An independent supplement distributed in the Guardian on behalf of The Report Company, who takes sole responsibility for its content |Our sponsors have no control over the content of this editorially-led supplement. June 06.06.2012 Asian giants of and . centre of a new Silk Route, embracing its proximity to the historical status as an economic hub in , at the Sri Lanka is shaking off a troubled past to regain its Previously overlooked by tourists and investors alike, Asia’s next wonder? p. 05 Politics: National reconciliation p. p. 08 Mahinda Exclusive Interview with Sri Lankan President p. 12 Commerce: Trading post Trading

p. 18 Asian hub Infrastructure:

2 _ SRI LANKA > INTRO An independent supplement produced by The Report Company 3 The place to be Writer: Keyur Patel

Sri Lanka is winning international recognition for its impressive economic progress. After three years of peace, old wounds are beginning to heal. Today, with strong security, flourishing tourism and a fast growing plethora of industries, the island is convincing investors that it is among the world’s most promising emerging prospects.

At its best, Sri Lanka is a quite remarkable Sri Lanka as one of five countries that offer country. Its charms are alluring and many: a good investment opportunities in challenging A melting pot fascinating history at the heart of the ancient times – and said: “the Sri Lankan government’s Sri Lanka seeks to bring together Silk Route; a landscape that is truly beautiful; a tight control of the security situation has made people with a diverse array of breathtaking mix of fauna and flora unique to the the island much safer”. backgrounds and religious beliefs island; a diverse people, among the most literate Yet serious questions linger. The LTTE has in the emerging world; and an economy growing been branded a terrorist organisation in the powerfully even in a troubled global climate. UK, and was internationally condemned for The last of these is testament to its people’s its violent methods and disregard for human resilience and creativity. The country’s economy life. But respected groups, including Amnesty grew by more than 8 per cent in both 2010 and International and Human Rights Watch, have 2011, while unemployment is low and infla- urged a full investigation into allegations that tion is comfortably controlled. “I am proud to Sri Lanka’s armed forces also committed war say that Sri Lanka is now emerging as a mid- crimes against civilians – allegations vehement- dle income nation,” says President Mahinda ly denied by the government. In March, the UN Rajapaksa, in an interview for this report. “I be- Human Rights Council passed a resolution lieve that the next few years will be exciting years pressing Sri Lanka to investigate deaths of Ta- for our country and I think we can continue mil civilians towards the end of the war. An- 01 to build on this strong and stable platform to swers are crucial to the country’s development. convince the world that Sri Lanka is truly the Peace, though, offers Sri Lanka the chance 01 is popular with kite flyers and boasts emerging wonder of Asia.” to showcase its many attractions, far supersed- an array of stalls selling food from crab cakes to curry. But over much of the past three decades, ing its size. To many readers, the island – with 02 Sri Lanka’s apparel industry has grown to be one of the tragically, the world has seen the worst of Sri fewer than 20m inhabitants – will perhaps be largest contributors to the export revenue of the country. Lanka. From 1983, a brutal civil war was waged best known for its Ceylon tea and extravagantly 03 Nanotechnology is fast emerging as a new industry. 04 Pure Ceylon tea is prized for its quality and taste. between the Liberation Tigers of Tamil Eelam talented cricket team – as well as its geographi- Visitors to Sri Lanka are often 05 Sri Lanka, like most former and remaining British (LTTE), a militant separatist group fighting for cal proximity to Asia’s emerging superpowers. struck by its cultural diversity, and an independent Tamil state, and the nation’s Visitors will also recognise the nation’s colonies, has adopted cricket as its national sport. nowhere is this more evident than in 06 The World Trade Centre is the tallest completed armed forces, until the LTTE was defeated in plethora of enchanting tourist destinations. the many mobile shrines adorning its building in Sri Lanka. 2009. According to the United Nations, this con- With its many idyllic beaches, eight World Her- tuk-tuks. Its predominantly Theravada 02 03 flict killed between 80,000 and 100,000 people. itage sites, and what is celebrated as a unique Buddhist Sinhalese, who make up The island has been assiduously promoting ‘Sri Lankan smile’, tourism has inevitably around three-quarters of the population, a national reconciliation strategy since 2009 soared since the end of the war. and its mostly Hindu Tamil people – and has received praise from independent You may be surprised, however, by the have lived on the island since ancient sources for its security. In a recent report, AT breadth and quality of the island’s fast-growing times. Christianity and Islam are also widespread. With a literacy rate of nearly Kearney, the global management consultants, industries. As well as being the fourth biggest 95 per cent, Sri Lanka’s people are among said Sri Lanka was “among the safest, lowest producer of tea, Sri Lanka exports almost all of the most educated in any emerging risk, emerging markets, both in terms of per- the world’s cinnamon and much of its rubber. economy. And surveys have found that sonal safety and business security”. Strategic Its precious gems are regarded as among the they regularly rank among the happiest 05 consultants Control Risk, meanwhile, identified finest on the planet. Its garments and apparel in South Asia, if not the world.

Publishers: Jose Powell and Rafael Muñoz Illustrations: Daniel Jimenez and Alya Mark For suggestions on a feature on your country or Management and Sales: Jose Powell, Photography: Emanuelegiusto.com, Sri Lanka any specific theme, contact us on: Michele Jensen-Carlen Tourism Board, Sri Lanka Board of Investment, [email protected] Field Editorial Director: Alexander Woods Government Information Dept., Dreamstime For an expanded version of this feature: Writers: Keyur Patel, Sam Mendelson, www.guardian.co.uk/the-report/srilanka Eleanor Wragg and 81 Oxford Street The Report Company has an exclusive media www.the-report.net Editing: Eleanor Wragg The Report Company takes sole responsibility for London W1D 2EU, UK partnership with Guardian News and Media for Creative Director: Joana Pessanha the content of this feature. Tel: +44 (0) 207 903 5079 the distribution of this content. 04 06 4 _ SRI LANKA > INTRO > POLITICS 5 Timeline of a war National reconciliation Sri Lanka’s civil war was fought Writer: Sam Mendelson intermittently over 26 years, before LTTE forces were finally defeated in 2009. After three decades of fighting and amidst international An LTTE ambush kills censure of the military’s past actions, reconciliation is 13 soldiers, sparking anti-Tamil riots and the 1983 proving worthwhile - but hard. deaths of several hundred Tamils. Civil war begins.

More than 4,000 Indian 1987 peace-keepers deployed in Situated in the facing the, the Old Parliament Building Tamil areas, before leaving (above) housed the island’s legislature for 53 years until the New in 1990. In 1991, an LTTE Parliament Complex was opened at Sri Jayawardenepura in 1983. suicide bomber kills Below, a building downtown Colombo. former Indian Prime Minister Rajiv In May 2009, the 26-year civil war came to is plenty to go around - to develop agribusiness Gandhi. an end, to the relief of Sri Lanka’s beleaguered but to provide national and agriculture”, says population. With the conflict over, the coun- catharsis. The healing of Dr. Nonis. try is now focussed on moving on to the next deep wounds is a crucial Sri Lanka’s Ambassador chapter in its history. step towards the future to the UN Dr. Palitha Like Rwanda before it, Sri Lanka knows it Sri Lanka wants, expects Kohona has made it clear Ranasinghe Premadasa, can little afford to be complacent about the and deserves. that the government re- then president of Sri 1993 challenges that lie ahead in rebuilding and Now the government has mains committed to implementing Lanka, is killed in reunifying the nation. Therefore, just 12 to show its good faith. This has already begun, the many recommendations for action on an LTTE suicide months after the end of the war, the govern- with efforts to re-house the Internally Displaced post-conflict reconciliation. bomb attack. ment established the Lessons Learnt and Recon- Persons (IDPs). There were several dozen of these. Those in ciliation Commission (LLRC). Hearings began According to Dr. Chris Nonis, the Sri Lankan conflict-affected areas are to be given increased sector – making up around half of exports – is vanced rapidly up the World Economic Forum’s in August 2010 and the Commission’s report High Commissioner to the UK, the rehabilita- employment opportunities. An inter-agency lauded for its ethical practices. It boasts, too, Global Competitiveness index, ranking 52nd was released last December. tion program for the 300,000 IDPs has been task force is to be created to address the needs industries higher up the value chain, from out of 142 countries in the latest report. In an official response, the British govern- incredibly successful, with “only a few thousand of vulnerable groups, and an independent Pub- nanotech to ICT, including a very well-regarded It is hardly surprising, then, that foreign ment said it “believes that the report contains remaining to be re-housed”. , lic Service Commission will be established to outsourcing sector. direct investment into Sri Lanka is surging, as During the following six many constructive recommendations for action Minister of Economic Development, adds that ensure that there is no political interference in What’s more, it has a burgeoning banking the country seeks investors to help it reclaim its 1995 years, fighting escalates on post-conflict reconciliation and a political the government “had a plan, starting with bat- the public service. and finance industry. Global brands such as once-enviable position on the ancient trading across the north and settlement. Implementation of these recom- tlefield demining, humanitarian demining, and The British government has responded pos- HSBC and Citigroup operate in the country, route known as the Silk Route. And no nation has east. LTTE attack on the mendations, however, is the real test of Sri then establishing facilities like roads, hospitals, itively to the Sri Lankan government’s commit- while 19 out of 20 of its banks were given a stronger historical and cultural ties with the island Bandaranaike Airport Lanka’s progress.” schools and irrigation”. It is a holistic view of ments, observing that the LTTE, which remains “stable” outlook or better for 2012 by Fitch, one than the UK, its second-biggest trade partner. destroys much of the Sri Lanka faces some considerable hurdles post-conflict reconciliation and development. proscribed in the UK, was a “brutal and ruthless of the world’s big-three rating agencies. While Sri Lanka courts further investment national fleet. to post-conflict reconciliation. In March, the Progress so far has exceeded targets. Today, organisation”, of which Sri Lanka is gladly rid, from established markets such as the EU and UN Human Rights Council voted 24-15 on a almost 95% of the IDPs are re-settled. Drinking and adding that its “long-term interest is in a the US, it is also exploring new partnerships, US-led resolution to press Sri Lanka to investi- water wells are being cleaned, houses roofed, stable, peaceful Sri Lanka, free from the scourge particularly in Asia and Africa. Almost half the gate the deaths of Tamil civilians in the closing and cash grants, food rations and agriculture of terrorism”. That said, the recent interna- “ participants in its biggest trade exhibition since Norway brokers a stages of the war. For its part, the British govern- kits have been provided. tional censure has wounded Sri Lanka’s pride We can continue to build on the war, held in March 2012, were from India ceasefire between the ment declared itself to be “disappointed by the The government’s efforts are starting to pay in having beaten terrorists on its own soil, while and China, which together make up more than LTTE and the Sri LLRC report’s findings and recommendations off, with multinationals putting their stamp of a well-organised diaspora continues to remind this strong and stable platform a third of the world’s population. Lankan government, 2002 on accountability.” It noted that “many cred- approval on the country. Nestlé is one of the the world of the country’s alleged failings and to convince the world that Sri Difficult challenges undoubtedly remain. which officially lasts ible allegations of violations of international most visible investors, and as part of its plan abuses during the conflict. Lanka is truly the emerging ‘Brand-Sri Lanka’ is not as well known interna- five years, despite humanitarian law and human rights law... are to invest £49m in Sri Lanka over the next five Sri Lanka’s biggest issue today is that of tionally as it should be – though this is chang- incursions from both either not addressed or only partially answered.” years has recently opened several milk collec- confidence. If the Sri Lankan government is wonder of Asia. ing. The island needs to tackle a growing bal- sides. In 2008, “Innocent people who had never touched a tion centres and a UHT milk factory. good to its word, then a genuine process of government President Mahinda Rajapaksa ance of payments deficit, exacerbated by steep weapon in their life were killed by the LTTE,” Speaking at the opening of the newest fac- healing will continue, and the country can con- pulls out and global oil prices. Above all, it must prove to its counters Lakshman Hulugalle, director-general tory, Nandu Nandkishore, Nestlé’s Zone Direc- tinue on its path of peace, prosperity and rec- launches people – and to the world – that national rec- a huge of the Media Centre for National Security. “The tor for Asia, Oceania, Africa and the Middle onciliation. Hulugalle points to the mentality And yet this is just a fraction of the island’s onciliation is healing old wounds, to the relief offensive. people who talk about human rights violations East said the company “sees real potential in of the people as a key factor: “when the Indian potential. In 2010, it put in place a vision to of all afflicted by its war. never stop and think about the human rights the country.” Ocean Tsunami hit in 2004, the Sinhalese and become a regional hub in five key sectors: com- “What we want is not any spin of any sort,” Government declares victory of the innocent victims of the LTTE.” Furthermore, an impressive 52 companies Muslims - who had been chased out of the munications, aviation and maritime, energy, Dr. Chris Nonis, Sri Lanka’s High Commis- 2009 over LTTE. Conflict ends and The release of the LLRC report was supposed have applied for a presence in a new industrial north and east of the country by the LTTE - commerce, and 21st century knowledge. Bil- sioner to the UK, tells us. “All we want is to national reconciliation begins. to be a watershed. Like similar post-conflict estate in Jaffna. “About 30% of the land has went back to those areas to help and provide lions of pounds have been spent upgrading encourage people to come to Sri Lanka and reconciliation procedures in other countries, opened up in the north and east and this now aid. This shows what our culture is like. We put infrastructure and it shows: Sri Lanka has ad- make their own objective assessment.” <<< it sought not to assign blame - though there offers tremendous opportunity for investment our differences aside and stick together”. <<< 6 _ SRI LANKA > RELATIONS An independent supplement produced by The Report Company 7

A one dimensional Why Sri Lanka matters to the West

Geopolitically crucial for India, China and the West, Sri Lanka is among the places where the relationship? balance of power for the coming century will be contested. Writer: Sam Mendelson

Sri Lanka sits at the intersection of global rising China, the country is also an invaluable geopolitical terms and forcing India to re- Sri Lanka is concerned that the strong focus on past A diplomat's view geopolitics, a stone’s throw from the Asian partner for the West. think relations with its neighbours. The new behemoths of Pakistan, India and China; “Our location has stood us in good stead port development of , financed grievances is preventing the bilateral relationship with the UK the relations between which will define the throughout history and is vitally signifi- mainly by the Chinese, adds to infrastructure from reaching its full potential. coming century. cant in the present”, said Professor Peiris, already in place in Pakistan, Bangladesh and Once a major port on the historical Sri Lanka’s Minister of External Affairs. The Burma which Chinese leaders and companies network of transcontinental trade between first-of-its-kind Free Trade Agreement (FTA) hope will enable them to open and expand West and East, Sri Lanka is now emerging as with India - which came into operation in markets for their goods and services by con- a vital point on the new Silk Route. As South 2000 - “has resulted in a 7-fold increase in necting the southern Yunnan province to Asian demand for infrastructure, particularly the volumes of trade between India and Sri the world. electricity, grows rapidly, Sri Lanka is being Lanka”, he added. This development, as well as others that eyed by countries looking to secure energy Sri Lanka also plays a key role in the are in the pipeline, firmly positions Sri Lanka supplies to power their own growth. As a realisation of China’s ambitious trading as an important element in the shift of power Dr. Chris Nonis potential arena for Indian competition with a strategy, which is reshaping the region in from West to East in the new Asian Century. << Sri Lankan High Commissioner to the UK Q&A These terrorists were not fighting for the Tamils; if they were, they would not > Great Britain is The diaspora’s voting strength With experiences ranging from have killed all the educated people in the Tamil community. This was a terrorist probably the country with which in marginal British political medicine to international affairs Sri Lanka has had the closest cul- constituencies is one reason, to business, Dr Chris Nonis has organisation that fought for its own benefit. worked and lived in both Sri Lanka tural, educational and historical ties. he argues, that their voice is so Lakshman Hulugalle | Director General, Media Centre for National Security British companies have been present loud. And it is a voice speak- and Britain. He became High for centuries, and the ties of friend- ing from recollections of life Commissioner in September 2011. ship and commerce date back to in Sri Lanka that are no longer Sri Lanka’s crucial strategic po- representative. What he asks for is 1. What is your overview of the new, sition on the Silk Route. Ceylon that Sri Lanka “be given the space post-war Sri Lanka? and the time it needs to come to After 28 years of conflict we have Conventional wisdom achieved peace in Sri Lanka, and we fi- terms with its problems and to re- nally have a historic opportunity to make solve them in a manner in keeping a transition from a developing to a devel- with the traditions and aspirations oped nation. The speed of that transition Rethink Sri Lanka “ of its people”. It is sad that the relationship will depend not only on the indigenous The people of both islands have communities in Sri Lanka but also on Perceptions of a place can be an opaque mix of truths, half-truths, rumours, prejudices and right now has become one a long shared history. The Sri Lankan the communities within the diaspora in ignorance. Is Sri Lanka what many in Europe think it is? Or is conventional wisdom wrong? dimensional. High Commission in the UK was the countries such as Britain. second overseas Mission to be opened in Professor G.L. Peiris October 1948. It was the first embassy 2. What is your assessment of the state Tourism is expanding at a staggering rate; at last count, > Sri Lanka is poor, violent and dangerous. Minister of External Affairs to start operating after Sri Lanka, then of the bilateral relationship between Sri 197 hotel projects were underway which, when completed, Ceylon, gained independence. Lanka and the UK? will add a further 12,579 rooms. In 2009, tourism revenue The UK has probably the greatest reservoir NOT ANY MORE - While Sri Lanka’s three-decade-long The ties remain strong. The UK was just £252m from 450,000 arrivals – making up less of goodwill of any country with Sri Lanka. conflict put off investors and tourists alike, since 2009 there tea has always been a favourite of the is the second largest tourism market has been a complete cessation of violence, and investment - than 1% of GDP. It has now passed £650m and the target I think we should draw more deeply on the is 2.5m tourism arrivals by 2016. British, and the love of cricket is perhaps for Sri Lanka, and one of the country’s major strength of our shared heritage, harness particularly from China and India - is flourishing after being Britain’s greatest common passion with the investors, ranking first in direct foreign invest- our collective strengths, and leverage held back. Like everywhere in South Asia, Sri Lanka is a developing nation. GDP per capita is £1800 and the country > Sri Lanka is a particularly difficult place to do entire Asian subcontinent. ment from the EU. British companies invest in on our commonalities as we build the business But the British-Sri Lankan bilateral rela- everything from power generation and infra- economic base of a unitary Sri Lanka. ranks 89th out of 187 countries worldwide in the Human Development Index. But there is a burgeoning middle class tionship is far from its full potential. Sri Lan- structure to agriculture, software development FALSE - While not yet at Western European levels, recent How would you like Sri Lanka to - especially in the cities - and a 2009 global survey ranked Sri ka’s Minister of External Affairs, Professor G.L. and garments. 3. Lankans in the top ten in terms of happiness.’ reforms implemented by Sri Lanka have helped create a Peiris, observed that in its singular focus on It is no wonder then that Professor Peiris be perceived in the UK? much better business environment for entrepreneurs than human rights and domestic political develop- is concerned. He wants more people to know Sri Lanka is occasionally seen in a nega- can be found in its neighbours in the region. The World tive light, which is an anachronistic view, > Almost all travel to Sri Lanka is tourism, and it’s ments, “it is sad that the relationship right now of the things both countries have in common, Bank’s Ease of Doing Business Review 2012 saw the and doesn’t give a true picture of the off the beaten track anyway... has become one dimensional”. and the rapid progress being made on the issues country rise 9 places in only a year, making it one of the really positive things that are going on. fastest-improving countries in the world. Ranked at 89th Professor Peiris bemoans a “very sharp, that are important to the diaspora in the UK We call on all those in the international PARTLY TRUE - 80% of Sri Lanka Airlines’ business almost obsessive focus on the human rights in order to combat misperceptions – fuelled by is tourism travel, but while business travel figures are globally, it comes in 32 places higher than the regional community to visit Sri Lanka, so they average and 43 places higher than India. issue”, driven by the influential Sri Lankan vocal groups and a sometimes sensationalist may make a fair, objective and impartial lower than the company would like, they are increasing. diaspora – very effective “not only in terms of media – which risk holding back a relationship analysis of the country’s post-conflict money but also their organisational capability”. which has a great future ahead of it. <<< progress based on facts not fiction. 8 _ SRI LANKA > INTERVIEW An independent supplement produced by The Report Company 9

Mahinda Chintana

Mahinda Chintana (Mahinda Vision) is a development plan which envisages an ambitious acceleration of growth through the scaling up of investment and increasing productivity. It aims to position Sri Lanka as a five-hub economy Mahinda Rajapaksa centred around the aviation, maritime, energy, commerce and knowledge sectors.

When was it implemented? try has launched several massive infra- Q&A The Mahinda Chintana phase of socio- structure development projects with economic development in Sri Lanka the intention of conquering the skies, began in November 2005 following from the modernisation of Bandaranaike In November 2010, former human rights lawyer We are keen to transform the election of President Mahinda Ra- International Airport to the construc- and trade unionist Mahinda Rajapaksa won a japaksa. The policy framework envis- tion of a new airport at Hambantota. Sri Lanka into a modern and aged the resolution of the conflict, the second term as president, a position he’s held since prosperous nation with sound implementation of large infrastructure Commercial hub 2005. His re-election manifesto outlined his plan for development initiatives, the re-emer- Sri Lanka aims to develop along the ethical and cultural values. gence of agriculture, the promotion same lines as Hong Kong, Singapore and a brighter future for Sri Lanka, with the promise to of SMEs and the introduction of rural Dubai as one of Asia’s foremost jurisdic- focus on new areas of development. development initiatives. tions in the fields of commercial services, international banking and investment. What next for the plan? Since the end of the conflict, President Energy hub Rajapaksa has expanded on his vision Sri Lanka is seeking to develop its own and now envisages a Sri Lanka that will energy resources, from oil and gas to become an “emerging wonder of Asia”, renewable sources, as well as build- Writer: Eleanor Wragg through the development of five key ing greater thermal energy capacity. CV hubs in the naval, aviation, commerce, New oil refineries are being planned in 1970 Elected to parliament energy and knowledge sectors. Hambantota and Sapugaskanda, and > What is your assessment of the country’s economic landscape and are giving priority to legal and accounting practices, and other in- the country also believes its mineral current stage of development? improving our “doing business” practices, as vestor services should be at an internationally 1994-2001 Appointed Minister for Labour & Naval hub sand resources could be used to gener- Vocational Training and Minister for Fisheries I am convinced that Sri Lanka can attain a much well as our commercial and banking practices. acceptable level. Our law and order situation Sri Lanka was once an important cen- ate nuclear power. higher stage of development than we are cur- must reach a high level. Our port and aviation 2002 Elected Leader of the Opposition tre point along the silk route. Today, with the construction of a Knowledge hub rently at. Unfortunately, we lagged behind for What are your short-term objectives to en- services must be efficient and effective. 2004 Appointed as Prime Minister over 30 years as a result of a debilitating war that hance the quality of life of Sri Lankans? It is clear that we have made great strides in new port at Hambantota, the doubling In ancient times, Sri Lanka’s Buddhist 2005 Sworn in as President on November 19th of container handling capacity at the monasteries were seats of learning that sapped the energies of our nation and the will We are keen to transform Sri Lanka into a mod- each of these areas and as a result, we have 2010 Elected to a second term and new port devel- spread the teaching of the Buddha to of our people. However, we, as a people, have the ern and prosperous nation with sound ethical begun to impress many overseas and local in- opments at Oluvil, and the rest of Asia. Today, Sri Lanka aims ability and courage to overcome any challenge and cultural values. Towards that objective, vestors. But we would also have to admit that Trincomalee, the government hopes to attract local experts who have ex- and to create a new future for ourselves. we are working hard to increase our GDP to Sri Lanka may not have yet reached the very Sri Lanka can regain its historical status. celled internationally to return to the $100bn (£64bn), and our GDP per capita to high levels that are generally demanded by country. Through significant reform What has driven the country’s economic $4,000 (£2,500) within the next 3 - 4 years. In some of the more sophisticated investors. Aviation hub of the education system, and the devel- turnaround since the end of the conflict? the meantime, we also want to ensure that our There is still work for us to do. In the mean- During the Second World War, Lord opment of ICT education, the country Long before the humanitarian operation ended, youth are well educated and possess the neces- time, our advantages such as our excellent lo- Mountbatten selected Sri Lanka as wants to provide both foreign and do- we started work on our economic agenda. I was sary skills to benefit from the opportunities of cation, good climate, friendly people, knowl- an aviation headquarters, recognising mestic students with the tools to suc- of the firm view that there is no peace without the 21st century. We are keen to preserve our edgeable work force and good law and order the country’s strategic positioning. To ceed in a modern economy. capitalise on its geography, the coun- development, and there is no development with- rich and diversified cultural heritage, as well as situation will definitely be attractive to many. out peace. It was soon clear that such strategy continually foster national harmony between had great merit since we were able to create a the people of different races and religions in What opportunities are available for global new momentum which led to the successful our country. In addition, we are seriously work- investors in Sri Lanka? turnaround of our country. I believe the next ing towards building a society that will be free In line with our strategy of development, an few years will be exciting for our country and from corruption. We are conscious that more enormous number of opportunities have I think we can continue to build on this strong needs to be done, and are therefore determined emerged in apparel, the high-tech and nano-tech and stable platform and convince the world that to ensure that these efforts are continued. sectors and ICT. In addition, tourism is an area Sri Lanka is truly the emerging wonder of Asia. where the international hospitality industry What is Sri Lanka’s potential to become a could benefit from our tremendous potential. What are the competitive advantages of Sri hub for international commerce? Lanka as an investment destination? For Sri Lanka to be recognised as a hub for in- What is your view of the bilateral trade and The economic conditions in Sri Lanka have ternational commerce, there are several condi- investment relationship between Sri Lanka improved tremendously over the past several tions that need to be fulfilled. Our infrastruc- and the UK? years, and I am proud to say that Sri Lanka ture should be up to international standards. While we have committed ourselves to interna- is now emerging as a middle income nation. Our “doing business” indicators must be on tional practices in trade and commerce, we have We are considered by many investors as a safe par with the currently accepted international also been keen to develop strong bilateral part- destination, and sectors such as tourism, ICT, norms. Facilities and opportunities available nerships with friendly countries. In the case port and maritime related activities, agricul- in the country for education, leisure, health, of the UK, Sri Lanka’s bilateral trade and eco- ture based industries and the apparel sector and entertainment should be at a high level so nomic relations have grown substantially over have shown strong potential. We have also that foreign investors will see the country as the past several years. However, there is a lot added several new and exciting sectors to our a preferred destination. Our judicial system, more potential to develop these ties further. <<< investment Areas for transfers,” hesays. “Itshouldbeawin-win situation.” creationemploymentof opportunities technologyand the country should enjoy new sources of foreign transformation.exchange, “Investors gain commercial benefits Investment,while believes that FDI can inspire major economic knowledge. eas:maritime, aviation, power ar key andfive energy,in hub regional a commerce, become to seeks Lanka andSri investors” sub-category, ranked ashigh46th. world’s big 4 emerging markets – and in the “protecting Russia, India and China) – commonly recognised as the (Brazil, BRICs the of all than better fared It 2011-2012. rise 70percentthisyear. to course on is FDI fast: growing is it but neighbours, might not seem a lot compared to its much larger Asian (FDI) into Sri Lanka broke the $1bn (£640m) mark. That Writer 10 dex, the highest jump by any country from from country any by jump highest places the nine dex, in Business climbed Doing of it Ease Bank’s World 2012, the in In ethos. friendly THE FACT > _ SRILANKA In 2011, for the first time, foreign direct investment M.M.C. Ferdinando, chairman of the country’s Board of Chintana, Mahinda the as known is what Under business- island’s the to testament a is This : Keyur PatelKeyur therefore willbeabletoachieve confidentthatin2012SriLanka aboutUS$1.7 billioninFDI. infrastructurewhich reached US$ 706 million. This is a 107% increase from the 2010 figure. I am A break up of the FDI indicates that we achieved US$ 322 million in 2011 in manufacturing, which is a 101% increase from the previous year. However the bulk of the investments was in services and prices across Sri Lanka Double-digit property over recent years > INVESTMENT - -

32km fromIndia only and West; the to Asia connecting lanes shipping the of north developing world the in highest the of one – cent per 95 nearly of rate workforce: index latest Forum’s Economic World the in countries 142 of out 52nd competitive: in Sri Lanka 3 reasons to invest New airport in Hambantota > > > expected to create more Location: Educated Globally than 7,000 jobs M.M.C Ferdinando

literacy literacy just just ranked ranked Government allocates £640m to theroad sector this year |ChairmanoftheBoard ofInvestment markets to raise $1bn, its 10-year bond sale was was sale bond 10-year its $1bn, raise to markets propel ittoanew level altogether. years – the economy will enter an “auto-pilot” which will he argues, if that figure rises to £2,500 – targeted within 5 that there is a new momentum in our economy”. Moreover, proves which region, the in rate fastest the at increasing is annum) per £1,800 around (currently income capita per “Our noting: Asia, south in resilient” and balanced context oftheworst oftimes,”hepointsout. today’s in even above, or par at trading are bonds “Our dence that the country’s growth story is being recognised. governor of the Central Bank of Sri Lanka, cites this as evi over-subscribed by a factor of seven. , 27 countries,includingtheUK. also has bilateral investment protection agreements with five-fold, while trade with Pakistan has trebled. The island into force, bilateral trade with India has grown more than fifth of the world’s population. Since the agreements came in more than 4,000 products duty-free access to around a agreements with both India and Pakistan, giving investors Cabraal believes that Sri Lanka’s economy is “the most international to looked Lanka Sri when July, Last Sri Lanka is the only country to have signed free trade power set to double Base demand for over thedecade 2016 –with earnings set to reach £2.75bn foreign visitors in Targeting 2.5m

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Figures converted into British Pounds throughout this feature must be considered estimations based on current exchange rates. Brand Sri Lanka How they view it to India, one of the world’s largest trading areas gateway a as also conventionsand important the all toadherence system,transparentlegal excellentan asbusiness suchenvironment, – a investorsattractiveoptionsto offer can which nised acrosstheglobe. recog brand national a foster to work must it and proximity to emerging superpowers. Now, size, particularly due to its desirable geography > that is changing. Sri Lanka is perhaps still best known for cricket and tea. But For all its economic growth and the breadth of its industry, > BRANDING Sri Lanka’s economic potential belies its its belies potential economic Lanka’s Sri “Sri Lanka needs to be branded as a nation

economic development, ensuring a sustainable peace.” “We believe that engaging with these communities and undertaking business activities will expedite

Nirmali Samaratunga says Mackwoods is specifically focussing on Sri Lanka’s north and east.and north Lanka’sNirmaliSamaratungaspecifically SriMackwoodssaysfocussing ison tial public offering of its energy arm was oversubscribed on its opening day. Co-chairmanday.openingoversubscribedits was on armenergy its ofoffering publictial elhae o C ad nnil evcs truh t ‘lrde bad I My te ini the May, In brand. ‘Claridge’ its through services, financial and ICT to healthcare thansecond-oldest mercantileorganisation,Lanka’smoreestablished Sri isMackwoods 170 years ago. Primarily known as a tea merchant, it operates in many industries,from many in operates itmerchant, tea a as knownPrimarily ago. years 170 the government.’ within from encouragement of lot a is there and markets, new at look growingwill quiteversatile,fast they market.are Lankans Sri are looking at vertical integration with India, because India is a very companieslotof A resilient. very is here community exporter ‘The Dawn Austin where we were.’ to back get and circle the close to want we so time, that at nation maritime best the were We ago. years 2,000 world the of part this in partner trading largest the been have we that prove to evidence Weand everywhere. were with our location. We gifted have a lot of subcontinent Indian the Africa, to go can you Lanka Sri ‘From Dr. PriyathWickrama optimistic aboutthenextfew years.’face, Iamvery income after the Maldives and, notwithstanding the challenges we per-capita highest the have also We region. entire the in economy comparatively small nation, we have the most balanced and resilient ‘We have shown that Sri Lanka is a powerhouse. We believe that as a Ajith Nivard Cabraal products, fromteatorubber.’ our about awareness build to want We that. of aware is anyone ‘98% of the world’s cinnamon is produced by Sri Lanka, but hardly Basil Rajapaksa | Chairperson of the Exporters Association oftheExporters | Chairperson

|MinisterofEconomicDevelopment

- | Governor oftheCentralBank | Chairman of the Ports Authority |ChairmanofthePorts the country clean”. the country keepingand people educating in effort huge a made have we years two past these ence...over experi good a has Lanka Sri to comes who anyone that ensure to have first “We though. ment. It’s not just about branding in the media, Develop Economic for Minister Rajapaksa, certed effort to brand our products,” adds Basil M.M.C. Ferdinando, chairmanoftheBOI. saysgrowing, fastest the of one certainly and “On the export side we are making a con a making are we side export the “On EYE ON MACKWOODS <<< -

- - -

www.the-report.net gain visibility Where nations In exclusivepartnershipwith GuardianNewsandMedia at: us contact To discuss a feature on your country, Highlight investment opportunities. Brand your economy. Strengthen your reputation. [email protected]

12 _ SRI LANKA > TRADE AND COMMERCE 13

Made in Sri Lanka products Tea Trading post A!er water, tea is the world’s most widely consumed Writer: Keyur Patel beverage – and Sri Lanka is the world’s fourth biggest producer, thanks to the optimal tea-growing conditions in its highlands. Garments Sri Lanka is renowned for its ethical textiles industry, with child labour outlawed. "e sector makes up around half the island’s exports, most going to the US and Europe.

Cinnamon A popular spice derived from the bark of a tree native to Sri Lanka – by far its number one producer – cinnamon is used across the world in hot drinks and sweet and savoury dishes, and has been linked with numerous health bene#ts.

As Sri Lanka seeks to reclaim its historic status as an international trading hub, its exporters Gems are exploring new markets to bolster existing trade with the West. World-renowned for its Regarded as among the highest quality in the ethically- produced garments, dazzling precious gems and luxurious Ceylon tea, the island world, Sri Lanka’s precious gems include diamonds, emeralds, rubies and sapphires. is defying gloomy global economic conditions with impressive growth – though balance of payments concerns suggest challenges ahead.

The Silk Route, an ancient net- to a certain extent. Dawn Aus- interest elsewhere. Expo 2012 – to cater to markets that don’t need Coping with global problems to be. We change gear, we adjust, work of trade routes that stretched tin, chairperson of the Exporters the island’s biggest trade fair since huge volumes.” Sri Lanka is no longer at we flex and make opportunities thousands of miles though Africa, Association of Sri Lanka, points the war, held in March – attracted The ‘Made in Sri Lanka’ brand war – but political turmoil in its out of challenges,” Lawrence “Nobody believed that we could southern Europe, the Indian sub- out: “Since the currency devalua- 1,385 international buyers, well is not confined solely to agricul- major export markets inevitably adds. Fernando agrees, despite achieve what we have achieved, continent and China, helped many tion we are competitive but surpassing expectations. tural and inexpensive manufac- troubles its industries. Dilmah concerns about the Middle East. and we did it our way. That’s great civilisations evolve. And at its everything else has hit us That included more than turing products, though. The Tea exports to 104 countries. “In “Every time I go into the city I heart, a small island – enviably situ- as well. There’s the oil 550 participants from country seeks to promote its bur- the Middle Eastern countries can’t recognise the place. There been the key to our success.” ated – became an intercontinental crisis, the global finan- China and India, the geoning industries higher up the Ceylon tea is like gold,” says are so many opportunities which trading centre. cial crisis and uncertain- world’s two most popu- value chain, to be recognised for Merrill J Fernando, its founder. never existed before and people Basil Rajapaksa Minister of Economic Development In the modern era, Sri Lanka ty in the world markets.” lous countries. its technological prowess and to “The present disturbances in who take the chance today will be is determined to reclaim its for- A grim A u s t i n ease its dependence on low-cost , Syria, Egypt and Libya are multimillionaires in five years,” merly privileged position. Recent economic sees poten- exports as it grows more prosper- really affecting us”. he said. <<< signs have been promising. In climate in tial in small- ous. Its fast-emerging nano-tech Still, with more than 8 per Basil Rajapaksa, younger brother of President Mahinda 2011, exports totalled more than the West Our preferential trade er emerging sector is just one example of this. cent GDP growth last year, the Rajapaksa, has held his current role since 2010. He was involved in fostering political stability in Sri Lanka the targeted $9.1bn (£5.8m); this may force agreements with India and economies, Nirmali Samaratunga, island has avoided the economic Fast facts: year the goal is $12.5bn (£8bn). To Sri Lanka t o o . S h e co-chairman of the mercantile sluggishness that infected much In 2010, Sri Lanka’s exports after the civil war. enhance its reputation as a hub for to reduce Pakistan provide us notes: “There firm Mackwoods, sees big po- of the world after the global fi- to the European Union were commerce, the country has worked its reliance are trade tential in the IT industry – par- nancial crisis. worth £1.83bn, while exports to Two years ago Sri Lanka was importing rice, Basil Rajapaksa with access to a market points out – whereas it recently gave a donation of 500 metric resolutely to develop its infrastruc- on trade missions, ticularly in business process and Shirendra Lawrence, manag- the United States totalled more of 1,3bn people. tons to the World Food Program. ture: expanding its roads, airports with its fact-finding knowledge process outsourcing. ing director at MAS Active, de- than £1bn. and ports, setting clear goals for two big- Nirmali Samaratunga m i s s i o n s As she points out, she is not alone. scribes how the clothes retailer The minister describes how he prioritised food security in rural renewable energy, and modernis- gest part- Co-chairman of Mackwoods and people In a recent report, A.T. Kearney, – accounting for around a third After the US, the UK is areas after the war. “We developed backyard economic units in ing its legal and regulatory systems. ners, the coming in. the global management consult- of Sri Lanka’s apparel exports Sri Lanka’s second largest export 2.5m households, to ensure the individual family is guaranteed But there is a problem: the cost EU and the The export ants, called Sri Lanka “a hidden – used the crisis to improve its market. Four-fifths of that trade their nutrition and an income”, he says. “Now it is time to try to of imports is growing fast, raising US. Indeed, the former withdrew development board has started gem for outsourcing.” Its take on business practices.“We came out is in apparel. export some of these products.” serious concerns about a growing preferential tariff benefits to the looking at places like South the country? “Among the safest, of the recession in a better place balance of payments deficit. To try island in 2010 over human rights East Asia. There is also a small lowest risk, emerging markets, than we were when we went in,” Sri Lanka has ratified all fun- Rajapaksa cites Sri Lanka’s educated workforce, its health and ease this imbalance, Sri Lanka concerns – though this proved to segment going into Africa, for both in terms of personal safety he says. “A lot of that came from damental conventions by the system and controlled inflation as reasons for the country’s announced a 3 per cent currency have little impact on its flagship less sophisticated manufactured and business security.” our focus on lean enterprise, International Labour Organisation rapid post-war economic development. Its balance of payments deficit, he argues, is largely down to high global oil prices. devaluation in November 2011. garments industry. goods. Because Sri Lanka isn’t a which started in the mid 2000s”. protecting workers rights - one of That had an effect – but only And there is no shortage of huge country, it has the capacity “Sri Lanka is an exciting place the few Asian countries to do so. 14 _ SRI LANKA > TOURISM An independent supplement produced by The Report Company 15

TUK-TUKS GO GREEN

FACT: Sri Lanka’s Alliance Finance recently partnered with a Dutch company which had developed technology to “30 per cent higher fuel improve the fuel efficiency of tuk-tuks, the ubiquitous three-wheeled vehicles. “The potential is tremendous: efficiency and 25-30 per we can change the carbon footprint in Asia,” says Romani de Silva, Alliance’s deputy chairman. “We think if cent emissions reduction” we pilot this project well we can create a triple bottom line project for the entire tuk-tuk industry – we can do something that will benefit the environment and give people an employment opportunity.”

their entry into the country. To buttress the the tourism sector. overall growth of the industry, the government “Due to the current economic situation in Spotlight on Nidro intends to open up 14 areas for foreign direct Europe, we are sustaining rather than growing,” investment, including golf courses, water parks, says Kapila Chandrasena, CEO of Sri Lankan light aircraft services and shopping malls. To Airlines. “We are very keen to hold onto our Nidro Supply used to do chandlering for the British facilitate these investments, a “one stop shop” current destinations and maintain our market and American naval vessels has been set up. share there, but there’s no short term plan to that called at the Port of With improvements in road infrastruc- deploy any new capacity.” That said, the airline Colombo. When the Maldives ture and development of the new airport in has just launched new destinations such as started developing, its manag- Hambantota as well as the planned upgrade of Zurich, Moscow and China. “We are also im- ing director, Dawn Austin, the country’s main Bandaranaike International proving our service by training our cabin staff saw the opportunity to start an export business. SriWriter: Eleanor Wragg Lankan smile Airport, various new destinations are set to to integrate the much talked-about warmth and emerge, and international markets are starting hospitality of Sri Lankans into our products,” Today, the company has to take note. adds Chandrasena. developed into a hospitality Sri Lanka has regained both its place on the The results of a recent questionnaire handed to The country is keen to maintain its unique “Over the last two years, 28 new airlines have The long-awaited growth trajectory for the resource base, selling products of Sri Lankan origin - from ce- tourist map and its winning smile and is fast tourists leaving the country by the Sri Lanka environment. Sri Lanka has a long history of started flying to Sri Lanka,” says Minister of country is now underway, and Sri Lanka looks ramics to stationery - to luxury emerging as the next up and coming destina- Tourism Board showed that the most memora- preservation; its ancient King Devanampiya Economic Development Basil Rajapaksa, add- set to emerge as a unique and successful tourism hotels in the Indian Ocean. tion for travellers looking for more than just ble aspect of a stay on the island was the ubiq- Tissa reputedly created a wildlife park more ing that now is the time for British Airways to destination. With a jump in tourist arrivals from “Sri Lanka is a good manufac- winter sun. uitous Sri Lankan smile. than two thousand years ago. consider operating direct flights to the country. 450,000 at the end of the war in 2009 to a pro- turing base,” says Austin, “and “The potential here is absolutely huge,” Sri Lanka’s culture stretches back over two Over the past few years, the Ceylon Chamber However, there are worries about the effect of jected 800,000 in 2012, more and more travellers there are a lot of very clever says Rudolf Troestler, GM of Hilton Colombo, millennia, and the country boasts eight UNESCO of Commerce, with EU funding, has been spear- the economic downturn in the country’s tra- are discovering that there really is something for craftsmen in the country.” one of the capital’s main tourism institutions. World Heritage Sites. The town of Nuwara Eliya heading a project to make the country’s hotels ditional markets in the West on the growth of everyone in this friendly green island. <<< “Everything is here in one country.” in Sri Lanka’s hill country, known locally as greener through the improvement of energy, Besides its pristine coastline, cultural Little England because of its chilly climate and water and waste management systems. sights and lush tropical climate, one of the key British colonial architecture, is a great place to Today, the country faces arguably its biggest attractions for visitors to the country is its discover the country’s pre-independence his- challenge yet: getting the infrastructure in place friendly, multicultural and multi-faith society, tory, while the vast coastline is home to prime to accommodate the projected 2.6 million tour- which is most apparent when travelling in a surfing spots popular with backpackers and ist arrivals expected in the year 2016, with the tuk-tuk past the coastal capital Colombo’s many beach lovers alike. Ministry of Economic Development launching roadside shrines. Gaudy illuminated Buddhas “We promote eight types of tourism prod- an ambitious plan to double the country’s hotel jostle for space with anguished Catholic saints, ucts,” explains Dr. , chair- room capacity to 45,000. while green lights shining from minarets reflect man of the Sri Lanka Tourism Development Dr. Godahewa has invited international hotel- off the façades of towering Hindu temples. Authority. “Business, heritage, wildlife, yoga iers to invest in the tourism industry to meet the Even during the peak of the conflict in 2009, and religious tourism, festivals, sports and ad- growing demand, and many have snapped up the Sri Lanka ranked 21st in the New Economics venture, scenic beauty, and the eighth is our offer - Six Senses, Shangri-La and Movenpick are Foundation’s Happy Planet Index, and it shows. essence, the feeling of being in Sri Lanka.” just some of the brands that have announced

Dr. Nalaka Godahewa Chairman of the Sri Lanka Tourism Development Authority

Can you give us an overview of Sri Lanka What can you tell us about your target as a tourism destination? markets? We can compare Sri Lanka to any destina- We are targeting 2.6m tourism arrivals by Q&A tion. Maldives has beaches, so do we. South 2016, and to generate £1.74bn in tourism Africa has wildlife; we have the highest revenue. We are a primarily European driven density of wildlife in the whole of Asia. destination, and while these markets China and Thailand have religious festivals, continue to be important, we also need to so do we. Malaysia has rainforests, so do we. look at the emerging markets of China and Greece, Rome, Egypt and Cambodia have India. The UK is definitely a key market, and Dr. Nalaka Godahewa was appointed ancient heritage sites, so do we. India has remains our second biggest market after chairman of Sri Lanka Tourism ayurveda and yoga; we have 2,500 years of India. Development Authority in May tradition in that. 2010 and has been responsible for What specific areas would you highlight doubling tourism arrivals to the How are you addressing perceptions for investors in the tourism sector? country through the introduction of about safety and security? There are so many investment opportunities a very clear branding and positioning We fought a terrorist conflict for 30 years, in tourism. Ours is a virgin market. Unfortu- strategy. Today, he wants to take but tourists were never targeted. Today we’re nately what’s happening is the Europeans are tourism in Sri Lanka to new heights, probably one of the safest countries in the holding back. My message is to come and see positioning it as an exotic yet world. We are very sure that everything is for yourself and grab the opportunity now. sustainable destination. under control. 16 _ SRI LANKA > TOURISM An independent supplement produced by The Report Company 17

reasons to visit Sri Lanka

This compact pearl-shaped island offers an almost bewildering diversity of tourism experiences, with something to suit every taste, budget and season.

Heritage Tradition Celebrations Adventure Sri Lanka’s cultural depth is Sri Lanka possesses a rich The legacy of the country’s With over 1,600km of coast, Sri recognised by UNESCO, which cultural heritage spanning over diverse civilisation is its colourful Lanka is an ideal location for has declared eight World Heritage 2500 years, most evident in its Buddhist, Hindu, Muslim and water sports. Sites in the country. varied traditions. Christian festivals. Pristine environment Ayurveda and spas Wildlife The need to conserve the Scenic views Sri Lanka has been a centre of The country boasts 14 national environment is deeply ingrained The island is fringed by sublime spiritual and physical healing for parks, 92 species of animals and beaches and blessed with lagoons, in traditional Sri Lankan society. 2,000 years. over 3000 elephants. mountains, rivers and jungles. 18 _ SRI LANKA > INFRASTRUCTURE An independent supplement produced by The Report Company 19

(Mahinda Vision in English). This plan envisages we will enhance the existing passenger capacity, capacity by 2015. With the extra 1m capacity a hub economy in which aviation, maritime, enhance the facilities for transit passengers, and from Hambantota – itself set to increase by a energy, commerce and 21st century knowledge, increase cargo volumes and air cargo handling”. further 4m within five years – he is confident take pride of place. It will be done from a relatively low starting point, that the country’s aviation infrastructure will too, with only one international airport – though have the capacity to handle this influx. Dubai, Singapore, Sri Lanka? with a second to be opened by the end of 2012 at The aim, of course, is the reach the whole Transportation is among the central fea- the crucial Hambantota development. world. Sri Lanka has an optimal geographic lo- tures of this ten-year plan, and the country’s This new airport cannot come too soon, cation for reaching into the emerging African geographical location for aviation links is with the current Bandaranaike Colombo economies. “This is ideal for airlines, but also for one of its strongest features, says Prasanna International Airport already over capacity – a air cargo and courier companies such as FedEx, Wickramasuriya, chairman of Airports and happy problem caused by the twin effects of in- UPS and TNT”, says Wickramasuriya. Aviation Services Ltd (AASL), the government- creased international tourism and growing trade He is not the only one. Kapila Chandrasena owned company charged with helping Sri Lanka links. Wickramasuriya recognises that increasing is CEO of Sri Lankan Airlines, and explains why become an aviation hub. capacity to handle growing numbers of tourists air travel is key. “In this region, there are fast It’s no mean feat, and requires parallel efforts, and businesspeople is a top priority, and believes growing economies on a huge scale, especially he says. “We have to concentrate on many areas: AASL is on track to double the existing airport’s China, Indonesia, Malaysia and India. Every 10% > Peace in Sri Lanka has brought countless opportu- Sri Lanka’s re-emergence really began in 2009, with nities on an individual level for the country’s people. the end of the conflict. But the key event was Presi- Asian hub But the opportunities for the country in a world in- creasingly dominated by the Asian giants are more than Mahinda Chintana the collective sum of the individual doors that have mandates development for a been opened. In fact, Sri Lanka is uniquely positioned “We were the best maritime nation to leverage its opportunities to become a hub for the and biggest trader 2,000 years ago, Q&A Industry voices five-hub economy based on Asian Century. and we want to close the circle and get aviation, maritime, energy, To properly deserve the title of a hub, a country Dr Priyath Wickrama from India, Pakistan, Singapore, convert it into a service centre so must bring together connections, communications or back to where we were. Chairman Ports Authority Australia and China, but only it will provide water, crew change knowledge and commerce. commerce by demonstrating ideal attributes for this one investor from Europe. facilities, food and all other ship Can it work? exchange. Sri Lanka – with its age-old position on the Dr. Priyath Wickrama | Chairman of the Ports Authority What would you like potential handling services as well as a Silk Route, its ports, time-zone, proximity and political investors to understand about How will Hambantota port large dockyard. Writer: Sam Mendelson planning – has in rapid time become just that: a trans- dent Rajapaksa’s re-election to office in 2010 with a Sri Lanka? complement the current port Because of misleading informa- in Colombo? What are your projections for portation, logistics, ICT and energy hub for the region. multi-faceted policy initiative called Mahinda Chintana tion in the media, European and It’s going to be a free port, like the future? British investors do not know Singapore. We are also waiting The contribution from the ports much about the opportunities until we get the license to import sector to the national GDP is about here. We have a lot of investment oil and then we will start bun- 10%. Our target is to reach 40%.. opportunities and investors kering at Hambantota. We will

Prasanna Wickramasuriya better than other competing negative perceptions about our Chairman of Airports and countries. We provide a shorter country will fade. We all have Aviation Services route, which is good for compa- a big role to play there, not to nies looking to save on costs. exaggerate things but to tell the What makes Sri Lanka stand true story of what is happening. out as a hub? What would you like people to We just ask that people come The connectivity. We are geo- understand about Sri Lanka? here, visit the country them- graphically located in an ideal Unfortunately, for 30-odd years selves and realise how things spot, especially for launching we had this conflict situation. really are here. into the African continent. Our Now democracy is prevailing labour force is also very much everywhere. I think with time the

Kapila Chandrasena about 60% of all the incoming and about 80% of our business is CEO of Sri Lankan Airlines travellers to Sri Lanka. We’re also tourism travel. Due to the conflict, developing Sri Lanka as a hub business travel makes up a lower What’s your perspective on the for air travel. In order to sustain percentage than we’d like, but business so far this year, and this and grow these types of going forward we want Sri Lankan the progress the company opportunities for the country, Airlines to have the right percent- has made? we may have to operate certain age of its revenues from business We are looking not so much at routes at a loss. travel. Therefore, we’re putting a the economics or profitability lot of emphasis on the front cabin, of air transport, but more at the What is the ratio of tourism creating the right product and the macro benefit that we’re bring- travel to business travel? right cabin ambiance. ing to the country. We carry We are a leisure traveller carrier,

R.W.R. Pemasiri is a cooperative project among nent and also reach to Europe. Director General of Road countries in Asia and Europe and Development Authority the United Nations Economic What specific projects could and Social Commission for investors participate in? What examples would you give Asia and the Pacific (ESCAP), to We are looking for investors in of the road network develop- improve the highway systems the expressway network, for PPP, ment in the country? in Asia. Agreements have been or build-operate-transfer. Our The most important project is the signed by 32 countries to allow southern expressway will con- Asian Highway Network, which the highway to cross the conti- nect Hambantota to Colombo. 20 _ SRI LANKA > INFRASTRUCTURE An independent supplement produced by The Report Company 21

HAMBANTOTA DEVELOPMENT Located in the STAY city centre and The Port of Hambantota will service ships travelling along one of the world’s busiest shipping lines - the overlooking the The only hotel connected to the Colombo World Trade Centre, this multi-storey resort offers Indian Ocean, the east-west shipping route. Capacity will eventually be 20 million TEUs per year. When completed, the port will business amenities such as a 24-hour business centre, wi-fi internet connection and spacious Hilton Colombo be the biggest port constructed on land to date in the 21st century. The finished project will provide indirect hotel is ideally meeting and function venues. With ten speciality restaurants and bars, the Hilton is a point of employment to over 50,000 people. The project also includes an international airport, a highway, railway, oil located close to key reference for Colombo’s entrepreneurs and tourists alike. refinery and related facilities. tourist and business destinations.

increase in a country’s GNI virtually ing Port of Colombo is one of the of container handling equipment, the Colombo port is the new de- sector is embarking on a period of Focus on Mobitel doubles the amount of air travel largest public-private partnership and the interim terminal facility velopment at Hambantota. This immense evolutions. “The key driv- and citizen will take”, he claims. deals in the country right now. The is one of the world’s largest pro- will be “a logistics and manufactur- ers will be the mobile sector and “This, with population growth, chairman of the Ports Authority is jects of its kind – the breakwater ing centre”, he says, “so we’ll have a mobile broadband services” he says, means there is a great opportunity Dr Priyath Wickrama, and his role alone cost £267m”. lot of generated cargo within the adding that the high literacy rate of not only to sustain our existing is overseeing the development of The project will have its new ter- port to handle”. It has competitive 90%, government plans to improve Minister of Power and Energy market but to develop and target Sri Lanka as a maritime hub. The minal open from April 2013. The advantages, too. Dubai’s port can ICT literacy in schools, an almost a new market segment”. port as it stands has a 4.5m annual 1,000m long berth and the latest only reach India’s west coast, and blanket mobile coverage and wide- Lalith de Silva Tourism obviously Singapore can only reach the east. spread broadband connectivity is An annual 9% GDP growth super-grid. Still, renewables CEO Mobitel plays a big role, but Sri “If you want to reach both, Ham- leading to a wealth of multi-skilled is placing huge energy de- cannot meet the demands Lanka’s opportuni- bantota is ideal”. workers able to handle the physical mands on Sri Lanka, forc- of any growing country, and “Competition in our ties come from being The target is to reach over £3bn infrastructure developments. mobile industry is fierce ing the country to explore oil and gas exploration has “on the crossroads in of FDI by 2015 through the port Telecommunication, in de with global players aggres- new solutions to meet its already started. Ranawaka sively marketing to capture every sense” – especial- sector alone. And it seems possible. Silva’s mind, sits between mari- power needs. hopes that by 2016, gas will market share even at the ly between Africa and “We were the biggest trading part- time, aviation, commerce, energy be a commercial viable expense of profitability. The China. Chandrasena ner in this part of the world 2,000 and knowledge – the five pillars In 1995, Sri Lanka’s power energy source. mobile telephony market is obviously modelling years ago”, he says. “We were the of Mahinda Chintana. “Telecom- system was 100% hydro, but In recent months, however, is approaching saturation the airline’s role on best maritime nation at that time, munications is an ‘infrastructure as demand increased other hope has grown that viable sources have been added. reserves of oil are about to and growth in voice-based other successful hubs and we want to close the circle and facilitator’, a service sector for the “58% of our primary energy be discovered in the coun- products is expected to too. “Look at Singa- get back to where we were”. country’s development weaving the slow. Broadband is expected still comes from renewables, try’s Palk Strait. India’s pore and Dubai – both five sectors in unison”. but we have to build at least state-owned oil company, to drive future growth as have achieved their sta- The art of communication So can Sri Lanka re-emerge as a current penetration remains 300MW in extra capacity in ONGC-Videsh, has visited tus with the help of a Ports, airports and airlines to move hub? The President himself spoke low. Therefore Mobitel the next two years” notes Sri Lanka in recent weeks, is undergoing significant strong national carrier”. goods and people between markets to this in his interview for this fea- Minister of Power and En- and the Indian government expansion and further in- are nothing in a modern economy ture. “A hub for international com- ergy Champika Ranawaka, is reported to have asked Sri vestments are planned. We A sailor’s paradise without the information and com- merce does not happen overnight or who is responsible for Lanka to create oil explora- intend to aggressively move As China resumes its munications infrastructure to sup- by accident. Such an outcome has overcoming the challenges tion blocks in the Strait, to into new businesses as well historical position as port them. After being restricted by to evolve over a period of time, and ahead. prevent other countries bas- as underserved markets and the export driver of the three decades of conflict, the coun- when a large number of investors 90MW of the country’s ing themselves there. power comes from wind Russia’s state-owned to establish ourselves as a global economy, with Always connected try is now making up for lost time. and other stakeholders recognise energy, which will increase to Gazprom, Vietnam’s state- strong platform provider. the Asian tigers booming, and with container handling capacity, he technology will, Wickrama believes, Lalith de Silva is CEO of Mobi- and accept a country as a hub, then This is to be complemented a forecast 650MW by 2020, owned PVEP, private French the end of the shipping downturn says, but it has reached its limits. be able to handle the next genera- tel – Sri Lanka’s national mobile tel- and only then can it be considered alongside 300MW of solar giant Total are all reported by innovative product and from the global economic crisis in “To avoid congestion, we decided tion of massive container ships, ecommunications provider and the an international hub.” service offerings and inter- energy. Plans are underway to be clamouring for the sight, Sri Lanka is again at the centre to expand the current capacity, “bringing revenue, investment and first mobile operator to launcher su- By that measure, Sri Lanka is national best practices and to link this to a modern next big oil discovery. by offering the best custom- of the maritime world. and build a new terminal. In 2010 employment to Sri Lanka”. per 3.5G HSPA technology in South on its way. <<< er experience and value.” The expansion of the exist- we were the world’s largest buyer Perhaps more important than Asia. From his perspective, the telco 22 _ SRI LANKA > FINANCE An independent supplement produced by The Report Company Winning recognition SL Sri Lanka’s rapidly growing financial services industry is winning international approval – and looking to the UK for investment. Writer: Keyur Patel

> In 2007, a report by the IMF described “If I look at my top 30 shareholders, 10 years ago I sentiment. Because we’re islanders, we have this Sri Lanka’s financial system as “remarkably resil- didn’t have a single foreign fund – but today, 15 of cohabitation and integration that is not present ient” amid a major program of financial sector them are institutional investors from abroad,” he in China or India,” he says. reform. “Even in the face of natural disasters, says. “Investors putting $1bn into India today are And it is not just the banking industry that continued civil strife, high fiscal deficits, a wid- asking to put five per cent into Sri Lanka.” is optimistic about the future. Sri Lanka Insur- ening current account deficit, Indeed, some of global ance, the country’s largest insurer, is on track to and accelerating inflation,” the banking’s biggest brands have double its turnover over four years, according to IMF said, “the banking sys- Growth in numbers recognised Sri Lanka’s po- its chief executive. tem’s financial performance tential. HSBC and Standard Meanwhile, Romani de Silva, deputy chair- has improved on the back of 19.2%: Growth of Chartered, both headquartered man of the leasing and finance provider Alliance robust economic growth”. assets in the Sri Lankan in the UK, operate in the country. Finance, sees vast potential for small and medium Five years on, the sector financial system from So does Citigroup, the US lender. enterprises, particularly in high growth areas is continuing to win favour- 2009 to 2010 Theagarajah says that the outside Sri Lanka’s western province. “In the able international recogni- single biggest barrier to doing financing industry I think that’s going to be the tion. Fitch Ratings rated 8.3%: Estimated business – the security threat – biggest growth industry for the next few years,” he the outlook for 19 out of 20 Sri Lankan GDP growth was removed after the civil war says. “The SME space has a very good margin and Sri Lankan banks in 2012 in 2011 ended in 2009. “Now we are away offers a good niche for players like us to operate.” as “stable” or better – un- from that, we only see an up- There are challenges, of course. Fitch is con- Sri Lankan derpinned by both post-war 95%: side,” he adds. “The excitement cerned about the Sri Lankan banking system’s banks covered by Fitch growth in the domestic econ- Ratings with a “stable” really started in mid-2010, and ability to manage a sustained level of above-aver- omy, which has improved outlook or better in 2011 we started to see credit age loan expansion; and, as credit grows rapidly, it their earnings prospects, and growing at levels which have not says that banks’ capital ratios could come under the government’s capacity to been seen in the past decade.” pressure. Continuing global economic turbulence support the banking system. Nihal Fonseka, chief execu- might also have a detrimental knock-on effect. Rajendra Theagarajah, managing director of tive of DFCC Bank, believes Sri Lankan lend- But if the sector can successfully implement cer- Hatton National Bank, one of Sri Lanka’s largest ers are targeting investment from the UK in tain structural changes – for instance, improve- privately-owned lenders, has seen a surge of inter- particular, given London’s privileged role as a ments to risk management – the agency reckons national interest in the country’s financial sector. global financial sector. “There is no anti-foreign that its outlook and ratings can get better still. <<<

Corporate Profile Why they got it right

Mohan de Alwis Rajendra Theagarajah Chief Executive of Hatton National Bank What we’ve built in terms of understanding, Sri Lanka Insurance engagement of communities and risk management picked for the role because of my ability to bring Penetration is currently low, at around 11 per capacities over the past decade puts us very much in a lot of private sector culture and thinking.” cent. “We have been able to access their da- ahead of the curve. Things have gone to plan. Following three tabase, use their infrastructure and their call stagnant years, the company’s turnover grew 12 centres,” he explains. “We provide them with The first decade of the 21st century was prob- to Turkey between 2005-2009 after it grew at per cent in 2010, to £66.8m, and another 22 per the training and the product knowledge and ably the worst period for Hatton National an annual rate of more than 55 per cent. “We Our mission is to be the insurer to the nation. cent in 2011, to £91.1m. It boasts a high-grade they promote our insurance via telemarket- Bank in 40 years, says Rajendra Theagarajah, achieved that by sticking to the core business, We’re celebrating our 50 year anniversary this “AA” rating from Fitch, upgraded from a nega- ing. With these processes coming into place the bank’s managing director. And yet the what we understand best,” Theagarajah adds. year as a strong company with huge goodwill. tive to stable outlook last year. we are seeing huge growth.” Asian Banker ranked Hatton’s stock as the best This is a strong national retail bank which does De Alwis projects more rapid growth in 2012, Sri Lanka Insurance aims to launch an Initial performing of 130 small banks’ from Australia good quality wholesale banking. When Mohan De Alwis was brought in as the insurer’s 50th year. “We’re targeting 20 per Public Offering (IPO) by 2016 – with interna- chief executive of Sri Lanka Insurance in May cent top-line growth, covering both life and tional investors “very welcome.” De Alwis says Romani de Silva 2010, one of the key challenges he faced, as general insurance, and I’m happy to say that we the company is “looking for financiers and Alliance Finance We give equal priority to all our customers, from he puts it, was to dispel the “perception of are on track to meet that target,” he says. insurance companies of international repute”. tuk-tuks to Sri Lankan airlines. That’s been our government-owned commercial enterprises as The company has explored tie-ups and as- He travelled to the UK in May, partly to dis- business philosophy for 3 generations now. white elephants and a drain on the funds of sociations to enhance its longer term returns, cuss new lines of insurance in the petroleum the country”. partnering with a string of publically-owned industry. Though Sri Lanka produces no oil De Alwis has strong business credentials: prior banks and several large leasing companies at present, its potential reserves have attracted Alliance Finance grew by 85 per cent last year “We’re looking at enabling the creation of to joining Sri Lanka’s largest insurer, he was the to advance its banking insurance and motor interest from investors across the globe. “It’s – outperforming an industry that grew by a wealth outside the western province and the vice chairman of the county’s Free Trade Zone insurance divisions. something we need to talk about because if it still impressive 42 per cent. And as a business capital,” he says, highlighting Alliance’s opera- Manufacturers’ Association. “We need to run It has also joined forces with a telecommu- turns out that we have reserves, there’s going conceived more than 50 years ago, de Silva says tions in the north and east. “We want to create government-owned business models as profit- nications company in an effort to tap into to be a huge area for coverage,” he says. “Initial the company has a duty to play an active role in financial inclusiveness.” able commercial enterprises,” he says. “I was Sri Lanka’s potential life insurance market. indications are positive.” the development of Sri Lanka.