VZCZCXYZ0022
RR RUEHWEB

DE RUEHLM #0976/01 2941210
ZNR UUUUU ZZH
R 211210Z OCT 09
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 0662
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHNE/AMEMBASSY NEW DELHI 3390
RUEHKA/AMEMBASSY DHAKA 1969
RUEHIL/AMEMBASSY ISLAMABAD 9005
RUEHKT/AMEMBASSY KATHMANDU 7243
RUEHCG/AMCONSUL CHENNAI 9568

UNCLAS COLOMBO 000976 
 
STATE FOR SCA/INSB AND EEB/IFD/OMA 
STATE PASS USTR FOR VICKY KADER 
TREASURY FOR MARY BRENNAN 
COMMERCE FOR ITA EROL YESIN 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD PGOV CE
SUBJECT:  U.S. Business Delegation Examines Investment Opportunities 
in Sri Lanka 
 
¶1. (U) SUMMARY: On October 13 U.S. and Sri Lankan government 
officials and business people met in Colombo to attend the first 
post-conflict Private/Public Partnership Conference, focusing on how 
economic development can help foster national reconciliation.  The 
mood of the conference was upbeat, with Sri Lankan officials 
providing information on the economy's fundamentals and giving an 
outline of opportunities for trade and investment.  Following the 
conference, U.S. business people met one-on-one with Sri Lankan 
counterparts and government officials to more closely examine 
individual plans and interests.  Post's impression was that 
U.S.-based leaders were interested but not quite ready to invest 
yet, while U.S. business representatives based in India were ready 
to move.  END SUMMARY. 
 
¶2. (U) Representatives of over 40 U.S. firms and 30 local firms 
attended a public-private partnership forum to discuss 'investment 
and business opportunities in post-conflict Sri Lanka.'  Organized 
by the Sri Lankan Department of Commerce, the focus was on Sri 
Lanka's overall economic and investment climate, particularly on 
ways to redevelop the North and East.  The U.S. delegation included 
16 U.S. companies based in India and several U.S. multi-national 
firms.  The conference heard addresses by the Sri Lankan Minister of 
Enterprise Development and Investment Promotion, Central Bank 
Governor Nivaard Cabral, Attorney General Mohan Peiris and the Sri 
Lankan Ambassador to the U.S., Jaliya Wickramasuriya.  Ambassador 
Butenis and visiting Assistant U.S. Trade Representative (AUSTR) 
Michael Delaney emphasized that Sri Lanka had a unique opportunity 
to build an inclusive economy for all Sri Lankans.  All speakers 
noted the historic opportunity to turn a page in Sri Lanka's 
development and start healing the divisions of the recent civil war. 
 Ambassador Wickramasuriya urged businesses to invest in the North 
and East said 'economic opportunity is freedom.'  AUSTR Delaney 
agreed that there is great untapped potential in Sri Lanka and 
employment creation is a key factor in fostering national 
reconciliation.  AUSTR also urged U.S. companies entering Sri Lanka 
to pay attention to promoting internationally accepted labor 
standards in their businesses in Sri Lanka. 
 
Early Bird Catches the Worm 
 
¶3. (U) 'The early bird catches the worm' was an oft repeated slogan 
throughout the day.  Governor Cabral said despite the war, Sri 
Lanka's per capita income nearly doubled from 2003 to 2008 to 
USD2000.  Furthermore, he claimed that following the end of the war 
the Sri Lankan economy could 'leap frog' and double the per capita 
income once again by 2014.  He invited investors to share in Sri 
Lanka's endeavors and emphasized that whoever gets in early will 
benefit most. 
 
Reconstruction of the North and East 
 
¶4. (U) All speakers made a strong pitch for development in the North 
and East of the country, where the bulk of the fighting and 
destruction has occurred in the final years of the conflict.  These 
regions cover 30 percent of the land area and 50 percent of the 
coastal belt of Sri Lanka.  Both AUSTR Delaney and Ambassador 
Wickramasuriya highlighted the need as well as opportunities to 
build infrastructure in the North and East.  Wickramasuriya said 
that roads, schools, health care facilities and irrigation systems 
need to be built.  Further, business sectors such as fisheries, 
agriculture and tourism offer good prospects for investors.  For 
instance, the best beaches in Sri Lanka are in the northern and 
eastern coastal belt.  The government has already identified three 
locations in the North and East for tourism development.  These 
locations are in Trincomalee, Puttalam and Amapara districts. 
Another key sector is fisheries.  Potential has increased with the 
government now controlling the full exclusive economic zone (which 
covers an area more than eight times the size of the island).  There 
are also opportunities for property development (most of the 
property in the North and East is damaged by the conflict) and 
investors heading there will receive generous tax holidays ranging 
from 10-20 years and be eligible to import raw materials and capital 
equipment duty-free. 
 
¶5. (U) On October 14, a portion of the trade delegation traveled to 
Trincomalee in the East to learn first-hand about investment 
opportunities there and to meet with local business and government 
 
officials.  Local government officials stressed opportunities with 
agriculture, fishing and livestock, and noted that several garment 
factories had recently opened in the East. The GSL also showed off 
the large natural Trincomalee harbor, but today the harbor is little 
used aside for supplying a wheat milling plant and a cement factory. 
 The business leaders based in India seemed much more interested in 
Eastern opportunities. 
 
Countrywide Business Opportunities 
 
¶6. (U) The following areas offer the best prospects for investment: 
IT outsourcing, Knowledge-based Business processes Outsourcing 
(BPO), Tea, Rubber products, Ceramics and porcelain, Gems and 
Jewelry, Light and Heavy Manufacturing, Fisheries, Agriculture and 
Dairy Farming, Health Care, Tourism, and Food Processing. 
 
¶7. (SBU) The Attorney General (AG) in his speech listed the numerous 
laws that provide investors with legal protections. (NOTE: Post will 
provide additional information on these laws upon request.  END 
NOTE.)  Sri Lanka still faces significant problems with corruption, 
cumbersome rules and regulations and government procurement policies 
which often favor national companies.  Potential investors are 
advised to review the Country Commercial Guide or contact Commercial 
Attache Ken Kero-Mentz at CommercialColombo@state.gov or 
keroka@state.gov. 
 
 
¶8. (U) Sri Lanka also offers generous tax incentives through the 
Board of Investment (BOI) for foreign investors.  The tax holidays 
for export industries and services range from 3-5 years.  Large 
infrastructure projects receive tax holidays of 3-15 years.  As 
highlighted above, investors going to the North and East will 
receive additional incentives. 
 
¶9. (SBU) Investors in Sri Lanka could also access Indian and 
Pakistan markets duty-free through bilateral Free Trade Agreements. 
In addition, Sri Lankan exports to EU are duty free under the EU's 
GSP Plus.  (Note:  On October 19, the European Commission 
recommended cancelling Sri Lanka's GSP Plus benefits due to human 
rights issues surrounding the end of the war and present confinement 
of 250,000 people in closed camps.  The EU process is lengthy, and 
GSP Plus benefits should remain in place until at least mid 2010. 
End Note.)  Two U.S. business executives active in Sri Lanka spoke 
of their successful experiences here.  CH2MHill highlighted their 
experiences in Sri Lanka in completing a range of infrastructure 
projects costing USD60 million for USAID.  He commended the 
assistance received from government agencies such as the BOI, 
regional officials, chambers of commerce as well as the U.S. 
Embassy, and said there is still a great need for road 
infrastructure. 
 
Results in Over 200 Business Meetings 
 
¶10. (U) Following the conference, the U.S. delegates had one-on-one 
meetings with local companies and government agencies.  According to 
Ayoni Waniganayake, Assistant Secretary General of the Ceylon 
Chamber of Commerce, the CCC had arranged over 200 business meetings 
for that afternoon.  In addition, some of the delegates were meeting 
with government ministers and doing factory visits throughout the 
week. 
 
¶11. (SBU) Comment: The PPP conference focused on the positives while 
ignoring corruption, some long-standing transparency issues and 
other trade and investment problems.  However, post believes that 
there are real opportunities for investment here in Sri Lanka, and 
the size and strength of the U.S. delegation is far stronger than we 
expected.  The U.S. participants were quite impressed with 
opportunities in Sri Lanka, but they were still testing the waters, 
while U.S. businesses based in India seemed ready to dive in. 
 
¶12.  (SBU) Comment continued.  The TIFA talks (septel) and the PPP 
Conference stood in apparent contrast to the general strains in the 
political relationship between the U.S. and Sri Lanka.  Ambassador 
Butenis noted to the PPP conference the importance of political 
reconciliation and rapid resettlement of internally displaced 
persons to permit Sri Lanka to win the peace by developing the 
economy.  Moreover, Ambassador Butenis and AUSTR Delaney emphasized 
 
how providing real economic opportunities in the North and East will 
begin to heal the divisions of the civil war.  END COMMENT. 
 
BUTENIS