By Ajith Nivard Cabraal
The dynamics of the Sri Lankan economy have changed enormously in the last decade. Particularly after ending the prolonged terrorism conflict, the growth outlook in Sri Lanka has been impressive with massive reconstruction and rehabilitation efforts being carried out.
In the post-conflict economy, we have been able to record many important milestones. We doubled per capita income to over 2,900 US dollars in a relatively shorter period graduating to an emerging market economy status; we grew our economy to a robust 59 billion US dollars; we controlled inflation at single digits for more than four and a half years; we reduced poverty levels to around 6 percent; we brought down unemployment levels to less than 4 percent; we elevated the quality of infrastructure to a level comparable with many emerging market economies; we maintained our foreign reserves at over 6 billion US dollars; we managed our debt prudently so as to reduce our debt-to-GDP ratio from as high as 105 percent in 2003 to about 78 percent; and most importantly, we achieved an over 8 percent economic growth in successive years 2010 and 2011. Today, Sri Lanka is ranked among the top five fastest growing economies in developing Asia.
The efforts that we have put together to improve and sustain the positive outlook for our nation, have ensured a conducive investment atmosphere. The low and stable interest rate regime serves as an important support to businesses by reducing the risk factor. Moreover, the country’s peaceful environment, complemented by political stability, has been able to ensure the continued safety of investments, while ensuring maximum yield. In this context, we have initiated a robust investment framework along the lines of the ‘5+1’ hub concept, which has now opened out new ventures in promoting knowledge, maritime, aviation, energy and commercial sectors, while tourism is emerging as a further thrust industry.
Becoming key tourist and transit hub
As far as the tourism industry is concerned, we are increasingly becoming one of the fastest growing tourist destinations in the world; and our efforts to gear up the port and airport development is expanding the potential for Sri Lanka to become a key tourist and transit hub for Asia. Anticipating this growing potential, some of the leading hotel chains in the world have chosen Sri Lanka for their expansion, and currently major hotel and entertainment projects, including Shangri-La, Sheraton, Mövenpick, Crown Resorts, and Marriott which are planning to open for business in the years 2014 and2015, are underway.
It is noteworthy that most of these major developments in the tourism industry take place as foreign direct investments (FDI). Such FDIs are due to create thousands of new jobs over the years for Sri Lanka, and these inflows will continue to be a key job creation source for our nation. For example, the US$4 billion FDI project spearheaded by Singapore’s Sri Lanka Gateway Industries (Pvt) Ltd is, expected to create 5,000 direct and 20,000 indirect jobs in the country. These and other additional jobs will lead to increased spending locally by the thousands of new entrants to the economic stakeholder groups. As is well known, many FDI projects also utilize other local non-human resources as well. For instance, manufacturing projects will use local material while hospitality ventures will consume large quantities of local produce. These economic inputs will also provide a strong stimulus for existing Sri Lankan businesses to grow, and what we would experience then, is an increase in our standard of living.
What is more, the development of our nation increases its allure to tourists, at a time when the country is forging ahead towards its target of 2.5 million tourists by 2016. Given the projected growth trends for international tourism over the next few years, this ambitious target will be well within reach. Nevertheless, it is important that we strategically target the key source markets and customize the tourism product to cater better to the needs of those markets. Furthermore, to successfully market the destination, it is essential that Sri Lanka is also able to attract international tourism brands that will provide high visibility for the country as well as their own brands, in the source markets.
Emerging trends in regional and global tourism
In developing Sri Lanka’s tourism strategy, more emphasis will also need to be placed on the prospects and emerging trends in regional and global tourism landscape, as well. It is becoming increasingly clear that much of the rapid growth in global travel over the next few years is expected to be from China. China’s outbound travel market is one of the fastest growing in the world. In 2000, only about 10 million Chinese tourists travelled abroad. However, this number exploded by 690 percent to 83 million in 2012, and it is now estimated to reach 150 million by 2016! At the same time, the largely untapped Indian market is also expected to figure prominently in Sri Lanka’s tourism effort, and the Leisure sector must make a concerted effort to draw in more Indian tourists, by identifying and catering to the needs of India’s high net worth individuals and its affluent middle class.
As a destination which just 1 to 3 hours away from most Indian airports, Sri Lanka could be one of the more popular destinations for the burgeoning Indian middle class population with rising disposable incomes, seeking affordable holiday options.
The availability of direct flights, and high quality tourism facilities make Sri Lanka the perfect destination even for weekend travel. Furthermore, there is vast potential in India’s outbound MICE segment which was estimated to be worth nearly USD 600 million in 2011. Meanwhile, Sri Lanka will also be an attractive destination for Middle Eastern travelers, offering both the business and leisure tourists a host of options and a convenient location, along with sensitivity towards their cultural needs. Therefore, Sri Lanka must make the most of its central locations connecting the Eastern and Western worlds in order to attract tourist traffic from all these destinations.
Investments in hospitality industry
To capture these lucrative markets, investment in the hospitality industry is critical. In this connection, it is heartening that Sri Lanka has embarked on various activities to provide the best entertainment experience for tourists, in parallel to the competitor destinations in the region. In this regard, a ‘tourism event calendar’ which facilitates international sporting events on an annual basis, will help to target niche tourist markets, particularly of youth tourism, which is involved in adventure sports, including beach volleyball, sailing, white water rafting, mountain biking, hot air balloon racing, scuba diving, water skiing etc. In addition, several areas of Sri Lanka are being given a modern look with ample recreational facilities, so that tourists can also enjoy the benefits of modern lifestyle within the country. Further, the progress that is being made to enhance the entertainment and gaming industry, would help to cater to a growing segment of leisure travelers across the world.
With Sri Lanka’s strong economic growth and positive policy initiatives, the country is now well positioned to take advantage of foreign investment. Our continued efforts to create a business friendly environment have been well recognized with Sri Lanka being the highest ranking country in the Doing Business Index (DBI) in South Asia and is the only country in the region to improve its ranking for 2013. Sri Lanka also moved to “High Human Development Category” from “Medium Human Development Category” in the Human Development Index (HDI). In this backdrop, it is the responsibility of every citizen to foster a warm and welcoming environment for tourist development, in order that we will, collectively, secure prosperity for our nation in the years to come.
(Ajith Nivard Cabraal is the Governor of the Central Bank of Sri Lanka)