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A cut tree, a dead elephant, is a lost tourism dollar in the future



by Michel Nugawela and Pesala Karunaratna

Four decades of inaction since introduction of open economy – Sri Lanka has never missed an opportunity to miss an opportunity

Globally and regionally, country is unplanned and unprepared to drive forex earnings; exports, FDIs, and foreign-earned wage remittances record very slow growth rates below CAGR 5%

With CAGR 13.69%, tourism sector shows resilience despite no concentrated effort or national strategy; emerges as priority sector in medium-term to be No 1 forex earner

Nature and wildlife tourism has most potential to drive Sri Lanka as a hot destination for high value travellers as global mobility returns in 2021

A single elephant, alive, contributes $0.16mn a year or $11mn over its lifetime to tourism sector; 350 elephant deaths in 2019 amount to economic value of $3.9bn had they lived their lives fully

Forest cover reduced by 130,349 hectares from 2010-2019 reflecting a sharp increase of 8.6% of net forest change

The coronavirus crisis throws into sharp relief the tenuous state of Sri Lanka’s economy. The government is committed to export expansion but remains handicapped by decades of unpreparedness in strengthening the underlying enablers of competitiveness.

This opinion paper proposes a refocus on tourism as the priority sector to drive growth as Sri Lanka begins the difficult and lengthy task of reforming, restructuring, and strengthening national competitiveness. This will require shifting away from one-size-fits-all marketing under the mass tourism model to developing a product differentiation strategy that targets the best tourists – the high value traveller – with our best assets – nature and wildlife. This broad and diverse segment of travellers outspend mass tourists by 3-4 times and will be the first to travel and visit other countries once global mobility returns in 2021.

However, the high rate of deforestation dismantles the only competitive advantage Sri Lanka has to compete internationally and increase its exports of services. By stripping away nature and wildlife assets, the destination will be left with only its beaches and reputation for cheap sea-sun-sand tourism in the future.

Stagnant exports of goods and services

Exports of goods and services (% of GDP) was reported at 18.8% in 2019 of which goods accounted for 14.2% and services for 4.6%. In the years 2015-2019, total exports of goods grew from $10,547mn to $11,940mn – CAGR 3.15% – while total exports of services increased from $3,266mn to $3,888mn – just CAGR 4.45%.

Sri Lanka continues to lag other emerging economies in Asia that have successfully transitioned from an overreliance on primary goods to achieve export diversification and sophistication. In 1989, our total exports of goods and services as a percentage of GDP was 21.4% against Vietnam’s 16.5%. Thirty years later, our exports had shrunk to 18.8% as Vietnam’s increased to 119.3%. The reasons for this disparity can be found in the underlying enablers of export competitiveness where Sri Lanka’s capabilities are weak or entirely lacking.


Enabler #1 – Resource abundance

We have none. Consider the example of India’s BPO industry which is around 1% of the country’s GDP and 6% share of global BPO, directly and indirectly employing 10mn people. According to Tholons and AT Kearney Indexes of 2019, India remains the leading country to outsource because of cheap labour costs, a huge talent pool of skilled, English-speaking professionals (India’s English proficiency: #35/100 in the world and #5/25 in Asia), and tech-savvy manpower, despite competition from The Philippines, Vietnam and other Asian countries.

Enabler #2 – Price and contribution of unskilled or market-ready labour

We are stagnating at middle-income levels. The unskilled labour market demands higher wages and Sri Lanka lacks a pool of skilled market-ready workers (unlike the example of India, above).


Enabler #3 – Trade agreements that give producers access to a larger market

Domestic interest groups in Sri Lanka have opposed and successfully pressured governments to abandon free trade agreements. Meanwhile, emerging economies like Vietnam have made huge economic advances through trade liberalization and global integration. Since its Doi Moi reforms, the country has signed 12 (mostly bilateral) FTAs that have increased trade by ten-fold – from US$30bn in 2000 to almost US$300bn by 2014 – shifting it away from exports of primary goods and low-tech manufacturing products to more complex high-tech goods like electronics, machinery, vehicles and medical devices. The competitiveness of its exports will continue to increase, firstly, through more diversified input sources from larger trade networks and cheaper imports of intermediate goods from partner countries, and secondly, through partnerships with foreign firms that transfer the know-how and technology that is needed to leap into higher valued-added production.

Enabler #4 – Ability to enter, establish or move up regional or global value chains and production networks

Today, global firms optimize resources by investing or outsourcing the design, procurement, production, or distribution stages of their value chain activities across different countries. Yet since 1978, Sri Lanka has only captured share in the manufacturing and design stages of the global apparel value chain. The examples of Vietnam and Thailand demonstrate how both economies have become integral to different stages of the smartphone and automobile value chains for Samsung and Toyota.



Vietnam attracted Samsung at the early stages of smartphone evolution. Samsung established its first factory in Vietnam in 2008, when smartphone penetration was 10.8% globally; today it has three factories in Vietnam and world smartphone penetration is at 41%. Samsung remains the single largest foreign investor in Vietnam, with investments totaling $17bn (20% of Sri Lanka’s GDP) whilst Vietnam’s exports of smartphones and spare parts, mostly produced by Samsung Electronics, account for $51.38bn (20% of Vietnam’s GDP). On top of the current $220mn Samsung R&D center, Vietnamese Prime Minister Nguyen Xuan Phuc has requested Samsung Chairman Lee Jae-yong to next invest in a chip manufacturing plant, further strengthening the country’s competitiveness and sophistication in exports.



Toyota’s decision to enter the Thai automobile market in 1962 was largely due to the country’s industrial policy regime. Today – after 6 decades of concentrated effort between the Thai government and Toyota – Thailand is becoming a global passenger car production hub. Toyota’s investments have also helped to transfer knowledge and technology into Thailand, strengthening the R&D capabilities of Thai engineers. Toyota Thailand president Michinobu Sugata has expressed complete confidence in both Thailand and the company’s future direction in the country.

Since 1978, Sri Lanka has repeatedly missed opportunities to enter or establish itself in global value chains and production networks. We continue to be unplanned and unprepared in strengthening the underlying enablers of export competitiveness. Expect meagre export growth to continue.

Slow flowing foreign direct investment

These enablers of competitiveness are also the most important considerations to increase foreign direct investment. Inflows between 2015-2019 totalled $6.4bn, averaging $1.2bn every year and merely growing by CAGR 0.93% (this excludes the 99-year lease of Hambantota port to China in exchange for $1.1bn). Without improving supply-side constraints, international investors will remain reluctant to sink substantial resources in the country.

Strengthening the underlying enablers of competitiveness will take time. Expect stagnation in FDI inflows to continue.

Sluggish foreign worker remittances

Sri Lanka has become a major country of origin for unskilled workers with minimal economic value. Wage receipts, which amounted to $6,717mn in 2019 or 8% of GDP, negatively grew by CAGR -0.96% between the years 2015-2019. In 2019, the highest inflow ($3,459mn) came from the Middle East, a segment that participates in the lowest economic positions and lacks the skills, abilities and qualifications to mitigate any downturn in value in remittance flows.

However, the demographics are changing for neighbouring countries like India, where an increasing number of skilled white-collar workers (a growing cohort of professionals in the IT and engineering fields, according to MoneyGram) are quadrupling the average volume per each remittance.

To export quality human capital and increase our share of foreign-earned wages, Sri Lanka must introduce transformational policy reforms in education. Our university system – supported by proactive primary and secondary education systems – must be restructured to produce market-ready workers with the skills and adaptability to learn, grow and respond to change.

Reforms in the education sector will take time. Improving value in wage receipts remains a remote opportunity in the near future.

Amid no support or concentrated effort, tourism receipts grow double-digit

Tourism continued to expand and record double-digit growth of CAGR 13.69% between the years 2015-2018, despite the absence of a national strategy and a high percentage of low-income visitors. As a single sector, tourism receipts amounted to $4,381mn in 2018 or 4.96% of GDP and trended towards topping that in 2019. As Sri Lanka is weak or entirely lacking in the underlying enablers of competitiveness, and continues to be unplanned and unprepared in all other means of earning foreign exchange, tourism is the priority sector to drive economic growth in the short to medium-term.

The myth of mass tourism

For Sri Lanka, mass tourism has its advantages; it produces high revenues at high seasons by attracting tourists looking for the cheapest way to holiday (Sri Lanka’s largest inbound mass tourist markets are India, Britain, China, Germany, France, Australia, Russia, the US, the Maldives, and Canada). The mass tourism sector is also one of the largest employers in the country, providing direct and indirect employment to about 400,000 people.

But there are inherent constraints to the mass tourism model – such as its high seasonality, low average length of stay and low occupancy rates – which accelerate a downward pressure on prices. By repeatedly discounting for shrinking tourism dollars, mass tourism suppliers attract tourists who don’t spend (enough) and the tourism product stagnates: service quality decreases and consumer dissatisfaction increases over time. Finally, the destination gains popularity and is promoted for inexpensive travel.

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HNB Assurance Group surpasses 20% growth mark for third consecutive year



HNB Assurance Group recorded yet another year of exceptional performance, marking the third consecutive year of achieving a growth rate exceeding 20% in terms of GWP (Gross Written Premium). The year 2023 witnessed the Group achieving remarkable financial milestones and an array of local and international awards, solidifying its position as a frontrunner in the insurance industry.

HNB Assurance Group recorded a substantial GWP of LKR 18.7 Bn, showcasing a remarkable growth of 20% compared to the previous year. Reflecting on this achievement, Rose Cooray, Chairperson of HNBA and HNBGI, expressed her delight, stating, “To me personally, the remarkable growth trajectory of the HNB Assurance Group stands as a testament to our commitment to delivering value to our stakeholders.

Both teams at HNBA and HNBGI performed an outstanding job, leaving no stone unturned, meticulously analyzing every challenge, and capitalizing on every opportunity. Our Group assets grew by LKR 10 Bn during the year, well exceeding a remarkable total of LKR 51.2 Bn. Further, investment income for the Group surged to LKR 7.2 Bn, representing an outstanding growth of 49% from LKR 4.8 Bn in the preceding year. In terms of the Group’s profits, we recorded a commendable LKR 1.76 Bn in PAT.”

“Consistency has been our main focus and certainly the cornerstone of our success”, said Lasitha Wimalaratne, CEO of HNB Assurance PLC. At HNB Assurance, our track record speaks for itself. Year after year, we’ve demonstrated and honoured our commitment to our stakeholders and most importantly to our policyholders.

“I am delighted to highlight that as a team we have effectively translated our promises into action. Our Profit After Tax (PAT) reached LKR 1.61 Bn, marking a commendable 9% increase from the previous year. Moreover, we surpassed the significant milestone of LKR 10 Bn in GWP, representing a growth of 23%, which is almost twice the industry growth rate,” he said.

Sithumina Jayasundara, CEO of HNB General Insurance said: “Despite economic uncertainties and high inflation rates, the team showcased remarkable proficiency in risk assessment and customer management. Moreover, we made LKR 4.3 Bn in claims, marking a 12% increase from the previous year, reaffirming our commitment to honouring the trust instilled in us by our valued customers.”

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CEAT fortifies brand presence in Sri Lanka with three new premium Shop-In-Shop outlets



The opening of the SIS outlet at U&H Wheel Service (Above) and at Paramount Tyre Traders

The CEAT brand’s retail presence in Sri Lanka has been further strengthened with the opening of three more premium outlets in the country – two in Colombo city and one in Hanwella, the company announced last week.

The three new CEAT Shop-In-Shop (SIS) outlets are designed to drive brand identity and enhance customer experience at leading dealer outlets. They are located at U&H Wheel Service and Paramount Tyre Traders, both at Prince of Wales Avenue, Colombo 14; and at Sakura Tyre Centre, Hanwella, a news release said.

“Part of a three-year distribution channel expansion strategy by the country’s highest-selling tyre brand, the CEAT Shop-in-Shop concept entails demarcating a dedicated area for CEAT branded tyres within existing multi-brand dealer premises. CEAT furnishes the interior, customer lobby and reception areas of this private space to augment customer comfort.

“Additionally, CEAT Kelani Holdings invests in interior branding, signage, and innovative product display racks to emphasise the tyre offerings available with the channel partner. Besides enhancing the visibility and positioning of the brand, this model is also known to increase the channel partners’ revenue,” the company said.

Elaborating on the company’s commitment to investing in premium retail concepts even in challenging times, CEAT Kelani Chief Operating Officer Mr Shamal Gunawardene said: “When the going gets tough, it is even more important to look for wins for all stakeholders. These SIS outlets add value for our customers, boost sales for our dealers and raise the brand’s presence in the market, benefiting the Company and all its stakeholders. They also ensure that the quality of the retail operation keeps pace with, and does justice to, the brand’s growth and the continuous improvement of the products.”

He said these premium retail outlets are also designed to bring special focus on providing all tyre-related services for passenger cars and SUVs, for which CEAT Kelani manufacturers a range of high-performance radial tyres in Sri Lanka.

Among the services common to CEAT SIS outlets are an extensive range of CEAT tyres at attractive discounts, specialized tyre care and technical expertise, computerized wheel alignment, nitrogen and air pumps for tyre inflation, dedicated customer lounge facilities and easy payment plans for credit card purchases. Some of the outlets also offer a wide range of alloy wheels and car batteries.

The manufacturer of nearly half of Sri Lanka’s pneumatic tyre requirements, CEAT Sri Lanka is considered one of the most successful India – Sri Lanka joint ventures. The joint venture’s cumulative investment in Sri Lanka to date exceeds Rs 8 billion. The company’s manufacturing operations in Sri Lanka encompass tyres in the radial (passenger cars, vans and SUVs), commercial (nylon and radial), motorcycle, three-wheeler and agricultural vehicle segments.

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ComBank stays on growth trajectory in 2023 with notable Q4 performance



Commercial Bank Chairman Prof. Ananda Jayawardane (left) and Managing Director/CEO Mr Sanath Manatunge

Accelerated lending sees loan book grow by Rs 56.8 billion in three months

Deposits surge by Rs 109.4 billion in final quarter

12-month gross income up 21.82% to Rs 341.6 billion

The Commercial Bank of Ceylon Group lent Rs 56.816 billion in the fourth quarter of 2023 at a monthly average of Rs 18.939 billion to end the year with a loan book of Rs 1.296 trillion, continuing its trend of strong lending growth in support of economic revival.

Robust deposit growth of Rs 109.408 billion was also witnessed in the three months ending December 31, 2023 at a monthly average of Rs 36.469 billion, demonstrating the Group’s strong deposit franchise and focus on financial intermediation in volatile macroeconomic conditions. Deposits grew by 8.60% YoY to Rs 2.148 trillion at the end of the review period.

The Group, comprising of Sri Lanka’s biggest private sector bank, its subsidiaries and an associate, reported in a filing with the Colombo Stock Exchange (CSE) that total assets increased by Rs 156 billion or 6.24% YoY and by Rs 130 billion or 5.15% in the three months reviewed to reach Rs 2.656 trillion as at December 31, 2023.

Gross income improved by 21.82% YoY and by 33.44% in the final quarter to total Rs 341.566 billion for 2023, and interest income grew by 33.84% to Rs 297.646 billion, the Group said. With interest expenses increasing at a higher rate of 53.37% over the year to Rs 211.231 billion, net interest income grew by a marginal 2.07% to Rs 86.415 billion. This was however, a welcome reversal of the negative growth recorded at the end of the preceding quarter, and was made possible by net interest income of Rs 25.534 billion in the fourth quarter, an improvement of 16.85%.

“We have consistently reinforced our balance sheet strength throughout the year and reaffirmed our position as the leading private sector bank,” Commercial Bank Chairman Prof. Ananda Jayawardane commented. “Our solid performance stands as a testament to our resilience and enduring dedication to serving our customers and stakeholders with distinction. We look forward to building upon this foundation of success and charting new heights of prosperity in the future.”

Commercial Bank Managing Director/CEO Mr Sanath Manatunge noted that the Bank continued to demonstrate its unwavering strength and adaptability amidst a landscape of economic revival and reform. “As the country navigated through the aftermath of challenges flowing from the immediately preceding years, our focused strategy and commitment to stakeholder equity remained steadfast,” he said. “Embracing pivotal reforms and leveraging innovative approaches, we propelled forward, ensuring stability and sustainable value creation for all stakeholders. Our resilience and adaptability in the face of adversity is a testament to the dedication and resolve of the entire Commercial Bank team, whose unwavering commitment remains the cornerstone of our success.”

The Group posted an operating profit before taxes on financial services of Rs 38.885 billion for the full year, and Rs 10.193 billion for the fourth quarter, achieving improvements of 36.77% and 253.81% respectively, the latter due to the higher impairment provisions of the fourth quarter of the previous year.

The Group’s profit before income tax of Rs 33.927 billion for the 12 months recorded an improvement of 38.45%, in contrast to 13.56% at the end of the third quarter. With income tax for the 12 months increasing to Rs 12.027 billion, the Group reported a net profit of Rs 21.900 billion, a decline of 10.25% YoY.

Taken separately, Commercial Bank of Ceylon PLC reported a profit before tax of Rs 31.880 billion for the 12 months, an improvement of 41.07% while profit after tax for the year reduced by 10.92% to Rs 20.461 billion.

The largest private sector bank in Sri Lanka and the first Sri Lankan bank to be listed among the Top 1000 Banks of the World, Commercial Bank operates a strategically-located network of branches and over 950 automated machines island-wide, and is the largest lender to Sri Lanka’s SME sector. Commercial Bank has the widest international footprint among Sri Lankan Banks, with 20 outlets in Bangladesh, a Microfinance company in Nay Pyi Taw, Myanmar, and a fully-fledged Tier I Bank with a majority stake in the Maldives.

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