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Economy

Sri Lanka's tourism industry defiant after deadly attacks

Minister and merchants expect rebound, despite risk to economy and jobs

Security personnel keep watch at Galle Fort, one of Sri Lanka's most popular tourist destinations, on April 24. (Photo by Amila Gamage)

COLOMBO -- The Shangri-La Hotel in the heart of Colombo is shut down for business, its shattered windows open to the wide expanse of the Indian Ocean. Armed soldiers surround its perimeter.

The hotel was the target of two suicide bombers, who detonated explosives at a restaurant in the Shangri-La on Easter Sunday. They were part of a series of attacks targeting churches and hotels in Sri Lanka that killed more than 250 people.

The coordinated attacks threaten Sri Lanka's burgeoning tourism industry, a bright spot in an economy that has been sluggish over the past five years. After natural disasters in 2017 and a political crisis last year, the Central Bank of Sri Lanka says the economy grew at 3% in 2018, cut from an original forecast of 5%.

A slowdown in tourism now could stall the reforms needed to spur growth, such as economic liberalization, tax and tariff cuts, and initiatives to attract foreign investors into other sectors. Those investors may now question Sri Lanka's stability. 

The country's tourism industry was poised for a strong 2019 before the attacks. Foreigners have flocked to the island since the end of the civil war a decade ago, with arrivals increasing fivefold to over 2.3 million in 2018 from 447,000 in 2009.

Tourism accounted for 27% of Sri Lanka's exports and 6% of gross domestic product in 2017, World Bank statistics show. Foreign tourists spent about $5 billion that year in the nation of 21 million. 

 

Lonely Planet, the best-selling guidebook, even named Sri Lanka the best country in the world to visit in 2019.

Now hotels are bracing for a significant slowdown. Sanath Ukwatte, president of The Hotels Association of Sri Lanka estimated that the industry could suffer a "massive loss of $1.5 billion in tourism earnings this year." Speaking to the Daily FT, a local paper, he said: "This is the first ever time the terrorists have targeted and attacked tourists, particularly hotels."

On Thursday, Sri Lankan authorities warned that additional attacks may occur targeting places of worship, and the Muslim Affairs Ministry asked mosques to avoid holding Friday prayers. 

John Amaratunga, Sri Lanka's minister of tourism, wildlife and Christian religious affairs, admits "It's a big blow. But we are quite confident that we can bounce back."

Speaking to Nikkei Asian Review this week, Amaratunga acknowledges "negligence on the part of the security." Ten days prior to the attacks, intelligence agencies warned of a threat from an Islamic extremist group -- but government officials including the president and prime minister were not informed, and authorities failed to take action.

Sri Lanka has undertaken aggressive security measures following the attacks, the minister said, setting up checkpoints across Colombo and other cities and arresting 60 suspects within a few days.

Parliament declared a state of emergency granting the army, navy and air force broader powers to work with the police in securing the country.

The tourism ministry assisted foreign visitors choosing to leave Sri Lanka, including the injured, in the immediate aftermath of the attacks. The agency is providing armed guards at the request of hotels, and assistance with bolstering security protocols.

"Many countries have experienced this," Amaratunga said, citing attacks in Bali, Paris and New Zealand. "They have bounced back."

Despite cancellations and a slowdown in arrivals, strong security measures will send a message that Sri Lanka is safe and restore confidence for foreign tourists, said Harith Perera, president of the Sri Lanka Association of Inbound Tour Operators.

Sriyalatha Vithanage, a 67 years old vendor, is left with no customers on the beach at Galle Fort on April 24. (Photo by Amila Gamage)

Since the war, the security apparatus has not been at full capacity "to polish, buckle up and come back to secure all gaps," Perera said.

"We had a very cruel war that was worse than this," Amaratunga said. "As soon as the war was crushed, tourists started coming."

Sirimal Abeyratne, an economics professor at the University of Colombo, says the impact on the economy will be immediate. The government needs to show it can minimize the security problem to build investor confidence in the country's stability, the professor said.

Abeyratne remains optimistic, however. "Obviously we missed the bus, but hopefully that is a short-term thing." he said. "Once security is restored, hopefully we can start rebuilding things again."

In Galle, a picturesque seaside town of cobbled alleys, colonial-era fortified stone walls and small boutique shops, the impact of the attacks is already obvious. Two hours south of Colombo, this popular tourist destination was far from the violence, but the streets are empty.

Suzy Shen, 28, a Chinese businesswoman who owns a coffee shop in Galle, said this week she had expected a busy time between Easter and the May 1 Labor Day holiday in China. Customers regularly fill her shop and spill into the street. But the shop is empty, with only a few tourists wandering the alleys.

"Sri Lanka only just started showing itself to the world," Shen said. "People don't know yet how beautiful and amazing it is -- then this happened."

Shen said she fell in love with Sri Lanka and moved to the Galle Fort heritage area in April 2018, four months after her first visit to the country.

"After this, tourism will definitely go down," she said.

Shen shows a photo of a British family who ate at her café the day before the bombing. The next morning the father was injured in the blast at Shangri-La Hotel, and his two children were killed. 

Foreign tourists gather at the Shangri-La Hotel on April 21. (Photo by Amila Gamage)

The U.S. and China have issued travel advisories against visiting Sri Lanka, prompting tour groups from those countries and others to cancel trips and leaving guides in Galle and other tourist destinations with nothing to do.

"Immediately, they are losing their jobs," Shen said.

Tourism employs 170,000 Sri Lankans directly, with another 260,000 employed indirectly in the informal sector and complementary industries.

Sampath Calder, 33, a Sri Lankan tuk-tuk driver in Galle Fort, puts it bluntly: "When the tourists are here, we have a job. If they're not here, we don't have a job."

Shen says she will keep the shop open, even if profits suffer in the next few months. "If you close it, they win," she said.

Peter Prokic, 32, manager at The Fort Printers, a five-star hotel in Galle Fort, thinks Sri Lanka's charms will prevail over the attacks.

"It was a random act of madness," Prokic said. "It can happen anywhere."

Prokic cited attacks in recent years in New Zealand and Egypt. "They recovered quickly after two or three months," he said. "So we think there will be the same pattern here."

The Shangri-La's Mahika Chandrasena is equally confident. "There will be a sad situation at the moment," Chandrasena said, "but I don't think it will be a deterrent."

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