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How to save tourism industry



Statement by Opposition Leader Sajith Premadasa on Tourism industry crisis

Leading up to 2019, Sri Lanka was recognized as one of the most exciting travel destinations in the world by numerous prestigious publications, including the ‘Lonely Planet’, The New York Times and Condé Nast. Improvements to the transportation system, the development of infrastructure, world class hotels and facilities and Sri Lanka’s natural beauty and hospitality were all factors. The Tourism Industry, a critical component of Sri Lanka’s economy and a key foreign exchange generator, was left devastated by the 2019 Easter Attacks as well as by the ongoing Global Pandemic.

The resulting lockdowns have impacted every facet of life and every industry, but especially Tourism; research shows that 36% of low-skilled workers and a further 36% of semi-skilled workers have been laid off; 28% of the junior and middle management segments have also been retrenched. 70% of tourism and hospitality specialists estimate that between 41% and 60% of the total industry workforce would be terminated.

Tourist arrivals have dwindled; only 507,704 between January and December 2020 with zero arrivals recorded between April and end December due to the closure of the airport and suspension of flights since the 18th of March 2020. This represents a decline of 73.5% over the previous corresponding period, when arrivals exceeded 1.9 Mn.

There are numerous service providers directly dependent on Tourism; over 500 travel agents, 250 recreational outlets, 300 tourist shops, 5,000 guides and the airlines as well, with employment opportunities within these service sectors severely restricted.

Over 90% of formal sector outlets and 75% of informal sector outlets remain temporarily closed. Over 75% of the informal sector outlets have closed down operations. Dependent industries have suffered due to sectoral linkages, leading to a multiplier effect, with millions of livelihoods left devastated.

Given the importance of Tourism to the economy, the GOSL must prioritise this industry.

In this regard, we consider certain budget proposals to be counterproductive to uplifting this vital sector. Pricing and margins will suffer due to the proposed 2.5% Social Security Contribution in addition to the 1% TDL on turnover. This impacts competitiveness of the Sri Lankan Tourism offering and these taxes are largely regressive in nature. The upcoming moratorium expiry deadlines will only lead to further cash flow constraints, plunging individuals and businesses into further debt. Disposable incomes will be virtually non-existent, fresh investments become unfeasible.

Based on the above critical issues we submit the following proposals

a) To restructure the debts obtained by the tourism sector from Licensed Commercial Banks for a period of ten (10) years with a grace period of two (2) years.

b) To waive-off the total interest portion of the term loans from April 2019 until 30th June 2022 during the moratorium period.

c) Implementation of the debt restructuring plan recommended by the Monetary Board of CBSL.

We further recommend abolishing the Local Government Levy up to 1% of the Turnover and replace it with a trade license fee similar to all other industries. In fact, this proposal was presented at the last budget by the Hon Finance Minister but has not been implemented to date.

Hotels are also subject to higher electricity tariffs. Tariffs applicable to hotels (i.e., H-1, H-2 & H-3) should be matched with Industrial tariffs (i.e., I-1, I-2 & I-3 which is currently a lower rate than “Hotel purposes”).

The restructure of the Tourism industry’s total debt portfolio of Rs. 350 billion as per recommendations of the Monetary Board of CBSL and the full implementation of concessions granted by the Cabinet of Ministers on the 10th of June 2020 are of vital urgency.

As a measure of immediate relief, the industry has requested authorities to intervene by mandating restructuring and rescheduling of loan facilities. The CBSL must provide clear guidelines to all Licensed Commercial Banks and Finance companies regarding the enforcement of contracts and recovery of facilities.

Effective mediation is necessary, unlike the previously ad hoc approach. Facilities need to be extended to new, approved projects in the tourism pipeline.

The main objective was to ensure worker retention, even on reduced salary terms, yet these have not been met, with a continued spike in terminations across all sectors. Many previously employed in the tourist sector also lack formal social security and are thus vulnerable to bankruptcy and destitution.

Revenue from Tourism was Sri Lanka’s second highest net foreign exchange generator in 2018/19 with earnings of USD 4.3 billion. As per the last budget speech presented by the former Finance Minister and present Prime Minister, the valuation of the hotel industry has exceeded over USD 10 billion.

Apart from the above, the following government institutions have benefited from the inflow of LKR 12.6 billion in 2018/19

It is estimated that the public sector will lose approx LKR 12 Bn in revenue from the Tourism sector in 2020 with similar losses expected by the end of 2021.

The loss of public sector revenue through tourism in 2020, based on 2019 earnings is estimated to be around Rs.12, 000.0 million. Even 2021 will see similar losses. Overall, the economy has lost around US$ 3.5 Bn during 2020 and this trend will continue in 2021. At a time when Sri Lanka has depleted foreign exchange reserves, protecting established and proven avenues for the generation of foreign exchange has to be a primary concern of the government.

Please also note that 90% of all tourism sector investments have been implemented by local entrepreneurs, of which 90% belong to the small and medium category.

It is notable that the 2009/10 registered hotel room capacity of 14,461 increased some 71% to 24,757 by 2018/19, a remarkable growth rate that has supported Sri Lanka’s investment portfolio.

Based on industry recommendations to the government, assurances have been given that steps to re-negotiate and re-structure the facilities extended through commercial banks will be favourably considered. However, in reality, this policy has not been equitably implemented and would not on its own be sufficient to support the industry at this crucial juncture. The following factors need urgent consideration to support the industry:

Repayment of accumulated interest on current borrowings once the moratorium has been granted comes to an end by mid-2022

Repayment of any outstanding capital on borrowings by end December, 2021

Repayment of outstanding statutory payments

Assistance to support a minimum of 6 months working capital

Assistance towards maintenance and product upgrading to ensure conformity with required quality and standards in keeping with classification requirements

Assistance for new, approved development projects that are on-hold as a result of increases in development costs, mainly due to depreciation of the Rupee and increase in construction cost – Bridging finance –

Financial assistance to industry stakeholders to be provided through local commercial banks.

Government on obtaining Cabinet approval, to set up a separate unit to plan, structure, evaluate, control and monitor the entire exercise. It could fall under the Ministry of Finance, Ministry of Planning and Implementation, Ministry of Tourism or at the Sri Lanka Tourism Development Authority (SLTDA) falling directly under the Ministry of Tourism.

The government to provide required guarantees to the fund through local banks. Perhaps a mechanism of the individual entities pledging shares to the value of borrowings or similar to be considered.

Though, the offshore funding made available will be in US$, the lending to industry stakeholders to be in Sri Lanka Rupees. (This will also assist the government to strengthen its depleted foreign reserves to some extent)

After careful evaluation of applications against an established criterion, assistance in the form of soft loans to be offered. – Minimum two year grace period on repayment of capital and interest. Preferential interest rates below 4% per annum. Payback period of 7 years. (In total, covering a period of 10 years)

Special Financial package purely meant for promotions for all local inbound tour operators as local inbound tour operator business volumes equal to 65% of the total arrivals to Sri Lanka during the pre-pandemic period.

We are aware of the forthcoming tourism policy document which has been submitted for public observations. It needs to articulate an action plan for all sectors namely: Development, Promotion and Regulations with clear time lines to prevent these policy documents from gathering dust.

We do not believe that this is the appropriate time to enact a rushed Tourism act, replacing the current Tourism Act 38 of 2005. The current act certainly does require changes but this must include adequate private sector participation in decision-making.

It is also an instrument that determines how the tourism fund has to be managed and disbursed. We note with consternation that the proposed Tourism Act leaves governance aspects to representatives

of state bodies with the private sector invited merely as ‘observers’.

It is also transparent that this proposed act has been orchestrated to suit the needs of certain individuals. This is not acceptable.

The Hon Minister of finance indicated the other day that the tourism fund was likely to be revoked and collections will go directly into the consolidated fund. This was the system that we did away with 15 years ago and brought the current act to enhance effective industry participation towards the development of tourism. We should not forget that the payoff was 2.3 million arrivals with tourism receipts hitting over USD 4 billion.

Sri Lanka is one destination out of over 250 competing destinations and hence it is vital that our country is positioned in source markets. We need to reach out to our primary, secondary and emerging markets aggressively to prevent ourselves from falling behind to other destinations.

We are aware of the massive shortage of foreign exchange in the country and tourism is one effective and sustainable remedy.

Indeed, given the above, it is clear that the economic destiny of Sri Lanka as a whole is closely intertwined with the performance of our Tourism Sector. Thus protection of this sector and related aspects, such as protection of the environment, wild life as well as reduction in pollution are vital to our Sri Lankan National project.

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Why cry for Djokovic?



By Dr Upul Wijayawardhana

Cassandra, who uses her column liberally to criticise our politicians for giving special treatment to their kith and kin, is shedding tears for Novak Djokovic, who was denied special treatment in Australia! She opines that he should have been segregated and allowed to play in the Australian Open and states in her column, in The Island of 21 January:

“Now, the Aussie Open has lost its glamour and even interest to this ole soul – Cassandra. She hoped Nadal and others would withdraw from the OA. But since it was not their deportation, they go along. Hopefully they will publicly comment in support of their co-sportsman. Nadal already spoke out.”

She may have lost interest in the Australian Open as her favourite was deported but it has not lost its glamour as plenty more talented players are left to display their prowess in Tennis. If at all, the Australian Open has lost its glamour, it is due to the misdeeds of Australia Tennis. More than anything else, what I find ludicrous is her suggestion that Nadal and others should have withdrawn from the tournament in support of Djokovic! Nadal has already spoken out and, as mentioned in my piece which she refers to (Australian antics and Djokovic’s disgrace; The Island, 18 January), was very clear that if Djokovic makes a stand, he should be prepared to face the consequences. Djokovic has not had Covid vaccination and was well aware that it was a requirement for entering Australia.

Going even further, Cassandra faults our editor by stating; “The Editor of this paper commented on it and seemed to stand for ‘the Law holds for all’. He made no mention of the health waiver the world’s Number One tennis wizard received which he traded on to go to Melbourne in the first place.” It is a pity she has completely disregarded the fact that this waiver was on false premises as Djokovic could not substantiate that he had any medical contraindications to vaccination. In fact, another player stated that it is hardly conceivable for players who play competitive tennis to have contraindications for Covid vaccination!

Interestingly, Tennis Australia is evasive about the circumstances leading to the waiver; it has now been revealed that the Federal Government had informed them well in advance that dual vaccination was the criterion for entry. The State Government of Victoria has claimed that Tennis Australia kept them in the dark about this.

The position of the Federal Government has been vindicated by the unanimous verdict of the three-judge Bench of the Federal Court of Australia, which confirmed not only the legality but also the reason for cancelling the visa. In giving reasons for their judgement the judges state:

“The minister’s justifications for revoking the visa were not “irrational or illogical or not based on relevant material,”

Commenting on the minister’s argument that Mr. Djokovic’s position as a role model who chose to remain unvaccinated against Covid-19 could “foster anti-vaccination sentiment”, they found that he has exercised his disctionary powers lawfully and go on to state:

“An iconic world tennis star may influence people of all ages, young or old, but perhaps especially the young and the impressionable, to emulate him. This is not fanciful; it does not need evidence.”

Cassandra’s cry too illustrates how influential sport stars can be! Perhaps, she should reserve her tears for what may happen in the future. Unless rules are changed, Djokovic would not be able to play in the French Open. Protests, even in Serbia, have died down but it is reported that his sponsors are in talks with Djokovic.

There is yet another interesting twist to the story. According to a post “Mail Online” website , titled “Novak Djokovic’s astonishing Covid-19 decision before coming to Australia is finally revealed”(

“Novak Djokovic’s hesitancy to get vaccinated is well known – but it can also now be revealed the tennis superstar reportedly purchased a majority stake in a Danish biotech company looking to develop a treatment against Covid-19 in June last year.”


has reported that the world number one holds an 80 per cent stake in QuantBioRes, who are currently developing a peptide which prevents the virus from infecting human cells. Djokovic, 34, is said to own 40.8 per cent of the company – while his wife Jelena owns 39.2 per cent.”

Djokovic’s vaccine hesitancy may be for totally different reasons!

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Dollar Crisis: What aggravated it



by Eng. D. Godage

Total foreign currency reserves of the country were around seven billion dollars at the beginning of 2021 but it decreased to around 1.2 billion dollars towards the year end, even though the Central Bank announced that there was a reserve of three billion dollars. The net foreign assets of the total banking system are said to be a US$ 4.1 billion deficit by 2021 end. Everybody knows the suffering and difficulties the countrymen undergo as a result of the depletion of foreign currency or dollar reserves. Without elaborating on those effects, it is the intention of the writer to examine how foreign reserves depleted so fast.

Politicians, officials, public speakers very often tend to blame every government since independence over the past 70 years for ruining this country, but with regard to foreign debt, it is not applicable. Moreover, the effects of the COVID-19 pandemic were felt globally but other countries in this region did not suffer as much and face such crises like the ones faced by Sri Lanka, so it is no excuse. It is not essential to elaborate on this fact as it is common knowledge. Consequently, the writer makes an attempt to understand how and when it happened. The focus of this discussion is on infrastructure development, and not other debt instruments.

Debt burden since independence

The Oya project implemented around 1948 using local funds comes to mind. Moreover, from 1950 the major port development scheme of Colombo Harbour created the Colombo Port, one of the most modern ports at the time, by 1956 under the leadership of the Minister of Transport and Works, Sir John Kotelawala in the Dudley Senanayake Cabinet, utilising local funds amounting to 110 million rupees. While work was in progress, the ship ‘Gothic’, carrying Queen Elizabeth II, berthed alongside the newly constructed Customs Quay to christen it the Queen Elizabeth Quay (QEQ). Incidentally, the QEQ was buried in the privately developed SAGT or South Asia Gateway Terminals around year 2000.

The Mahaweli Development Project, a massive irrigation cum hydroelectric scheme originally planned for 30 years but telescoped into about six years, was undertaken by the J.R. Jayewardene government using concessionary loans as well as grants. Funds were provided based on a thorough feasibility study, with eminent engineer late Dr. A.N.S Kulasinghe and his team of engineers working as consultants. Resultant benefits are well known and they did not lead to any debt crisis in the country.

Road and railway infrastructure development has been carried out with locally raised funds. After the 2004 tsunami disaster, the Railway Department staff rehabilitated the destroyed line to recommence operations with the least possible delay. It is said that northern rail line improvements carried out later on loans under Uthuru Wasanthaya had spent two to three times the cost.

Since 1980 the country has seen another major development programme in the port sector. Studies had been conducted at a time of increasing demand for container traffic, confirming the urgent need to expand port facilities. The first phase of expansion, requiring US$ 32 million, was funded in the form of a Yen currency loan. The project progressed systematically aided by further loans, through a transparent bidding process. As a result, the Colombo Port was elevated from the global rank of 127 in 1981 to 21st in 1997. These loans were granted only after proper feasibility studies were carried out and confirmation of loan repayment capability, as affirmed by the lending Japanese Agency. Extensive borrowing for project infrastructure became the norm only after about 2000 and not since independence.

Newer debt accumulation

A Sunday English newspaper on March 9, 2014 and May 1, 2016 reported, with details from the External Resources Department, on 28 projects funded predominantly by China Exim Bank loans amounting to US$ 7,671 million, with five-year grace and 10-year repayment periods; their interest rates are not indicated but is supposed to be over six percent. All these projects are said to have been initiated through unsolicited tenders. The same newspaper published a report under the caption, “Normal tender procedure not possible for mega projects: PBJ”. This is a questionable statement. Further examination of the above list shows seven projects, all in Hambantota, totalling US$ 5,054 million, for airport, port, highway extension, railway extension and local road network. None of them seem capable of generating revenue to repay the massive loans even though they have been in operation for around 10 years by now. These loans alone require about US$1 billion per year as repayment, burdening the country, and using up its dollar reserves. During the previous regime the Hambantota Port was given out on a 99-year lease.

Did the Treasury officials who handled these borrowings not see the danger of the debt burden or debt trap and the country’s inability to repay them without adequate future revenue? One can cite the shifting global financial structure and unforeseen circumstances as the reason. But they should have been taken into consideration in any plan. High costs due to unsolicited proposals without a competitive bidding process are also an issue. As for costs, the Treasury Secretary has said that it is the engineers who determine costs. This is not an acceptable excuse.

The Colombo Port South Harbour was found to be an urgent project, and proved viable after an extensive feasibility study by 2001. After producing detailed designs, cost estimates and all implementation requisites, it was not possible to proceed due to lack of funds. The Hambantota Port project was also given high priority by the same government though two feasibility studies failed to show the viability of the project. For the Colombo Port project, the Treasury Secretary advocated commercial borrowing claiming that the lending agency conditions were unacceptable.

In fact, only one lending agency came forward to offer approximately one third of the fund requirement. The Ports Authority managed to obtain very concessionary loan of US$ 300 million in 2006, to proceed with the project, albeit after a two-year delay. The new harbour was completed successfully within the stipulated time and cost while adhering to a transparent tender process. It is worthwhile to note that the lowest cost, approximately US$ 320 million, was quoted by the Korean contractor who successfully completed it, while the next bid was around US$ 570 million by a Chinese contractor. This project seems to be generating more revenue than budgeted.

In fact, the biggest container ship in the world ‘Ever Ace’, with a carrying capacity of 24,000 TEU, berthed in the Colombo South Harbour in October 2021 as it is the only port in the region that could accommodate a ship of that scale, bringing great honour and promoting the Colombo Port.

Most Chinese funded projects that commenced during the past two decades seem now complete and in operation, spread among power and energy, transportation, airport and aviation, ports, irrigation and water sectors. Debt distribution is US$ 1,553 million in power and energy, US$ 3.99 billion in transportation, US$ 232 million in airport and aviation, US$ 1,336 million in ports and US$ 101 million in irrigation. This includes projects indicated by the aforementioned 2016 news item, and subsequent major projects like the Central Highway are not included.

Expensive ventures like the Norochcholai coal power plant costing US$ 1,346 million have helped to meet the country’s energy demands and there has to be a post project evaluation to ascertain its financial gains and loan repayment capacity. Highway projects undertaken on expensive loans do not seem to generate enough revenue to meet dollar loan repayments. Although some benefits accrue, the post project economic and financial evaluations are not satisfactory. The highest revenue on a peak day on the Southern Highway has been 38 million rupees a day. Considering the average annual turnover minus the operation and maintenance costs it could take 100 years to repay loans. Authorities should perform a post project evaluation for the benefit of future planners.

Lessons to learn

This is history but should not be discarded, for the valuable information and data therein demonstrate the actual scenario and resultant repercussions. Decision makers and economic advisors to the government, especially of the Treasury and any other relevant officials could review them.

The debt burden has aggravated the dollar crisis during the past two decades. The COVID-19 pandemic during the past two years is not an excuse as other countries in the region too have faced the same but are performing better. The negative economic growth in 2020 and the considerable dollar debt burden, with the country’s reserves collapsing have not occurred suddenly. Severe import restrictions have made day to day life of the people inconvenient and led to the collapse of some domestic industries.

The worst is yet to come, as warned by the Secretary to the President, delivering a speech in Colombo, as reported by a Sunday English newspaper on 28 Nov. 2021. He was the Treasury Secretary during the past two decades, when China Exim Bank loans were signed to the tune of billions of dollars mostly for white elephant projects, The massive dollar debt seems the root cause of most problems faced today.

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Territorial mindset, a recipe for disaster!



By Chani Imbulgoda

I recall a documentary on animal life on a TV channel. Describing the behaviour of lions, a caretaker said, “These lions are from the Dehiwala zoo. They are vigilant of other lions entering their territory, if one crosses the boundary they fight to death. They won’t like other lions entering their territory.” The announcer remarked, “Just like humans!”

Exactly, just like us. In the animal kingdom the survival of the fittest is the norm and not crossing others’ territory is a rule of thumb. Since the beginning of human civilisation there have been tales of battles. The Trojan war, Alexander’s, Caesar’s, Napoleon’s wars degraded human values. Saddled with cynicism, hostility and jealousy, we humans, like beasts, are at war with ‘others’ who do not fit into our ideologies or our comfort zones. History is a storehouse of tales of human battles over territories in the guise of civilisation. So-called civilisation itself was won over battles. In the local context, the native ‘Yakkhas’ were massacred by Prince Vijaya to develop ‘Sinhale’. America, Canada, Australia inherit a dark history of looting territories of indigenous people in the name of civilisation. Portugal, Spain, Britain tasted the blood of their ‘colonial slaves’. Centuries later, we have not yet shed our primary animal instincts. We battle tooth and nail to protect our territories, our autonomy, values and interests all in the guise of civilised behaviour.

We rarely welcome outsiders into our territories. In the 40s and 50s, women were kept out of men’s territory. Late British Prime Minister aka Iron Lady, Margaret Thatcher, had to struggle many years to break through another of man’s territories, the Parliament. In the movie ‘Margaret Thatcher: The Long Walk to Finchley’, she sobs to her husband that contrary to what she previously believed, despite hard work she cannot win on merit and that dedication and passion are irrelevant. One-time Prime Minister, Edward Heath condemns Thatcher’s outspoken nature to force her out of politics. Heath says that the Parliament is akin to an orchestra made up of many musicians and Thatcher is a French horn more loud than appropriate, that threatens the orchestra’s harmony.

This is how men and also women of the same flock air their resentment towards outsiders, in their own words ‘intruders’ who are colourful and loud in action. Insult, indifference, suspicion, suppression, oppression are not uncommon experiences of pioneers in anything in history or at present. I once heard a senior Professor advising a young colleague attempting to change the system for the better, “Lady, look, do not swim upstream, people would not like it.” Yes, despite good intentions any novel act breaks the harmony…That is why the Buddha had many foes. That is why the notorious thief Barabbas was chosen by the crowd over Jesus.

I tried to uproot a tiny cinnamon sapling that grew through my interlock pavement blocks, failing which I crushed it. It made me realise that this is what happens, no matter how valuable you are. If you crop up in a place where you would not be accepted, every effort is made to root out, failing which, crush you, to ensure that you would not resurface. I suppose many of us had faced similar circumstances at work places, in politics or within social circles. Why does this happen, because of ego, envy, distrust or insecurity? Or because someone deemed a threat by another individual, a leader or a group enters their territory?

A pack of wolves has a leader; the protection of lions’ territory is the responsibility of the leader; the leader is the first to announce danger. No outsider can cross the boundary. We see certain lions, wolves and foxes as alphas. The mentality ‘I am the boss, I know everything’ blinds them. They live on ego, with a superiority complex, under the assumption that no one can challenge their power. If the newcomer is meek and sucks up to the leader, he or she survives and can slowly squirm their way into the pack.

I have heard parents complain about how difficult it is to enrol their kids into various sports clubs in schools. I have worked in private as well as public sector organisations, local and overseas. I have experienced antagonistic behaviour in these organisations. Driven by their insecurity, superior or inferior complexes, they would go to any lengths to harass the outsider and go to any extreme to protect his or her territory. They are myopic to the point of rejecting ideas foreign to them no matter how good they are, as they see ‘danger’ in ideas alien to them. Some group ideologies are thicker than blood. Certain professional groups rarely welcome females. They believe that women cannot meet challenges as men do and can be fiercely territorial. Many qualified and capable individuals are ostracised from organisations or industries or expelled from positions because of this territorial mindset.

A person with a territorial mindset is often overcome by thoughts of safeguarding or enhancing his or her power, control, influence and self-proclaimed status. These are primitive emotions. Taking ownership and defending what people believe belongs to them is a positive trait. But it is this mentality that subjects newcomers to agony when they grow too smart for their own good. They are stifled when the power of those with a territorial mindset is threatened. Many novel ideas and skills go to waste while some newcomers or ‘misfits’ are forced to leave their workplaces, others would continue the fight or be forced to conform.

We talk of harmony, reconciliation, tolerance and unity in diversity. Why cannot we synergize each other’s differences? A French horn would add glamour and at least amuse the audience. A garden consisting of a variety of flowers is more awe-inspiring than a garden of roses alone. Poet Khalil Gibran said that when a river enters the sea, the river is no more, it is diluted in salt water and one cannot trace the river in the sea, but the river grows larger and so does the sea. When we come out of our confining shells we are exposed to greater opportunities as well as benefits for both the newcomer and those already in that society.

(The writer holds a senior position in a state university and has an MBA from the Postgraduate Institute of Management [PIM], Sri Lanka and is currently reading for her PhD in Quality Assurance in the Higher Education Sector at PIM. She can be reached at

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