The Economic Situation in Trincomalee

Business and Economic Situation Report of The North and East

The Business for Peace Alliance

9th January 2008

The BPA Secretariat, No. 7/9, Hamers Avenue, Colombo 06. Tel: 011 236 3051/2 Fax: 011 2363053 Trincomalee District

1) Background

Trincomalee has the weakest economy in the East. It used to be a thriving economy before 1996. The main economy activities in Trincomalee are agriculture, fisheries, animal husbandry, and business. The agriculture crops are mainly rice, onions and vegetables, which were previously exported to other districts. Fisheries used to bring significant income to Trincomalee and provided employment opportunities. Tourism was also a sizeable industry.

Productivity has greatly decreased in recent years. Fishing is restricted due to the security arrangements. The number of functioning hotels has reduced from 35 to 5, and their trade is mostly commercial (companies which conduct workshops or meetings in the hotels) rather than tourism. Though many government and private banks have come to Trincomalee, they are mainly based in the city, rather than having branches in the other parts of the district. Few government banks have branches in the rural areas. The conflict and the tsunami have both played a major role in the downturn of the economy. Six divisional secretariats - namely Kinniya, Seruwila, Muttur, Echchilampattai, Kuchaweli and the town of Gravets - are affected severely by the war and the tsunami. In all these areas, properties and jobs have been lost, and people from these areas have been displaced. Some are staying in welfare camps while others have become dependent on relatives and friends. In addition to internally displaced people, there are also people who have been displaced from Jaffna, Vavuniya and Batticaloa, who have moved into Trincomalee. Many now rely on carpentry, working as agricultural laborers or in retail shops, or engaging in small business activities for their livelihood. Non governmental agencies are providing assistance to some extent, while the Government is helping people to a lesser level.

2) Issues challenging economic recovery:

 Unemployed population Many people have lost their jobs or properties. The current situation has restricted many economic activities, which has also resulted in unemployment.

 Change in consumer pattern The increase in the price of essential goods has reduced the consumption level, exacerbated by the low or no income levels.

 Low productivity A lack of investment, the cost of production, and the lack of loan facilities have led to low productivity. Security planning within the district has a direct impact on levels of productivity.

 Influence of the paramilitary groups. Threats to the business community, extortion and robberies by paramilitary groups have prevented people from making investments.  Poor transport services The transport services have been restricted, so that many goods can not be brought into Trincomalee, or only at prohibitive cost.

 Limited banking facilities The banks are reluctant to give loan facilities, and demand collateral. Though the government banks are willing to give loans, the level of loans is insufficient to support enterprise and new businesses.

3) Potential solutions to rebuild the economy in Trincomalee district

o Increasing investments in factories

 Factories for processing rice need to be built. Currently, the rice from this district is sent to Polonnarruwa or Kurunegalle for processing – adding to both transport and opportunity costs. Processing in Trincomalee would lead to reduced costs and greater levels of employment within the district. There is a need for farming machinery and the introduction of new varieties of rice.

 There are no poultry feed factories in this district. Since the raw materials are available for making poultry feed, establishing factories would bring greater prosperity and employment opportunities.

 Since livestock farming plays a major role, there is a need for milk processing factories. The absence of such facilities has resulted in a waste of milk.

o Fishery could be expanded. The facilities for fishery are in place, but are not being used effectively. There is the opportunity for many who lost jobs in this area to be re-employed.

o There is a need for a development bank for the East. Though the Sanasa Development Bank is functioning here, its services cannot fulfill the economic expectations of the district. More services from private banks are also required in order to develop the district. o Greater flexibility in the security arrangements and current restrictions would help the economy to flourish. Batticaloa District

1) Background

The Batticaloa District faces a similar situation to that in Trincomalee. The economic conditions are very poor. The same paramilitary groups control activities here too. Threats against the business community, extortions and robberies continue. Due to this, many businessmen have closed down their business activities and are no longer willing to make investments. Productivity has gone down. There is limited availability of goods. No outsiders are willing to come to this district to invest, or to do business, due to the political situation. Many people have been displaced. Since NGOs and INGOs started helping the affected communities in this district, local inhabitants are no longer interested in working. The dependency syndrome and indolence are visible. There is much unemployment. The banking sector has restricted its services. The main economic activities such as agriculture and fisheries have all been affected. On top of it all, a recent flood has spoiled much of the crops. Transport services are being restricted.

2) Potential Solutions

 The government needs to take action to control the paramilitary groups (however, the situation is complicated, with some complaints that the paramilitary groups are being supported by the government). If this disruptive activity could be controlled there would be more investments, and more significant development.  More help is required to assist people to help themselves, rather than continuing dependency by giving grants.  Banks need to offer a broader range of services.  The transport service has to be expanded. Mannar District

1) Background

Fishing and cultivation are the main activities, with commercial business in the principal city. The same issues again are faced in Mannar. The war situation has made enormous changes to the economy of this district. The most significant difference between the other two districts and Mannar is with regard to the paramilitary groups. The dominating paramilitary groups cannot be seen in Mannar, but the battle is continuing. People earn their livelihood either by working as agricultural laborers, or engaged in small business activities. Availability of fuel is low, while the import of hardware items is banned into the district. NGOs and INGOs are supporting the people to some extent by providing grants. Banking services are as limited as in the other districts. Check-points in and around the district are stifling the free movement of people, and prevent them engaging in any income generating activities.

 The current conflict in this area needs to be resolved before commercial solutions can be implemented. Ampara District

1) Background

Ampara is the one district which is doing well in economic terms, compared to other districts in the East. Agriculture, animal husbandry, and fishing are the main activities. Rice cultivation, sugar cane cultivation, vegetable cultivation, inland and sea fishing, garment industry are helping to buoy the economy. Many other products are also found in Ampara, such as wood products, cement based products, and rubber products. Also many rice mills have been constructed to support the processing of rice. Sugar production has been recently introduced to the district. Since animal husbandry is another source of income generation, milk products also play a big role in strengthening the economy. There is also some tourism here. Many NGOs and INGOs have been focusing on Ampara since the tsunami. The tsunami affected areas are still being given grants and other services, though the war affected areas being neglected. The war effected areas are Mahaoya, Panpitiya, Aranthaluwa, Central camp and Malwatte.

2) The issues

 The number of checkpoints setup in this district have become a barrier to business activity. Also transport is a big challenge for dealing with the rural areas.  Unemployment is another issue, due to the low level of investments. Investors are no longer willing to invest in this district due to the security arrangements.  In general, the district suffers from poor infrastructure.

o Greater flexibility in terms of security arrangements is needed o Greater levels of investment need to be encouraged o Alternative employment opportunities need to be introduced. o Better infrastructure facilities. Vavuniya District

1) Background

Explosions, firearm shootings, kidnapping, murders and violence. This is the current situation in Vavuniya. Due to the war, cultivation, which is the main economic activity in Vavuniya, is being affected. Rice, chilly, grains, banana and vegetables are the major crops being cultivated here. Livestock farming is also another income generating activity in this district. There used to be a self-sufficient economy, but now the whole district depends on other sources. The cultivation area has been declared a high security zone, meaning, meaning that farming activities are being stopped. In addition, the increase in population from migrants from the war areas means that much of the land is being used for building shelters. The banking sector is providing services to some extent. They also have mobile services in this district. Vavuniya also faces the problem of paramilitary groups. Threats to people - especially the families receiving foreign income - and extortions, are not a new thing in this district. NGOs and INGOs are functioning, while the government is providing limited services. The check points in and around Vavuniya have an impact on the economy. Delays in getting goods, and damages, are resulting in a price increase of some goods. The IDPs (Internally Displaced People) are being looked after well by the NGOs and the INGOs, and consequently the local community has a feeling they are being neglected. Unemployment has become a major issue here.

o Self employment opportunities. o Removal of checkpoints will help increase levels of work on cultivations. o Provision of support to the local war affected people, not just to IDPs.

For further information please contact:

Dharshani Karthigesu Regional Support Officer The Business for Peace Alliance No 7/9, Hamers Avenue Colombo 6 Tel: 011 236 3051/2 Fax: 011 236 3053 Mobile: 077 357 0901 E-mail: [email protected]