Economist Intelligence Unit releases latest Sri Lanka – Risk Briefing

Summary

 The rebel Liberation Tigers of Tamil Eelam (LTTE) were defeated by the Government in May 2009, with the top leadership of the group being almost entirely wiped out. In the short term, although Tamil separatists may still exist, they are not likely to prove much of a threat. This should allow security measures to be relaxed. However, the north and east will remain more violent than other parts of the country, and isolated separatist attacks cannot be ruled out.

Political demonstrations will be common, and these can sometimes be accompanied by fatalities and damage. Crime levels are worrying and the civil conflict has made weapons readily available, although crimes involving firearms (sometimes carried by deserters from the Army) usually occur in areas outside the main cities. Attacks on foreigners are rare, but not unknown.

 Scenarios

A new group emerges to replace the LTTE

Low likelihood; High impact; Intensity = 8

In the wake of the LTTE’s defeat Sri Lanka’s Tamil separatists appear broken as a movement, with some factions advocating peaceful collaboration with the government and others calling for a continuance of the armed struggle. There are reasons to be concerned that a new rebel group could emerge from the ashes of the LTTE’s destruction.

Many Tamils on the island are convinced that the Government is not committed to devolution and retains an anti-Tamil discriminatory tendency. A large number of Tamils abroad remain willing to finance an insurrection, providing a pool of funding, and the LTTE’s connections to international arms smuggling networks are unlikely to have been lost. However, many other factors suggest that a new group would struggle to emerge, lacking the LTTE’s reputation and personnel networks.

Many Tamils both at home and abroad had grown increasingly estranged from the LTTE’s methods and violence, and a generational gap has weakened support for the independence struggle overseas. Meanwhile, the loss of the LTTE’s heavy weaponry and territorial bases will ensure that any new group that emerges will start from a position of weakness that would make it easier for the Government to suppress it.

Nevertheless, should a new group overcome these problems, it would likely wish to establish its reputation through acts of violence against high-profile targets. This would pose a risk for businesses in Sri Lanka. Companies should watch the media for signs that certain Tamil separatist figures are emerging as the lead spokespeople for the independence movement. Acts of violence within the Tamil community could also be a sign of an internal struggle that would presage the emergence of a new terrorist group.

Investors face security threats in the north and east

High likelihood; Moderate impact; Intensity = 12

The Government is keen to promote economic development in the Eastern Province, especially around the port city of Trincomalee, and foreign investors have expressed interest in exploiting opportunities in the region. Initial peace dividends have already been seen with a surge in economic activity. However, investors should be aware of security risks.

A breakaway faction of the LTTE whose defection helped deliver the province back to Government control remains powerful in the east, but clashes between groups allied to different leaders within this movement (now a political party, the Tamil Makkal Viduthalai Pulikal) could escalate into serious violence.

The situation in the Northern Province is similarly volatile, although foreign-investor interest for now will be more limited than in the Eastern Province, with most attention being focused on Jaffna and rebuilding work. It is less clear at present which personalities will emerge dominant in the north, but there is likely to be a struggle between senior Tamil figures (many formerly linked to the LTTE) and the military. The latter will retain a strong influence over the province for many years that will involve it in business affairs as well as security issues.

Both in the north and east, isolated incidents of violence are likely to continue to be perpetrated by all the parties mentioned above, including the military. Against this background the climate is likely to be favourable for assaults, kidnappings and extortion as factions seek to fund their illicit activities. Meanwhile, logistical challenges may also be posed by security checkpoints and dangerous roads.

 Ethnic tensions rise once again

Moderate likelihood; High impact; Intensity = 12

Skirmishes between the majority Buddhist community (which accounts for 75% of the population, according to the 2012 census) and Muslims (around 9% of the population) have increased in the past two years.

In April 2012 protests broke out in the central town of Dambulla when Buddhist monks attempted to storm a mosque during Friday prayers, claiming that it was illegally built. In September 2011 a similar incident occurred in Anuradhapura, when a mosque in the area was demolished by a mob led by a Buddhist monk.

In 2013, a hardline Sinhalese-Buddhist group, the Bodu Bala Sena (Buddhist Power Force, or BBS) is continuing its campaign against Sri Lanka’s Muslim minority, calling for a ban on foods bearing a Halal certification and curbs on the emigration of Sri Lankan women to the Middle East. The heated rhetoric employed by the BBS is the latest indication of rising anti-Muslim sentiment on the island in recent years.

The organisation, which was set up in mid-2012, calls itself a non-political and action-oriented body with the stated goal of promoting Buddhist philosophy alongside Sinhalese culture and heritage. However, ethnic minorities complain of a rise in nationalist sentiment and communal tensions. In late January 2013 Muslim leaders called on the Government to address what they termed as a failure of the State’s law-and-order machinery to stop anti-Muslim protests and attacks.

Attacks on churches have also been increasing, while the Jathika Hela Urumaya, a nationalist (Buddhist) party that is part of the ruling coalition, has called for laws banning conversions to Christianity. Foreign investors, particularly those involved in large-scale ventures, should take note of the rise in nationalist sentiment and seek to safeguard their employees and assets effectively should the spectre of communal violence re-emerge.

 Rating Score

Overall assessment C 49 C 47

Security risk B 36 B 32

Note: E=most risky; 100=most risky.