By Skandha Gunasekara
In spite of the many predictions made of a doom and gloom scenario for the country’s economy, particularly the tourism industry, due to the Easter Sunday terror attacks that sent shockwaves across the island, experts attested that Sri Lanka’s economy as a whole would not be too drastically affected in the long run.
Days after the bombings, Minister of Finance Mangala Samaraweera told reporters that the tourism sector would be the worst-affected and that the Government anticipated a 30% drop in tourist arrivals which amounts to a loss of $ 1.5 billion. The Finance Minister said that it would take at least two years for the country to recover.
However, Central Bank of Sri Lanka former Deputy Governor and senior economist W.A. Wijewardena said he does not expect the negative impact on the tourism industry to last for an extended period. He pointed out that Sri Lanka had been through similar incidents in the past too.
“Many people are overestimating the impact on the tourism industry. Even after the Central Bank bombing in 1996, the tourism sector recovered substantially within two to three months,” he said.
Country will pick up in the long run
Wijewardena went on to note that tourism was still a small segment and would not result in any major loss to the economy.
“In Sri Lanka’s case, tourism contributes less than 1% to our GPD. It’s a very small sector and the value added amounts to about 30%. So, the actual loss to the economy is quite small when compared to any other major industry in the country,” he explained, adding that when considering foreign direct investments (FDIs), it was crucial the Government clamped down on further terrorist activities and strengthened national security.
“It all depends on whether the Government would be able to restore the confidence of the investors. And this depends on whether the perpetrators would be brought to justice as quickly as possible, so that the investors would have the confidence in the country’s stability. Other than that, there won’t be any long-term impact on the economy from this particular terrorist attack on Sri Lanka.”
Concerning the future of the rupee, Wijewardena said the terror attack would not have an impact on the rupee.
“The rupee’s destiny will not be affected by this attack, but will be determined by the country’s inability to have enough foreign exchange earnings to make its foreign exchange commitments, and for that, the country has to borrow money in the short run. But in the long run, the country must have a programme to increase its tourist earnings, earnings on exports, services, and also remittances the country receives.
Once it happens, it will be able to stabilise the rupee. The attack has nothing to do with the rupee,” he confirmed.
Meanwhile, University of Colombo Professor of Economics Sirimal Abeyratne, while accepting that tourism would in fact take the hardest hit, expressed confidence in Sri Lanka’s tourism sector bouncing back.
While noting that Sri Lanka faced a disadvantage in this scenario as many countries had issued travel warnings on visiting the island, he said that many other countries too had faced terrorist attacks but picked up soon after.
“Sri Lanka is not the only country; many other countries in the world face terrorist threats and have been attacked. Sri Lanka is not alone in this. One thing we can do is learn how the other countries have managed to sustain their businesses and industries after terror attacks. However, one disadvantage we have is countries issuing travel warning against us, but when terror attacks happen in those countries, there are no travel warnings from our part of the world,” Abeyratne said.
He asserted that the travel warnings on Sri Lanka and security lapses had a far greater impact on the economy than the attack itself.
“It’s important to understand that it was not necessarily the blast or the attack that will damage the economy; the more severe issue is the international community perceiving that we have a problem with our security arrangements. Security lapses have a far bigger impact on the economy than the attack itself. One important thing we can do is improving our security arrangements to show the world that we are a secure nation,” he stressed.
Nevertheless, he said that Sri Lanka tourism would improve in the coming months and the economy would not be too affected, as some have claimed, if much-needed policy reforms are carried out.
“I don’t think this is the end of the tourism industry – it will bounce back. We have always been a resilient country against these kinds of situations considering our history. The impact on the economy will not last too long – maybe in a few weeks or months, things would return to normalcy. The attack will mainly affect tourism, but I believe it will not affect the economy as a whole. However, in other areas (of concern) the issue is not security concerns but our policy reform process, which we have to improve. That has been the major bottleneck constraining our economic performance for many years,” Abeyratne concluded.
Need for sound policy reformations
Ceylon Chamber of Commerce (CCC) Chairperson Rajendra Theagarajah, in a letter addressed to both President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, condemned the “failure on the part of law enforcement to prevent this attack despite being in possession of intelligence that warned of impending threats” and listed out several proposals for the Government to utilise when moving forward in the aftermath of the terror attacks.
With regard to national security, the Chamber highlighted the need for the portfolios of defence, and law and order to be “placed in the hands of those who have capacity to provide leadership to handle current and future challenges with foresight, wisdom, and devoid of political aspirations”.
The Chamber called on the Government to adopt an inclusive process that secures inputs from all stakeholders when formulating a national policy to revive major sectors of the economy such as tourism. The CCC was also quick to highlight the need to manage the perception of the country by the international community which is key for FDIs and especially tourism.
“In our efforts to recover from this situation, it is vital to inspire confidence in the people of this country as well as internationally. Such an effort, if effectively carried out, will result in our ability to reinforce the pursuit of vital targets such as attracting investment, attracting tourists and being held out as a country that has systems and processes in place to deal with vulnerability to terrorism and the resilience to overcome such threats.”
Reviving the tourism industry
The Sri Lanka Tourism Development Authority (SLTDA) was already in the process of rolling out a plan to restore the image of Sri Lanka in the eyes of the world.
SLTDA Chairman Kishu Gomes said that a public relations (PR) campaign will be launched within a week to revive the affected tourism brand of Sri Lanka.
He told The Sunday Morning that the campaign would not be limited to the usually targeted markets in the industry, but would reach a much wider scope.
“We will be running the campaign to revive the affected tourism brand, which will not be limited to the targeted markets, but would go beyond that. The perception of our country has to be corrected and a positive perception has to be built across the entire world,” Gomes said.
He said it was vital that there was no room for the world to jump into rash conclusions on the status of Sri Lanka without possessing proper and accurate knowledge and understanding.
“While we specifically focus on the targeted tourism market, it is important that we don’t leave room for the rest of the world to contemplate and make conclusions based on their level of understanding,” he elaborated.
Continuing his positivity in the recovery of the tourism sector, Gomes said that if there were no more such incidents and national security was tightened, confidence in Sri Lanka tourism would return in less than a year.
“If we consider a scenario where there will not be further trouble, attacks, or incidents, I think over a period of six months or so, we will be able to – through action, not only PR campaigns – get to a state where tourists will gain back the confidence in Sri Lanka and look at Sri Lanka for travel,” he added.
Meanwhile, the Finance Ministry along with the Central Bank is set to roll out a financial assistance package to help restore the tourism industry, The Sunday Morning learnt.
Central Bank of Sri Lanka Governor Dr. Indrajit Coomaraswamy told The Sunday Morning that the package of the Central Bank had been approved while a package from the Ministry of Finance was to be formulated and approved.
“The Central Bank package has been approved. Now we are waiting on the Finance Ministry. Once their package is also approved, we will make an announcement on the matter,” the Central Bank Governor said, adding that they expect to announce the financial assistance package for the tourism sector soon.
In spite of the many predictions made of a doom and gloom scenario for the country’s economy, particularly the tourism industry, due to the Easter Sunday terror attacks that sent shockwaves across the island, experts attested that Sri Lanka’s economy as a whole would not be too drastically affected in the long run.
Days after the bombings, Minister of Finance Mangala Samaraweera told reporters that the tourism sector would be the worst-affected and that the Government anticipated a 30% drop in tourist arrivals which amounts to a loss of $ 1.5 billion. The Finance Minister said that it would take at least two years for the country to recover.
However, Central Bank of Sri Lanka former Deputy Governor and senior economist W.A. Wijewardena said he does not expect the negative impact on the tourism industry to last for an extended period. He pointed out that Sri Lanka had been through similar incidents in the past too.
“Many people are overestimating the impact on the tourism industry. Even after the Central Bank bombing in 1996, the tourism sector recovered substantially within two to three months,” he said.
Country will pick up in the long run
Wijewardena went on to note that tourism was still a small segment and would not result in any major loss to the economy.
“In Sri Lanka’s case, tourism contributes less than 1% to our GPD. It’s a very small sector and the value added amounts to about 30%. So, the actual loss to the economy is quite small when compared to any other major industry in the country,” he explained, adding that when considering foreign direct investments (FDIs), it was crucial the Government clamped down on further terrorist activities and strengthened national security.
“It all depends on whether the Government would be able to restore the confidence of the investors. And this depends on whether the perpetrators would be brought to justice as quickly as possible, so that the investors would have the confidence in the country’s stability. Other than that, there won’t be any long-term impact on the economy from this particular terrorist attack on Sri Lanka.”
Concerning the future of the rupee, Wijewardena said the terror attack would not have an impact on the rupee.
“The rupee’s destiny will not be affected by this attack, but will be determined by the country’s inability to have enough foreign exchange earnings to make its foreign exchange commitments, and for that, the country has to borrow money in the short run. But in the long run, the country must have a programme to increase its tourist earnings, earnings on exports, services, and also remittances the country receives.
Once it happens, it will be able to stabilise the rupee. The attack has nothing to do with the rupee,” he confirmed.
Meanwhile, University of Colombo Professor of Economics Sirimal Abeyratne, while accepting that tourism would in fact take the hardest hit, expressed confidence in Sri Lanka’s tourism sector bouncing back.
While noting that Sri Lanka faced a disadvantage in this scenario as many countries had issued travel warnings on visiting the island, he said that many other countries too had faced terrorist attacks but picked up soon after.
“Sri Lanka is not the only country; many other countries in the world face terrorist threats and have been attacked. Sri Lanka is not alone in this. One thing we can do is learn how the other countries have managed to sustain their businesses and industries after terror attacks. However, one disadvantage we have is countries issuing travel warning against us, but when terror attacks happen in those countries, there are no travel warnings from our part of the world,” Abeyratne said.
He asserted that the travel warnings on Sri Lanka and security lapses had a far greater impact on the economy than the attack itself.
“It’s important to understand that it was not necessarily the blast or the attack that will damage the economy; the more severe issue is the international community perceiving that we have a problem with our security arrangements. Security lapses have a far bigger impact on the economy than the attack itself. One important thing we can do is improving our security arrangements to show the world that we are a secure nation,” he stressed.
Nevertheless, he said that Sri Lanka tourism would improve in the coming months and the economy would not be too affected, as some have claimed, if much-needed policy reforms are carried out.
“I don’t think this is the end of the tourism industry – it will bounce back. We have always been a resilient country against these kinds of situations considering our history. The impact on the economy will not last too long – maybe in a few weeks or months, things would return to normalcy. The attack will mainly affect tourism, but I believe it will not affect the economy as a whole. However, in other areas (of concern) the issue is not security concerns but our policy reform process, which we have to improve. That has been the major bottleneck constraining our economic performance for many years,” Abeyratne concluded.
Need for sound policy reformations
Ceylon Chamber of Commerce (CCC) Chairperson Rajendra Theagarajah, in a letter addressed to both President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe, condemned the “failure on the part of law enforcement to prevent this attack despite being in possession of intelligence that warned of impending threats” and listed out several proposals for the Government to utilise when moving forward in the aftermath of the terror attacks.
With regard to national security, the Chamber highlighted the need for the portfolios of defence, and law and order to be “placed in the hands of those who have capacity to provide leadership to handle current and future challenges with foresight, wisdom, and devoid of political aspirations”.
The Chamber called on the Government to adopt an inclusive process that secures inputs from all stakeholders when formulating a national policy to revive major sectors of the economy such as tourism. The CCC was also quick to highlight the need to manage the perception of the country by the international community which is key for FDIs and especially tourism.
“In our efforts to recover from this situation, it is vital to inspire confidence in the people of this country as well as internationally. Such an effort, if effectively carried out, will result in our ability to reinforce the pursuit of vital targets such as attracting investment, attracting tourists and being held out as a country that has systems and processes in place to deal with vulnerability to terrorism and the resilience to overcome such threats.”
Reviving the tourism industry
The Sri Lanka Tourism Development Authority (SLTDA) was already in the process of rolling out a plan to restore the image of Sri Lanka in the eyes of the world.
SLTDA Chairman Kishu Gomes said that a public relations (PR) campaign will be launched within a week to revive the affected tourism brand of Sri Lanka.
He told The Sunday Morning that the campaign would not be limited to the usually targeted markets in the industry, but would reach a much wider scope.
“We will be running the campaign to revive the affected tourism brand, which will not be limited to the targeted markets, but would go beyond that. The perception of our country has to be corrected and a positive perception has to be built across the entire world,” Gomes said.
He said it was vital that there was no room for the world to jump into rash conclusions on the status of Sri Lanka without possessing proper and accurate knowledge and understanding.
“While we specifically focus on the targeted tourism market, it is important that we don’t leave room for the rest of the world to contemplate and make conclusions based on their level of understanding,” he elaborated.
Continuing his positivity in the recovery of the tourism sector, Gomes said that if there were no more such incidents and national security was tightened, confidence in Sri Lanka tourism would return in less than a year.
“If we consider a scenario where there will not be further trouble, attacks, or incidents, I think over a period of six months or so, we will be able to – through action, not only PR campaigns – get to a state where tourists will gain back the confidence in Sri Lanka and look at Sri Lanka for travel,” he added.
Meanwhile, the Finance Ministry along with the Central Bank is set to roll out a financial assistance package to help restore the tourism industry, The Sunday Morning learnt.
Central Bank of Sri Lanka Governor Dr. Indrajit Coomaraswamy told The Sunday Morning that the package of the Central Bank had been approved while a package from the Ministry of Finance was to be formulated and approved.
“The Central Bank package has been approved. Now we are waiting on the Finance Ministry. Once their package is also approved, we will make an announcement on the matter,” the Central Bank Governor said, adding that they expect to announce the financial assistance package for the tourism sector soon.