Sri Lanka’s Development Boom
Replacing a lamppost near the new Performing Arts Center. Photo by Dhammika Heenpella
When I lived in America we’d come back to visit Sri Lanka once every three or four years. In my memory, it never changed. Same buses, same cars, same streets, same stuff to do. In the last year, however, Colombo and Sri Lanka have changed dramatically, and these changes seem to be picking up steam.
In the past month we’ve seen the first proper highway, the first proper development in the city center and now the first 3D theatre. There is construction everywhere and new businesses popping up left and right, including online. This is just stuff I’ve seen and interacted with, literally off the top of my head.
Colombo Beautification
Independence Square had not changed since Independence. Now there’s a full promenade leading to the planetarium, and more recently a bike path. I was leaving the Cinnamon Gardens police and I was like WTF, an actual bike path. The place is peaceful, beautiful, and you can take families there without worrying about dog shit, cow shit, or any shit at all. It’s just a lovely shit free space for the people. And I say this not for color. Where I live in Dehiwela there are two parks, one is also a cow grazing ground and the other is somewhat randomly home to dead, headless crows.
Roads
For over 30 years cops have been on checkpoint duty. Now there are almost no checkpoints and they can do actual cop stuff, like policing traffic. Colombo now has a one-way system and flyovers and you can generally pipe in and out of the city. What is neglected is public transit and people moving around within the city, but it’s still better than the non-moving that was going on before.
Provincially, there are now decent roads throughout the country, and a highway. The A9 to Jaffna is open, itself a generational wonder, and they’ve even set up a dedicated (temporary) bus stand at the end of Marine Drive. The roads in the East were improved years ago, though flooding really raked them. The next expressways planned are one around Colombo, a new Kandy Road and one to Trinco in the East. There’s also an Indian funded train planned for Jaffna.
Business
I drive up and down the zoo road a lot. Seven months ago there was a plot of bare land saying for sale. Then it was bought and there was a hole in the ground. Now there’s a building, with another for sale or lease sign on it, for four floors of commercial property. You see this all over Colombo and Sri Lanka. I was in Matara and they have the biggest Arpico I’ve ever seen, plus the best kept guesthouse. In Colombo there are now like 10 coffee-shops. I remember when it was only Barista and that shit-paste tandoori sandwich. Now you can pay Rs. 500 for a sandwich all over town.
For the lower end, I also remember seeing Burgers King in Slave Island go from some dudes on the street to a huge signboard and all the functionality of a sit down restaurant. If by sit down you mean sitting on plastic chairs in an alley, but still. Really big sign. Other stuff includes the Gonuts For Donuts chain and countless small home sweet shops, and in the same time I think ODEL has opened like 5 outlets.
Online, Anything.lk is pimping all these small to medium businesses. Through them I’ve learned that we have enough new hair salons for me to go someplace new every week. I got some clippers to save myself the trouble, but still. I know at least two friends who are starting businesses, a few friends who are DJing and organizing parties, and there are now multiple arts events, like Pecha Kucha.
Scene
This December international acts Chicane, Basement Jaxx and Avicii are coming down. For the first time these are acts I have heard of and not in an ironic way. As a child I remember seeing Poison posters, and more recently we’ve gotten Englebert Humperdinck and Jay Sean and some sort of rash. Slowly, however, we’re getting bigger and bigger acts and, even if promoters are kinda fumbling about, a scene is coming up.
So
Online I still hear hyperbole about how Sri Lanka is a basket-case and going the wrong way and things have never been worse, which is completely disconnected from reality. Seriously, just walk or travel around. We have a sushi bar, a Ministry Of Crab and actual sidewalks on the Galle Road. I lost my ID months ago and still haven’t replaced it, nor have I had any problems. You don’t know how amazing this is. My childhood memories of Sri Lanka are almost all the same, but now I see the country changing literally every day. And for the better.
Is inequality a problem? Are some changes wasteful? Yes. But these problems I’m actually happy to deal with. For once its not like, are we killing each other again? Was there a bomb on the bus? We’re having second or first world problems now, and the papers are talking about policy and issues rather than bodycounts.
Hence, I don’t discount the problems, but I’ll be damned if I don’t see things getting better right before my eyes.
Not to quote Ice Cube, but the Sri Lankan police are hardly beloved. A 
I just gave a talk at the University Of Sri Jayawardenapura along with Reeza Zarook of Anything.lk and Rohan Jayaweera of Google. These are my notes: Devin Jayasundara asked me for a subject for this talk and I told him Internet property. But I talked to my fiancé Shru and she had a better idea. Startups aren’t about creating property at all, not really. They’re about creating territory, about creating land.
I haven’t been blogging much, I know. It’s partly because we’ve been doing a lot of work on YAMU, especially shipping 1.0.1 of the Android app today. It’s on the 
I met an old-timer who said they used to drop acid and sleep atop Sigiriya, but the place has taken on a more commercial and quasi-spiritual role now. It was built by a king as a sort of retreat and used as a monastery. Now it’s a prime tourist and cultural destination. Hence it’s a bit odd to see a Japanese beer commercial shot up there. There’s a bunch of people eating, um, deep fried cream filled coconuts and then drinking some bracing beer. I hear the whole thing cost Rs. 25,000 (I’m presuming they used stock images).
I was at AGM of UoM and listened to Mr. Harsha de Silva’s talk [a politician from the opposition (do we really have one?) <-- for people like me] and came to think of the point he tried to raise. All this growth we see is only at the top of the pyramid. Yes it paints a nice picture for the sky view but it's probably not as beautiful when you fly down.
Also, something I liked from his talk goes like "Growth is not as good as development".
But let's be positive anyway.
(He showed some numbers and graphs taken from your dad.)
tell me where its beautiful when you fly down in south or east asia?
The development and all is good. But I feel all these are just icing covering a uneatable cake. I’m from Dehiwela and I just wrote an article detailing the problems residents of Dehiwela face due the construction of the flyover at the Dehiwela Galle Road junction. You live in Dehiwela Indi, so you must have experienced the negative side of the flyover which for a outsider might look like development but really is contributing to increase the accidents and traffic jams near the junction.
I agree, a lot of change is happening in Colombo but not having a unified or centralized plan is dampening the benefits these changes would bring. The biggest problem people face is the traffic. I can feel my blood pressure going up just thinking about it. With the low interest loans and the increasing middle class there’s a lot more vehicles on the road and more people coming to Colombo.
Since the road networks out of the city hubs remain unchanged, there are massive choke points to get in and out of the city. I commute to Borella from Mahara which is about 15 kilometers away, and it takes me a total of about 3 hours to do
this. 3 hours for 30 kilometers (back and forth). The worst traffic is in the night (about 2 hours), where it starts from Dematagoda right to the Kelaniya bridge. Due to this I’ve actually taken to working from home as much as possible and keeping a 10 to 7.30 work cycle. I really feel sorry for the ones who get off work during the rush hour period.
They really need to come up with a solution for this. Even stop gap measures like stopping containers from getting on the road during rush hour is a start.
decent public transport is the answer to that. a metro system for those who want to go about the city, and a proper bus and railway system for those who commute. if that was there, i’m sure most people who travel by car would opt to use public transport. win win.
but of course, we’re getting domestic airports instead, so maybe the “planners” want us to fly over the traffic.
The basics need to be addressed. Without those being addressed all the eyewash in the world built on loans and credit will be for naught. As John and PP mention above, beautification of Colombo is not going to amount to anything if the basics of transport are not fixed.
Heh heh.
“Online I still hear hyperbole about how Sri Lanka is a basket-case and going the wrong way and things have never been worse, which is completely disconnected from reality. Seriously, just walk or travel around. We have a sushi bar, a Ministry Of Crab and actual sidewalks on the Galle Road. ”
I once read something to the effect that investors in China should not mistake the skyline for the system. It may look like HK, but its rather different underneath.
Similarly we are indeed heading for some very rough water. One part of it-the recession in Europe /US is not our fault but it will impact. It is next year that we will really feel the impact of the loss of GSP+. On top of that we have the local issues.
The last six weeks have left investors perplexed, as one banker put it. I think a credit downgrade is likely, I believe we have some debt to roll over next year, which is going to be more expensive and difficult thanks to the lack of confidence created by the devaluation. They are trying to get state institutions (like the port) to raise debt independently, which is clever, and may work.
There are serious issues with Governance, which the latest turn of events at the SEC have only served to underline. Add to that the expropriation and investor confidence is at a pretty low level, so there will be issues with investment. The state keeps asking the private sector to invest more, this was repeated many times by PB at talks post budget, he said the state cannot do it all. Unfortunately, I don’t see that happening in a big way.
Meanwhile, we can be confident that government expenditure, including defence will only rise. The president has said that the spending is mostly on salaries, uniforms etc, therefore no reduction likely, therefore expect taxes to keep rising to finance the expenditure and the losses at the ever increasing number of state run ventures.
Lets see how things look like by Q4 2012.
Also talk to some insiders in the hotel trade in Colombo and see how they feel. There’s a lot of talk about 5* hotels, etc but the people who know the business are not optimistic at all. Part of this is due to the governance isues that JP alludes to above. When people brought up the issue of viability during the ‘discussions’ about the minimum rate Gazette they were told very bluntly in a business forum by one of the Big Five that if they cannot run their business correctly the government will take it over. Right now there is still enough sheen and gloss on things to hide what is underneath, but value needs to back up marketing and good governance needs to underpin everything. We don’t provide value ($5 sandwiches better be bloody good) and we have terrible governance. We don’t have the export muscle of China. We had better think smart and think for the future if we want to succeed.
What an extraordinary observation. If these so called ‘insiders’ aren’t optimistic about the hotel trade, then why are they building so many hotels & aggressively expanding the already established ones. Of course internet hyperbole has always been about ‘insiders’ saying this and that, and a lot less about objective reality.
Who are the ones expanding in Colombo?
To add to this, Colombo hotel revenues are up but occupancy is not good. Margin is currently high on fewer customers. The question is how long is this sustainable (especially considering that places like Bangkok have more to do in close proximity to the city and lower rates)? Currently most Colombo hotels get occupancy with business travelers and make money on F&B (i.e. the wedding trade). My point is that the government’s draconian management with things such as the floor price gazette and their strong arming of this in is not the way to do it.
The hoteliers can grumble all they like, but what are they doing to actually improve their product? Some supposedly 5-star hotels are barely 4-star, and many tourists complain about the chaos and bad service across the board. I don’t know about occupancy in Colombo, but I was down at Vivante (the former Taj Exotica) in Bentota a couple of weekends ago, and it was at 100% occupancy.
Colombo is a specific exception because of the gazetted minimum rate which is what I was referring to. Most tour companies haven’t bothered with Colombo when it comes to promoting leisure activities, etc to bring tourists in because the hotels are so expensive. Agreed that most hotels should improve but they should also be able to decide what price to sell at. The way it is now they can’t even put in special offers during low season to fill rooms and get more revenue.
Really? What’s the minimum gazetted rate and does it only apply to five star hotels?
Check out: http://www.documents.gov.lk/Extgzt/2011/PDF/Mar/1697_24/1697_24%20%28E%29.pdf
Applies to all starred hotels in Colombo only for the moment.
Jack, is this going to end up like your prediction about inflation earlier this year.
Lets see.
The index shows a low figure, after they readjusted it to reduce the weightage on food. Its running higher than the index but not sure how much. Because they have contained the budget deficit somewhat and not printed much its not way out of control, but is still uncomfortable.
The development I’m talking about is really small and medium businesses. That guy converted land on the zoo road cause he thought he could sell it. ODEL opened more outlets cause they thought they could sell stuff. To a large degree they are.
This isn’t Dubai or China where the government is funding huge projects in Colombo that actually change the skyline. The skyline is relatively unchanged. I’m talking about the street.
The analogy was metaphorical.
Parts of the city do look nicer but there is a canker in the heart of the system.
Jack Point
Good post !!
An honest point of view!!
The economy is in a mess …
This what happens when President is surrounded by – Yes Men …..
After Bell Pottinger, had written the UN speech for Sri Lanka President , perhaps it can run Sri Lanka economy too
Sri Lanka will follow the Greece into the abyss of huge debt crash …. Majority of Sri Lankan people are completely clueless and the irony is that they don’t know about it.
Jack Point
Good post !!
An honest point of view!!
The economy is in a mess …
This what happens when President is surrounded by – Yes Men …..
After Bell Pottinger, had written the UN speech for Sri Lanka President , perhaps it can run Sri Lanka economy too
Why do you assume there is no master plan? Despite all the adversarial talk, most of the developments in the city are based on a master plan prepared under a previous government.
I’ve been hearing about the imminent collapse of the Sri Lankan economy since I returned in 1992. Hell, I’ve been predicting it myself for as long as I can remember. But SL has this inexplicable resilience (dumb luck?) that just keeps confounding all of us ‘experts’.
Sure, I can sense the headwinds coming from the Euro crisis. I can smell white elephant dung and lipstick smeared pigs all over the place. I can see the government acting like a bull in a China shop. So I know it’s foolish to be sanguine.
It’s probably very likely that Jack, N, Harsha De Silva et al will be able to say ‘I told you so’ by Q4 2012. It’s just that after 20 years of living here, I would no longer bet on it.
And for the record indi, we’ve had sushi bars here for decades.
I don’t mean sushi shops as in Sakura or Nihon-Bashi, I was referring to the suchi/bar Kamikaze. Wrong word I suppose. It’s a sushi cocktail lounge/nightclub, something new for Colombo I think.
The thing is I don’t really want to say ‘I told you so,’ I’d rather we try to get it right with a view to the future and learn from others mistakes rather than repeating them.
Rajiv, the fact of the matter is, whether people like it or not, except for a few occasional hiccups Sri lankan economy has been doing pretty well since the 80. Acute criticism of our economy is always politically motivated. Whatever the European crisis is it will never be as bad as 2008 & 2009 US crisis. I’ll be extremely surprised if our economy doesn’t grow at least 6% next year.
Dodo, only to you would people asking for more transparency and less corruption be ‘politically motivated.’
Yes, most people who yap about corruption & transparency in this country are politically motivated. That has been the case forever & ever, regardless of whether they belong to UNP, SLFP or anything in between.
Most of us in the business community know very well that part and parcel of doing business is the abuse of power. It’s ubiquitous & unavoidable.
Tell me…what should the motivation be for ‘yapping’ about corruption and transparency? You’re in the ‘business community’? Lol. I know plenty of people in the ‘business community’ who do make an honest living, but I guess if you’re corrupt yourself then that puts your comments into perspective.
Of course they do. ;)
Dodo,
agreed that some, maybe many, of the business community don’t worry too much about transparency. But the questions are:
1. Is greater transparency a good thing?
2. Does it really matter who calls of transparency?
The Government does not like transparency because it makes it harder to line their pockets. Should taxpayers be willing to go along with that view.
@Dodo – hehe…they’re probably the same ones who know what a P&L statement look like….you might actually learn something :)
Early 1990′s was pretty good, with liberalisation of plantations and followed up in mid 1990′s by telecoms, which was a big driver for almost a decade.
We then had a pretty near shave in 1999/2000.
Remember when the rupee collapsed from 80 to 100 in a space of a couple of weeks and everything went dead? That was the factor that brought the UNP into power. The platform they set in 2001-3 gave the economy a good boost that ran for several years after. The economy also received a massive stimulus with the tsunami a lot of funds poured in.
2008 was the next bad year, when the economy contracted (power consumption did, so I reckon the economy did too although the stats showed otherwise, again the rupee dropped to around 115 or so. With the end of war and with some timely restructuring of debt in 2009 we were ok, but the policies of 2005-2010 are now bearing fruit and the last two months have been a disaster.
Ok Jack, are you going to give a more concrete prediction. For example will we have negative growth in 2013. Or are we going to get anything less than 6-7% growth in 2012.
I would guess that growth, as measured the official statistics will drop off by by 1-2% points, possibly more, so 5-6%.
Actually there is growth for all to see. It has nothing to do with this government. It would have been much better under another administration that is less corrupt. We have received US$27B in the past 8 years and this year alone we expect $6B from our hardworking workforce overseas. If we had US$500B invested in US treasury bills we will be still getting the same dividend.
The money these people send is equivalent to that US$500B in a sovreign wealth fund. Any country with this size of sovereign wealth fund would have had development double this total. So it is no surprise It is the government that has squandered most of it so we see only the balance in the growth statistics.
In fact the govt. has been very slow in developing the infrastructure. Roads to no where in Hambantota is a waste but a proper subway system or rapid transit rail system in the Western province will immediately show a return on social or public investment.
Sp please before prognosticating on what we see as a result of this regime ponder that it is nothing to do with this regime, it is from people who cannot vote that we get all this largesse. The people who have voted in this government therefore are just those spunging off other people’s work!!
Actually, it has everything to do with this government. For example, the UNP ran Colombo for how long? And what improvements did you see? They couldn’t even clear the garbage properly. The end of the war also has everything to do with this government.
End of war not possible without CFA.
Without CFA no Karuna breakway.
Without Karuna, no top quality intelligence. It also stripped LTTE of a large number of cadres.
Not really.
The war was ALWAYS winnable – with or without Karuna. But they never had the right people running the show – until Mahinda came along. You think if Chandrika or Ranil were in charge, that the LTTE would have been wiped out and the war would have ended? All the CFA did was strengthen the LTTE and hand them plenty of $$$ and legitimacy.
The CFA strengthened both sides. Just before it was signed the SL Army was the closest to completely losing the Jaffna Peninsula than it had ever been. Elephant Pass had fallen and the GoSL was seriously contemplating an evacuation of Jaffna. Generals were panicking, and the public thought all was lost.
The biggest effect the CFA had was that it gave the SL Army time to regroup and recover, and it cut away the Tigers from the Tamil population of the NE. For the first time, the Tigers were no longer the liberators but the de facto state, and they failed at that utterly. The Tamil public began to see what was wrong with a Tiger state, and they also got to see what peace was like.
Karuna was an added benefit, militarily, but the split was more significant morally. It showed the world that there were cracks in the Tiger monolith.
Your remittances argument doesn’t make sense. Infrastructure is built with donor money/loans, and it doesn’t really make sense to compare remittances to earnings on sovereign wealth funds. It’s an issue, but a completely separate one.
A lot of this growth is thanks to the government, especially ending the war, and they have built infrastructure at a pretty fast clip. Some of it is corrupt but it’s happening.
They’re building a ring road around Colombo now, and the Southern Expressway isn’t a road to nowhere, it’s a road to Galle, Matara and yes, Hambantota.
Give credit where credit is due and criticize where necessary. Things are visibly getting better, and I do give them credit for that.
Southern Expressway is a road to nowhere because Hambantota is still not making any money and no one knows when the port starts to make any money ..
The point is the expressway runs to Galle and opens up the south to access within an hour. So no, it’s not a road to nowhere. It’s a road to Galle, Hikkaduwa, Unawatuna, and a lot of other places I and many people want to get to quickly.
I do not for a moment deny there has been growth of course there has been lots, but I reiterate and would put it another way where would we be if we did not get this, then you may realize.
Of course the remittance money effectively paid for the war as that was the foreign exchange to buy the arms. Of course the remittance money paid for the infrastructure as that was how one was able to borrow because it both strengthens the economy and it improves our GNP so budget deficits as a % GDP can be sustained with higher GDP.
Of course remittance is the same as dividends from wealth funds invested abroad. Just like our workers are equivalent to that asset figure, as it is money that is remitted back to Sri Lanka free and clear unlike the value added exports., whether it comes by way of dividends or remittances is no different. The only difference is that most of the remittances are to people who are poorer than recipients of dividends and so causes a higher multiplier effect in the economy speeding its growth.
So it is all to do with them. As any self respecting economist how we would be as a country if we had not received this unencumbered (by debt) money over this period. We would be in dire straits still fighting the war!! Just think!!
Any other government during this period could have done a far better job.
Again, I don’t get why you’re fixated on remittances. GoSL reported over 670 billion in revenue in 2011, mostly from tax. According to you we’re expecting $6 billion from remittances. Remittances are an important part of the economy, but this isn’t Haiti. It’s not like they are THE ECONOMY.
GDP and economic growth are really not determined by remittances, they’re part of a much bigger economy. And what’s the point anyways? That the government is bad because they’re exploiting housemaids?
There are certainly better possible governments, but as far as Sri Lankan governments go, this one is putting serious numbers on the board economically. The numbers would be way better if they weren’t so willfully dumb, but those numbers are still there. GDP, personal income, vehicle ownership, tourism, all have risen quite dramatically.
Remittances are the key because:
1. We export all our unemployed. If not huge social problems.
2. The remittances send by by the formerly unemployed support domestic consumption. Everything from telecoms to clothes to domestic appliances to motor cycles are helped paid for by overseas labour.
Or potentially unemployed.
The migration helps create openings for unemployed to take up locally.
At senior levels in management, it is mostly migration that leads to openings, very little new investment is taking place.
We’re going to get $6 billion in remittances? Pretty amazing if true. In 2010-2011, India’s legendary diaspora – teeming as it is with steel magnates, tech lords, celebrity physicians, stand up comics and Wall Street douchebags – sent back $56 billion.
http://www.centralchronicle.com/india-received-usd-56-billion-in-remittances.html
Ok, so that’s over 9 times larger than what we’re apparently expecting. But the population of India is, what, 60 times bigger than ours?
Do the math, you say Govt. of SL has Rs670Billion in revenue. Hey you know what that is the same as US$6B in remittances! What a coincidence.
The remittances are a freebie. The revenue is from taxing our poor people, cigarettes, alcohol, food, import duties mainly on food and some corporate and income tax. So that is the SECRET of our success. No wonder it takes a while to appreciate it as the govt. does NOT want you to know that lest all the steam from their boasting will all turn to mush. Like most people in SL they still do not appreciate the significance!! The govt. has done a super hush up job in this regard.
15% of GDP remitted PER ANNUM in our US$40B economy is no joke. It is almost as large as the whole trade deficit. So we did not have to devalue all this time as it also propped up the rupee. I have only used the official statistics of the money coming through the formal sector. If the informal sector is included the mind will truly boggle. How do you think the millions of dollars in foreign currency gets smuggled out daily from BIA? We only caught one shipment for good measure to keep the customs and press and people happy. Remember the fine about Rs2M. Just some of the cash people bring into SL has to go out too, when it is part of the unofficial black market.
I can go on if you want.
I must admit that number is huge. According to LBR, USD $4.1 billion was remitted in 2010. However, it’s not like that all goes to the government
“Remittances flow directly from one person to other. Also, unlike official aid flows, the process of transferring remittances does not include tax and the only cost incurred is that of the money transfer service.” (Sunday Times).
People use remittances to tend to their daily needs mostly, maybe but a fridge. I’m still not clear what this has to do with building roads. Or anything really, besides establishing that you don’t like the government.
But the government does collect all the indirect tax revenues that result from people in Sri Lanka spending the remitted monies in the local economy. Of course this assumes that the government can actually collect these taxes in an efficient manner!
we have a lot of foreign remittance. But i can’t imagine how our foreign remittance has gone up 50%, up to 6bn, from the 2010 number especially given the prevailing global economic circumstances. I would say the actual number is probably closer 5bn & probably less. That’s a growth of .9bn.
The IMF estimate puts our economy at 56bn, with growth around 8%. So essentially the economy expanded around 5bn. out of which .8-.9bn was remittance.
If I understood the post correctly, Indi was noting down some observations and being a little bit optimistic – now there is nothing wrong with that now is there?
Then the readers go all anti-givernment and pro-government and someone even suggested the development plan was by the “previous government” :-)
Whatever the agendas are or whether there is a master plan or not, or even if this is good or bad for the country in the long term – there is no denying that there is development in a pretty aggressing manner in the last year or so. Now I agree some may be just a show and even there seem to be a lot of waste (like near the parliment roundabout where they seem to be in an infinite loop of constructing-breaking down, almost like a prototyping experiment), but some things are built that are actually useful.
So let’s just forget our petty politics and give this a chance shall we?
Tania,
just have a read through my first comment.
As someone once said: for while, falling feels like flying
;)
PS: Indi, where is this 3D theater coming up?
Majestic City, fifth floor I think. Some friends went yesterday. They’re only showing Three Musketeers, however, which looks quite shite
[...] around, I must reiterate, Colombo and Sri Lanka are seeing a development boom. Most of this stuff didn’t exist five years ago or it was in a bad state. The last public jog [...]
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