Foreign firms sticking with Sri Lanka

In analysing Sri Lanka’s business landscape post-Easter Sunday attacks, it is crucial that the state of affairs across multiple sectors be looked upon both individually, as well as a whole, so as to gain as informed an understanding as possible. First and foremost, it must be acknowledged that the industry impacted the most, by a considerable distance, is the tourism sector.

300-plus flights a month have been cancelled, hotel occupancy rates have whittled down to a fraction of the expected numbers, and that’s not even taking into consideration the wide array of cottage industries, small-scale businesses and third-party suppliers that have been impacted.

For Wattura Resort and Spa Front Office ManagerErandiSiriwardena, the attacks took place at the worst possible time - a mere couple of months after the soft launch of the property - but while this has seen occupancy dry up and cancellations reach unprecedented levels, she’s cautiously optimistic.

“We’re a very new hotel, and we are just at the start of our business after the pre-opening in December. We were just picking up business when the attacks happened. After that, every single reservation we had was cancelled until February 2020,” she explained.

“Prior to the attacks, we were managing quite well. We were introducing ourselves into the market and we had a PR company helping promoting us in the UK and Europe - those are our main target markets as we are pretty high-end in terms of price.

“Now, however, it’s just a wait until the travel advisories into Sri Lanka are lifted, but even then as soon as the travel advisory is lifted, we can’t expect the numbers to immediately pick up. There will have to be a new marketing campaign to promote and reposition Sri Lanka abroad, it will take another couple of months I think.”

Nevertheless, the story of Wattura, while undoubtedly echoing those of other hotels in the sector - many of which have slashed prices to attract more local clientele - is still amongst the more extreme. In fact, there have been positive murmurs emanating from the sector over recent weeks, most notably from The Hotels Association of Sri Lanka President SanathUkwatte, who at a recent public forum voiced his pleasure at a gradual upturn in the industry.

And even though the wet blanket placed on the tourism sector has been a body blow for Sri Lanka’s economic objectives - the tourism sector is the second largest earner of foreign exchange into the country after inward foreign remittances - it is crucial to acknowledge that in terms of investment opportunities in Sri Lanka, tourism is not the be-all and end-all for Sri Lanka’s FDI dreams. 

Pierre Pringiers, Chairman of Camso Loadstar, one of the leaders in solid rubber tyre manufacturing in Sri Lanka - another foreign company, like Wattura Resort and Spa, setup in Sri Lanka with the assistance of the Board of Investment - says his company hasn’t felt the post-21/4 pinch quite as hard.

“There has been minimal impact on us. Our plants were up and running fully from the next day, and it has had no impact on our exports or deliveries to customers,” stated Pringiers.

This sentiment was also echoed by Chandani Ekanayake, General Manager at AmSafeBridport, one of the world’s leading aircraft solutions providers. AmSafe has experienced delays owing to supplier complications, and added security measures following the attacks, but as a company having functioned during the war, Ekanayake said they were well equipped to navigate the speed bumps.

“There were certainly delays of course, but we managed to navigate around it, changing our working hours and delivery times. This was to ensure we met all our customer requirements,” she explained.“I think business-wise we are recovering. As a business that relies on the US and Europe as markets, I don’t see any impact in terms of volume.”

The Hirdaramani Group meanwhile, which has its fingers in several baskets such as apparel, leisure, and financial services, was ideally positioned to provide a more holistic survey of the current business climate in the country.

“In the apparel sector, yes, there’s been a slight impact due to delays in clearing of raw material imports and worker absenteeism, but in terms of customers there has been no major impact as we are primarily an export driven business. Business is pretty much back to normal now,” explained Hirdaramani Group Director Siddharth Hirdaramani. Though, as expected, his outlook on the leisure side of things wasn’t as rosy.

“The leisure sector has seen a major impact due to cancellations, as a result of the drastic drop in tourism. This has also seen a significant reduction in our bottom line for 2019.”

Focusing on the positives

In the weeks following the attacks, the increase in security around the country and the effort put in by Sri Lanka’s armed forces in cracking down on terrorist cells, cannot be understated. In a little over a month, many a report has been released reassuring the public that the country is once again safe. However, in this day and age of rampant public scepticism of not just governments, but even privately owned media, these reports have done little to allay gnawing fear and paranoia.

“It is expected that the public would be angry about this. It is a shock, it is unexpected, the question is asked ‘Why us? Why not somebody else?’ And that emotional sentiment is obvious. Naturally businesses will take some time to recover, but the Government has moved extremely quickly. Safety and security is number one. We have taken all the measures necessary to make sure that Sri Lanka is safe and secure,” State Minister of Finance EranWickramaratne told foreign media recently.

“I would say over the next two months, as things begin to normalise, the Sri Lanka tourism authorities will be going overseas and trying to explain the situation. There are countries that have taken one to three years to come out of situations like this, we are hoping to be at the shorter end of the recovery period,” he added.

The Government’s optimism is not unfounded. While it is true that the tourism sector is one of Sri Lanka’s primary foreign exchange earners bringing in nearly $ 4.4 billion in revenue for 2018, and employing some 400,000 people (direct and indirect employment), it still accounts for only roughly about 5% of the country’s gross domestic product (GDP). And despite broader public perception mirroring that of watching international stakeholders, for businesses working in Sri Lanka, the reasons they invested in the country in the first place are still there.

“We have been operating in Sri Lanka for the last 35 years, throughout the civil war, and were able to carry on our business normally throughout. Sri Lanka has a well-educated workforce, which makes it easy to bring in new technologies, processes, and systems. There are also extremely experienced managers and experts in many technical fields. Our business had at one point 25 expatriates, but is now down to 3, as all positions have been localised,” noted Pierre Pringiers.

Siddharth Hirdaramani added: “The situation has improved tremendously since April, and we continue to see good progress being made by the military in addressing the terrorism concern. Of course foreign investors and business leaders are still hesitant to travel to Sri Lanka, and it will likely take about six months of strong progress before we can start getting back to pre-21/4 investor confidence and sentiment, but there is still a very large opportunity for growth in tourism, as Sri Lankans are very resilient people.”

Added Chandani Ekanayake: “The people, skills, the commitment, and the competency and availability in Sri Lanka is really good. The manufacturing quality we deliver is quite high. The dedication in terms of flexibility in meeting customer requirement is also quite positive. And of course there is the lower costs.”

Key takeaways

On the whole, the takeaway is clear: tourism has undoubtedly suffered in the weeks since the attacks, but other industries have managed to find ways to slowly but surely return to business as usual. So what does this mean for the future, and what of Sri Lanka’s security going forward?

As Pringiers summed it up: “The type of incident we experienced on Easter Sunday has sadly become common around the world. It has happened, and can happen, in other countries as well, but it does not, and did not, stop investors in those countries from going ahead with their plans. The security forces has 30 years’ experience in dealing with terrorist threats, and are very capable to do so now as well. They have done a tremendous job since the attacks to neutralise the network behind them. Security everywhere has also been increased so there is no reason to feel unsafe or hesitant to do business in Sri Lanka.”