Monday 30 August 2010

Role of Imports in Sri Lankan Economy. Interaction of Imports and Tariffs with Five Hubs of Growth - By Dr Saman Kelegama

By courtesy of www.island.lk

Address by Dr. Saman Kelegama, Executive Director, Institute of Policy Studies of Sri Lanka at the AGM of the Import Section of the Ceylon Chamber of Commerce, 3 August 2010:

"It is an honour to be the Chief Guest at the AGM of the Import Section of the Ceylon Chamber of Commerce. I thought that it will be appropriate to share some of my views of the import sector of Sri Lanka so as to identify its current role in the Sri Lankan economy and its role in the future. Accordingly, I will deal with four broad issues relevant to the import sector in Sri Lanka, viz., (1) the positioning of imports in the Sri Lankan economy, (2) imports as a value adder to the Sri Lankan economy, (3) imports as a revenue earner to the economy, and lastly, (4) imports as a growth facilitator in the economy.

Let me start with import positioning in the Sri Lankan economy. In the Sri Lankan economy today, imports (of goods) roughly amount to US$ 12 billion and exports (of goods) amount to US$ 8 billion. This roughly boils down to imports amounting to 30% of GDP and exports amounting to 20% of GDP. Basically, exports of goods finances 63% of the imports of goods. If we add remittances which amount to approximately US$ 3 billion or 7.5% of GDP, then 92% of the goods import bill is financed by goods exports and remittances. Thus, the country is in a position to support its import (goods) flows as long as the foreign reserves are in a healthy position.

If Sri Lanka could sustain its reserves above US $ 3 billion, then the country will be in a comfort zone where it could finance 3 months and above of imports. Sustaining reserves above US $ 3 billion when the import bill is escalating will be a challenge. Sri Lankan remittances in recent years have been covering the oil import bill – this is also a noteworthy feature of the import sector.

The largest source of imports is India (accounting for 25% of total imports), followed by China (includes Hong Kong). But if we consider EU as a single source, then it is the second largest source of imports to Sri Lanka and not China. Sri Lankan imports as a percentage of global imports amount to meager 0.1%.

One can note that if the Sri Lankan economy is growing above 5%, it is normally supported by growth in imports above 10%. Sri Lanka’s growth is such that it is an import-intensive growth. Take for instance, the growth of our industrial sector and services sectors – the two fast growing sectors in the economy. Industrial growth is mainly driven by export industries like ready-made garments, gems and jewellery, leather products, etc., and they are all import intensive. Two export items that grew under the India-Sri Lanka Bilateral FTA were Vanaspathi and Copper — they too were import intensive with palm oil imported for vanaspathi production and raw iron imported for copper production. In services, growth sectors like wholesale/retail trade, tourism, telecommunication, etc., all are import intensive.

In any country in the early stages of development this is what we observe, an import-intensive growth. In Sri Lanka, the import composition statistics further provides evidence of this. Consumer imports amounted to 50% of overall imports at the time of Independence. Today, they amount to only 19% of overall imports. On the other hand, intermediate goods used for industries and services that accounted only for 11% of overall imports at the time of Independence, have doubled its share to 22% of overall imports today, clearly indicating that the input of imports in Sri Lankan production has increased.

Sometimes, when there is a call for depreciation of currency by exporters there is also the concern of the impact on the import-intensive exports and import-intensive services and thus the overall growth trajectory, as imports will become more expensive. That is why calls for depreciation take time for full consideration by the policy making apparatus in this country.

These are some of the noteworthy characteristics of Sri Lanka’s import sector.

I now come to my second topic of imports as a value adder to the economy. Import liberalization can also be a source of value addition. Take for instance, assembly operation from Completely Knocked Down importations. One can import components of a motor vehicle, three wheeler or refrigerator and assemble them with some value addition to sell in the domestic market. The value addition will be small but if the operation takes place in a large scale the value addition will also be bigger. Let us now take a higher value addition case with the example of the gem and jewellery industry. There was a call in the early 1990s to liberalize the importation of gem stones. After some initial hesitation, we did liberalize, and as a result, variety and jewellery products were manufactured in Sri Lanka using a variety of stones. One can easily say that the import liberalization in this case certainly increased the value addition to the economy.

But we must note that import liberalization contributing to value addition is not straightforward. If there are competing products in the domestic market, import liberalization will not lead to value addition. In fact, import liberalization will lead to closure of industries if Sri Lankan products are not in a stage to face competition. That is why in the India-Sri Lanka Bilateral FTA (ISLFTA), all agriculture products and SMI (small and medium industries) products were kept on the negative list. Even in the SAFTA, APTA and the Pakistan-Sri Lanka Bilateral FTA (PSLFTA) those sensitive products of Sri Lanka have been put under the negative list.

Then there are cases of import liberalization for value addition where the arguments are not straightforward. In cases where Sri Lanka has a brand name like tea, the case for import liberalization is not straightforward because if import liberalization is done without a proper regulatory framework in place, import liberalization can dilute the brand name and reduce the domestic price for tea. Brand name can be diluted, for example, by mixing 10% Ceylon tea with 90% imported Indonesian tea and exporting as Ceylon tea. Tea traders will benefit, but tea manufacturers and exporters will have concerns on domestic price level and ‘Ceylon Tea’ brand name, respectively. That is why the liberalization of importation of tea has become a hotly debated topic. In such a case, value addition through imported tea should be done with supervision and extreme care. Some countries created special Export Processing Zones for enhanced supervision to get the best results from import liberalization. In cases like this, we have to be constantly vigilant on how global operations are taking place and accordingly adjust our strategy to be in line with global trends.

I now come to my third topic of imports as a source of revenue. At the time of Independence, import duties contributed revenue amounting to 6.2% of GDP, today it contributes close to 2% of GDP as revenue. Here, I am only referring to tariff revenue. When liberalizing an economy, we should not see import duties as a major source of revenue. From 1977 onwards, revenue from import duties fluctuated – from 2.27% of GDP in 1977 it increased to 4.1% of GDP in the late 1980s due to the increase in import volumes making up for the reduction in tariffs as a result of liberalizing the economy. But import duties declined to 3.3% of GDP in late 1990s and further to to 2.0% of GDP in the late 2000s. That is understandable because although the import volumes increased by the mid-1990s, WTO related tariff reduction, regional and bilateral agreements related tariff cuts further reduced revenue. For example, 1,208 product lines became duty free for India under the ISLBFTA and 102 product lines became duty free for Pakistan under the PSLFTA. It is estimated that there are 2,500 duty free lines (746 MFN duty free lines) out of the 6,500 tariff lines. Also, with the formation of BOI in 1992, duty free importation increased rapidly so much so that about 65% of imports now come under duty free or tariff free to Sri Lanka.

At the border however, it is not only tariffs that operate: there are a number of other taxes that have been imposed from time to time at the border, viz.: (a) surcharge on customs duty (was removed for most products on 1 June 2010); (b) VAT, (c) Excise Duty, (d) Commodity Export Subsidy Scheme (CESS), (f) a number of development taxes operating in the border – (1) Port and Airport Levy (PAL), (2) Social Responsibility Levy (SRL), (3) Regional Infrastructure Development Levy (RIDL), and (4) Nation Building Tax (NBT). Due to these taxes, the overall border tax contribution to revenue is close to 50%. This boils down to overall customs duties related revenue amounting to 8% of GDP. Now the question arises why are all these taxes in operation? Several factors have contributed to their evolution. One was to raise additional funds for the war at that time; second, to meet expenses on development activities – PAL, RIDL, etc.; third, to meet product development like the CESS – whether the CESS goes to the industry concerned, i.e., tea, rubber or coconut via the Consolidated Fund is another matter; and fourth, for protection on the basis of industrial lobbying – duty surcharge or CESS may have been imposed to fulfill aspiration of various lobbies.

This has made the border tariff structure highly complicated. These taxes are imposed on different tax bases at the point of importation making it further complicated. When designing the tariffs for the imports coming into Sri Lanka, there was a four band tariff structure: 2.5%, 6%, 15% and 28% and they were to cover the following: 2% for raw material, 6% for semi-processed raw material, 15% for intermediate goods, and 28% for final goods (of course there was the zero rate also). This structure has got complicated not only due to the development and other nuisance taxes, but also due to specific tariffs – extremely high duty on cigarettes, liquor, motor vehicles, etc.

The time has come to simplify this process – get rid of these ‘add-on’ taxes and keep the same level of protection by adjusting the import duties. This is a very important area that the Presidential Taxation Commission has been asked to look into and all of you will be able to see the Commission’s recommendations by early September.

My final topic is imports as a facilitator of growth: ‘Mahinda Chintana Idiri Dakma’ aims for a 8% growth rate. This can come by improving the ‘doing business’ environment in Sri Lanka and bringing down the ICOR (Incremental Capital Output Ratio) from 5 to 4 and increasing investment to 32% of GDP. Currently, investment per GDP is at 24% of GDP and thus an 8% GDP increase of investment is required —- 4% will have to come from FDI and the remaining 4% GDP increase in investment from the domestic private sector. If investment cannot meet these targets, we will have to look at a combination of consumption-led growth and investment-led growth.

Most of the consumption-led growth is import intensive. The increased sale of motor vehicles and electronic goods after the import duty was lowered was consumption-led. It is a consumption-led growth that is giving a new lease of life to the leasing industry and electronic good importers. Take for example meeting the challenge of the tourism sector — 15,000 new rooms are required by 2016. It has been estimated that the per room cost will be close to Rs.10 million, and more than 60% of this will be on import expenditure – carpeting, curtaining, air conditioning, TV, DVDs, etc.

Even investment-led growth will be import intensive. Take for instance, North-East rehabilitation and reconstruction – that will also be quite import intensive. Take for instance, the five hubs articulated in Mahinda Chintana: Aviation, Shipping, Energy, Knowledge and Commercial — which will become major growth poles. Can hubs be developed by cutting off Sri Lanka from the rest of the world ? – No, they can be developed only by further opening up the economy and welcoming imports of not only goods but also services.

Singapore is an oil hub —- does it produce any oil ? - no. But, it liberally imports oil and is engaged in value addition. Singapore, blessed by its strategic location by a major sea route for oil tankers, is one of the major energy hubs in the world for oil refining and exporting. In addition to the Singapore Petroleum Company Limited, the world’s largest energy multinational companies such as ExxonMobil, Royal Dutch Shell, Chevron, BP, Total, Marubeni and, Mitsui have invested in Singapore’s oil industry. Singapore produces 8.3 million oil barrels a day, which is nearly a 10% of world oil consumption, but 10 times Singapore’s own consumption. The point I am trying to make is that Sri Lanka need not be an oil producer to become an energy hub.

Let us look at the 5 hub areas from Sri Lanka’s regional perspective: Aviation – today close to 42 % of revenue of Sri Lankan Air Lines comes from flights to India with 90 to 100 weekly flights. Shipping – today close to 71% of transshipment in the Colombo port comes from India. Energy – today close to 35% of our oil imports comes from India – Lanka IOC. Knowledge: IT, Biotech, Nanotech, Ayurvedic and Indigenous medicine —— all these areas we share closely with India. We have to seriously take cognizance of these issues when talking about making Sri Lanka a regional hub. The point I am trying to make is that these hubs will be difficult to develop by trying to by-pass India. It is in this context that the proposed frameworks such as CEPA have to be looked at seriously.

Always there will be views in favour of and against CEPA. Even in the EU there are the Euro-files and Euro-sceptics and this is particularly seen in the UK where the debate is still going on whether UK should be a part of Euro or remain outside it. But unlike in Sri Lanka, these debates are kept at a very professional level and not at a personal level or ‘patriot versus traitor’ level, as it is sadly the case in Sri Lanka. As a result, many are reluctant to openly come out and debate the subject of CEPA.

Be that as it may, imports are going to play a vital role in the Sri Lankan economy in the coming years. Sri Lanka has to clean up the border taxes and make the import tax regime simple and transparent while strengthening the regulatory framework to ensure that dumping of unwanted imports do not take place. Imports will play a vital role as a growth generator and a value adder to the economy in the coming years."

Saturday 28 August 2010

Where Is Sri Lanka Tourism Going? And the Need to Address Many Complex Challenges Ahead - By Srilal Miththapala

By courtesy of www.thesundayleader.lk

Just over a year ago, I penned an article entitled “Sri Lanka Tourism — Quo Vadis” where I raised the issues and challenges Sri Lanka was facing in developing its tourism industry. Of course, that was during the latter stages of the war, and now after the ending of the war, there has been a dramatic turn-around of the industry. Hence it may be worthwhile re-visiting the issues.

For the last seven months that ended July 2010, arrivals are up almost 50 percent year-on-year (YOY) (341,991), with earnings also keeping pace at 69 percent growth (Quarter 2; US$ 244.5 million). The hotel and travel Colombo Stock Exchange (CSE) index increased by 199 percent for 2009. Today tourism is on everyone’s minds, and it is difficult to open a local newspaper without seeing at least one article on tourism. There are tourism “experts” cropping up at the rate of a-dime-a-dozen, as everyone tries to hitch a ride on the bandwagon.

All this euphoria gives rise to the question about whether Sri Lanka Tourism is well on the way to recovery and growth or not.

The answer is a very emphatic “yes” — in the short term. There is no doubt that pent-up demand for the destination, which has been inaccessible for many years, is driving growth. At the cost of being labeled a pessimist and a devil’s advocate, I am of the view that all this spectacular growth we see is definitely short term. In my mind, the challenge is whether these growth patterns can be translated into long-term sustainable growth.

Even if we sit back and rest on our laurels, tourism will certainly chug along growing at a leisurely pace of 5-10 percent YOY. But if we want to play catch up with our competition, grow exponentially, and propel Sri Lanka tourism to be in the forefront of our economy, then there are many complex challenges ahead.

Competition from the region with the global financial crisis now petering out, very soon our Asian neighbours, such as Thailand (who had their own series of problems), Malaysia, Singapore, Bali, etc. will get their act together and join the fray, with strong promotional campaigns strengthening their already solid differentiated brands and positions as prime tourism destinations. Singapore is already re-branding from their squeaky clean image to a relatively more exciting destination with casinos opening up. July of this year saw their highest arrivals ever for a single month at one million visitors. The product offering of these countries is far superior than what Sri Lanka can offer on a one-to-one comparison.

Hence as a first step, the ageing Sri Lanka hotel plant has to be refurbished and upgraded on the fast track. It is good to see that some 1,500 existing hotel room stock is currently under refurbishing and upgrading.

With hotel pricing being rapidly readjusted to reflect a more internationally-accepted base (we were selling at cheap war-time rates until recently), we run the risk of seeing dissatisfied clientele. When tourists begin to pay higher premium rates, their expectation levels rise, and the product offering has to be of international standard. Otherwise we may end up over-promising and under delivering.

Engine of Growth

Almost everyone talks about Sri Lanka tourism being the engine of growth and expects it to play a pivotal role in the economy. This is nothing new, and we have heard this through the past decade. However, it has never really translated into action by successive governments and never has it being given its rightful place in the national mindset.

There are many examples as to how the government pays lip service in positioning Sri Lanka tourism as the engine of growth. For example, it is now four years since the annual Presidential Awards for the Tourism Sector was set up, but never have the awards been presented by the President. In fact, it has been gradually downgraded from the initial presence of the prime minister as the chief guest, now relegated to a deputy minister to do the honors.

However, perhaps for the first time we see some signs of steps in the right direction in the consolidation of tourism along with other related subjects under one powerful ministry. The results of the exercise are still to be seen.

Tourism Earnings

Earnings from tourism amount to only about US$326.3 million annually (2009 CBSL) , having slipped down to the sixth position among Sri Lanka’s foreign exchange earning sectors. However, current trends show a dramatic increase because of the hotel rate price correction that is taking place in the market now. Given the current trend, it should easily surpass US$500 million this year.

Tourism, especially in the Asian region, has a huge multiplier effect, which has a great bearing on the livelihoods of a very large proportion of population. In a study done and quoted by Air Asia, it was revealed that while tourism earnings of Malaysia and Thailand amounted to some 6-8 percent of their respective GDPs, when the multiplier effect, which is about 12 times, is applied, the impact on GDP shoots up to close to 35 percent! In Sri Lanka, tourism accounts for less than 1 percent of the GDP, but will certainty increase with the development of tourism in the post-war scenario.

Growth Targets

Sri Lanka tourism was suddenly put into somewhat of a spin about an year ago, when the President came out with a target of 2.5 million tourists by the year 2016. We certainly do not know how this number was arrived at, and even now, no one has really questioned it. There is certainly no harm in setting out Big, Hairy, Audacious Goals (“BHAG,” to borrow from management parlance ref. James Collins & Jerry Porras).

There are two schools of management theory in goal-setting and planning. One is the conservative method of taking stock of where you are, what your resources are, what opportunities there are, etc. (SWOT Analysis) and then deciding on your goal. The other school of thought is where the analytical assessments are enhanced with and tweaked with an element of emotion and gut feeling, where the leader, using his in-depth experience, plants a much bigger and more ambitious (audacious) goal. Subsequently, the planners and operational experts somehow try to muster up sufficient resources and work out strategy and plans to achieve this goal. So for Sri Lanka, it is the latter that has taken place, and for better or worse, a 2.5 million target of tourists (or something very close to that) by 2016 is now an accepted fact among everyone in the industry.

Arrivals vs. Earnings

It is obvious that arrival figures alone do not give the correct picture. Earnings from tourism is also important, or in fact, more important than arrival numbers.
There are two ways of “skinning a cat:” — we can have 1,000 tourists spending US$50 per day bringing in US$5,000; or — we can have 50 tourists spending US$1,000 each, bringing in the same US$5,000 revenue. One needs to, therefore, take a good hard look as to where Sri Lanka tourism would like to position itself – does it have to play the numbers game, or can it go down the qualitative route. The answers are not easy.

The qualitative route calls for the attraction of the high-end market. While all of us would like to follow this strategy, one must pause to take stock of the practical realities. This will require not only high-quality hotel rooms, but it will require a whole horde of other specialised infrastructure requirements and improvements in the supply chain to cater to this discerning clientele. It will require a paradigm shift and re-positioning of the entire fabric and delivery of the tourism product and service in the country. Other than for the small boutique hotel segment, none of the more conventional higher-end properties can really cater to such top-end discerning clientele currently, given the fact that they are still catering to the mass-market segment as well.

Such a changeover may be possible over a considerable period of time, to completely shift the perception of the destination in customers’ minds, and to completely change the product offering . (Currently Sri Lanka is perceived as a value-for-money, cheaper-end destination.) The question is do we have the time?

If we need to fast track development and reach for high, sustainable growth (and BHAG’s), we will have to look at higher numbers who may be somewhat less demanding. This has been the success story of most Asian countries in the forefront of tourism development today, such as Singapore, Malaysia, Thailand, Vietnam, and Cambodia, who drive millions of visitors per year. Certainly there will still be room for the high-end boutique hotel clientele and other niche markets, but that will only constitute a part of the overall market mix and will not be the predominant segment.

The Room Requirement Controversy

There has been a lot of controversy generated by the estimates put forward for the number of rooms that need to be built to sustain 2.0-2.5 million tourists annually. Calculating and forecasting the number of rooms required is somewhat complex, because it depends on many factors. The main drivers are: occupancy, average length of stay per tourist, seasonality, and dispersion of occupancy into different regions.
Currently, the mix is predominantly weighted towards the leisure traveler seeking a beach holiday, which results in a longer average stay of 10 days per visitor. There is strong seasonality, with the months of January and February having sharp peaks, calling for larger number of rooms during this period, while the months of May and June have a very low occupancy. Currently occupancy is generally concentrated around the southern and western coastal areas where the largest number of hotel rooms is situated. If these parameters are slotted into the equation, the room requirement works out to around 50,000. Thus to achieve the 2016 target, some 35,000 more rooms will have to be built by 2016 (currently we have approximately 15,000 rooms in stock).

Assuming an average of 100 rooms per hotel, this will translate into building another 360 hotels in the next six years. Firstly, it is difficult to envisage where such vast amounts of land suitable for tourism development, to build some 300+ hotels, can be found in the country. Even if we can find the land and fast track such developments, a fully-fledged conventional hotel will take at least two years to build and commence operations. It does not take too much expertise to realise that this will be virtually impossible, and, therefore, we have to look at a different model.

After some in-depth analysis and study of emerging tourism trends, especially in the Asian region, the tourism private sector came to the conclusion that the mix of tourists should move away from dependence on “sun and sand” and attract more visitors seeking entertainment, conventions and incentives, and specialised interests. This would then drastically change the market mix of visitors to the country and reduce the average stay to around six days per tourist.

With the development of tourism in the east, seasonality will be evened out, and the tourism product will be spread more equitably around the country. When these new parameters are worked into the equation, the total room requirement reduces dramatically to a more manageable total of 28,000 odd rooms, which then calls for the development of only a further 13,000 new rooms. This is certainly a more manageable and feasible option.

Environmental Issues

In reaching for these large arrival numbers, there has to be careful thought given to environmental sustainability issues. If some 13,000 extra rooms are to be built in the country (which will translate into 100 or more new hotels) with over two million tourists unleashed annually in the country, without proper planning, there is bound to be serious environmental and sustainability issues. Such large-scale and fast track growth has to be carefully planned and managed within specific tourism zones to prevent environmental and cultural degradation. This is the reason that the private sector has suggested large-scale zonal development of tourism in building these additional 13,000 rooms on the fast track.

This will require large-scale resort developments on a planned basis in at least 4-5 designated zones in Sri Lanka. Individual hotel developments will not suffice. Such well-planned, large-scale tourist resorts can be designed to encompass sound sustainable environmental practices (e.g., common self-contained sewage disposal facilities with recycling of water, solar lighting for resort public areas, no-build green belts within resorts, etc).

Such organised and well-managed, large-scale developments contained in several designated zones will help mitigate most of the possible negative fallout of the socio-cultural and environmental aspects. Building and subsequent maintenance should be under strict environmentally-sustainable guidelines. Large numbers of small-scale development strewn all over will not be a viable proposition to maintain Sri Lanka’s environmental sustainability nor will it be sufficient to drive the exponential growth required.

Need for Outsourced Resort Development Model

In the ideal scenario, these developments should be outsourced to foreign or foreign/local collaborations (perhaps with a greater bias towards local participation) to develop, market, and operate these resorts on a BOT/PPP basis, under a special set of incentives and laws (similar to an economic investment tourism development zone). These mega BOT/PPP developers should be called upon to undertake the provision of all internal infrastructure activities within these designated resorts, including the required sustainable environment practices within government guidelines, and then attract local and foreign hotel companies to undertake individual development within these zones (already identified development areas such as Kalpitiya, Kuchcheveli, Pasikuda, Arugambay, etc., should be included).

Public–Private Sector Partnership and Tourism Reforms

For over a decade, the private sector lobbied, quite legitimately, for a greater say in the affairs of tourism , given the fact that the entire hotel infrastructure is privately owned and funded. Proposals for such a partnership between the state and private sector was formulated , debated, modified by successive governments, and finally a landmark legislation was passed unanimously in parliament in 2007, laying the framework for a private sector-public sector collaboration framework.

Four distinct entities were set up to run the affairs of Sri Lanka tourism, somewhat along the lines of a corporate structure, with both private sector-public sector board members. The private sector voluntarily offered to partially fund this exercise through the payment of a new 1 percent CESS and the Tourism Development Fund was set up under the Finance Ministry Act No. 25 of 2004. A good foundation was laid, and the new frame work began to work very satisfactorily. Multiple changes of ministers in quick succession, followed by the inevitable changes in individual chairmen of the institutions, disrupted the smooth development of this process.

The initial success of this private sector-public sector partnership was seen as a model that could be duplicated in other sectors as well, and even donor agencies such as the World Bank considered this an important example to be emulated in other developing countries.

However, there are currently far-reaching structural changes being contemplated to this success story, which will effectively limit private sector participation in the future. There has been no discussion or consultation with the private sector regarding the proposed changes. It is important, therefore, that the private sector is consulted and made a part of this evaluation and development process.

Promotion and Branding the Destination

Reaching towards large ambitious goals is certainly quite good and commendable. But at the same time, we must know exactly what Sri Lanka tourism stands for. How do we as a nation want Sri Lanka to be seen and portrayed as a tourism destination? Without deciding what our competitive advantage is and planning out our strategic position, we will not be able to sustain exponential growth targets.

At a recent public forum on tourism, the leading local exponent of positioning, Dr. Uditha Liyanage, who was very closely associated in the now defunct branding exercise for Sri Lanka tourism, very clearly brought out the need for Sri Lanka to decide what it stands for as a tourist destination or even, for that matter, as a nation.

Unless and until we have a clear idea of what Sri Lanka’s strategic position is in the market, no amount of infrastructure development, marketing, and promotions will be successful in the long term. We need to figure out who we want to be and what our competitive position is. Our deliberations a few years back revealed that the ideal positioning for Sri Lanka tourism was “Asia’s authentic and compact island providing a diverse array of natural and other attractions and experience.” From this stemmed the vital brand architecture of:

- diversity … unique
- unspoiled … traditional
- compact … authentic
- indigenous … exotic
Therefore, even if the “small miracle” has fallen by the way side, it is important that we retain this brand architecture in all our proposed developments to ensure environment sustainability.

Conclusion

Sri Lanka needs to see tourism grow rapidly and provide the impetus to drive the economy forward and play an important part in improving the livelihood of Sri Lankans.

- In doing so, there will be a price to pay, but we have to carefully minimise the impact on the environment and on our culture.

- There has to be a clear branding and positioning of Sri Lanka tourism, and these key attributes should be maintained and safeguarded in all developments that will be undertaken.

- Large-scale, mega-tourism developments, which unfortunately will be necessary, must be limited in order to carefully zone selected tourism areas in the country under strict environment planning guidelines.

- A strong private sector-public sector task force must be mandated and authorised to drive the development of Sri Lanka tourism under these guidelines.

(Srilal Miththapala is a wild life and elephant enthusiast. He is also President, Tourist Hotels Association of Sri Lanka.)
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