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CEYPETCOENERGIZING THE FUTURE

Monday, November 8, 20102 Sri Lanka

Monday, November 8, 2010 Sri Lanka 3

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economy With peace and stability assured, Sri Lanka’s economic prospects are bright. And the government is working hard to boost competitiveness.

Reaping a peace dividend

A lmost 18 months since the end of a three-decade-long conflict, Sri Lanka’s economic prospects are look-ing bright as the island comes under

increasing attention from global investors and fund managers. Anointed as the number one holiday destination by The New York Times in January, Sri Lanka finds itself in the news for all the right reasons.

President Mahinda Rajapaksa is wasting no time licking the economy back into shape with investor-friendly policies. Simplified application and approval procedures have been introduced as well as a leaner company-formation process. A Cabinet Sub-Committee on Investment Facili-tation (CSIF), led by the President to resolve the issues faced by investors, reinforces the govern-ment’s commitment.

Growing business confidence secured Sri Lanka more than $6.3 billion of orders for a glob-al sale of $1bn in bonds last month at an indica-tive yield of 6.5% towards rebuilding the econo-my and debt repayment.

“We have seen foreign investment flowing in fairly large chunks, especially into our Treasury

bills and Treasury bonds,” says Ajith Nivard Ca-braal, Governor of the Central Bank. “The recent $1bn sovereign bond issue was oversubscribed over six times in 14 hours. So, we are confident about the resilience of our economy. Our poli-cies have been consistent, and as a result many people have begun to take a longer-term view in their dealings with Sri Lanka.”

Drained of resources due to the protracted war, foreign direct investment is the pivot on which the $43bn economy plans to consolidate growth. The Board of Investment expects FDI to reach $600 million by year-end – short of the ambitious $1bn target set in May. The feeling is that prospective investors are holding out until the 2011 budget due to be unveiled this month.

The peace dividend has come into its own in the last two quarters, with Sri Lanka’s sovereign credit rating upgraded in September by Standard & Poor’s (from B to B+) and Fitch Ratings (from stable to positive). GDP growth of 8.5% in the sec-ond quarter far exceeded the modest 7% forecast by the Central Bank for the year as a whole (the IMF is expected to upgrade its own forecast for the year this month). The government has set an achievable target of sustained 8% growth.

Basil Rajapaksa, Minister of Economic De-velopment, is quick to point out that all the economic indicators are positive: “Inflation [is dropping] and the unemployment rate at 5.3% is the lowest ever recorded and foreign reserves are at an all-time high.”

Citing economic stability, the IMF in June approved a $408m disbursement to Sri Lanka as the third tranche of a $2.6bn standby agreement approved in July 2009.

In this feel-good environment, the Colombo Stock Exchange has recorded a year-on-year growth of 138% and a year-to-date growth of 110% as measured by the All Share Price Index. Bloomberg cited the CSE as the world’s best per-forming share market.

Agriculture, industry and services have all performed well in the year to date. Agriculture recorded a 5.1% growth over the same period in 2009, boosted by a strong performance for tea, rubber and fishing; while the industrial sector grew by 9.2% due to solid growth in gem min-

ing and construction. The ser-vices sector recorded growth of 8.8% showing robust recovery in wholesale and retail trade, ho-tels and restaurants, and trans-port and communications.

The opening of vast tracts of the country’s land and coastline – once rendered no-go by the conflict – offers exciting possi-bilities. One of the world’s larg-est producers of fresh fruit and vegetables, Dole, has entered the market via a tie-up with lo-cal company CIC Agribusiness to produce bananas and papayas for export.

Located a few miles off In-dia’s southern tip, Sri Lanka’s proximity makes it a strategic entrepot to tap into the vast Indian market, coupled with the fact that existing free-trade agreements with both India and Pakistan, along with the South Asian Preferential Trade Ar-rangement (SAPTA), renders trade easy out of Sri Lanka.

Sri Lanka is now thinking big, chalking out plans to opti-mize resources and eliminate obstacles to FDI. The govern-

ment is inviting foreign participation in tour-ism, power, pharmaceuticals, agriculture and fisheries, services, textiles and ceramics through Greenfield or joint-venture projects.

Investors can count on a skilled labour force with a literacy rate of 96%, the highest in South Asia. Although labour may not be as cheap as In-dia, China or Vietnam, its skills make it a perfect match for high-end manufacturing/assembly fac-tories. In fact, many BPOs and KPOs have set up back-office op-erations in Sri Lanka and reflect healthy rev-enues over the past de-cade. The industry has targeted export rev-enue of $2bn by 2012.

Over 100 UK af-filiated companies are currently operating in Sri Lanka. Moreover, the British Govern-ment has recently increased its level of export credit cover for UK companies wishing to invest in Sri Lanka from £150m to £200m. Cairn Lanka, a subsidiary of Cairn India, is poised to start drilling off the Mannar Basin in the first quarter of 2011, marking the beginning of petroleum exploration in Sri Lanka after a 25-year hiatus.

Challenges facing the government include serious infrastructure bottlenecks, but the gov-ernment has laid out an ambitious development plan to tackle them with ports, roads and power the priority. The loss of the Generalised System of Preferences (GSP+) in August – a system that al-lowed duty-free exports on a range of Sri Lankan products – is a setback, but not insurmountable says the country’s export tsar, Janaka Ratnayake.

“Sri Lanka doubled its per capita income in the last five years from $1,053 in 2004 to $2,050 by 2009,” says Cabraal of the central bank. “Our focus is to take the country to $4,000 in the next five years by ensuring good coordination among the banking, commercial, port, aviation, knowl-edge, agricultural, industry and services sectors, while ensuring that all these sectors deliver con-tinuous improvements.”

The government wants economic growth to reach all Sri Lankans.

All indicators point to strong

economic recovery and a return

of business confidence. With the

first two quarters of 2010 witnessing 8%

growth, GDP is expected to exceed $43

billion; remittances have surged and are

estimated at over $3.8bn (against $3.3bn

in 2009, itself a record year), the Lankan

Rupee has strengthened to around 112

to the dollar and the Colombo All Shares

Index is up 110% so far this year.

But foreign investors have been slower

to catch the fever. Despite the years of

conflict, foreign direct investment flows

into Sri Lanka increased from $604 mil-

lion in 2006 to peak at $889m in 2008.

Unsurprisingly 2009, which saw some of

the fiercest fighting and the defeat of the

LTTE, coincided with a fall off in FDI to

$601m. But if 2010 was expected to be

the rebound year, it hasn’t yet happened:

in the first six months of the year FDI to-

talled $218m, against a target of $1bn.

Thus while the flood of portfolio

investment has made Colombo one of the

world’s best performing stock markets,

more long-term investors seem to be

taking their time to assess the business

opportunities on offer.

“What happens with FDI is, from the

time you sign up to when it actually does

come it takes a timeline of about a year,

a year and a half,” explains Jayampathi

Bandaranayake, Chairman of the Board of

Investment (BoI). “The real year-to-year

take off has to be looked at for the year to

2011, for which the budget and incentives

are being fashioned.”

The BoI has

been tasked with

overseeing six

thrust areas for

attracting private

investment. The

first is tourism

where the govern-

ment wants to

more than treble

the number of

hotel rooms from

the present 15,000

to 50,000 by

2015; simultaneously it plans to create the

capacity to train staff to meet the require-

ments of an expanded hospitality industry.

Sri Lanka already employs 60,000 workers

in its information technology and busi-

ness process outsourcing industry; given

a young and educated populace, it has

enormous potential to scale up operations.

Agriculture, fisheries and dairy are also

candidates for new investment, given the

large tracts of arable land and stretches

of coastline that have become accessible

with the end of the war. Infrastructure

will increasingly be developed on the

basis of a private-public partnership and

support services, whether in aviation or

port-related trade, will also create new

opportunities.

The country needs a good governance

model in place to attract sustained invest-

ment. The government has made a good

start with the setting up of a tax commis-

sion which is expected to rationalize 60

taxes into a more manageable 30.

inviTing in inveSTorS

Monday, November 8, 20104 Sri Lanka

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Monday, November 8, 2010 Sri Lanka 5

finance Sri Lanka’s resilient banks have a critical role to play in rebuilding the country and driving growth. By Alejandro reyes

Betting big on banking

CorporATe profiLe:Bank of Ceylon

The end of sri lanka’s civil war in May 2009 opened the door to inves-tors who made the Colombo Stock Exchange one of the best performing

markets in the world this year. According to the country’s Securities and Exchange Commission, the number of active investors in the bourse had risen to 64,000 by September, up from 37,000 a year earlier.

While the market has undergone a correc-tion recently, the bulls are poised to run again. “This is the time to come,” advises Dr. Gamini Wickramasinghe, Chairman of the Bank of Cey-lon (BOC), the Colombo-based state-owned commercial bank and one of the country’s lead-ing financial institutions. “This is the time to start because the country is about to take off.”

Institutional investors are heeding that ad-vice, many of them attracted by opportunities in the banking and finance sector. At the end of Oc-tober, German financial-services giant Deutsche Bank and Ceylon Asset Management (CAM) launched a new investment fund that will focus on banking, finance and insurance companies, stocks that have outperformed the market index in the past two years.

The banking sector, Dulindra Fernando, CAM’s managing director, told the press, “is in very good shape, particularly with non-perform-ing loans in the range of 5%, with the exception of Seylan Bank.” Growth, he said, would be “driven

by low interest rates, excess liquidity in the fi-nancial sector, and hopefully a VAT reduction for the financial sector in the next budget. We ex-pect many new projects to need financing in the fast-growing sectors of the economy.”

The banking sector has certainly proven its resilience through the global economic crisis. “When the whole world was undergoing tremen-dous turmoil, we came through without any of our banks going down or without a balance-of-payments crisis,” Ajith Nivard Cabraal, Gover-nor of the Central Bank of Sri Lanka, observes. “Our fundamentals are very, very sound.”

At People’s Bank, another state-owned com-mercial bank based in Colombo, the outlook is equally positive. Chairman W. Karunajeewa is proud that his institution has in three years man-aged to become the most profitable bank in the country. And with the economy’s resurgence, he is confident that it can stay at the top. “I will try my best to stabilize this position for the next 10 years,” he vows. “We passed a difficult time and now we are in a strong position. We are trying to develop by coming up to the level of a world-class international bank. That is the goal.”

Sri Lanka-watchers caution that the recent market correction means that in the short term most sectors are a sell. “This mainly reflects the over-exuberance the market had felt during the last 18 months since the Tamil Tiger threat was eliminated,” explains Vidhi Tambiah, a Geneva-

based independent investment analyst who cov-ers Sri Lanka and invests in the market. “That said, over a longer period of time certain sec-tors such as hotels and banking are bound to do well. All banks will benefit from new business in the north and east, where not only new custom-ers will demand services but infrastructure and merchant banking opportunities exist.”

Indeed, banks look set to gain a peace divi-dend. “We have to give priority to the people in the north and east to develop their areas and raise their living standards,” says Karunajeewa.

Adds Wickramasinghe of the Bank of Cey-lon: “Our motive is not profit, our motive is service. We are in those areas to support the people. The bank will continue to play the same

role what we have been playing until now, but in a better climate. Now we can help lift them at a much faster pace.”

Over the next two years, predicts Central Bank Governor Cabraal, “there will be major investments that will come in and add value as well as capacity in tourism, fisheries, and trans-portation. We will have sustained growth. The challenge for us is to ensure that there is suffi-cient electricity, infrastructure, and capacity for people, foreigners or anyone, to come in and do business.”

In this national effort to rebuild the country after three decades of war, Sri Lanka’s resilient banks and financial institutions will be playing a critical role.

Colombo expects this year’s rapid economic growth to be sustained. The government targets 8%.

established in 1939, and

with a network of more

than 300 branches

and an asset base of some

600 billion rupees, Bank of

Ceylon is the island’s leading

commercial bank owned by

the government of Sri Lanka.

Managing some 40% of the

country’s deposit base, the

bank takes its role as ‘Bank-

ers to the Nation’ seriously.

With an end to the

30-year conflict, BOC’s

British-educated chairman,

Dr. Gamini Wickramasinghe

– a former chairman of the

Insurance Board of Sri Lanka

and the country’s Securities

and Exchange Commission

– is confident the bank can

play an important part in the

country’s development.

“During the war it was

difficult for us to encour-

age new development, new

investments. We had to work

very hard to achieve what

we did. Today, those same

efforts in an environment

free from war and fear are

being rewarded.”

Even during the conflict

the country’s economy

continued to grow at around

6%. “In the next few years it

will grow at a rate of 8-10%,”

Wickramasinghe says. “We

will see the north and east

contributing to GDP. And

with the prevailing peace

and efforts by the govern-

ment to attract FDI and

tourism and encourage local

institutions to grow their op-

erations, there will be a ma-

jor boost to the economy.”

Wickramasinghe ac-

knowledges that there is a

huge demand for banking

services in the post-conflict

environment. BOC, the

island’s Business Times said

in March, will open 31 more

branches in the north and

east, focusing on small and

medium size enterprises. The

bank prioritises the financing

of agriculture, fisheries and

the dairy industry.

“Don’t think that be-

cause we are a big bank

we support only the big

industries. Yes, we support

all the big companies in this

country, they do large-scale

work with us, but our reach

is more than that of other

banks. Our motive is not

profit, our motive is service.

That’s the difference be-

tween a private bank and a

government bank.”

BOC aims to grow its

asset base to one trillion ru-

pees by 2012 by expanding

its operations and moving

into investment bank-

ing, including wealth and

asset management, bank

assurance, private equity,

international investments

and venture capital. With a

branch in London, BOC is

well placed to manage the

surge in remittances from

the 1.8 million Sri Lankans

who work abroad.

“We are getting an aver-

age of 16 to 18 billion rupees

a month,” says Wickrama-

singhe. “People who might

have been uncertain are now

investing in their homeland.”

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finance State-owned banks are leading rural development programmes aimed at empowering the poorest.

Public banks drive grassroots development

M ahinda rajapaksa, sri lanka’s President, is determined that the benefits of a post-war economic boom are shared equally by all Sri

Lankans, and that development projects deliver positive gains at every level of society, starting with better access to a quality diet for the poorest.

The island-nation has a commendable track record of village-centred projects and rural de-velopment has made steady progress – recent fig-ures indicate that the poverty level has dropped to 15.2% from 24% in 2007. But with more than half the country’s economic activity centred on the vibrant Western Province, the scope for develop-ment projects across the country remains large. Furthermore, the newly accessible north and east pose their own set of developmental challenges.

As the country embarks on a process of economic renewal and nation-building, state-owned banks People’s Bank and the Bank of Cey-lon (BOC) are spearheading rural growth and development by improving access to credit.

People’s Bank was established in 1961 to cater to the needs of the poor. Backed by a 670-strong branch network and service centres, the bank can claim to have created a firm foundation for rural development – funding agriculture, dairy,

fisheries and SMEs as a means of empowering rural communities. The bank’s relevance to the needs of those communities is evidenced by the fact that it serves some 12 million customers.

It is further evidenced by the bank’s results. Rapid growth in loans and advances helped de-liver a 48% rise in the People’s Bank Group’s pre-tax operating profit in the first half of the year, outstripping competitors. Deposits rose 7% com-pared with 2009, against an industry average of 4%. The bank’s appetite for loan growth mirrors the government’s own development objectives.

“It is our goal to give people the right tools, to give them the facilities to be able to be produc-

tive, to give them funds to invest in their own country,” says Chairman W. Karunajeewa. “If they come to make a deposit with us, we have to encourage them by giving them incentives and more financial potential. And we are doing that.”

The bank has prioritised lending to grassroots initiatives, including agriculture, agribusiness, fisheries, refrigeration and storage, infrastructure development and SMEs. The government’s aim of doubling per capita income to $4,000 by 2014 is a vision the bank shares and envisions helping achieve through capital mobilisation.

“If someone wants to start an SME, build their life through self employment or request

a group loan to start a small business, we help them by giving loans and advances, and we are doing this island-wide,” Karunajeewa says. “We give housing loans, development loans, loans to fishermen and for all types of motor vehicle. We have reduced our interest rates from 17% in 2009 to 12-13% this year, and plan to lower them fur-ther next year.”

The group is popularising microcredit and seed finance in rural communities. In particular, the bank aims to fast-track development of the north and east by enabling the poor to access finance in conjunction with group subsidiary, People’s Leasing Company, the country’s larg-est leasing solutions provider. People’s Leasing has already extended loans for the purchase of luxury buses which represent the main form of transport between Colombo and Jaffna.

Bank of Ceylon is similarly focused on sup-porting the underprivileged, particularly in the north and east. The bank has recently initiated a New Comprehensive Rural Credit Scheme to in-centivize the cultivation of paddy and other food crops as approved by the Central Bank at a low interest rate of 8%. The initiative will capitalise on expertise in what were traditionally produc-tive farming areas.

Dr. Gamini Wickramasinghe, BOC’s Chair-man, explains: “The bank has a long history in ag-riculture financing. If you talk about agriculture, fisheries, animal husbandry, dairy production, we are heavily entrenched. We are not an indus-trial country, most people live from agriculture.”

Most Sri Lankans still make a living from the land. Loans to agriculture are aimed at boosting food production.

Monday, November 8, 20106 Sri Lanka

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Monday, November 8, 2010 Sri Lanka 7

infrastructure The island’s strategic location makes it an ideal shipping, logistics and trading hub. The government is betting on it.

Bidding to become a modern maritime hub

A plan to initiate annual infra-structure investments of over a bil-lion dollars in roads, power plants and ports in particular will help Sri Lanka

double the size of its $43 billion economy within five years, suggest senior government officials. Fixing the infrastructure and relieving bottle-necks to growth is a priority for the government of President Mahinda Rajapaksa.

The wish list is lengthy: already underway are a second international airport in the south – which is expected to position the island as a South Asian air cargo hub and grow visitor numbers to the region’s pristine beaches – a 900-megawatt Chinese-financed coal power plant on the north-west coast, and a raft of ambitious port-develop-ment projects. A Colombo-Kandy Expressway and the development of a Mass Rapid Transport System for the capital are some megaprojects said to be in the pipeline.

Several of these projects are being financed through loans from multilateral institutions like the Asian Development Bank or through bilater-al agreements. China has loaned $425 million for the first phase of the new Magampura port near Hambantota, while a further $800m loan is be-ing negotiated for the second phase.

The country’s ports represent a particular focus for the government, who are keen to resur-rect the country’s role as a trading hub.

“One of the President’s [priorities] is to de-velop the ports and aviation sector,” says Dr. Pri-yath Wickrama, Chairman of the Sri Lanka Ports Authority. “In 2007, and with an eye on Sri Lan-ka’s future, the government gave instructions for us to prepare a plan to develop our port-related infrastructure.”

That year, Wickrama says, work started on port projects in Colombo, Hambantota and Olu-vil, as well as a small tourist port in Galle. “To develop after the war, we needed to improve our infrastructure facilities, especially port, road, electricity and rail. We convinced the govern-ment at that time to set up a good road network connecting the ports. We did not want to convert

Colombo and Hambantota separately as hubs, but to [develop] Sri Lanka as a [maritime] hub.”

Wickrama estimates that close to $600m has been invested in building new ports and up-grading and expanding existing ones since 2007. This year and next he expects to have invested another $1bn. “From 2011 to 2014, we will invest another $1.5bn. This is our investment plan and by doing this we want to be the leading player in the economic development process. At the mo-ment, the contribution is just about 10%, but we want to reach 40% by 2020,” he says.

The new Colombo South port, part funded by the ADB and costing $450m, will nearly triple container handling capacity at Colombo when fully developed.

A consortium led by China Merchant Hold-ings has secured a concession to build the first of three container terminals at the port. Port ser-vices will be offered by private companies under public-private partnerships.

Sri Lanka was a vital port for merchant ships plying the Silk Route centuries ago. Today, its strategic location makes it an ideal maritime, lo-gistics and trading hub, offering easy access from both eastern and western hemispheres. Wickra-ma points out that the new Magampura port lies just six nautical miles from the main East-West shipping route plied by up to 600 vessels daily.

Magampura port is also being developed as a free port by the government. “It is export-orient-ed,” says Wickrama. “Exporters will bring their [products], sometimes assemble, value add, pack, store and then distribute it; to do that they need tax benefits and custom relief.” Five thousand hectares alongside the port have been earmarked for industry, warehouses and oil refineries.

Designed to process 2,500 ships annually in the first stage, the port is expected to begin han-dling ships this month.

“This is part of making this country an emerging wonder of Asia,” President Mahinda Rajapaksa said at the launch of the port in Au-gust. “It is not sea water that will fill this port but the future prosperity of our nation.”

With the end of 30

years of conflict

and improvements

in the global economic cli-

mate, new business opportu-

nities are opening up for this

island of some 20 million.

Mohan de Alwis, manag-

ing director and CEO of the

state-run Sri Lanka Insurance

Corporation (SLIC) says

prospects are bright: “Finally

Sri Lanka has peace. We also

have a high literacy rate,

well-qualified people with

an understanding of English,

flexibility, a developing

infrastructure and a strategic

location,” he says.

“The financial sector will

be of immense help to the

development of Sri Lanka,”

de Alwis adds. Among the

fastest growing areas in the fi-

nancial sector is the insurance

market. There are currently 19

insurance companies in the

country and, according to the

Insurance Association of Sri

Lanka, in the first half of 2010

the general insurance sector

grew by 6.6%. The life insur-

ance segment, although still

in its infancy, grew by 14% to

June this year, compared with

the same period last year.

SLIC, the country’s larg-

est insurer, collected 9.5 bil-

lion rupees (£53m) in gross

written premiums in the nine

months to September, com-

pared with 8.5 billion rupees

for the full year 2009. The

company, rated AA- by Fitch

and AAA by RAM Ratings,

was awarded Insurance Com-

pany of the Year, Sri Lanka at

the World Finance Insurance

Awards 2010.

Sri Lankan insurers ex-

pect motor policies to grow

rapidly following the slashing

of import duties on cars. Life

insurance is also a burgeon-

ing market: SLIC says that

its life business is growing at

around 24% this year and is

expected to be worth 6 bil-

lion rupees in 2010, up from

4.8bn last year.

“There is tremendous

potential in two segments:

general insurance covering

motor, fire, and workmen’s

compensation, and life

insurance,” says de Alwis.

The market for life insur-

ance is currently small; less

than 10% of the population

has life cover, but de Alwis

expects this to grow signifi-

cantly. “We’ve got a popula-

tion of 20.5 million. With

average incomes projected

to rise from $2,000 to about

$4,000 in the next few years,

there is so much potential. As

a national insurer our task will

be to see how best we can

reach the masses with afford-

able life and disability cover,”

he says.

Reaching the masses

means going beyond the cap-

ital Colombo, home to most

existing policyholders, to the

regions, including the war-

ravaged north and east. De

Alwis says it will be a process

of education. “We will have to

explain the importance of [life

insurance], talk to people in

person because there are so

many parameters.”

MoTor And Life LeAd An inSurAnCe BooM

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Champions of changebusiness A dynamic private sector stands to capitalise on the economy’s rapid rejuvenation. Those in strategic sectors are likely to prosper first.

Despite the challenges that a war economy poses, Sri Lanka’s private sector has proved to be an engine of

growth, driving GDP rises of 5-6% even through the war years, while account-ing for an impressive 75-80% of GDP. The end of the war has created a new mood of optimism, and the country’s leading groups are moving to capitalise on the economic upswing. Those with interests in strategic sectors will be the first off the blocks.

Sri Lanka’s private-sector landscape has been dominated by a handful of dy-namic conglomerates over the past few years. Groups such as John Keells Hold-ings, Hayleys and Aitken Spence have invested in strategic diversification, al-lowing them to hold on to market share despite lowered profitability in one or more business sectors. For both John Keells and Aitken Spence, earnings from the hospitality sector may have taken a beating in 2009, but they are already ex-periencing an upsurge in profits in 2010 – a watershed year, in which visitor num-bers have doubled.

A leading Sri Lankan blue chip, and one of the prized scripts on the Co-lombo Stock Exchange, John Keells has maintained its leadership role through strategic diversification into sectors such as food and beverage, transport, leisure, IT, BPO, financial services, property development, plantations and investor services. It is already ex-periencing strong post-war growth in its leisure, consumer foods and retail, financial services and transportation segments, allowing the group to record a 56% growth in after-tax profits for the quarter ended June 30, compared with the same period in 2009.

To capitalise on the tourism boom, the com-pany has commenced the construction of a 200-room hotel on the island’s west coast, while an-other 150-room property will be unveiled during the 2011/12 winter season.

“Based on where we are now and the poten-tial of Sri Lanka over the next 10 years, we be-lieve that we can become regional leaders using Sri Lanka as the base,” says Ajit Gunewardene, John Keells’ Deputy Chairman. “It’s a great op-portunity, because it’s almost a blank canvas that we’ve got here. I don’t think there are many other countries, especially in this region, that will give you that potential.”

Chairman Susantha Ratnayake echoes Gunewardena’s optimism: “If you go back a year

or so, when the country was in some level of turmoil, we were looking at regional expansion. However, since May last year, we’ve decided that we would be focusing all our efforts on Sri Lanka, to have a Sri Lanka-centric strategy. We believe that in a post-war scenario our growth can be ex-ponential if we focus it right in Sri Lanka.”

Another diversified blue-chip group, Aitken Spence, with operations in six countries, is lead-ing innovation in hotels, travel, maritime ser-vices, logistics solutions and power generation. The conglomerate also has significant interests in plantations, insurance, financial services, IT, printing and garments. It is the country’s largest resort operator with almost 800 rooms; beyond Sri Lanka, Aitken Spence is the biggest interna-tional hotel operator in the Maldives and man-ages five hotels in Oman and India.

Key projects rolled out this year against the backdrop of rising business confidence include

the conversion of the Neptune Hotel, the group’s first resort property, into a 64-room specialised ayurveda and wellness resort, due to open in December, along with the acquisition of the 94-room Ramada Resort, which will also undergo refurbishment. A 100-acre beachfront property at Nilaveli in the east is being fast-tracked along with plans for a hotel in Jaffna. Aitken Spence’s most recent triumph was being awarded the prized $450m contract to build and operate a new deep-water container terminal in Colombo port, alongside China Merchant Holdings.

“Apart from this, we are looking at agriculture in the north and east; we are thinking of putting up a winery,” says J. M. S. Brito, Aitken Spence’s Deputy Chairman and Managing Director. “Agri-culture and fisheries, and inland fisheries will be new for us. We are also looking at working with British companies in the BPO/KPO sector. For in-stance, all the legal work for Aviva is being done

by us. Another area that we’re looking at is retirement homes. The British find it expensive to live there, so they can come and live here for six months.”

Sri Lanka’s financial sector is poised to play a key role in the eco-nomic revival. Given the health of the local financial institutions coupled with an IT-savvy workforce, banking chiefs are striving to position Sri Lan-ka as a financial hub for the region.

Institutions such as People’s Bank are laying emphasis on their micro-finance and micro credit operations, which will be the pivot on which SMEs in the north and east consolidate. Sri Lanka’s commercial banks are en-hancing market share through new products, high quality service and new investments in technology.

Lanka ORIX Leasing Company, a leading financial-services conglomer-ate and one of the country’s top 10 elite corporate entities in terms of market capitalisation, is an increasingly diver-sified organization, having moved con-vincingly into the leisure and power sectors. The company has acquired a cluster of four hotels, rendering LOLC the largest hotel chain on the southern coast. Pre-empting rapid growth in the power sector, LOLC announced its de-cision to invest in 14 mini-hydropower projects to be built at a cost of $30m, along with a 4-megawatt dendro power plant, fuelled by biomass.

Furthermore, its microfinance operation has received Central Bank approval as the only mi-cro grade company with equity stake from a for-eign government, FMO, the Development Bank of the Netherlands. LOLC has also acquired Sri Lanka’s largest agricultural implements com-pany. The firm has achieved strategic vertical integration inter-linking its businesses.

Kapila Jayawardena, Managing Director and CEO of LOLC, says: “If you walk into an LOLC branch, you can do your banking, you can do your insurance, you can get stock broking advice and you can finance your agricultural equipment, so it’s a complete solutions provider and we are the fastest growing financial institution in terms of our footprint in Sri Lanka. Every month we open four mini-branches in rural areas because we have an agreement with Sri Lanka Post Offices to open a two-man window, and there are 6,000 post offices in the country.”

Monday, November 8, 20108 Sri Lanka

The twin-tower Colombo World Trade Center is a business hub for the city.

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www.heritancehotels .comwww.aitkenspencehotels.com

Monday, November 8, 2010 Sri Lanka 9

eXPLore Cultured, compactand utterly captivating, Sri Lanka is Asia’s best-kept secret. Look again at the Indian Ocean. By debbie Ward

Rediscoverthe riches of Sri Lanka

If a group of theme park designers was set the challenge of creating a compact tourist destination from scratch it would probably end up with a place not unlike Sri

Lanka. It seems only logical there would be pris-tine, palm-fringed beaches lining the coast and a cluster of cultural attractions in the centre. Blue-prints would no doubt show zones stuffed with exotic wildlife which visitors could encounter on safari. The residents would, of course, be re-cruited for their friendliness.

Despite boasting such pocket-sized perfec-tion, the real-life version of this holiday destina-tion has so far been experienced by a relatively modest slice of the world’s travellers. Now that’s set to change. The civil war which rumbled on for decades finally ended last year and the coun-

Next, as the plantations turn to lush jungle, is Sigiriya, Sri Lanka’s answer to Uluru. This 200-metre-high rock is topped with the remains of a fifth-century king’s fortress. Spectacular views await those who manage the 2,000-odd steps, passing erotic frescoes and climbing be-tween a pair of carved lion’s paws. Close by at Dambulla atmospheric cave temples contain

hundreds of murals and Buddha statues.

Two former capitals, now im-portant archaeological and reli-gious sites, complete Sri Lanka’s cultural cluster. Medieval Polon-naruwa, a few miles east of Sigiriya, includes three giant rock-carved Buddhas. To the northwest, often missed by time-conscious tour-ists, is Anuradhapura. This city was founded in the third century around a cutting said to be from the tree under which Buddha received enlightenment. The living relic still thrives today and is a major site of pilgrimage.

South of the cultural and jungle region, roads climb and twist into the cooler hill country of Nuwara Eliya where scenic tea plan-tations and British colonial accommodation are the draw. The Dutch influence on the country can be seen at historic Galle, set on a stretch of southern coast favoured by Sri Lanka’s famous stilt fishermen. This UNESCO-listed walled city will be familiar to cricket fans as a venue for in-ternational matches. It also hosts an acclaimed annual literary festival.

Twitchers will know Sri Lanka as a birdlife hotspot but the country is set to restore its repu-tation for big-game safaris. Elephant sightings have always been probable but with the coun-try’s two biggest national parks – Yala and newly de-mined Wilpattu – re-accessible, leopards too are back on the tick-list. In fact Sri Lanka is one of the most reliable places in the world to see the cat. Despite the lure of all these riches some would-be visitors are still succumbing to nerves, Godahewa believes. “I think many people still don’t understand that this country has come back to normalcy, the positive side has not been communicated well enough yet. A lot of people think that even though the war is over there must still be problems, but the truth is very different. Actually, from the 18th of May 2008 to date this country has not reported a single incident related to terrorism. How many countries can say that?”

International hotel groups seem confident.

Among the first to look to Sri Lanka are upmar-ket Anantara and Six Senses which recently an-nounced projects on the popular Southwest coast. Development has also started in the East. Previously considered too near the Tamil Tigers’ heartland for comfort, this coast has been largely the preserve of backpackers and surfers who hit the waves at Arugam Bay. Not only does the east boast some pristine beaches, it experiences a dif-ferent monsoon season to the west, seeing its best weather during our summer.

In a couple of years, it seems, not only will more of us be enjoying Sri Lanka, we’ll have the opportunity to do so year-round.

Kuoni’s 13-day escorted Sri Lanka Panorama

includes Colombo, Pinnawela elephant orphan-

age, Sigiriya, Dambulla, Polonnaruwa, Anurad-

hapura, Kandy, Nuwara Eliya, Galle and Yala. It

costs from £1,852 per person, on a mixed board

basis, departing Jan. 3. A private version with

driver-guide is available, as are beach exten-

sions. www.kuoni.co.uk

try that previously earned Foreign Office travel advisories has instead been picking up glowing recommendations. Sri Lanka topped a coveted New York Times list of places to visit in 2010 and was runner-up in a similar National Geographic countdown.

Some have already rushed to see what they’ve been missing. In the first six months of 2010 alone Sri Lanka saw a 46% jump in overseas visitors.

“Before the problems started, Sri Lanka was a thriving tourist destination,” says chairman of Sri Lanka Tourism, Dr. Nalaka Godahewa. “I re-member when we were in school 30 years ago, we used to travel by train along the coastal areas and we found beaches full of tourists. Then came the war and for 30 long years tourism didn’t grow. However, now the tourism boom will start.”

As its star rises, Sri Lanka is busy improving its infrastructure. The island’s key attractions on the other hand have been around for centuries.

Most visitors looking for something beyond affordable winter sun will take the classic tour-ing route which bisects the middle of the country and links several of Sri Lanka’s eight UNESCO World Heritage Sites. The first stop is typically the city of Kandy, home to the revered Temple of the Tooth. Devotees, school children and tour-ists bearing lotus blossoms and incense crowd here for the daily unveiling of the multi-layered casket said to contain a relic of Buddha.

The wild beaches of the south are likely to be yours for the day; the island’s cool and hilly interior; young monks at the Temple of the Tooth in Kandy.

Colombo’s gangaramaya Temple offers a tranquil escape.

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hoteLs Boutique hotels aimed at the discerning traveller are leading the push upmarket. And many more are planned. By debbie Ward

A luxury revolution

W hile mauritius and the mal-dives have long been associated with luxury hideaways, Sri Lanka has been something of a poor re-

lation with just a handful of highlight hotels ca-tering for the discerning traveller.

In recent years, however, the island has been undergoing something of a luxury revolution and it is boutique properties that are leading the way.

Among the first of the compact newcomers was romantic Aditya at Hikkaduwa near Galle

Surf’S up!

off, one tousle-haired surfer after another

raved to the assembled surfing media

about “A-Bay.” Even King Neptune was

smiling if a week of quality waves was

any guide.

“What a place for a contest,” Aussie

surfer Drew Courtney told Transworld

Surf magazine. “The waves line up su-

perbly on this point – it’s like a machine

peeling through, with section after

section standing up and allowing major

moves. I love this place: the people, the

wildlife, everything about Sri Lanka.”

Plus ça change. The ASP media

circus marked the moment when world

surfing fell in love with Sri Lanka all over

again. In the hazy dawn of surf-travel in

the 70s, Australian wave-riders returned

from the hippy trail with fabulous tales

from the Indian Ocean. Waves were con-

sistent and empty, the sea warm enough

to surf in boardshorts year-round. There

was cheap accommodation behind

picture-postcard tropical beaches,

jungles where leopards, monkeys and

crocodiles roamed – Arugam Bay sits just

north of the famous Yala National Park –

and genuine gentle hospitality from the

locals. Surf nirvana in other words.

That paradise lay at the end of a long

lonely road just added to the adventure.

Manoj Gunawardena, CEO of Sri

Lankan Airlines, sponsor of the ASP

event, says: “To get to Arugam Bay you

have to go to a place called Siyambal-

anduwa. Jungle stretches from there for

a couple of miles and you can see wild

elephants along the way.”

Not many of those in Newquay. Small

wonder that surfers are rediscovering

paradise. —James Stewart

few fishermen put out to sea from

Arugam Bay at the end of June.

They awoke on the last Friday of

the month to discover a large ground-

swell pumping into the east coast bay.

Blue-green swell lines sped towards

the shore, peeling flawlessly off a point

as waves that were twice head-height

and spitting out barrels that collapsed

in clouds of dazzlingly white foam. Bad

news for fishermen, pure perfection for

surfers in the final of the Association of

Surfing Professionals’ Six-Star Sri Lankan

Airlines Pro.

While this may have been the inau-

gural visit to Sri Lanka for world surfing’s

professional body, it’s a fair guess it

won’t be the last. Over the course of the

week-long qualifier for a World Title surf-

with its giant suites and anytime-dining concept. This year the resort of Wadduwa debuted the con-temporary Serene Pavilions, a 12-villa property with butler service, and neighbouring Reef where Indian Campaign furniture creates a retro feel.

Sri Lanka doesn’t do bling. Higher-end prop-erties allow their setting to wow, with heritage and environment used to great effect.

A century and a half of British rule left the island peppered with colonial accommodation which has been adapted for tourist use, particu-

larly around the highland tea estates. Even Co-lombo’s international airport now boasts a heri-tage bolthole – 15 minutes from the terminals you can play croquet on the lawn at The Wallaw-wa, a converted 18th-century mansion.

Best known among several environmentally conscious hotels is multi-award-winning Heri-tance Kandalama. Designed by celebrated archi-tect Geoffrey Bawa, it is set unobtrusively into a tree-covered rock face and maximises natural light and panoramic views to Sigiriya.

Kandalama is operated by Aitken Spence, Sri Lanka’s largest resort chain and among those stepping up the island’s luxury offer now the war is over. The company is developing a 100-acre upscale resort on the formerly no-go east coast and has just announced a joint venture with Six Senses to create a resort, spa and residential vil-las on the south coast and a nearby island.

Five of the best CeyLon TeA TrAiLS Some 4,000 feet above sea level in central Sri Lanka’s lush Bogawantalawa Valley, four colonial tea planters’ bungalows of-fer the island’s most unique and authentic accommodation. Surrounded by rolling green hills of spectacular tea estate, the Tea Trails offer an exclusive escape of but-ler service and gourmet cuisine. Charm-ing guide Andrew Taylor offers invaluable insight into the workings of the estate and scenic walking trails link the properties af-fording magical views. www.teatrails.comHeriTAnCe AHungALLA

A second property from the upscale Heri-tance collection, the Ahungalla delivers on the brand’s promise of architectural distinction and environmental consideration. The hotel is anoth-er masterpiece of the celebrated Geoffrey Bawa –blending his creations into nature was a signa-ture. The hotel appears to rise from the sea, and the horizon sits beyond the edge of the spectacu-lar infinity pool. This is a collection of exclusive properties that understands the needs of visitors. www.heritancehotels.com/ahungallaMounT LAviniA HoTeL

Few hotels can match the Mount Lavinia’s heri-tage. Set on the golden coast of Colombo itself, the property was the majestic weekend retreat of British Governor Sir Thomas Maitland in 1806. Legend has it that ‘King Tom’ would engage in ro-mantic trysts at the property with an intoxicating mestizo dancer by the name of Lavinia, a tunnel slipping her unnoticed into his wine cellar. Today, the 226-room hotel – including a wonderful Gov-ernor’s Suite – retains an old-world charm and imperial elegance. www.mountlaviniahotel.comeden reSorT & SpA

The Eden Resort & Spa boasts an enviable loca-tion on the pristine southwest coast, with five acres of tropical gardens fronting the wonderful Beruwela Beach. The five-star, 158-room property brings a new range of deluxe rooms (aptly labelled Paradise Suites) offering butler service, a pillow menu and personal coffee machines, among other accoutrements aimed at the discerning traveller.www.confifihotels.com/edenresortandspaJeTWing viL uyAnA

Jetwing’s most ambitious project to date is locat-ed with 5km of spectacular Sigiriya, the island’s celebrated 5th-century rock fortress. High-end bungalows have been built over an intricate wet-land system to create a peaceful, private and tran-quil environment in which nature (and attention to detail) is king. A member of the exclusive Small Luxury Hotels of the World collection, the Vil Uy-ana sits amid the island’s ‘cultural triangle’. www.jetwinghotels.com/jetwingviluyana

few hotels can match the romance and old-world charm of Colombo’s Mount Lavinia.

The Sri Lankan Airlines pro in Arugam Bay.

Monday, November 8, 201010 Sri Lanka

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Monday, November 8, 2010 Sri Lanka 11

nature Sri Lanka offers 12 wildlife-rich national parks, and close encounters with its own ‘big five’. By debbie Ward

A walk on the wild side

Air TAxiS reTurn From December, and in time for the busy winter tourist season, Sri Lankan Airlines will re-launch its much-loved domestic ‘floatplane’ service, Sri Lankan Air Taxi.

Twin Otter planes with seating for 13 pas-sengers will take off and land on lakes, lagoons & reservoirs across the island adding a breath-taking dimension to domestic travel and en-abling visitors to reach most parts of the island within 40 minutes – a soothing antidote to the three-hour climb required currently to reach Kandy, the island’s medieval hill capital.

Scheduled flights connecting with Sri Lankan Airlines international arrivals will oper-ate daily, with charter and scenic flights also available. The low-flying aircraft will afford panoramic views of the island’s palm-fringed beaches, lush tropical forests, waterfalls, and mist-swathed mountains.

“It’s an incredible experience,” says Manoj Gunawardena, CEO of Sri Lankan Airlines, “coming through plantations and landing in Nuwara Eliya or on the Castlereagh Reservoir.”

Daily scheduled flights to Bentota and Koggala will provide convenient transfers to popular locations and resorts in the south and charter flights will be available to Negombo, Bentota, Koggala, Dikwella, Tissamaharama, Kandy, Nuwara Eliya, Dambulla and Ampara.

The national carrier operates a direct ser-vice from the UK to Colombo 9 times a week, and four via Male in the Maldives. Flights de-part from London Heathrow, Terminal 4.

B acklit by dawn, a pack of jack-als rises from the dusty ground. The animals yawn and arch their backs to stretch out their limbs. Behind them

an elephant flings its trunk upwards and pulls its mouth wide open. They troop groggily past my jeep, heading to resume their roles on the great wildlife set that is Yala National Park. It’s a first-class animal encounter and I haven’t even entered the gate yet.

Yala, in Sri Lanka’s southeast corner, is a jewel among the coun-try’s myriad animal at-tractions. During the lat-ter years of the civil war, a Foreign Office advisory effectively closed the park to British tourists while others were shut by the Sri Lankan gov-ernment. All the coun-try’s reserves have now reopened and tourists are in for a treat.

For those who think of safari in terms of browns and khakis, Sri Lan-ka’s version can be a little startling. Peacocks dec-orate the treetops, their tails trailing like Christ-mas tinsel, or flick open their fans on dusty tracks. There are flitting green bee-eaters and scenic wa-terholes where crocodiles bask beside pink lilies. You may even, as I did, spot day-tripping Buddhist monks, their saffron robes fluttering through the bars of an open-backed bus.

Sri Lanka claims to be the easiest and most rewarding safari destination outside Africa and it’s not hard to see why. There are 12 wildlife-rich national parks and 52 sanctuaries on a land mass the size of Ireland.

The top draw is leopards and Yala boasts among the highest densities of the big cat in the world. On my own day in the park I’m not disap-pointed. We’ve been scanning the rocky outcrops

the predators favour but the feeling I’m being watched causes me to turn. A couple of metres away, on open grass, a young leopard is keeping pace with our jeep. I tap

my driver and he hits the brakes, the leopard hits the deck and for long minutes we all watch each other. “Take a photo,” my driver implores but my arms have turned to jelly. I feel like a sparrow be-ing sized up by a housecat.

Leopards join elephants, sloth bears, blue whales and sperm whales in what Sri Lanka is call-ing its own ‘Big Five’. The two aquatic stars in the line-up were only recently found to migrate past the coast and, handily for tourists, the best place to see them is not far from the Unesco-listed his-toric city of Galle. Whale-watching tours run out of Mirissa and the best sightings require an early start, arriving at the port as local fishermen are leaving, balancing fresh tuna on their bicycles.

It’s 13 miles out to the deep, whale-friendly stretch of water which sits between two shipping lanes and between December and March sightings

The opportunity to see leopards and elephants is boosting the island’s appeal.

are reliable. On the boat I join from Mirissa Water-sports, the captain, almost childlike in his own ex-citement, briefs a few passengers at a time, spread-ing maps and pictures and ignoring his mobile as it bursts into whale song in his pocket.

Flying fish buzz across the water then a huge back breaks the surface, appearing like an island on which we might land. The blue whale sighs out a jet of water and we ‘ooh’ and ‘ahh’ like we’re at a fireworks display as it upends and flips its huge fluke. This time I get my photo.

Sri Lanka’s big fiveLeopArd Yala boasts among the highest densi-ties in the world. Another good bet is Wilpattu on the Northwest coast, relatively close to the popu-lar beach resort of Negombo and Colombo’s in-ternational airport. May is the top spotting time. SLoTH BeAr The most elusive of Sri Lanka’s big five. Again, Yala and Wilpattu are the top spots. June and July are the best times. eLepHAnT Many parks have elephants but they are best viewed in southerly Uda Walawe. Minner-iya, on the cultural touring route between Sigiriya

and Polonnaruwa, is another option. In the dry season (August and September), ‘the gathering’ sees groups of up to 300 converge around shrink-ing waterholes. BLue WHALe And SperM WHALe Between December and April, Mirissa is the best departure point for sighting both. Off Kalpitiya on the west coast is another hotspot for sperm whales. Other Sri Lankan wildlife includes giant squir-rels, porcupines, anteaters, crocodiles, barking deer and monkeys. Birdlife is also spectacular with Unesco-listed Sinharaja Rainforest, Kumana national park and the Talangama Wetlands near Colombo among key viewing spots. Operators featuring Sri Lanka safaris include Exo-

dus, Indus Tours, Jetwing Eco Holidays, Kuoni,

Reef and Rainforest and Wildlife Worldwide. Indus

Tours’ eight-day Leopard Safari costs from £1,190.

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Monday, November 8, 201012 Sri Lanka

trade Part of the blueprint for economic recovery, Colombo aims to recoup lost markets and build new trade relationships to revitalize exports. By dipti Kotian

Trade tsar’s strategic plan to drive export growth

TASTe of CeyLon

The words ‘Ceylon’ and ‘Tea’ go

together like the proverbial horse

and carriage. For tea has been the

country’s most important export crop ever

since the 1860s, when British planters in-

troduced tea cultivation as a substitute for

the coffee and cinchona grown previously.

It remains so to this day, with Sri

Lanka still among the world’s leading tea

exporters – certainly in terms of quality

and, in good years, quantity as well. The

tea industry brings in over a billion dollars

a year in foreign currency and provides

employment to around 1.5 million people,

an unusually high proportion are women.

Sri Lanka’s climate and topography

proved ideal for the production of high

quality teas, combining tropical sunshine,

abundant rainfall, and – in its central high-

lands – good drainage and cool tempera-

tures. But growing top quality teas – and a

century ago Ceylon White Tea, composed

uniquely of high-grown ‘silver tips’, was

constantly breaking price records at auc-

tion – is a labour of love, especially in the

rugged hill country around Nuwara Eliya.

That can still be seen in the gold-

green slopes of a well-maintained planta-

tion, the tea bushes pruned so carefully

that the ensemble resembles topiary,

while the golden blush of new leaf and

bud (which provides both the flavour and

healthy enzymes) shimmers in the clear

light some 6,000 feet above sea level. This

effect is the result

of hand-picking

and pruning, a

highly skilled and

labour-intensive

process compared

to the mechanised

CTC (cut, twist,

crush) technique

predominant

among newer pro-

ducers in Africa.

For a hundred years Ceylon tea was

synonymous with quality. Although it still

fetches a premium over Indian or African

competitors, many regret it has lost much

of its original cachet.

But now some are battling to reinstate

Ceylon Tea as a premium brand by main-

taining its purity as a ‘single origin’ tea.

With exports making up 20% of the island’s GDP of $43 billion, Janaka Ratnayake, left, the energetic chairman of the Export Development Board, has his work cut out. “If the country is to achieve the pro-jected economic growth of

8% by 2015, exports have to grow from $8bn cur-rently to $15bn,” he says.

Sounds formidable, but Ratnayake believes it’s doable and has just put the finishing touches to an aggressive five-year strategic plan designed to drive the growth of key exports.

Export revenues were down by 12.9% in 2009, a result of negative growth in the high-performance categories of apparel and tea which account for more than 60% of the total. Provi-sional figures to August this year show an almost 10% jump, but with 80% of the turnover coming from just seven products, much depends on tra-ditional markets’ sustained recovery from the economic downturn.

Apparel, Sri Lanka’s number one export, pulls in about $3.2bn. Declining demand from two ma-jor markets, the US and the EU, has turned around with 2010 registering a positive 6% rise. However, garment exporters are bracing themselves for yet another challenge. Concessions under the Gener-alised System of Preferences (GSP+) that allowed Sri Lankan imports into EU and UK markets tax-free were withdrawn in August.

While industry sources believe it’s early days to say how buyers will react, Ratnayake is not too worried. “Apparel majors like Brandix and MAS and many SMEs cater to top high-street brands. Quality-conscious labels like Marks & Spencer, Gap, NEXT or Victoria’s Secret are unlikely to change suppliers over a minor price elevation,” he says, emphasising the importance of initia-tives like “Garments without Guilt” in growing and retaining markets in the face of possible price competition. The positioning as an ethi-cal apparel sourcing destination could not have come at a better time.

Value addition is the name of the game and

Ratnayake says the Tea Board and the Spice Council are trying to prosper in the interna-tional market by leveraging the uniqueness and quality of their products without compromising on price. The erosion of traditional markets se-duced by cheaper mixed-tea varieties (CTC) has made it increasingly hard for superior quality Sri Lankan tea to hold on to market share, with ex-ports declining 19% in the first half of 2009.

“Good things don’t come cheap,” counters Hasitha De Alwis, Promotions Director at the Sri Lanka Tea Board. “In Middle Eastern, Gulf and North African markets Sri Lankan tea sells at far higher prices than mass produced CTC varieties.”

With 45% of all tea exports in small con-sumer packs the branding of Ceylon tea (Ceylon resonates with buyers more than Sri Lanka does, and has the advantage of time-honoured brand equity) is high on the Tea Board’s agenda.

Investments in R&D and branding are what the Spice industry also needs with an aggressive export target of $1bn by 2020. Cinnamon, which accounts for 64% of the island’s spice exports, is the definitive jewel in the Spice Council’s prod-uct portfolio.

“Other countries pass off cassia as cinna-mon when in fact 90% of the authentic cinnamon grows in Sri Lanka,” says Council chairman, D. A. Perera. “Sri Lanka has lost a lot in the past by ex-porting spices in bulk when value addition can go up as high as 300%.”

Ratnayake says efforts are on the anvil to set up processing centers making essential oils and oleoresins to Western specifications and special incentives are on offer to growers of Vetiver, Pa-tchouli and Palmarosa, sought after by perfume makers.

Fisheries, ICT and BPO are high-potential sectors the EDB is keen to mine. Surprising trade pundits, IT and BPO exports happened to be the only one reg-istering positive growth in 2009 and Ratnayake has identified outsourcing IT services as a thrust area in his strategic plan.

Ratnayake acknowledges that the concen-tration of exports on a few markets is a chal-lenge. “Nearly 67% of exports are absorbed by only nine countries. Exploring new markets and focusing on developing low growth but high po-tential products and services has to be a priority going forward.”

The island’s climate and topography are ideal for the production of high-quality tea.