Sri Lanka Special Feature

7/28/2019 Sri Lanka Special Feature

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June06.06.2012

Politics:

Nationalreconciliationp.05

Exclusive Interview

with Sri Lankan PresidentMahinda Rajapaksap.08 Infrastructure:Asian hubp.18Commerce:Trading postp.12

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Sri LankaAsias next wonder?

Previously overlooked by tourists and investors alike,Sri Lanka is shaking offa troubled past to regain itshistorical status as an economic hub in South Asia, at thecentre of a new Silk Route, embracing its proximity to theAsian giants of India and China.


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32 _ SRI LANKA > Anindependentsupplementproducedby TheReportCompanyINTRO

Writer:Keyur Patel

The place to be Sri Lanka is winning international recognition for its

mpressive economic progress. After three years of peace, oldwounds are beginning to heal. Today, with strong security,flourishing tourism and a fast growing plethora of industries, thesland is convincing investors that it is among the worlds most

promising emerging prospects.

Visitors to Sri Lanka are oftenstruck by its cultural diversity, andnowhere is this more evident than inthe many mobile shrines adorning itstuk-tuks. Its predominantly TheravadaBuddhist Sinhalese, who make up

around three-quarters of the population,and its mostly Hindu Tamil peoplehave lived on the island since ancienttimes. Christianity and Islam are alsowidespread. With a literacy rate of nearly95 per cent, Sri Lankas people are amongthe most educated in any emergingeconomy. And surveys have found thatthey regularly rank among the happiestin South Asia, if not the world.

A melting potSri Lanka seeks to bring togetherpeople with a diverse array of

backgrounds and religious beliefs

01 Galle Face Green is popular with kite flyers and boastsan array of stalls selling food from crab cakes to curry.

02 Sri Lankas apparel industry has grown to be one of thelargest contributors to the export revenue of the country.

03 Nanotechnology is fast emerging as a new industry.

04 Pure Ceylon tea is prized for its quality and taste.

05 Sri Lanka, like most former and remaining Britishcolonies, has adopted cricket as its national sport.

06 The World Trade Centre is the tallest completedbuilding in Sri Lanka.

At its best, Sri Lanka is a quite remarkable

country. Its charms are alluring and many: afascinating history at the heart of the ancientSilk Route; a landscape that is truly beautiful; abreathtaking mix of fauna and flora unique to the

sland; a diverse people, among the most literaten the emerging world; and an economy growing

powerfully even in a troubled global climate.The last of these is testament to its peoples

resilience and creativity. The countrys economy

grew by more than 8 per cent in both 2010 and2011, while unemployment is low and infla-

tion is comfortably controlled. I am proud tosay that Sri Lanka is now emerging as a mid-dle income nation, says President Mahinda

Rajapaksa, in an interview for this report. I be-ieve that the next few years will be exciting years

for our country and I think we can continueto build on this strong and stable platform toconvince the world that Sri Lanka is truly theemerging wonder of Asia.

But over much of the past three decades,tragically, the world has seen the worst of Sri

Lanka. From 1983, a brutal civil war was wagedbetween the Liberation Tigers of Tamil Eelam

LTTE), a militant separatist group fighting foran independent Tamil state, and the nationsarmed forces, until the LTTE was defeated in2009. According to the United Nations, this con-

flict killed between 80,000 and 100,000 people.

The island has been assiduously promotinga national reconciliation strategy since 2009

and has received praise from independentsources for its security. In a recent report, ATKearney, the global management consultants,said Sri Lanka was among the safest, lowestrisk, emerging markets, both in terms of per-sonal safety and business security. Strategicconsultants Control Risk, meanwhile, identified

Sri Lanka as one of five countries that offer

good investment opportunities in challengingtimes and said: the Sri Lankan governmentstight control of the security situation has madethe island much safer.

Yet serious questions linger. The LTTE hasbeen branded a terrorist organisation in theUK, and was internationally condemned forits violent methods and disregard for human

life. But respected groups, including AmnestyInternational and Human Rights Watch, haveurged a full investigation into allegations thatSri Lankas armed forces also committed warcrimes against civilians allegations vehement-

ly denied by the government. In March, the UNHuman Rights Council passed a resolutionpressing Sri Lanka to investigate deaths of Ta-mil civilians towards the end of the war. An-swers are crucial to the countrys development.

Peace, though, offers Sri Lanka the chanceto showcase its many attractions, far supersed-ing its size. To many readers, the island withfewer than 20m inhabitants will perhaps bebest known for its Ceylon tea and extravagantly

talented cricket team as well as its geographi-cal proximity to Asias emerging superpowers.

Visitors w ill also recognise the nation splethora of enchanting tourist destinations.

With its many idyllic beaches, eight World Her-itage sites, and what is celebrated as a unique

Sri Lankan smile, tourism has inevitablysoared since the end of the war.

You may be su rprised, however, by thebreadth and quality of the islands fast-growingindustries. As well as being the fourth biggestproducer of tea, Sri Lanka exports almost all ofthe worlds cinnamon and much of its rubber.Its precious gems are regarded as among the

finest on the planet. Its garments and apparel

For suggestions on a feature on your country orany specific theme, contact us on:[email protected] an expanded version of this feature:www.guardian.co.uk/the-report/srilankaand www.the-report.netThe Report Company takes sole responsibility forthe content of this feature.

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81 Oxford StreetLondon W1D 2EU, UKTel: +44 (0) 207 903 5079

Illustrations: Daniel Jimenez and Alya MarkPhotography: Emanuelegiusto.com, Sri LankaTourism Board, Sri Lanka Board of Investment,Government Information Dept., Dreamstime

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54 _ SRI LANKA > >INTRO POLITICS

Situated in the Colombo fort facing the, the Old Parliament Building(above) housed the islands legislature for 53 years until the New

Parliament Complex was opened at Sri Jayawardenepura in 1983.Below, a building downtown Colombo.

We can continue to build onthis strong and stable platform

to convince the world that Sri

Lanka is truly the emerging

wonder of Asia.

President Mahinda Rajapaksa

sector making up around half of exports isauded for its ethical practices. It boasts, too,ndustries higher up the value chain, from

nanotech to ICT, including a very well-regardedoutsourcing sector.

Whats more, it has a burgeoning bankingand finance industry. Global brands such asHSBC and Citigroup operate in the country,

while 19 out of 20 of its banks were given astable outlook or better for 2012 by Fitch, one

of the worlds big-three rating agencies.

And yet this is just a fraction of the islandspotential. In 2010, it put in place a vision to

become a regional hub in five key sectors: com-munications, aviation and maritime, energy,commerce, and 21st century knowledge. Bil-

ions of pounds have been spent upgradingnfrastructure and it shows: Sri Lanka has ad-

vanced rapidly up the World Economic ForumsGlobal Competitiveness index, ranking 52nd

out of 142 countries in the latest report.It is hardly surprising, then, that foreign

direct investment into Sri Lanka is surging, as

the country seeks investors to help it reclaim itsonce-enviable position on the ancient tradingroute known as the Silk Route. And no nation hasstronger historical and cultural ties with the island

than the UK, its second-biggest trade partner.While Sri Lanka courts further investment

from established markets such as the EU andthe US, it is also exploring new partnerships,

particularly in Asia and Africa. Almost half theparticipants in its biggest trade exhibition since

the war, held in March 2012, were from Indiaand China, which together make up more than

a third of the worlds population.Difficult challenges undoubtedly remain.

Brand-Sri Lanka is not as well known interna-

tionally as it should be though this is chang-ing. The island needs to tackle a growing bal-ance of payments deficit, exacerbated by steepglobal oil prices. Above all, it must prove to itspeople and to the world that national rec-onciliation is healing old wounds, to the reliefof all afflicted by its war.

What we want is not any spin of any sort,Dr. Chris Nonis, Sri Lankas High Commis-sioner to the UK, tells us. All we want is to

encourage people to come to Sri Lanka andmake their own objective assessment.


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76 _ SRI LANKA > Anindependentsupplementproducedby TheReportCompanyRELATIONS

Great Britain isprobably the country with whichSri Lanka has had the closest cul-tural, educational and historical ties.

British companies have been presentfor centuries, and the ties of friend-ship and commerce date back toSri Lankas crucial strategic po-sition on the Silk Route. Ceylon

tea has always been a favourite of theBritish, and the love of cricket is perhapsBritains greatest common passion with theentire Asian subcontinent.

But the British-Sri Lankan bilateral rela-

tionship is far from its full potential. Sri Lan-kas Minister of External Affairs, Professor G.L.Peiris, observed that in its singular focus on

human rights and domestic political develop-ments, it is sad that the relationship right now

has become one dimensional.Professor Peiris bemoans a very sharp,

almost obsessive focus on the human rights

ssue, driven by the influential Sri Lankandiaspora very effective not only in terms ofmoney but also their organisational capability.

The diasporas voting strength

in marginal British politicalconstituencies is one reason,he argues, that their voice is so

loud. And it is a voice speak-ing from recollections of lifein Sri Lanka that are no longerrepresentative. What he asks for isthat Sri Lanka be given the spaceand the time it needs to come toterms with its problems and to re-solve them in a manner in keepingwith the traditions and aspirationsof its people.

The people of both islands havea long shared history. The Sri LankanHigh Commission in the UK was the

second overseas Mission to be opened inOctober 1948. It was the first embassyto start operating after Sri Lanka, then

Ceylon, gained independence.

The ties remain strong. The UKis the second largest tourism market

for Sri Lanka, and one of the countrys majorinvestors, ranking first in direct foreign invest-ment from the EU. British companies invest ineverything from power generation and infra-structure to agriculture, software developmentand garments.

It is no wonder then that Professor Peirisis concerned. He wants more people to know

of the things both countries have in common,and the rapid progress being made on the issuesthat are important to the diaspora in the UK

in order to combat misperceptions fuelled byvocal groups and a sometimes sensationalist

media which risk holding back a relationshipwhich has a great future ahead of it.


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98 _ SRI LANKA > Anindependentsupplementproducedby TheReportCompanyINTERVIEW

What is your assessment of the countryscurrent stage of development?I am convinced that Sri Lanka can attain a much

higher stage of development than we are cur-rently at. Unfortunately, we lagged behind forover 30 years as a result of a debilitating war thatsapped the energies of our nation and the will

of our people. However, we, as a people, have theability and courage to overcome any challengeand to create a new future for ourselves.

What has driven the countrys economicturnaround since the end of the conflict?

Long before the humanitarian operation ended,we started work on our economic agenda. I wasof the firm view that there is no peace withoutdevelopment, and there is no development with-out peace. It was soon clear that such strategy

had great merit since we were able to create anew momentum which led to the successfulturnaround of our country. I believe the next

few years will be exciting for our country andI think we can continue to build on this strongand stable platform and convince the world thatSri Lanka is truly the emerging wonder of Asia.

What are the competitive advantages of SriLanka as an investment destination?

The economic conditions in Sri Lanka havemproved tremendously over the past several

years, and I am proud to say that Sri Lankas now emerging as a middle income nation.

We are considered by many investors as a safedestination, and sectors such as tourism, ICT,port and maritime related activities, agricul-ture based industries and the apparel sectorhave shown strong potential. We have alsoadded several new and exciting sectors to our

economic landscape and are giving priority toimproving our doing business practices, as

well as our commercial and banking practices.

What are your short-term objectives to en-hance the quality of life of Sri Lankans?We are keen to transform Sri Lanka into a mod-

ern and prosperous nation with sound ethicaland cultural values. Towards that objective,we are working hard to increase our GDP to$100bn (64bn), and our GDP per capita to$4,000 (2,500) within the next 3 - 4 years. Inthe meantime, we also want to ensure that ouryouth are well educated and possess the neces-sary skills to benefit from the opportunities ofthe 21st century. We are keen to preserve our

rich and diversified cultural heritage, as well ascontinually foster national harmony between

the people of different races and religions inour country. In addition, we are seriously work-

ing towards building a society that will be free

from corruption. We are conscious that moreneeds to be done, and are therefore determinedto ensure that these efforts are continued.

What is Sri Lankas potential to become ahub for international commerce?

For Sri Lanka to be recognised as a hub for in-ternational commerce, there are several condi-tions that need to be fulfilled. Our infrastruc-ture should be up to international standards.

Our doing business indicators must be onpar with the currently accepted international

norms. Facilities and opportunities availablein the country for education, leisure, health,and entertainment should be at a high level sothat foreign investors will see the country asa preferred destination. Our judicial system,

legal and accounting practices, and other in-

vestor services should be at an internationallyacceptable level. Our law and order situation

must reach a high level. Our port and aviationservices must be efficient and effective.It is clear that we have made great strides ineach of these areas and as a result, we havebegun to impress many overseas and local in-vestors. But we would also have to admit thatSri Lanka may not have yet reached the veryhigh levels that are generally demanded bysome of the more sophisticated investors.There is still work for us to do. In the mean-

time, our advantages such as our excellent lo-cation, good climate, friendly people, knowl-

edgeable work force and good law and ordersituation will definitely be attractive to many.

What opportunities are available for globalinvestors in Sri Lanka?

In line with our strategy of development, an

enormous number of opportunities haveemerged in apparel, the high-tech and nano-tech

sectors and ICT. In addition, tourism is an areawhere the international hospitality industrycould benefit from our tremendous potential.

What is your view of the bilateral trade andinvestment relationship between Sri Lankaand the UK?

While we have committed ourselves to interna-tional practices in trade and commerce, we have

also been keen to develop strong bilateral part-nerships with friendly countries. In the caseof the UK, Sri Lankas bilateral trade and eco-nomic relations have grown substantially overthe past several years. However, there is a lotmore potential to develop these ties further.


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1312 _ SRI LANKA > TRADE AND COMMERCE

Made in Sri Lankaproducts

TeaAer water, tea is t he worlds most widely consumed

beverage and Sri Lanka is the worlds fourth

biggest producer, thanks to the optimal te a-growing

conditions in its highlands.

GarmentsSri Lanka is renowned for its ethical textiles

industry, with child labour outlawed. e sector

makes up around half the islands exports, most

going to the US and Europe.

CinnamonA 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 benets.

GemsRegarded as among the highest quality in the

world, Sri Lankas precious gems include diamonds,

emeralds, rubies and sapphires.

The Silk Route, an ancient net-work of trade routes that stretchedthousands of miles though Africa,southern Europe, the Indian sub-continent and China, helped manygreat civilisations evolve. And at itsheart, a small island enviably situ-ated became an intercontinental

trading centre.In the modern era, Sri Lanka

s determined to reclaim its for-merly privileged position. Recent

signs have been promising. In2011, exports totalled more than

the targeted $9.1bn (5.8m); thisyear the goal is $12.5bn (8bn). Toenhance its reputation as a hub forcommerce, the country has workedresolutely to develop its infrastruc-ture: expanding its roads, airportsand ports, setting clear goals forrenewable energy, and modernis-ng its legal and regulatory systems.

But there is a problem: the costof imports is growing fast, raisingserious concerns about a growing

balance of payments deficit. To tryand ease this imbalance, Sri Lankaannounced a 3 per cent currencydevaluation in November 2011.

That had an effect but only

to a certain extent. Dawn Aus-tin, chairperson of the Exporters

Association of Sri Lanka, pointsout: Since the currency devalua-tion we are competitive but

everything else has hit usas well. Theres the oilcrisis, the global finan-cial crisis and uncertain-ty in the world markets.

A grimeconomicclimate inthe West

may forceSri Lankato reduceits relianceon tradewith itstwo big-gest part-ners, theEU and theUS. Indeed, the former withdrew

preferential tariff benefits to theisland in 2010 over human rightsconcerns though this proved to

have little impact on its flagshipgarments industry.

And ther e is no sho rtage of

interest elsewhere. Expo 2012 the islands biggest trade fair sincethe war, held in March attracted1,385 international buyers, well

surpassing expectations.That included more than550 participants fromChina and India, theworlds two most popu-

lous countries.Au st in

sees poten-tial in small-

er emerging

economies,t o o . S henotes: Thereare tradem is s io ns ,fact-findingm i s s i o n sand peoplecoming in.The export

development board has startedlooking at places like SouthEast Asia. There is also a smallsegment going into Africa, forless sophisticated manufacturedgoods. Because Sri Lanka isnt a

huge country, it has the capacity

to cater to markets that dont needhuge volumes.

The Made in Sri Lanka brandis not confined solely to agricul-tural and inexpensive manufac-turing products, though. Thecountry seeks to promote its bur-geoning industries higher up thevalue chain, to be recognised forits technological prowess and toease its dependence on low-cost

exports as it grows more prosper-ous. Its fast-emerging nano-tech

sector is just one example of this.

N irm a l i S a m a ra t ung a ,co-chairman of the mercantilefirm Mackwoods, sees big po-tential in the IT industry par-ticularly in business process andknowledge process outsourcing.As she points out, she is not alone.In a recent report, A.T. Kearney,the global management consult-ants, called Sri Lanka a hidden

gem for outsourcing. Its take onthe country? Among the safest,

lowest risk, emerging markets,both in terms of personal safety

and business security.

Our preferential trade

agreements with India and

Pakistan provide us

with access to a market

of 1,3bn people.

Nirmali SamaratungaCo-chairman of Mackwoods

Coping with global problemsSri Lanka is no longer at

war but political turmoil in itsmajor export markets inevitablytroubles its industries. DilmahTea exports to 104 countries. Inthe Middle Eastern countriesCeylon tea is like gold, saysMerrill J Fernando, its founder.

The present disturbances inIran, Syria, Egypt and Libya are

really affecting us.Still, with more than 8 per

cent GDP growth last year, the

island has avoided the economicsluggishness that infected muchof the world after the global fi-nancial crisis.

Shirendra Lawrence, manag-ing director at MAS Active, de-scribes how the clothes retailer

accounting for around a thirdof Sri Lankas apparel exports used the crisis to improve its

business practices.We came outof the recession in a better placethan we were when we went in,he says. A lot of that came fromour focus on lean enterprise,which started in the mid 2000s.

Sri Lanka is an exciting place

to be. We change gear, we adjust,we flex and make opportunitiesout of challenges, Lawrenceadds. Fernando agrees, despite

concerns about the Middle East.Every time I go into the city Icant recognise the place. Thereare so many opportunities whichnever existed before and peoplewho take the chance today will bemultimillionaires in five years,

he said.


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1514 _ SRI LANKA > Anindependentsupplementproducedby TheReportCompanyTOURISM

Writer:Eleanor Wragg

Sri Lankan smile

Can you give us an overview of Sri Lanka

as a tourism destination?We can compare Sri Lanka to any destina-tion. Maldives has beaches, so do we. SouthAfrica has wildlife; we have the highestdensity of wildlife in the whole of Asia.China and Thailand have religious festivals,so do we. Malaysia has rainforests, so do we.Greece, Rome, Egypt and Cambodia haveancient heritage sites, so do we. India hasayurveda and yoga; we have 2,500 years oftradition in that.

How are you addressing perceptionsabout safety and security?We fought a terrorist conflict for 30 years,but tourists were never targeted. Today wereprobably one of the safest countries in theworld. We are very sure that everything isunder control.

What can you tell us about your target

markets?We are targeting 2.6m tourism arrivals by2016, and to generate 1.74bn in tourismrevenue. We are a primarily European drivendestination, and while these marketscontinue to be important, we also need tolook at the emerging markets of China andIndia. The UK is definitely a key market, andremains our second biggest market afterIndia.

What specific areas would you highlightfor investors in the tourism sector?There are so many investment opportunitiesin tourism. Ours is a virgin market. Unfortu-nately whats happening is the Europeans areholding back. My message is to come and seefor yourself and grab the opportunity now.

Dr. Nalaka Godahewa was appointedchairman of Sri Lanka TourismDevelopment Authority in May2010 and has been responsible fordoubling tourism arrivals to thecountry through the introduction ofa very clear branding and positioningstrategy. Today, he wants to taketourism in Sri Lanka to new heights,positioning it as an exotic yetsustainable destination.

Dr. Nalaka Godahewa

Chairman of the Sri Lanka Tourism Development Authority

Q&A

their entry into the country. To buttress the

overall growth of the industry, the governmentintends to open up 14 areas for foreign directinvestment, including golf courses, water parks,light aircraft services and shopping malls. To

facilitate these investments, a one stop shophas been set up.

With improvements in road infrastruc-ture and development of the new airport inHambantota as well as the planned upgrade ofthe countrys main B andaranaike International

Airport, variou s new destinations are set toemerge, and international markets are starting

to take note.Over the last two years, 28 new airlines have

started flying to Sri Lanka, says Minister ofEconomic Development Basil Rajapaksa, add-ing that now is the time for British Airways toconsider operating direct flights to the country.

However, there are worries about the effect ofthe economic downturn in the countrys tra-

ditional markets in the West on the growth of

the tourism sector.Due to the current economic situation in

Europe, we are sustaining rather than growing,says Kapila Chandrasena, CEO of Sri LankanAirlines. We ar e very keen to hold onto our

current destinations and maintain our marketshare there, but theres no short term plan todeploy any new capacity. That said, the airlinehas just launched new destinations such asZurich, Moscow and China. We are also im-

proving our service by training our cabin staffto integrate the much talked-about warmth and

hospitality of Sri Lankans into our products,

adds Chandrasena.The long-awaited growth trajectory for the

country is now underway, and Sri Lanka looksset to emerge as a unique and successful tourismdestination. With a jump in tourist arrivals from

450,000 at the end of the war in 2009 to a pro-jected 800,000 in 2012, more and more travellersare discovering that there really is something for

everyone in this friendly green island.


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17Anindependentsupplementproducedby TheReportCompany16 _ SRI LANKA > TOURISM

This compact pearl-shaped island offers an almostbewildering diversity of tourism experiences, withsomething to suit every taste, budget and season.

reasonsto visit Sri Lanka

HeritageSri Lankas cultural depth isrecognised by UNESCO, which

has declared eight World Heritage

Sites in the country.

Ayurveda and spasSri Lanka has been a centre of

spiritual and physical healing for2,000 years.

TraditionSri Lanka possesses a richcultural heritage spanning over

2500 years, most evident in itsvaried traditions.

Scenic viewsThe island is fringed by sublime

beaches and blessed with lagoons,

mountains, rivers and jungles.

CelebrationsThe legacy of the countrysdiverse civilisation is its colourful

Buddhist, Hindu, Muslim and

Christian festivals.

WildlifeThe country boasts 14 national

parks, 92 species of animals and

over 3000 elephants.

AdventureWith over 1,600km of coast, SriLanka is an ideal location for

water sports.

Pristine environment

The need to conserve theenvironment is deeply ingrained

in traditional Sri Lankan society.


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20 _ SRI LANKA > 21Anindependentsupplementproducedby TheReportCompanyINFRASTRUCTURE

increase in a countrys GNI virtually

doubles the amount of air traveland citizen will take, he claims.This, with population growth,means there is a great opportunitynot only to sustain our existingmarket but to develop and target

a new market segment.Tourism obviously

plays a big role, but Sri

Lankas opportuni-ties come from beingon the crossroads inevery sense especial-ly between Africa and

China. Chandrasenais obviously modellingthe airlines role onother successful hubstoo. Look at Singa-pore and Dubai bothhave achieved their sta-tus with the help of astrong national carrier.

A sailors paradiseAs China resumes itshistorical position asthe export driver of theglobal economy, withthe Asian tigers booming, and withthe end of the shipping downturnfrom the global economic crisis insight, Sri Lanka is again at the centre

of the maritime world.The expansion of the exist-

ing Port of Colombo is one of thelargest public-private partnership

deals in the country right now. Thechairman of the Ports Authority isDr Priyath Wickrama, and his roleis overseeing the development ofSri Lanka as a maritime hub. The

port as it stands has a 4.5m annual

container handling capacity, hesays, but it has reached its limits.To avoid congestion, we decided

to expand the current capacity,and build a new terminal. In 2010we were the worlds largest buyer

of container handling equipment,and the interim terminal facilityis one of the worlds largest pro-jects of its kind the breakwater

alone cost 267m.The project will have its new ter-

minal open from April 2013. The1,000m long berth and the latest

technology will, Wickrama believes,

be able to handle the next genera-tion of massive container ships,bringing revenue, investment andemployment to Sri Lanka.

Perhaps more important than

the Colombo port is the new de-velopment at Hambantota. Thiswill be a logistics and manufactur-ing centre, he says, so well have alot of generated cargo within the

port to handle. It has competitiveadvantages, too. Dubais port canonly reach Indias west coast, and

Singapore can only reach the east.If you want to reach both, Ham-

bantota is ideal.The target is to reach over 3bn

of FDI by 2015 through the port

sector alone. And it seems possible.We were the biggest trading part-ner in this part of the world 2,000years ago, he says. We were thebest maritime nation at that time,and we want to close the circle andget back to where we were.

The art of communication

Ports, airports and airlines to movegoods and people between marketsare nothing in a modern economy

without the information and com-munications infrastructure to sup-port them. After being restricted bythree decades of conflict, the coun-try is now making up for lost time.

Lalith de Silva is CEO of Mobi-tel Sri Lankas national mobile tel-

ecommunications provider and thefirst mobile operator to launcher su-per 3.5G HSPA technology in South

Asia. From his perspective, the telco

sector is embarking on a period ofimmense evolutions. The key driv-ers will be the mobile sector andmobile broadband services he says,adding that the high literacy rate of90%, government plans to improveICT literacy in schools, an almost

blanket mobile coverage and wide-spread broadband connectivity is

leading to a wealth of multi-skilled

workers able to handle the physicalinfrastructure developments.

Telecommunication, in deSilvas mind, sits between mari-time, aviation, commerce, energy

and knowledge the five pillarsof Mahinda Chintana. Telecom-munications is an infrastructurefacilitator, a service sector for thecountrys development weaving the

five sectors in unison.So can Sri Lanka re-emerge as a

hub? The President himself spoke

to this in his interview for this fea-ture. A hub for international com-merce does not happen overnight orby accident. Such an outcome hasto evolve over a period of time, andwhen a large number of investorsand other stakeholders recognise

and accept a country as a hub, thenand only then can it be consideredan international hub.

By that measure, Sri Lanka is

on its way.


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22 _ SRI LANKA > Anindependentsupplementproducedby TheReportCompanyFINANCE

Our mission is to be the insurer to the nation.Were celebrating our 50 year anniversary thisyear as a strong company with huge goodwill.

When Mohan De Alwis was brought in aschief executive of Sri Lanka Insurance in May2010, one of the key challenges he faced, ashe puts it, was to dispel the perception ofgovernment-owned commercial enterprises aswhite elephants and a drain on the funds ofthe country.De Alwis has strong business credentials: priorto joining Sri Lankas largest insurer, he was thevice chairman of the countys Free Trade ZoneManufacturers Association. We need to rungovernment-owned business models as profit-able commercial enterprises, he says. I was

Penetration is currently low, at around 11 percent. We have been able to access their da-tabase, use their infrastructure and their call

centres, he explains. We provide them withthe training and the product knowledge andthey promote our insurance via telemarket-ing. With these processes coming into placewe are seeing huge growth.Sri Lanka Insurance aims to launch an InitialPublic Offering (IPO) by 2016 with interna-tional investors very welcome. De Alwis saysthe company is looking for financiers andinsurance companies of international repute.He travelled to the UK in May, partly to dis-cuss new lines of insurance in the petroleumindustry. Though Sri Lanka produces no oilat present, its potential reserves have attractedinterest from investors across the globe. Itssomething we need to talk about because if itturns out that we have reserves, theres goingto be a huge area for coverage, he says. Initialindications are positive.

to Turkey between 2005-2009 after it grew atan annual rate of more than 55 per cent. Weachieved that by sticking to the core business,what we understand best, Theagarajah adds.This is a strong national retail bank which doesgood quality wholesale banking.

Were looking at enabling the creation ofwealth outside the western province and thecapital, he says, highlighting Alliances opera-tions in the north and east. We want to createfinancial inclusiveness.

picked for the role because of my ability to bringin a lot of private sector culture and thinking.Things have gone to plan. Following three

stagnant years, the companys turnover grew 12per cent in 2010, to 66.8m, and another 22 percent in 2011, to 91.1m. It boasts a high-gradeAA rating from Fitch, upgraded from a nega-tive to stable outlook last year.De Alwis projects more rapid growth in 2012,the insurers 50th year. Were targeting 20 percent top-line growth, covering both life andgeneral insurance, and Im happy to say that weare on track to meet that target, he says.The company has explored tie-ups and as-sociations to enhance its longer term returns,partnering with a string of publically-ownedbanks and several large leasing companiesto advance its banking insurance and motorinsurance divisions.It has also joined forces with a telecommu-nications company in an effort to tap intoSri Lankas potential life insurance market.

The first decade of the 21st century was prob-ably the worst period for Hatton NationalBank in 40 years, says Rajendra Theagarajah,the banks managing director. And yet theAsian Banker ranked Hattons stock as the bestperforming of 130 small banks from Australia

Alliance Finance grew by 85 per cent last year outperforming an industry that grew by astill impressive 42 per cent. And as a businessconceived more than 50 years ago, de Silva saysthe company has a duty to play an active role inthe development of Sri Lanka.

Mohan de Alwis

Chief Executive of

Sri Lanka Insurance

Corporate Profile Why they got it right

What weve built in terms of understanding,engagement of communities and risk managementcapacities over the past decade puts us very muchahead of the curve.

We give equal priority to all our customers, fromtuk-tuks to Sri Lankan airlines. Thats been ourbusiness philosophy for 3 generations now.

SL Sri Lankas rapidly growing financial services industry is winninginternational approval and looking to the UK for investment.

Writer:Keyur Patel

Winning recognition

Rajendra Theagarajah

Hatton National Bank

Romani de Silva

Alliance Finance

In 2007, a report by the IMF describedSri Lankas financial system as remarkably resil-

ent amid a major program of financial sectorreform. Even in the face of natural disasters,

continued civil strife, high fiscal deficits, a wid-ening current account deficit,and accelerating inflation, the

IMF said, the banking sys-tems financial performance

has improved on the back ofrobust economic growth.

Five years on, the sectors continuing to win favour-

able international recogni-tion. Fitch Ratings ratedthe outlook for 19 out of 20Sri Lankan banks in 2012as stable or better un-derpinned by both post-wargrowth in the domestic econ-

omy, which has improvedtheir earnings prospects, andthe governments capacity to

support the banking system.Rajendra Theagarajah, managing director of

Hatton National Bank, one of Sri Lankas largestprivately-owned lenders, has seen a surge of inter-national interest in the countrys financial sector.

If I look at my top 30 shareholders, 10 years ago Ididnt have a single foreign fund but today, 15 ofthem are institutional investors from abroad, hesays. Investors putting $1bn into India today areasking to put five per cent into Sri Lanka.

Indeed, some of globalbankings biggest brands haverecognised Sri Lankas po-tential. HSBC and Standard

Chartered, both headquarteredin the UK, operate in the country.So does Citigroup, the US lender.

Theagarajah says that thesingle biggest barrier to doingbusiness the security threat was removed after the civil warended in 2009. Now we are away

from that, we only see an up-side, he adds. The excitementreally started in mid-2010, andin 2011 we started to see credit

growing at levels which have notbeen seen in the past decade.

Nihal Fonseka, chief execu-tive of DFCC Bank, believes Sri Lankan lend-ers are targeting investment from the UK inparticular, given Londons privileged role as aglobal financial sector. There is no anti-foreign

sentiment. Because were islanders, we have thiscohabitation and integration that is not presentin China or India, he says.

And it is not just the banking industry thatis optimistic about the future. Sri Lanka Insur-ance, the countrys largest insurer, is on track todouble its turnover over four years, according toits chief executive.

Meanwhile, Romani de Silva, deputy chair-

man of the leasing and finance provider AllianceFinance, sees vast potential for small and mediumenterprises, particularly in high growth areasoutside Sri Lankas western province. In thefinancing industry I think thats going to be thebiggest growth industry for the next few years, hesays. The SME space has a very good margin andoffers a good niche for players like us to operate.

There are challenges, of course. Fitch is con-cerned about the Sri Lankan banking systems

ability to manage a sustained level of above-aver-age loan expansion; and, as credit grows rapidly, it

says that banks capital ratios could come underpressure. Continuing global economic turbulencemight also have a detrimental knock-on effect.

But if the sector can successfully implement cer-tain structural changes for instance, improve-ments to risk management the agency reckonsthat its outlook and ratings can get better still.


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Sri Lanka Special Feature