VZCZCXRO2301
RR RUEHLMC
DE RUEHLM #1313/01 2670512
ZNR UUUUU ZZH
R 240512Z SEP 07
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 6856
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHNE/AMEMBASSY NEW DELHI 1393
RUEHKA/AMEMBASSY DHAKA 0428
RUEHIL/AMEMBASSY ISLAMABAD 7415
RUEHKT/AMEMBASSY KATHMANDU 5542
RUEHCG/AMCONSUL CHENNAI 8006
RUEHGV/USMISSION GENEVA 2329
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION

UNCLAS SECTION 01 OF 02 COLOMBO 001313 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR SCA/INS 
STATE AND GENEVA PLEASE PASS TO USTR 
MCC FOR D NASSIRY AND E BURKE 
 
E.O 12958: N/A 
TAGS: ECON ETRD EFIN EAID KMCA CE
SUBJECT:  SRI LANKA: TOURISM INDUSTRY PINS HOPE ON NEW TOURISM ACT 
 
REF:  05 COLOMBO 1898 
 
COLOMBO 00001313  001.2 OF 002 
 
 
¶1.  Summary:  On October 1, following a two year delay, the 
government will implement the Tourism Act of 2005.   The law 
provides for greater private sector participation in 
government-controlled tourism regulatory, promotion and training 
agencies.  More importantly, the private sector will now have a 
direct role in the use of funds collected for promotion and 
marketing.  Tourism sector sources hail the decision to implement 
the law as a positive step to develop the industry.  End Summary 
 
----------------------------------- 
Tourism Act to Finally Boost Sector 
----------------------------------- 
 
¶2.  Sri Lanka's tourist industry is private-sector driven, with 
hotels, travel agencies, and airline offices privately owned. 
Nevertheless, the government historically played a crucial role 
through its control of the state-owned Sri Lanka Tourist Board 
(STB), the main tourism regulatory and promotion body.  This 
arrangement gave the Tourist Board and Tourism Minister control of 
tourism-related tax collections intended to be spent on promoting 
the sector as a whole.  The Board and various ministers, however, 
were frequently accused of utilizing these funds ineffectively, or 
even corruptly.  The Tourism Act of 2005 was intended to remedy this 
situation by ensuring greater accountability in the use of tourism 
tax collections.  Despite passage of the act in 2005, the Government 
resisted giving up control even in the face of repeated requests 
from the private sector.  Milinda Moragoda's appointment as Minister 
of Tourism in February 2007 finally brought in a minister committed 
to implementing the act -- it will become effective on October 1. 
(Note: Moragoda previously served as Minister of Economic Reforms in 
the 2001-2004 United National Party government.) 
 
------------------------------------- 
Private Sector Will Lead New Agencies 
------------------------------------- 
 
¶3.  The implementation of the Tourism Act of 2005 creates three new 
agencies to replace the current government-controlled Sri Lanka 
Tourist Board.  The new institutions are the Sri Lanka Tourism 
Development Authority (SLTA), the Sri Lanka Tourism Promotion Bureau 
(SLTPB) and the Sri Lanka Institute of Tourism and Hotel Management 
(SLITHM).  SLTA will steer tourism policy, regulate the industry, 
look at ways to improve tourism infrastructure, and administer a 
Tourism Development Fund using embarkation fees collected at the 
airport.  SLTPB and SLITHM will oversee promotion and training, 
respectively.  Private sector firms have strong representation on 
the management boards of the new agencies and will play a large role 
in determining both the planning and use of funds. 
 
¶4.  A major advantage of the new Act is that seventy percent of the 
Tourism Development Fund budget will be given to the new 
private-sector led Tourism Promotion Bureau for promotions and 
marketing.  Industry reps hope that targeted promotions and 
marketing, orchestrated by industry leaders, will help to revive the 
currently depressed sector.  Prema Cooray, Secretary General of the 
Ceylon Chamber of Commerce and a key tourism industry figure, will 
head the new Tourism Promotion Bureau.  According to Cooray, the 
city of Colombo, beach resorts, hill country, and ancient cities are 
the four primary locations the Bureau will promote.  Further, the 
Tourism Promotion Board will soon undertake a major promotion in 
five Indian cities, aimed at tourists and conference participants. 
The industry notes that 900,000 Indians attend conferences each year 
and would like Sri Lanka to attract ten percent of that market. 
 
¶5. Another advantage to the new Act is that the Sri Lanka Institute 
of Tourism and Hotel Management will now manage a hospitality 
industry training school that was formally government-controlled. 
Private sector contributions to the school's management will help 
ensure that the industry has qualified graduates to hire. 
 
¶6. Industry sources say these new institutions will enable the 
private sector to play an active role in developing tourism. 
According to Cooray, private-public collaboration in tourism was 
unsatisfactory in the past.  As a result, progress in the tourism 
sector was hampered.  He aims to redress this by ensuring that the 
new private-public partnerships will be effectively utilized in Sri 
Lanka, as they are in countries such as Singapore. 
 
 
COLOMBO 00001313  002.2 OF 002 
 
 
----------------------------------- 
Comment: Peace and Infrastructure 
 Improvements Also Vital 
----------------------------------- 
 
¶7.  Despite the Central Bank Governor's July comment that "the 
tourism industry's contribution [to GDP] is insignificant" and that 
the "dip in tourist arrivals is no serious issue" -- meant to 
assuage concern about a depressed tourism market due to the conflict 
-- Sri Lanka's tourism industry remains a key contributor to foreign 
exchange earnings.  The industry estimates that as many as 900,000 
Sri Lankans (of a population of 20 million) are in some way 
dependent on tourism.  Including private industry in the management 
of tourism promotion should increase the country's ability to reach 
new travelers and to encourage former visitors to return.  USAID's 
"Competitiveness Program" has long urged these reforms in its work 
with the Sri Lankan tourism sector.  Nevertheless, without a 
peaceful solution to Sri Lanka's long ethnic conflict, we do not 
expect significant increases in tourism-sector revenues anytime 
soon.  Other issues like dilapidated tourism infrastructure -- roads 
and rails -- will also need to be addressed for Sri Lanka to make 
major gains in tourism. 
BLAKE