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UNCLAS SECTION 01 OF 04 COLOMBO 000309 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
STATE FOR SA/INS; STATE PASS TO USTR; MCC FOR D.NASSIRY 
AND E.BURKE; TREASURY FOR S.CHUN; COMMERCE FOR E.YESIN 
 
E.O 12958: N/A 
TAGS: ECON EINV XD XO CE
SUBJECT: SRI LANKA'S PREMIER BUSINESS CHAMBER CALLS FOR 
RENEWED FOCUS ON PEACE, IMPROVED HUMAN DEVELOPMENT 
PROGRAMS AND BETTER INFRASTRUCTURE 
 
¶1.  (U) Summary:  Sri Lanka's first "Economic Summit," 
sponsored in January by Sri Lanka's premier business 
group, the Ceylon Chamber of Commerce, provided an 
opportunity for business leaders to discuss their role 
in vital issues confronting the country such as the 
peace process and economic development that is highly 
skewed toward urban areas.  Providing economic 
opportunities to marginalized populations was seen as 
vital to a durable peace.  Nevertheless, the influence 
of statist parties continues to keep the economy from 
operating at an optimal level.  End Summary. 
 
WELL TIMED SUMMIT - FOR A NEW GOVERNMENT AND FOR PEACE 
TALKS 
 
¶2.  (U) Sri Lanka's premier business chamber, the 
Ceylon Chamber of Commerce (CCC), held its first ever 
Economic Summit titled "Economic Growth towards 
National Prosperity" in Colombo on January 27-28.  The 
summit, modeled on the World Economic Forum in Davos, 
Switzerland and the India Economic Summit, presented an 
ideal opportunity for business leaders to consider 
their role in resolving crucial problems confronting 
the country.  Held relatively early in the new GSL 
administration, the Summit enabled new Government 
leaders to interact with the business community.    By 
coincidence, the summit was also well timed with regard 
to peace, coming only two days after the Government and 
the rebel Liberation Tigers of Tamil Eelam (LTTE) 
agreed to meet in Geneva to conduct talks aimed at 
enhancing the ceasefire, which had been significantly 
strained over the past year.  The summit had four 
sessions: finding a durable settlement (peace process- 
related), economic growth, employee empowerment and 
invigorating the rural economy. 
 
BUSINESSES THINKING ABOUT ROAD AHEAD FOR PEACE AND 
EMPOWERMENT 
 
¶3.  (U) Opening the summit, CCC Chairman Deva Rodrigo 
said the private sector should re-dedicate itself to 
facilitate peace and reconciliation in Sri Lanka. 
Rodrigo set the tone for the conference highlighting 
the highly skewed wealth distribution in Sri Lanka, 
where 51% of the GDP is concentrated in Colombo and its 
surrounding Western Province.  As a result of this 
imbalance in economic activity, and as a result of 20 
years of civil war, regions outside the Western 
Province have been excluded from growth.  Rodrigo 
stressed the need to remove inequalities and said there 
should be opportunities for "talent and hard work" and 
not "inherited privilege." 
 
A SOUTH ASIAN GROWTH MODEL - MORE REGIONAL TRADE 
 
¶4.  (U) The keynote speaker, Dr Subhasis Gangopadhyay 
of the India Development Foundation, a research 
institute in India, discussed his concept of a "South 
Asian Growth Model."   The model, according to 
Gangopadhyay, included increased intraregional trade, 
improved agricultural development, improved health and 
educational opportunities and capital investment. 
Making a strong push for regional trade and giving 
examples of how little intra-regional trade was taking 
place in South Asia, he suggested that improvements in 
this one area alone could provide the impetus for 
significant growth throughout the region.  He said 
trade and open economic policies would bring economic 
liberation to the marginalized and help the region to 
embrace inclusive and sustainable growth.  He said all 
countries in the region need to improve value addition 
in the agricultural sector, given the large proportion 
of people engaged in this sector.  He also listed 
several policy options for South Asia such as better 
quality and access to secondary and tertiary education, 
improvements in the health sector and physical capital 
improvement, which are needed to support all potential 
economic activity. 
 
GOVERNMENT HOPES OF GROWTH THROUGH TRADE AND INVESTMENT 
 
COLOMBO 00000309  002 OF 004 
 
 
 
¶5.  (U) Newly appointed Sri Lankan Board of Investment 
(BOI) Chairman Lakshman Watawala spoke of economic 
growth through investment promotion efforts woven 
around Sri Lanka's bilateral free trade agreements with 
India and Pakistan, the EU "GSP-plus" program and 
government infrastructure development projects. 
According to Watawala, the Government is working on 
expanding the Indo-Lanka FTA to cover services. 
 
MAJOR FOCUS ON EDUCATION AND SKILL DEVELOPMENT 
 
¶6.  (SBU) There was intense discussion on the urgent 
need to reform the education system to provide the 
skills required to fuel economic growth.  A university 
professor with wide experience in dealing with youth 
said that Sri Lanka's young people do not have the 
technical and language skills required by the private 
sector.  Charitha Ratwatte (former Treasury Secretary 
under the United National Party government, now engaged 
in private sector skills development through Outward 
Bound), pushed for urgent change in the educational 
system, saying there is a need to ensure that today's 
youth are able to participate fully in economic 
development and replace a rapidly aging workforce. 
Ratwatte argued that most Sri Lankan children are given 
a "useless" public education while rich children have 
access to private education in Sri Lanka and abroad. 
He suggested "freedom" for the education sector - 
including removal of exclusive government control over 
education, and broadening of curriculum options to meet 
the demands and interests of business and society. 
 
¶7.  (SBU) Ratwatte also advocated for privatization of 
higher education.  (Note:  Sri Lankan degrees may only 
be awarded from government universities.  End Note.) 
He called for a change in some educational methods, 
commenting that virtually all education involves rote 
memorization, with no opportunity for analysis, 
creativity or differences of opinion.  In response, 
private sector CEO's present confirmed the crisis in 
education and said that they are unable to provide 
employment to those thousands trained in liberal arts 
programs that discourage creativity and analysis; for 
graduates who obtain their university diplomas but have 
no marketable skills. 
 
EMPLOYEE EMPOWERMENT - OPEN DIALOGUE 
 
¶8.  (U) In the employee empowerment session, both trade 
union and employer representatives said that the time 
had come to change the adversarial relationship between 
employers and employees into an effective partnership. 
Both advocated more open communication, trust, truth 
and transparency as vital ingredients to build 
partnership.  A trade union leader stressed the need 
for a grass roots level dialog.  According to this 
leader, some employers do not even contemplate 
partnership with unions or employees, a result of years 
of past militant behavior by the trade union movement. 
The human resources director of Unilever Ceylon spoke 
of his positive experiences adopting an open 
communication style with his workforce.  A university 
professor stated that the Sri Lankan workforce lives 
with a great deal of insecurity, both economic and 
social, due to structural adjustments, globalization, 
the 20 year civil war and uncertainties surrounding the 
current ceasefire.  The absence of a social security 
scheme for the unemployed further adds to workers' 
stress.  Therefore, he recommended that changes to 
labor legislation be done in the larger context of 
social security.  NATURE (Sri Lanka's largest trade 
union alliance), the Employers' Federation and the 
National Labor Advisory Council (NLAC) were identified 
as possible platforms to provide leadership to 
strengthening the employer-employee relationship. 
 
BUSINESS COULD INVEST IN PEACE 
 
¶9.  (U) In the session titled "Finding a Durable 
 
COLOMBO 00000309  003 OF 004 
 
 
Solution," Irish and South African experts provided 
useful insights into business community experience in 
peace-building and economic development in their 
respective countries.  In South Africa, the business 
community under the National Business Initiative (NBI) 
had identified weak points in the peace process and 
focused on those first.  They initiated a peace 
dialogue which resulted in hundreds of peace committees 
(with local representatives) throughout the country. 
The business community facilitated visits by 
international constitutional experts to help in 
constitutional drafting and had been a vocal advocate 
of continued progress during the crucial stages of the 
peace process. 
 
¶10.  (U) An Irish business leader spoke of an Irish 
coalition between major businesses (including 
multinationals in Ireland) and trade unions which is 
known as the "Group of Seven" to speak collectively in 
the peace process.  He urged the business community to 
work hard on peace while influencing the government and 
working with people around the world who want to help. 
Another Irish expert illustrated a government 
initiative in Belfast which created a huge factory 
complex in a Sinn Fein controlled area, which was seen 
as a catalytic move, triggering investment and helping 
to build community confidence in Northern Ireland 
(Note: there is some interest in investing in 
Liberation Tiger of Tamil Eelam (LTTE)-held areas in 
Sri Lanka as Tamils are widely considered industrious 
and creative.  But the brutal nature of the LTTE and 
lack of transparency serves as a major barrier. 
However, US investment is prohibited because of the 
LTTE's FTO designation.  End Note). 
 
ON INVIGORATING THE RURAL SECTOR 
 
¶11.  (SBU) Several top businessmen spoke of their 
largely positive experiences going into rural areas for 
production and marketing.  Dave Ranasinghe, Director of 
MAS Holdings, Sri Lanka's largest garment manufacturer, 
explained how the company pumps millions of rupees 
(tens of thousands of dollars) into rural economies. 
In addition to 22,000 factory jobs, MAS has helped 
raise rural living standards by sourcing transportation 
services, local produce and meals for the staff from 
local service providers.  Ranasinghe said introduction 
of quality management systems in the factories have 
also contributed to raised living standards.  In 
closing, Ranasinghe urged that despite problems such as 
frequent power outages, bad roads, the breakdown in 
rule of law and inadequate infrastructure and services 
to retain top management, there still is a need to go 
to rural areas to empower the rural population (Note: 
While Ranasinghe's talk focused on MAS's contributions 
to the rural sector, it should be noted that most of 
the garment industry investment in rural areas was at 
the behest of the GSL in the mid-90s, in exchange for 
significant tax concessions and other business 
incentives. End Note). 
 
¶12.  (U) Hans Wijesuriya, CEO of Dialog, Sri Lanka's 
largest mobile telephone operator and a subsidiary of 
Malaysia Telecom, revealed how a technology services 
company could succeed by moving into rural areas. 
Dialog has adopted an inclusive approach, providing a 
service that is affordable.  1.7 million of Dialog's 
2.2 million customers are pre-paid (small) customers. 
Rural customers, however, contribute 50 percent to 
company profits.   He said that the success of Dialog 
in rural areas showed that technology is a great social 
leveler in terms of breaking barriers. 
 
¶13.  (U) Directors of several Sri Lankan conglomerates, 
with substantial rural presence through agriculture, 
also spoke of their experiences and the need for 
businesses to move into rural areas.  Rajan Yatawara, 
head of Hayleys, one of the largest companies in Sri 
Lanka, showcased the company's successful "out-grower" 
(contract farming) system that includes guaranteed 
 
COLOMBO 00000309  004 OF 004 
 
 
purchase of produce and provides inputs, 
entrepreneurship development and extension services. 
The CEO of the state-owned information technology 
agency spoke of ongoing efforts to take IT to rural 
areas for socio-economic development. 
 
WISH LIST TO THE GOVERNMENT 
 
¶14.  (SBU) Commenting on the government's role in the 
economy, most speakers agreed that the government 
should become an enabler of business.  Their wish list 
to the government includes improving education 
(including privatization), building infrastructure 
(including rural infrastructure), transparency in 
government processes, fiscal responsibility, reversal 
of the oppressive tax and levy regime and establishing 
better rule of law.   For agriculture, they sought 
Government support for consistent policies, tax 
concessions, credit facilities, technology support, 
farmer training and greater state-private sector 
cooperation in R&D. 
 
¶15.  (SBU) COMMENT:  While some CCC members in the 
audience, in private conversations with Embassy staff, 
expressed doubt that the various proposals would result 
in significant changes to GSL economic policies, we 
believe that the CCC has the clout and is responsible 
enough to try to work on at least some of the issues. 
CCC is the most powerful business chamber in the 
country.  It has a direct impact on government policy 
making (e.g., its chairman is a member of the powerful 
Monetary Board of the Central Bank).  Several members 
also sit on the National Council for Economic 
Development (NCED), which advises the Government on 
economic policy.  According to CCC sources, the 
organization is preparing an action plan based on the 
summit and identifying issues to be addressed by the 
CCC and those to be referred to the Government.  We 
hope the CCC will play a more dynamic role in the peace 
process, taking a cue from the South African and 
Northern Ireland experiences.  The CCC had launched a 
sub-committee on peace and reconciliation a few days 
before the summit.  Following the summit, the 
Federation of Employers of Ceylon (with strong 
connections to the CCC) and trade unions have started 
to discuss their roles in bringing economic prosperity 
to war affected communities. 
 
¶16. (SBU) Comment Cont'd: With regard to issues like 
education reform, the CCC faces an uphill battle given 
the current Government's statist tendencies and close 
relationship with a major Marxist-Nationalist party. 
The President's Economic Advisor, Nivaard Cabraal, 
during his presentation, was quite candid when he said 
changes in education would be difficult and would take 
a long time.  Consequently, education will not be a 
near-term "equalizer" granting greater opportunity to 
the "have nots."  Private sector expectation of a more 
responsible government is also illusive.  The roles of 
the private sector and the government were aptly 
illustrated by a foreign guest speaker who said "the 
purpose of industry is to create wealth.  It is not, 
despite belief to the contrary, to create jobs.  The 
jobs are created from the wealth that industry 
produces." In Sri Lanka, where even some private sector 
players tend to look to the Government as the main 
source of solutions for societal ills, this 
straightforward message needs to be heard. END COMMENT. 
 
ENTWISTLE