015 with the departure of President Mahinda Rajapaksa, and the formation of a coalition government led by President Maithripala Sirisena. The country’s highest voter turnout gave President Sirisena a mandate for good governance, accountability, and reconciliation. His government has restored fundamental democratic norms and practices; unblocked obstacles to fiscal decentralization through constitutionally-mandated resource flows to the provinces; dismantled restrictions on freedom of expression, civil society actions, and security; and supported inclusive citizen participation including of vulnerable groups across ethno-religious backgrounds in the country’s economic and social development.7 This momentum of reforms carried through to the Parliament Elections in October 2015 which resulted in the establishment of an unprecedented coalition government comprising the two largest rival political parties: the Sri Lanka Freedom Party (SLFP) led by President Maithripala Sirisena and United National Party (UNP) led by Prime Minister Ranil Wickremesinghe. However, the post-2015 period has also seen the resurfacing of old tensions where Sri Lanka’s three major ethnic groups (Sinhalese, Tamils, and Muslims) live in close proximity and have a history of conflict from the civil war that ended in 2009. The recent increase in economic resources, civic space, and freedom of movement have allowed previously unaddressed grievances to reappear, albeit in latent form. Drawing from academic research,8 TAF’s 2016 Sri Lanka Strategic Assessment, and the district-level stakeholder consultations, there appear to be three conflict faultlines: political, economic, and cultural that are most apparent in the ethnically-heterogeneous East.

In the political domain, a rift has formed along ethnic lines in the perception of unequal and ethnic influence over the government’s agenda. Many perceive Rajapaksa’s defeat largely as a victory of a pro-Sirisena Tamil and Muslim minority alliance (especially in the North and East) against the largely pro-Rajapaksa Sinhalese majority (particularly in Southern and Uva Provinces). Sinhalese see the post-war and post-Rajapaksa revitalization of the North and East – through large resource flows and infrastructure projects for these provinces that suffered the most war-time damage – as Sirisena’s reward to the minorities for his victory. Simultaneously, the Tamil-Muslim political relationship is strained. Muslims feel betrayed by the government’s seeming favoring of Tamils, especially to causes of the Tamil-dominated North rather than the East where all three ethnicities are equally represented. Tamil push

7 The Ministry of Provincial Councils and Local Government recently revitalized and is engaging prajamandalas, the only legally-mandated registered entity of organic community collectives at the village level created through the Gramodaya Act (1982). 8 Sri Lanka: Ending Poverty and Promoting Shared Prosperity: A Systematic Country Diagnostic for Sri Lanka 2016, World Bank; and The Chronic and the Acute: Post-War Religious Violence in Sri Lanka 2015, International Centre for Ethnic Studies

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for a North-East re-merger is fiercely opposed by Muslims not wanting to become a small minority in a larger Tamil-majority province. Tamils have in fact gained political power by the Tamil National Alliance’s role in Parliament as opposition leader.

In the economic domain, two macro-level issues regarding resource allocation are potential drivers of ethnic conflict. First, the increase in resource flows to the North and East has led to more acute inter-ethnic power struggles. While dominant in the North, Tamils are weary of Muslims’ economic dominance in the business sector and perceived unequal access to central government coffers through the East’s executive-level Muslim Chief Minister Zainulabdeen. TAF’s strategic assessment found heightened tension between Tamils and Muslims in the East, with the marginalization of domestic industry groups such as small and medium enterprises (SMEs) creating a sense of injustice. Local business community interest groups have perpetuated existing fears such as Sinhala-Buddhist nationalism, with knock- on effects of also marginalizing ethnic minority business concerns. These tensions also hold back women from uniting across ethnic lines to push for policies to address gendered consequences of the conflict, such as support for women who took on traditional male roles as breadwinners. Second, Tamils and Muslims are re-articulating longstanding grievances over land lost during the civil war. TAF’s 2014 Rapid Assessment of Community Level Land Disputes in the North and East9 highlighted 11,662 registered land ownership disputes over war-time Muslim encroachment onto state land, state seizure of Tamil and Muslim land, and perceived settlement of Sinhalese into Tamil and Muslim areas, with women facing particular difficulties in reclaiming land titles. The Unity government has not addressed these issues, inflaming sensitivities since high population density and proximity of ethnic groups in the East place immense pressure on access to land for settlement and livelihood.

In the cultural domain, ethnic segregation is on the rise. Ethnic groups are retreating to segregated cultural spaces due to intensified micro-level economic gentrification stemming from vestiges of historical inter-ethnic conflict. Exclusive geographic and economic enclaves are being defended by their dominant ethnic groups as a response to political and economic grievances. In Kattankudy City where Muslims dominate trade, Tamils perceive them exerting a “cultural boycott” in not leasing out commercial space. In response, in Batticaloa District, Tamil government functionaries are blocking new business licenses to Muslims. Economic antagonism increases segregation, and feeds cultural and religious misperceptions, e.g. Tamils having closer cultural affinity to Sinhalese, and Muslim women wearing the hijab as a sign they do not fit in Sri Lanka’s “cultural ethos.”

9.2 Ethnicized politics and state patronage

The dynamics between Tamils and Muslims in the East is markedly different from, the relationship between Sinhalese and Tamils, or Sinhalese and Muslims. This is because the core contestation is neither religious, nor ethnic, nor linguistic. TAF’s 2016 Sri Lanka Strategic Assessment showed, of contestation between Tamils and Muslims is access to the state, for example over state representation, resources or jobs. Competition for the state is in turn largely based on economic drivers. Poverty in the East is widespread. Estimated

9 Rapid Assessment of Community Level Land Disputes in the Northern and Eastern , The Asia Foundation, 2014

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poverty head-count levels in 2013 stood at over 8 per cent for both Ampara and Trincomalee, and a disconcerting 18.51per cent in Batticaloa. This translates into approximately 33,755 people in Trincomalee, 34,691 in Ampara, and 100,747 in Batticaloa. According to the poverty head-count index, national poverty is only 6.7 per cent, while in the Eastern Province, it is 11 per cent. In Kalmunai, Ampara, the estimated poverty head count index is 4.14 per cent. In Kalmunai Tamil Division, Ampara, poverty levels stand at 6.99 per cent. In Sammanthurai, Ampara, this figure increases to 12.49 per cent. Across the Eastern Province, only 47.1 per cent of the population aged 15 years and above are economically active. Employment is usually in agriculture, state employment, or in small to medium sized enterprises (SMEs). Several SMEs and co-operative farms receive assistance from the state, in the form of concessions or subsidies. As a result of the weak economic base in the East, the state is the main provider of economic goods. Hence securing access to the state is a key sphere of economic contestation, and has become increasingly politicised along ethnic lines. It is because of this fear of either losing existing access to state power or the other community gaining access to state power that a model of ethnicized politics has come to prevail. For example, Tamils argue due to their lack of access to the state, they lose vital economic opportunities and are deprived of grants loans or jobs handed out by the state.

This model of highly contentious ethnicized politics is also exacerbated by the unique demography of the Eastern Province with 39.5 per cent Tamil, 36.9 per cent Muslim, and 23.2 per cent Sinhala, thus making the province unique in not having a single ethnicity command a majority on its own. There are however even more unusual demographic dynamics at play upon closer inspection. For example, in the Ampara district there is a roughly 2:2:1 ratio between the Sinhalese, Muslims and Tamils respectively. In one of its Divisional Secretariat (DS) divisions, Kalmunai, the administration of the area is split into two bodies. That is, there is a Kalmunai DS division and a Kalmunai Tamil DS division and the areas administered by each are not geographically contiguous. Administration over the entire Kalmunai division is thus pulled in two separate directions based on communal lines.

A looming conflict faultline in the immediate horizon is the proposed Constitutional Reforms around the idea of merging the Northern and Eastern Provinces. For the Tamils in the East, who mostly see themselves marginalized by a Sinhala-Muslim majority, the only workable solution would be a merger of the Northern and Eastern Provinces into a single unit, within which they would form an ethnic majority. This position however, is in stark contradiction to the Muslim stance on the issue of a merger. For the Muslims, the only way to prevent them from becoming ‘guests’ in a Tamil-majority land is by maintaining the status quo of de- merged Northern and Eastern Provinces. A merger represents the biggest challenge to protecting their jealously guarded, albeit limited, access to the state. The current constitutional reform debate will need to closely consider this Tamil and Muslim insecurities with regard to power-sharing, particularly on the issue of re-merger where strong resistance from the Muslims is expected.

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The Tamil-Muslim contestation in the eastern Province is therefore, firmly rooted in the two communities’ relationship with the structure of the state and the administration of state services. The resolution of the contestation will also therefore become contingent on state reform as well as governance reforms aimed at tackling administrative deficiencies that prevent effective service delivery. Without addressing the strong perception that the state is ethnically partial in delivering public goods and services, incentives for ethnicised competition for state resources will remain. A more transparent, accessible and effective governance structure at local, provincial and national levels is important to mitigate the frustration with service delivery that both Tamils and Muslims experience, which in turn fuels ethnic competition for access to the state.

9.3 Mapping of conflicts/contestations at district levels

A series of multistakeholder consultations were held in all the four S4IG districts to map political formations, conflicts and contestations. The complete proceedings of these stakeholder exercises along with the list of participants are provided as Annexure 3.

The rest of this section discusses key pointers that emerged from these consultations:

Ampara District

Post-war context In general, stakeholders were of the opinion that there has been an overall development in Ampara district over the last five years, especially on infrastructure, education, development and road and transport development. Though the tourism sector has shown remarkable improvement over the last five years, tourism development has not been integrated with the local community, which in turn has not seen tourism development and its potential in improving their economy positively. Ampara also has historically faced challenges in enhancing the involvement of women in the development sector, especially from those from the Muslim community in. The district also reports pockets of extreme poverty in areas like Kanjikudichalai, Kokkala and Mahaoya. In addition to the cultural and religious barrier, there are political influence prevent the equitable resource allocation and balance development, issues related to land ownership also play huge role in development process, lack of financial support from government, development agencies and private sectors are other general development challenges.

Tourism related conflicts Political factors are perceived to be restraining tourism development in Ampara. This manifests as inequitable and adhoc resource allocations, political patronage needed to expedite approvals and clearances. In addition, certain potential places for tourism are not developed due to the political influence. Prevailing social and cultural views on tourism by the local community is also a deterrent factor in developing tourism. Lack of proper understanding of potential of tourism resources,

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and how it can be utilized for local economic development are factors preventing local community involvement in the process. Conflicts are also reported between traditional fishing communities and hotels. For instance, the beach area of Arugambe, now teeming with hotels is seen to have fishermen in the area of parking rights for their fishing boats on the shore. Arugambay Sea is also famous for surfing. When fishing boats move on the sea, it disturbs the surfers, especially foreigners, leading to clashes between them. There have been instances where school students were reported to have been victims of sexual abuse and drug addiction; economic exploitation of the same is also reported. Cultural and religious aspects also trigger contestations. In Pottuvil Divisional Secretariat area, a predominantly Muslim-dominated locality, movement of scantily clad visitors have been strongly opposed by local communities, resulting in the Mosque Federation to step in an arbiter. No conflict mitigation forums exist for tourism-related contestations. Participants were of the view that existing mechanisms like the Divisional, District and Provincial Coordination Committees should have more broad based participation from stakeholders like religious committees, fisher communities, hoteliers, Mediation Boards and regulatory agencies.

Batticaloa District

Post-war context In general, there has been considerable development during the last five years. Road networks have improved dramatically, connecting other districts and regions, and internal road networks are also developed. Along with road networks, education and health sector also improved considerably. Improved access to the Eastern University provided increased opportunity for education; this has also contributed to an increased interest in science related education.

It was indicated that Eastern province contribution to the Gross National Product is 6%, where Batticaloa alone contributes 1.2%.

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Exhibit 20

The Tourism industry also significantly developed compared to the previous periods resulting in an increased number of hotels, increased jobs and increased income. However, there is a strong perception that most of the benefits of the tourisms accrue to external investors and do not percolate locally. In the immediate period following the end of the war, the region saw a noticeable increase in private sector activity. Many companies and organizations opened up new outlets and new showrooms in the region and existing ones aggressively expanded their network across the region. However, this boom is being resented by sections of the local population as they see these expansions as ‘outsiders’ entering their localities. Recently, there was a massive public protest against the construction of the Ethanol factory in Valaichennai area.

There is also an expressed concern on what locals perceive as ‘rampant resource exploitation’ in the Eastern Province. Paddy, fisheries, dairy and the coastal belt are seen as the main resources of the east. Instead of developing these resources and adding value locally, these resources are processed in other provinces, resulting in unemployment, and labour migration in the Eastern Province. The Eastern Province accounts for 163,000 hectares or 42.9% of the agricultural lands. Annually, the Province produces around 840,000 metric tonnes of paddy in both seasons; equivalent to 25% of the national production. However, the province does not have sufficient rice mills and as a result approximately 75% of the paddy is husked and milled outside the Eastern Province. Sri Lankan milk production meets only 17% of the country’s requirement (Eastern Provincial Council 2012, 77). The Eastern Province has approximately 30% of the cattle and buffalo population of the country (Eastern Provincial Council 2012, 77). As such there is great scope for expanding and adding value to this sector. Multinational and national companies continue to collect the milk from the east and take it outside the province for processing depriving the Eastern Province of employment opportunities and higher revenue through value addition. Locals also point out that there are no fisheries processing plants in the Eastern Province, as a result fish caught in the east is taken to Colombo or Negombo for processing.

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Tourism related conflicts

There is a strong feeling that investors outside the district get approvals for commencing their project within the stipulated time, while their local counterparts struggle in terms of obtaining approvals from local bodies resulting in undue delays and denials. This also has resulted in conflict among local investors and local government officials.

The fishing community is widely seen to have been adversely affected by the tourism boom in Batticaloa. Their access to the sea for Karavalai fishing (a type of fishing from sea shore) has got severely restricted due to the new hotels that have sprung up in their traditional catchment areas; conflicts arise when access is denied for their catch. Lot of tensions on this count exist in the now-booming Pasikudah area where beach areas have been cordoned off by hotels for their guests, thus denying fishing communities their tradition rights to park boats on the shore. Lagoon fishing also has been affected severely by mushrooming hotels along the lagoon and also, due to sea planes operating on the lagoon.

Trincomalee District

Post-war context

In general, stakeholders strongly feel that Trincomalee district has been developed on several areas i.e. road networks, bridges, improved lifestyles, private sector services, improved including banking and investments. The tourism sector in Trincomalee showed a gradual and stable growth over the last five years; number of accommodation facilities increased to 1100 in 2016 from 350 in 2006. Several tourism-based infrastructure have been developed.

Participants identified numerous challenges that confront the growth of tourism sector in Trincomalee:

Security and legal barriers: There are several challenges in promoting tourisms due to the security and legal provisions. For example, access to places like Sober Island and Marble Bay requires prior clearances from security forces. On the other hand, there are non-standard practices in developing the coastal based tourism infrastructure; there is still confusion among relevant authorities as to what distance should be maintained between the sea and any new proposed tourism based infrastructure. There is a perception that there are malpractices in applying the law and legal interpretations are seen to vary for local, national and foreign investors. Unplanned Tourism development: There is no master plan to zone tourism areas, resulting in unplanned infrastructure development (for instance, Alless Garden). Adhoc regulations: There are archaeological places in Anuradhapura and Pollanarruwa, that are widely promoted as tourist places. However, in Trincomalee potential tourist places like the Kinniya Hot Springs have been recently takeover by the Archaeological Department from the Kinniya Urban Council. All tourism promotion activities have been restricted since then.

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Epidemics and absence of coping mechanisms to handle such scenarios: In recent time dengue outbreak, drought and flooding causing destruction to the tourism sector. There is still no proactive response from the relevant authorities to develop preventive and mitigative strategies. Access to investment: There are limitations for local investors to access finance, local based skilled labourers and reliable information. Inefficient regulatory services: There are delays in providing certain regulatory services (such as building approval, issuance of license and providing land on lease basis) as there are no clear roles and responsibilities shared among relevant government authorities. The capacity of relevant government authorities need to be improved; including improvement of systems and process in providing regulatory services. It was noted that there was a medium scale hotel project with the estimated cost of SLR 5 billion which was about to commence work in , but they are still struggling to get the approval from the Provincial Council. Political interference: Those with political background or having access to political elites can easily start tourism businesses in Trincomalee. But ordinary business community are not able to do so. And there is a perception that ordinary business people cannot secure business deals unless they have a political blessing.

Tourism related conflicts

Restriction for fishermen (Karavalai) to access to the beach and local public’s access to beach have created conflicts. In terms of selecting or any infrastructure development for tourism also comes under local community concern, if that is not consulted with them or if there are any perception that their access to seashore or livelihood will be affected. There is a general observation that use of drugs in tourist density places have multiplied in recent years.

Potential religion-based contestations are also reported. Especially, the move by the Archeology department to take over tourist places like the Kinniya Hot Wells. Some of these places had both Buddhist and Hindu shrines which were visited regularly by both tourists and locals. However, it is alleged that after the takeover, worship in Hindu temples have been prohibited as the site(s) are seen as ‘Buddhist’. These moves have resulted in creating tensions between the two communities.

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Polonnaruwa District

Post-war context

Post war interventions in education, infrastructure (roads, electricity, drinking water, irrigation etc.) and health has been considerable and has positively impacted on the tourism sector. Rapid urbanization has been another salient feature after 2009. The private sector is playing a noticeable role in promoting small and medium scale tourist facility development. Political landscape does not have any significant impact on tourism in the District as stakeholders pointed out but tourism stakeholders are now become more politically influential.

Tourism related conflicts

No identifiable conflicts have been reported as resulting from tourism development. (there were some minor cases but not significant. eg. construction of hotels in catchment areas of reservoirs). Regulations followed by departments of wildlife, forest, archaeology have created some conflicts in the district. This is mainly due to poor coordination among state sector institutions developers and service providers. There have been episodic contestations from community-level groups like farmer organisations, animal rights and nature organisations, especially on matters related to the use of and access to common properties like water tanks.

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10. Recommendations

This situational analysis has identified some critical faultlines that have implications for the S4IG program. Four recommendations are proposed to ensure smooth implementation of the program:

1. Need to monitor local and national political dynamics: Given the complexity of Sri Lanka’s politically fluid and dynamic environment, any proposed development intervention must be based on a strong understanding of the political economy and key drivers of change at the local and national levels. There is high volatility in policymaking with policies being vulnerable to breakdowns in both horizontal and vertical consensus. The horizontal consensus (e.g. consensus between the two parties particularly the President and Prime Minister) has become a key determinant in sustaining policy reforms. The intra-coalition competition has also made the vertical consensus between GoSL and electorate increasingly important. GoSL has demonstrated high sensitivity to public opinion, including policies with horizontal consensus diminishing in the face of public opinion with one or both parties disowning the policy to appeal to the electorate as the more responsive faction in government. Intra-coalition competition is further heightened by impending sub- national elections in which the two parties are likely to compete against each other as also in the eventual national electoral competitions that will take place in 2020. This unique context has far-reaching implications for policy stability.

2. Broaden stakeholder buy-in on the need to prioritize the sector: A key pointer emerging from the stakeholder consultations at the district level is the perception that tourism is not a priority sector for the province. Barring the Chief Minister, there are no visible champion for the sector. With the Council now dissolved, there is a need to forge a broader coalition within and outside the government to ensure the momentum stays on. The role of the Governor also becomes quite key in the new governance arrangement.

3. Investing in forging coordination mechanisms to link the deconcentrated and devolved streams. Given the duality of subnational governance, forging informal coordination/liaison mechanisms between the devolved and deconcentrated would be necessary. Setting up ‘Steering or Advisory Committees’ and facilitating regular meetings is a good starting point – similar mechanisms created for other development interventions have proved to be quite effective. 4. Credible conflict mitigation forums need to be created. A constant feedback from the stakeholder consultations was the absence of effective conflict mitigation mechanisms at different tiers. Existing structures could be leveraged for this: at the Divisional level, Divisional Coordination Committees (DSs and LAs; local dept. heads); for Districts, District Coordination Committees (All district level political and administrative heads); and for Intra community disputes, local-level Mediation Boards can be effective conflict mitigation forums.

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