Business
Pro-Poor Tourism: Can it reduce poverty in Sri Lanka?
By Kimuthu Kiringoda
“Tourism has been described as the world’s largest transfer of resources from rich to poor, dwarfing international aid.” – Salli Felton, CEO, Travel Foundation
The tourism industry’s performance was hampered first by the Easter Sunday bomb explosions in 2019 and then the COVID-19 pandemic. Sri Lanka saw a decline in tourist arrivals from 1,913,702 in 2019 to 194,495 in 2021. It is estimated that revenue declined from USD 3600 million to USD 261 million during 2019-2021, reflecting a staggering 92.75% reduction due to a fall in arrivals.
At present, the government is severely challenged with maintaining funds for basic provisions, and expansive investments in tourism cannot be expected in the foreseeable future. In November 2021, the Ministry of Tourism released the draft National Policy on Tourism for Sri Lanka with recommendations for improvement. Among them are the promotion of sustainable local tourism in Sri Lanka and community engagement. This article discusses existing disparities in tourism and the possibility of adopting a sustainable, pro-poor tourism strategy to reduce poverty in Sri Lanka.
Poor-poor Tourism
‘Pro-poor tourism’ aims to uplift livelihoods by garnering net benefits to the poor through tourism. It is not an act of charity to help the poor but to empower them with the knowledge, skills, and recognition to utilise their existing capacities to serve in the tourism industry. While the government can provide an impetus through regulations and infrastructure, the capacities must be commercially viable and not run on government aid.
The key objective of pro-poor tourism is empowering the communities. They must be aware and proactive participants. Communities are not required to be ‘tourist destinations’ solely functioning for the purpose. Still, they can benefit from the indirect effects of tourism – for example, by increasing poultry meat sales demanded by local eateries. On the other hand, if tourist arrivals fall, the loss of revenue will have to be borne by them. Participation is voluntary, and therefore, it is the individual who must maintain a balanced approach to manage the income.
An example of government intervention is South Africa’s Broad-Based Black Economic Empowerment strategy. The engagement of marginalised communities is measured through indicators such as ownership management, employment equity, etc., to rate establishments. For instance, a considerable number of black women as a percentage of the Board of Directors will give a higher rating to the tourist establishment or be fined if it falls short. A mandated quota to include women may offer relief to female poverty.
The ‘Sri Lanka Tourism: Strategic Plan 2017-2020’ emphasises the need to uplift livelihoods through tourism, with a focus on engaging local communities, supporting local businesses, and promoting the cultural values of the country. The active participation of minorities and women in traditional arts, crafts, and cottage industries is also recognised as key aspects in the poverty-focused tourism strategy.
Existing Regional Disparities
On the ground, there is a notable regional disparity in the operations of the tourism industry. The foreign guest nights spent, as per region in 2019 shows approximately 73% of foreign guest nights are spent in Colombo and the South Coast. Foreign guest nights spent in the North are almost zero as a percentage (See Figure 1). The area that foreigners choose to reside in is important because they tend to purchase commodities in the vicinity such as local goods use local services such as transportation, laundry, food, and beverages.
The accommodation capacity of tourist hotels also indicates a regional disparity (See Figure 2). However, these numbers are only related to 474 tourist hotels. There are 2,145 other supplementary tourist establishments that provide 24,831 rooms for guests. Unfortunately, data pertaining to the regional distribution of these establishments are not available. The number can be higher where unregistered establishments might be in operation.
Increasing Local Engagement
From the above, it is evident that tourism in Sri Lanka is centred in the Western and Southern provinces and the spatial concentration in these provinces should be eased. The Northern and Eastern provinces have untapped tourism potential. For example, Anailativu and Eluvativ islands in Jaffna with kayaking, bird watching, and ferry rides can be promoted as tourist destinations. Tourist hotspots should be identified by the authorities and the responsibility of surrounding operations should be handed over to the local communities.
Conservation of such locations should also be carried out by the community in consultation with the relevant tourism and environmental authorities. The tourism authorities’ role should be confined to that of a consultant and licensor. The authorities should exercise caution in inviting large corporates for investment. The naturally preserved locations may be destroyed for accelerated profit and locals may lose the right to use their own land and resources.
Greater utilisation of the island’s seas and natural resources can be beneficial to Sri Lanka. Stilt fishing, for example, has artistic and touristic value. This does not require the fisherman to make drastic changes to his main livelihood but to earn a separate income by promoting the fishing methods. The extra income can be seasonal but necessary education and awareness can be offered to manage the livelihood along with tourist services. Governmental agencies can act as educators rather than guarantors for income/services.
Way Forward
In promoting pro-poor tourism, it is important to draw boundaries not to over-depend on tourism. Sole reliance on tourism has proven to be detrimental during travel restrictions and off-season periods where incomes dry up. The communities’ livelihoods should be shaped to cater to tourists with minimal disruptions to their normal routine. Therefore, the government’s role should be limited to providing regulatory and educational impetus rather than guaranteeing financial incentives. Empowering the communities to maintain their existing capacities and capital and developing them, are key to effective pro-poor tourism.
Link to Talking Economics blog:
https://www.ips.lk/talkingeconomics/2022/02/14/pro-poor-tourism-can-it-reduce-poverty-in-sri-lanka
Kimuthu Kiringoda is a Research Assistant at the Institute of Policy Studies of Sri Lanka (IPS) with research interests in health, labour markets, tourism, SMEs and SDGs. She holds a BA (honours) degree in Economics from the University of Colombo. She also has a Bachelor of Laws (LLB) from the University of London. Kimuthu is currently reading for an MSc in Sustainable Management offered by the University of Bedfordshire (UK). (Talk with Kimuthu: kimuthu@ips.lk)
Indian tycoon Ratan Tata has died aged 86, says the Tata Group, the conglomerate he led for more than two decades.
Tata was one of India’s most internationally recognised business leaders. The Tata Group is one of India’s largest companies, with annual revenues in excess of $100bn (£76.5bn).
In a statement announcing Tata’s death, the current chairman of Tata Sons described him as a “truly uncommon leader”.
Natarajan Chandrasekaran added: “On behalf of the entire Tata family, I extend our deepest condolences to his loved ones. “His legacy will continue to inspire us as we strive to uphold the principles he so passionately championed.”
During his tenure as chairman of the Tata Group, the conglomerate made several high-profile acquisitions, including the takeover of Anglo-Dutch steelmaker Corus, UK-based car brands Jaguar and Land Rover, and Tetley, the world’s second-largest tea company.
UK Business Secretary Jonathan Reynolds said in tribute that Tata was a “titan of the business world” who “played a huge role in shaping British industry”.
A profile published in the Economist magazine in 2011 called Tata a “titan”, crediting him with transforming the family group into “a global powerhouse”.
“He owns less than 1% of the group that bears his family name. But he is a titan nonetheless: the most powerful businessman in India and one of the most influential in the world,” the magazine said.
In 2012, he retired as chairman of the group and was appointed chairman emeritus of Tata Sons, the group’s holding company.
Indian Prime Minister Narendra Modi hailed Tata as a “visionary business leader, a compassionate soul and an extraordinary human being”.
Paying tribute on X, formerly known as Twitter, Modi recounted “countless interactions” with Tata and said he was “extremely pained” by his death.
Tata was born in a traditional Parsi family in 1937. He studied architecture and structural engineering at Cornell University in the US. In 1962, he joined Tata Industries – the promoter company of the group – as an assistant and spent six months training at a company plant in Jamshedpur. From here, he went on to work at the Tata Iron and Steel Company (now Tata Steel), Tata Consultancy Services (TCS) and National Radio and Electronics (Nelco).
In 1991, JRD Tata, who had led the group for over half a century, appointed Ratan Tata as his successor. “JRD Tata was my greatest mentor… he was like a father and a brother to me – and not enough has been said about that,” Tata later told an interviewer.
In 2008, the Indian government awarded him the Padma Vibhushan, the country’s second-highest civilian honour.
He was drawn into a rare unsavoury controversy in 2016, when his successor as Tata Sons chairman, Cyrus Mistry, was ousted from the role, sparking a bitter management feud. Mistry died in a car crash in 2022.
The business tycoon also had a lighter side to him. His love for fast cars and planes was well-known – the Tata group website describes these as some of his “enduring passions”.
Tata was also a scuba diving enthusiast, a hobby that fizzled with age “as his ears could take the pressure no more”.
He was also a dog lover and fondly remembered the many pets who gave him company over the decades. “My love for dogs as pets is ever strong and will continue for as long as I live,” the industrialist said in a 2021 interview. “There is an indescribable sadness every time one of my pets passes away and I resolve I cannot go through another parting of that nature. And yet, two-three years down the road, my home becomes too empty and too quiet for me to live without them, so there is another dog that gets my affection and attention, just like the last one,” he said.
He was also often praised for his simplicity. In 2022, a video of him travelling in a Nano car – one of the world’s cheapest cars, now mostly remembered as one of Tata’s failed dreams – went viral on social media.
[BBC]
By Ifham Nizam
In an analysis of Sri Lanka’s public sector, Dr. Lakmini Fernando, Research Fellow at the Institute of Policy Studies of Sri Lanka (IPS), stresses the urgent need for rationalizing public sector employment to create a more productive and efficient system.
Addressing a packed audience at the launch of the IPS annual report, titled “Sri Lanka: State of the Economy 2024” on Tuesday, Dr. Fernando outlined how Sri Lanka’s bloated public sector, while providing substantial employment, should be rationalized for increased productivity.
The public sector employs 15% of the total workforce in Sri Lanka and makes up 35% of formal employment—figures that reflect global trends, where public sectors account for 11% of total employment and 37% of formal employment. In addition, it consumes a staggering 26% of public expenditure and 5% of GDP.
Fernando argued that, in this context, improving the efficiency of this vast machinery is critical, not only for the government’s fiscal health but also for the nation’s social welfare goals.
Fernando added: ‘If we are to achieve our social objectives like the Sustainable Development Goals and improving governance, the public sector must be more productive. In fact, from 2005 to 2023, Sri Lanka’s public sector grew by 60%, from 0.9 million to 1.4 million employees. Despite this expansion, the country’s governance score is alarmingly low, with a rating of -0.65, compared to the much higher ratings of 1.8 in countries like New Zealand and Australia.
‘At its core my proposal is to downsize the public sector, while simultaneously increasing wages for remaining workers. If Sri Lanka reduces its public sector workforce by 20%, it could afford a 30% pay rise for the remaining employees, while keeping the wage bill at 4% of GDP. This would not only boost worker morale but also improve productivity across the board.
‘However, such a pay rise alone would not guarantee productivity gains. The real challenge lies in reforming administrative operations. We need to adopt a new public management approach, similar to those implemented successfully in Malaysia, Singapore, and New Zealand, which focuses on merit-based recruitment and digitalization of services.
‘We need to eliminate “CEO-based performance systems” and replacing them with merit-based assessments to ensure that the public sector hires and retains the best talent.’
Research Officer IPS, Suresh Ranasinghe delved into the challenges facing Sri Lanka’s broader employment landscape. He pointed out that the country’s labour force participation rate had dropped to 48.6% in 2023, while the employment-to-population ratio declined to 46.3%. His research found that unemployment was not the only issue—labour market inactivity was also on the rise, particularly among the youth and less-educated men.
One of the most worrying trends Ranasinghe highlighted was the significant decline in high-skilled employment. From 2018 to 2023, the share of high-skilled workers fell from 23% to 20%, driven by migration during the country’s economic crises. He argued that without competitive salaries and investment in knowledge-based industries, Sri Lanka risked losing even more skilled professionals to emigration.
Both Fernando and Ranasinghe emphasised that immediate reforms are critical if Sri Lanka is to remain competitive in the global economy. Ranasinghe recommended promoting vocational education and training to combat youth unemployment, as well as updating education curricula to meet local and global demand.
By Ifham Nizam
President Anura Kumara Dissanayake, who also serves as the Minister of Agriculture, Land, Livestock, Irrigation, Fisheries and Aquatic Resources, is set to address matters related to the plantation sector, particularly worker wages and other pressing issues, an official said adding that the President has a tight schedule.
He said that the recent agreement in August with the Wages Board provides a daily minimum wage of Rs. 1,350 for plantation workers, along with an additional Rs. 50 per kilogram of tea leaves harvested above the daily target.
There was a Supreme Court interim injunction on 4th July that prevented the implementation of a gazette notification aimed at increasing the daily wage to Rs. 1,700.
Plantation workers can earn productivity-based incentives, which boost their overall earnings, with some additional allowances based on tea leaf collection.
Former President Ranil Wickremesinghe had previously announced a sharp wage hike for plantation workers to Rs. 1,700 during a May Day rally. However, there are ongoing debates about wage structures.
Trade unions and worker advocacy groups welcomed the Wages Board’s decisions, as they have been pushing for better compensation for plantation workers for a long time.
Indian tycoon Ratan Tata dies aged 86
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