Case

334
Institute for the Study of Diplomacy
Case Study

TOURISM DEVELOPMENT:
A Path to Peace in Sri Lanka?
Manny Fassihi

Cover photo source: https://pxhere.com/en/photo/797472

 Case 334

Tourism Development: A Path to Peace in Sri Lanka?

Manny Fassihi

ISBN: 978-1-56927-000-4

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Tourism Development: A Path to Peace in Sri Lanka?

MANNY FASSIHI

Manny Fassihi is a design consultant based in Singapore, where he leads human-centered processes to

understand people’s needs, develop insights and strategy, and guide innovative design solutions for products,

systems, and services. He works across a range of industries and is known for his expertise in education,

tourism, civic engagement, and international development. In 2016, he graduated from the Master’s

program in Global Human Development from Georgetown’s School of Foreign Service.

This case study was made possible (in part) by a grant from the Carnegie Corporation of New York. The
statements made and views expressed are solely the responsibility of the author.

I. A NEW DAWN FOR SRI
LANKAN TOURISM
On August 29, 2014, British tourists Joshua Gladstein
and Sophie Nathan were unwitting participants in Sri
Lankan history. After landing in Colombo, the
nation’s capital, they became the 1,000,000th and
1,000,001st tourists to arrive in Sri Lanka in 2014, in a
country that had never drawn over a million tourists a
year. 1 These numbers paled in comparison to countries
like the United Kingdom, which received in excess of
30 million foreign arrivals per year. 2 But for Sri Lanka,
a country emerging from decades of violence and
disasters, these numbers were signs of a new period of
hard-won peace and prosperity.
Sri Lanka faced two significant challenges in building
up its tourism industry. For decades, the country had
been troubled by a deep ethnic divide. 3 Between 1983
and 2009, the Sinhalese, the country’s dominant
Buddhist ethnic group, waged a civil war with the
Tamils, a minority Hindu group, with heavy losses on
both sides. The United Nations estimated that the
nearly three decades of war between the Sri Lankan
Army and the military arm of the Tamil resistance
movement, the “Liberation Tigers of Tamil Eelam”
(LTTE), cost over 100,000 lives. 4 In 2004, the country
experienced its worst natural disaster when a tsunami
ravaged the coastal regions, claiming over 35,000 lives
and leaving 500,000 homeless. 5 All of these years of
strife and destruction meant the Sri Lankan tourism
industry was largely stagnant.
But with the defeat of the separatist rebels in May
2009, the industry was now primed for record growth.
“Peace is the biggest investment for the development
1
“Sri Lanka Welcomes One Millionth Tourist for 2014,” August
29, 2014, http:/-/www.ft.lk/2014/08/29/sri-lanka-welcomes-one-
millionth-tourist-for-2014/ (July 9, 2016).
2
“International Tourism, Number of Arrivals,” World Bank,
http://data.worldbank.org/indicator/ST.INT.ARVL?locations=G
B (January 12, 2017).
3
Aravinth Kumar, “The Long Term Solution to Sri Lanka's
Ethnic Problem,” Colombo Telegraph, May 6, 2015,
https://www.colombotelegraph.com/index.php/the-long-term-
solution-to-sri-lankas-ethnic-problem/ (July 5, 2016).
4
“Up to 100,000 Killed in Sri Lanka's Civil War: UN,” ABC
News, May 20, 2009, http://www.abc.net.au/news/2009-05-
20/up-to-100000-killed-in-sri-lankas-civil-war-un/1689524
(July 11, 2016).
5
T.J. Helgeson, “Tsunami Disaster in Sri Lanka,”
http://academic.evergreen.edu/g/grossmaz/HELGESTJ/
of tourism in any country,” said Basil Rajapaksa, Sri
Lanka’s Minister of Economic Development. “There
won’t be tourists if there is no peace.” 6
Because of tourism’s potential to generate jobs, foreign
investment, economic growth, and infrastructural
development, the Sri Lankan government identified
tourism as central to the country’s national policy and
socio-economic development. By achieving these ends
and supporting sustainable livelihoods across the
island, the government hoped a vibrant tourism
industry would provide an economic boost – and
perhaps even reduce the likelihood of war starting
again.
In 2011, the government rolled out a strategy for
attracting 2.5 million arrivals and $3 billion in foreign
investment, with the goal of generating 500,000 jobs
by 2016. Minister Rajapaksa, the younger brother of
President Mahinda Rajapaksa, believed the country
was well on its way to achieving these goals.
Moreover, the benefits of tourism were broadly based,
and not restricted to the Sinhala-dominated south, as
in the past. “Today the industry has expanded to the
north, south, west, east and even the central hills,” he
said, following Gladstein and Nathan’s arrivals. 7 In
addition, tourism appeared to be playing a role in
poverty reduction. According to a 2016 World Bank
report, the country’s poverty rate dropped from almost
a quarter of the population in 2002 to as low as six
percent after the war. The report cited the economy’s
move away from agriculture and toward more
profitable sectors, including the apparel industry and
tourism, as a major contributing factor to poverty
reduction. 8
(July 27, 2016).
6
“Sri Lanka Eyes Tourism Boom but Challenges Lie
Ahead,” BBC News, January 25, 2011,
http://www.bbc.co.uk/news/mobile/business-12277809
(July 27, 2016).
7
“Basil Inaugurates ‘Sancharaka Udawa’ as Post-war Sri Lanka
Celebrates Tourism Revival,” Daily FT, June 28, 2014,
http://www.ft.lk/2014/06/28/basil-inaugurates-sancharaka-udawa-
as-post-war-sri-lanka-celebrates-tourism-revival/ (July 27, 2016).
8 “Sri Lanka: Poverty and Remaining Challenges,” World Bank,
2016, http://www-
wds.worldbank.org/external/default/WDSContentServer/WDSP/
IB/2016/03/14/090224b0841faaf9/1_0/Rendered/PDF/Poverty0a
nd0we0remaining0challenges.pdf (January 12, 2017).
 Manny Fassihi
Shaped like a jewel, Sri Lanka is an island country at
India’s southern tip, with beautiful beaches, wildlife
sanctuaries, a world-famous “tea country,” unique
ecosystems, and climate zones—all contained in a
space the size of West Virginia (see maps in
Appendices 1 and 2). In 1265, famed Venetian
explorer Marco Polo deemed Sri Lanka “the finest
island of its size in all the world.” 9 But modern-day
explorers had much to see as well. UNESCO, for
instance, had designated eight of the island’s ancient
cities and colonial forts as World Heritage Sites.
With this new period of peace and signals of
government investment, Lonely Planet, the largest
travel guide publisher in the world, named Sri Lanka
its top destination in 2013. 10 Was this yet another
promising sign that Sri Lanka’s tourism industry was
getting the attention it deserved? There were reasons
to be optimistic, but also notes of caution. After all,
this was not the first time the Sri Lankan government
had pinned its hopes on tourism.
II. PHASE I: TOURISM’S INITIAL
BOOM (1966-1982)
In 1948, Sri Lanka (then known as Ceylon) began its
transition to independence from centuries of colonial
rule in uniquely stable circumstances. The new
democracy’s anti-colonial struggle had been
remarkably peaceful, and the country had a
functioning bureaucracy, well-developed transport
infrastructure, and a relatively educated population. 11
Though profitable, Sri Lanka’s trade at the time was
still largely a legacy of the demands of the colonial
system for primary product exports—tea, rubber, and
coconuts. The prospects for an economically robust,
fully participatory, and manageable democracy looked
good.
9
Marco Polo, The Travels of Marco Polo, Translated by Henry Yule
(John Murray: London, 1920), Book 3, Chapter 14 (Can be
accessed at
https://en.wikisource.org/wiki/The_Travels_of_Marco_Polo/Book
_3/Chapter_14) (January 17, 2017).
10
“World’s Hottest Destinations for 2013 Contain Aussie
Surprise,” Traveller, http://www.traveller.com.au/worlds-hottest-
destinations-for-2013-contain-aussie-surprise-27tdl
(January 12, 2017).
11
Evan Due, “Tourism and Development: Examining the Case of
Sri Lanka” (master’s thesis, McMaster University, 1980),
2
The US government established relations with the
new Sri Lankan government shortly after the country’s
independence. On August 3, 1949, Felix Cole
presented his credentials as American Ambassador
Extraordinary and Plenipotentiary. Though Sri Lanka
ultimately opted to take a stance of non-alignment—
i.e., it did not formally align itself with either Western
or Eastern blocs during the Cold War—relations with
the United States were cordial and based on a shared
democratic tradition. 12 The start of US government
economic assistance to Sri Lanka in 1950 was modest
due to the country’s relative prosperity in the region.
Between 1950 and 1952, the US government allocated
less than $50,000 for specialized training and
education. 13
However, when commodity prices began falling in the
1950s, the terms of trade turned against Sri Lanka.
Now dealing with a trade deficit, the newly formed
and elected United National Party (UNP) faced its
first major test: could it help ease the Sri Lankan
economy into more productive sectors? The
population was growing faster than production in
most sectors. A World Bank study completed in 1952
noted that social welfare services were consuming 35
percent of the budget, and recommended that the
government reduce its subsidy on rice. 14 However, the
move proved to be the government’s undoing,
sparking a civil disobedience movement that
ultimately forced Prime Minister Dudley Senanayake
to resign.
The Sri Lankan people would go on to reject the UNP
mandate in 1956 when they elected the Sri Lanka
Freedom Party (SLFP) to power. Prime Minister
S.W.R.D. Bandaranaike used the UNP’s pro-Western
stance as a potent propaganda weapon, claiming Sri
Lanka’s independence in 1948 was “fake,” and the
country could only achieve true independence by
severing all links to the West. To boost the country’s
economy, Bandaranaike advocated a number of
https://macsphere.mcmaster.ca/bitstream/11375/10370/1/fulltext.
pdf (January 12, 2017).
12
Russell R. Ross and Andrea Matles Savada, “Sri Lanka: A
Country Study,” Library of Congress,
https://www.loc.gov/item/89600372/ (July 27, 2016).
13
U.S. Agency for International Development, “20 Years of
USAID Program in Ceylon,” 1970,
http://pdf.usaid.gov/pdf_docs/PCAAC252.pdf (January 18, 2017).
14
Ross and Savada, op. cit.
 Tourism Development: A Path to Peace in Sri Lanka?
populist policies, declaring his intention to nationalize
plantations, banks, and insurance companies. From
1956-1965, the government actively expanded the
public sector and broadened domestic welfare
programs, including pension plans, medical care, and
food and fuel subsidies. This social agenda put a strain
on the country’s supply of foreign capital.
Nevertheless, the SLFP remained strong due to the
unwavering support of the Sinhala majority.
During this time, the US government took heed of Sri
Lanka’s leftist turn and began expanding its presence
within the country. On April 28, 1956, Bandaranaike
and the US Ambassador to Sri Lanka signed a bilateral
economic assistance agreement, with a pledge of US
“economic development and technical assistance as
well as specialized training for [Sri Lankan]
technicians in the United States.” The United States
quickly granted a 30-year loan for “equipment
necessary for economic and technical development.” 15
The US assistance program in Sri Lanka was much
like US aid programs elsewhere in the developing
world at the time, designed to promote peace and
stability through foreign aid that was largely “tied” to
purchases of US goods and services. At the height of
the Cold War, keeping pro-communist factions at bay
was a major goal, and one the United States believed
it could achieve by boosting economic development in
countries around the world. 16 With a socialist India to
the north, Sri Lanka became more important to US
regional stability interests, including balancing the
Soviet presence in the Indian Ocean region, and
evolving a constructive relationship with non-aligned
Third World countries. 17
The US government would allocate loans and grants
for development projects, financing the purchase of
food and agricultural commodities, agricultural
extension and research, irrigation and land
development, airport development and
administration, highway and rail planning, and the
eradication of malaria. By 1963, US assistance to Sri
Lanka totaled US$92.3 million. 18 When the SLFP
nationalized a US oil company—a move that was
15
“20 Years of USAID Program in Ceylon,” op. cit., p. 6.
16
“Foreign Aid: The Cold War Foreign Aid Program, 1947-
1953,” Encyclopedia of the New American Nation,
http://www.americanforeignrelations.com/E-N/Foreign-Aid-The-
cold-war-foreign-aid-program-1947-1953.html
(January 12, 2017).
3
counter to US interests and US faith in free markets—
the US government temporarily suspended the
program between 1963 and 1965.
In March of 1965, the UNP, again led by Dudley
Senanayake, returned to power, capturing more than
39 percent of the parliamentary seats compared to
SLFP’s 30.2 percent. Chief among the party’s plans
was developing the country’s then-fledgling private
sector. Senanayake had declared the country
“bankrupt” due to its heavy expenditures on social
welfare. The previous government’s populist economic
policies and import substitution strategy, which
included maintaining an overvalued exchange rate,
production subsidies for traditional exports, and
restrictions on imports, did not alleviate the country’s
imbalance of trade. And these moves limited the
supply of foreign exchange. To support the
development of the private sector, the government
sought to improve relations with the United States and
seek more US aid following the suspension in 1963. 19
Aid would be critical if Sri Lanka hoped to meet the
country’s food needs, especially after a worldwide
shortage of rice in 1965 prompted a nearly 50 percent
increase in the cost of rice imports. World prices for
Sri Lanka’s exports—tea, rubber, and coconut—had
also been declining for years.
As part of the US mission in Sri Lanka, G.S. Kovach,
a tourism advisor, conducted a visit to Sri Lanka in
1965 to explore the country’s tourism potential. In his
report to the Sri Lankan government, Kovach declared
that the country had all the raw materials for a tourism
industry—scenery, climate, good transport facilities,
friendly people—but noted that there were fewer than
18,000 recorded visitors per year. At the time, the
country lacked a robust tourism infrastructure, and
needed luxury hotels, a better investment climate, and
the publicity and management expertise to launch the
industry. Given the increased affluence of the
industrialized world, the substantial growth in leisure
time, and a curiosity for exotic locales, tourism could
address some of Sri Lanka’s economic woes and
transfer this newfound wealth to local entities.
Moreover, a vibrant tourism industry would also signal
17
“Telegram 1387 from the Embassy in Sri Lanka to the
Department of State,” State Department, April 19, 1976,
https://history.state.gov/historicaldocuments/frus1969-76ve08/d94
(January 12, 2017).
18
“20 Years of USAID Program in Ceylon,” op. cit.
19
Ross and Savada, op. cit.
 Manny Fassihi
to developed countries that the investment climate in
Sri Lanka was as attractive to foreign investors as
industrial and manufacturing sectors elsewhere in the
region, including Singapore and Hong Kong. Kovach
pointed out that more market research and feasibility
studies were needed to help the country meet the needs
of international tourists. 20
The UNP government took steps to stimulate the
tourist industry, taking note of many of the findings in
Kovach’s report. In 1966, Minister of State J.R.
Jayewardene established the legislative and planning
foundations for the industry, starting with reforms
around the investment climate. Attracting visitors
would first require a highly developed tourist
infrastructure that could only by financed through
foreign capital inputs. In March 1966, the newly
created Ministry of Planning and Economic Affairs
had responsibility for formulating a foreign exchange
budget. As part of this mandate, the Ministry issued a
“White Paper” on foreign investment that offered new
tax holidays, depreciation allowances, and a range of
other concessions to attract foreign capital. 21
In May, Minister Jayewardene created two bodies to
function as the official arms of tourism development:
(1) the Ceylon Tourist Board and (2) the Ceylon
Hotels Corporation. The Board comprised seven
public servants—nominated by the Minister—tasked
with the objectives of ensuring that the country
accrued the maximum possible social and economic
benefit from international tourism, as measured by the
number of jobs generated and the amount of foreign
exchange brought into the country. The Board’s
activities focused on regulations, development (e.g.,
infrastructure, facilities, hotel school, and training),
promotion, and financing tourism ventures and
research. Its sister agency, the Ceylon Hotels
Corporation, owned and operated hotels and
restaurants, transport firms, and tourist shops. The
Corporation functioned in much the same way a
20
Report on Tourism in Ceylon, by G. S. Kovach (1965), quoted in
Evan Due, “Tourism and Development: Examining the Case of
Sri Lanka” (master’s thesis, McMaster University, 1980)
https://macsphere.mcmaster.ca/bitstream/11375/10370/1/fulltext.
pdf (January 12, 2017).
21
Ibid.
22
Government of Sri Lanka, “Ceylon Tourist Board,” (1966),
http://www.commonlii.org/lk/legis/consol_act/ctb224282.pdf
(January 12, 2017).
4
private corporation would, entering into profit sharing
with its enterprises. 22
The Tourist Board immediately hired a consortium of
firms, led by Harris, Kerr, Forster, and Company (a
Hawaii-based group of accountants), to propose a
tourism development strategy. The plan would be part
of a package of technical assistance given by the United
States Agency for International Development
(USAID) to survey the country’s tourism potential. 23
After just three months on the island, the team
compiled a ten-year tourism plan to serve as a
blueprint for tourism development. The 1966 “Ceylon
Tourism Plan” hailed tourism as “an export industry of
enormous proportions offering unlimited prospects as
a growth resource.” 24 The rationale for tourism, to the
team, was simple: it would provide economy-wide
benefits, with revenue “flowing quickly and directly
with a wide distribution into the local economy
providing a rapid cumulative and circulating flow of
income,” and launch an “inexpensive instrument for
creating good will, development of other industry, and
the circulation of desirable public and political
relations with neighboring nations and the world
community.” 25 The Plan made recommendations for
more liberal government investment policies,
expenditures on hotel, air, and road infrastructure, and
clustering of geographic areas, dividing the country
into five resort development zones (see Appendix 3). 26
Should the government follow through with the
recommendations, the Plan projected over 300,000
foreign arrivals in 1976. 27
The Sri Lankan government hastily adopted the plan.
As Dr. Ari Gamage, director of research at the Ceylon
Tourist Board in 1982, reflected: “The report had been
adopted in its entirety by the authorities without
discussion of the wider implications of the tourism
development.” 28 The Tourist Board followed the
recommendations closely, relaxing import restrictions,
introducing policies to make land acquisition for resort
construction legal, and identifying national landmarks
23
Due, op. cit.
24
Ceylon Tourism Plan 1967 (p. 27), quoted by Malcolm Crick,
Resplendent Sites, Discordant Voices: Sri Lankans and International
Tourism (New York: Routledge Press, 2012).
25
Ibid.
26
Ibid.
27
Ibid.
28
A. Gamage, “Tourism in the Economy of Sri Lanka,” (master’s
thesis, Scottish Hotel School, 1978).
 Tourism Development: A Path to Peace in Sri Lanka?
and park areas for protection. To meet the projected
demand, the government sought to increase
construction of new tourist accommodation facilities.
With low levels of visitors, the country would need to
provide extra inducements to high-end, international
hotels to invest (see Appendix 4). The Board approved
generous investment policies, including a five-year tax
holiday, indefinite loss carryforwards, and guarantees
against expropriation and nationalization.
However, despite the UNP’s fervor for private sector
development, the economy did not show significant
signs of improvement during their term. The party
would go on to lose the election in 1970 to the leftist
SLFP. Tourism fell in importance with the new
administration, which cut grants to the Tourist Board
by 60 percent.
Nevertheless, resorts continued to expand during this
period. Various multinational chains (including
Holiday Inn, Intercontinental, and Oberoi)
constructed hotels, and international tourist firms like
Kuoni and Neckermann increased operations. The
majority of these deals were largely a legacy of the
previous UNP administration’s contracts and incentive
arrangements that the SLFP opted to continue.
In addition to these large, capital-intensive projects,
the Sri Lankan government began promoting
“medium-sized” units, locally owned and operated.
This was to ensure “greater local participation in the
industry and stronger (and more) linkages with other
local economic sectors, particularly manufacturing and
food processing.” 29 Many of these hotels were based
on the southern coast, situated primarily in Sinhalese
areas with hotels run by Sinhalese or under US or
European management. Entrepreneurs in the
northern and eastern provinces did not usually have
access to the training facilities or support. Possibly as
a result of the Sinhala-majority government’s
influence, entrepreneurs in Tamil-majority areas were
excluded from the original master plan outlined by
Harris, Kerr, and Forster. 30
Over the entire 1966-1982 period, tourism boomed.
Arrivals grew at an average rate of 21.9 percent per
29
Due, op. cit.
30
Due, op. cit.
31
Ibid.
32
Sriyantha Fernando, Jayatilleke S. Bandara & Christine Smith,
“Regaining Missed Opportunities: The Role of Tourism in Post-
5
year, helping make tourism Sri Lanka’s fastest-
growing economic sector. Earnings grew from US$1.3
million in 1966 to US$28.2 million in 1976. Between
1970 and 1979, employment tripled from 12,000 to
36,000 working in hotels and restaurants, travel
agencies, airlines, tourist shops, and recreational
agencies. 31
Ultimately, though, many of the promises made by the
Plan went unrealized. While tourism did grow to
become the fifth-largest source of foreign exchange by
1976 (after tea, personal remittances, textiles, and
petroleum products), the country was earning only half
the foreign exchange predicted, and seeing only a little
over a third of the projected number of foreign arrivals.
Visitors from North America were only 7 percent of
the totals the Plan had led authorities to expect. 32
Global tourism growth during the 1970s was slow in
general, due in large part to the oil crisis in 1974 that
increased the cost of travel.
Apart from these predictive errors, the Plan was
defective in a more fundamental way. “The report had
been adopted in its entirety by the authorities without
discussion of the wider implications of the tourism
development,” the Ceylon Tourist Board’s director of
research wrote in his master’s thesis in 1978. 33 In other
words, not only were a number of economic issues not
considered, but the broader socio-cultural
consequences of tourism development were ignored.
Yet, the government did not feel that these low
numbers were a cause for concern. When the UNP
returned to power in 1977, it began a campaign to
maximize foreign exchange and re-open the Sri
Lankan economy for business. The administration was
prepared to take on significant amounts of external
debt, accepting foreign aid from the United States,
Western Europe, and Japan. The government would
use the aid money to invest in a massive irrigation
project, the Mahaweli Ganga Program, which was
expected to “make Sri Lanka self-sufficient in rice and
generate enough hydroelectric power to fill the
nation’s requirements.” 34 This signaled a turning point
in Sri Lankan economic policy to stimulate export-
war Development in Sri Lanka,” Asia Pacific Journal of Tourism
Research 18, no. 7, 2013, 685-711.
33
Gamage, op. cit.
34
N.C.M. Navaratne, “Overview of Mahaweli Programme to
Enhance the Water Security,”
 Manny Fassihi
driven industries that would have “multiplier benefits”
for other industries, including tourism.
As the economy grew, Sri Lanka succeeded in
attracting a large number of tourists, particularly from
Europe. The government began imposing heavy taxes
on hoteliers to increase its revenues, rolling back on
the previous policies of giving generous tax holidays.
While hotel investors took umbrage to the move, they
hoped that the increase in visitors would boost their
occupancy rates. Arrivals would finally break the
300,000 mark in 1982, as Harris, Kerr, and Forster
had projected. But it would take decades for the
country to pass 400,000 tourists per year. 35
III. TOURISM, INTERRUPTED:
THE CIVIL WAR (1983-2002)
The tourism boom came to an abrupt halt in 1983
when the Liberation Tigers of Tamil Eelam (LTTE)
ambushed an Army convoy, killing 13 soldiers. The
ambush would trigger riots, organized by the Sinhalese
majority, in which 2,500 Tamils died. The July 1983
riots marked the beginning of a bloody civil war
between the Sri Lankan government and the LTTE. 36
The sectarian tensions between Sri Lanka’s Sinhalese
majority (74 percent) and Tamil minority (12.7
percent) populations had their origins in the country’s
colonial past. 37 During the British colonial period,
according to the Sinhalese view, Tamils received
preferential treatment in education and civil service as
part of the “divide and conquer” strategy in Sri Lanka.
The Sinhalese deeply resented this favoritism and
began to see themselves not as the majority but as a
minority in a large Tamil sea that included 60 million
Tamils in India’s southern state of Tamil Nadu. In the
years following independence, the Sinhalese-run
http://www.narbo.jp/data/01_events/materials(tp7)/02%20-
%20Eng.%20N.C.M.%20Navaratna.pdf (January 12, 2017).
35
Fernando, op. cit.
36
“Sri Lanka: Conflict Profile,” Peace Direct, October 2013,
https://www.insightonconflict.org/conflicts/sri-lanka/conflict-
profile/ (July 27, 2016).
37
Census of Population and Housing of Sri Lanka, “Population by
District, Ethnic Group, and Sex, 2012,” Table A3,
http://www.statistics.gov.lk/PopHouSat/CPH2011/Pages/Activiti
es/Reports/FinalReport/Population/Table%20A3.pdf
(January 12, 2017).
6
government disenfranchised the Tamil migrant
plantation workers from India and made Sinhala the
official language. In addition, they gave preference to
Sinhalese applicants for university admissions and
government jobs. Many Tamils working for the
government lost their positions, as they were unable to
speak the national language. In 1972, the Sinhalese
changed the country’s name from Ceylon to Sri Lanka
and made Buddhism the nation’s primary religion—a
move that was not popular with the largely Hindu
Tamil population. 38
The Sri Lankan Freedom Party drove many of the
Sinhala nationalistic measures, often at the expense of
the rights of the country’s minorities. Tamil politicians
called for Gandhi-style campaigns of civil
disobedience, but their voices were overpowered by
calls for “national liberation” by younger Tamils.
Young Tamil radicals, calling themselves “Tamil
Tigers,” mobilized to form a number of terrorist
organizations, the most violent of which was the
LTTE. Under the leadership of Velupillai
Prabhakaran, the group vigorously campaigned for a
separate Tamil homeland in northern and eastern Sri
Lanka, where the country’s Tamil population was
concentrated. 39
During the ensuing conflict, the LTTE emerged as a
fearsome terrorist organization, gaining notoriety for
suicide bombings, recruitment of child soldiers, and
providing an all-around challenge for the Sri Lankan
government throughout the northern and eastern
provinces.
In the early years of the war, a number of attempts to
end the conflict were made both internally and
externally, as detailed in ISD Case Study #151, “The
Tamil-Sinhalese Ethnic Conflict in Sri Lanka: A Case
Study in Efforts to Negotiate a Settlement, 1983-
1988.” 40 Peace talks between the LTTE and the
38
“The Sri Lankan Conflict,” Council on Foreign Relations, May
18, 2009, http://www.cfr.org/terrorist-organizations-and-
networks/sri-lankan-conflict/p11407 (July 27, 2016).
39
Ibid.
40
Marshall R. Singer, “The Tamil-Sinhalese Ethnic Conflict in
Sri Lanka: A Case Study in Efforts to Negotiate a Settlement,
1983-1988,” ISD Case Study #151, 1989,
http://casestudies.isd.georgetown.edu/products/the-tamil-
sinhalese-ethnic-conflict-in-sri-lanka-a-case-study-in-efforts-to-
negotiate-a-settlement-1983-1988
(January 12, 2017).
 Tourism Development: A Path to Peace in Sri Lanka?
government began in Thimphu, Bhutan, in 1985, but
soon broke down.
India, with its own Tamil population in the south,
made a pact with the Sri Lankan government to send
peacekeeping troops to the island in 1987. Unable to
quell the violence, they began fighting with the
LTTE, and ultimately were forced to leave by Sri
Lankan President Premadasa in 1990. Not long after,
an LTTE suicide bomber killed Indian Prime
Minister Rajiv Gandhi in 1991. The Indian press
subsequently reported that LTTE leader Prabhakaran
decided to eliminate Gandhi as he considered the
Indian prime minister to be against the Tamil
liberation struggle. Following the assassination, India
limited its direct involvement in the war.
Washington, on the other hand, did not play a major
role in the conflict. In 1997, the US State Department
placed the LTTE on its terror list. 41
Throughout the war, both the government and LTTE
were implicated in widespread human rights abuses,
including abduction, conscription, and the use of child
soldiers. More than 1 million people in Sri Lanka
became internally displaced and were living in
camps—homeless, and struggling for survival. 42
Exhaustion with the war was building as the casualties
mounted. As a result, a significant peace movement
developed in the late 1990s, with many organizations
holding peace camps, conferences, trainings, and
“peace meditations.” 43
While the tourism industry certainly suffered during
these years of conflict, it did not, remarkably, self-
destruct. A decline in arrivals during the 1980s was
followed by a partial recovery during the 1990s as
foreign tourists grew more confident that the fighting
was confined to the north and northeast sections of the
island. As a result, tourist visits were mostly
concentrated in the south, which was marketed as
isolated from the conflict. By 2000, visitor numbers
were approaching their pre-conflict level, with
41
Ibid.
42
“UN Report Highlights Human Rights Violations in Sri Lanka
and Urges Creation of Hybrid Court,” International Justice Resource
Center, September 22, 2015,
http://www.ijrcenter.org/2015/09/22/un-report-highlights-
human-rights-violations-in-sri-lanka-and-urges-creation-of-
hybrid-court/ (July 27, 2016).
7
394,000 arrivals. 44 But many of these visitors were
backpackers, and less likely to be high spenders.
IV. PHASE II: A NEW PEACE
Hopes for peace emerged towards the end of 2001,
when the LTTE began to declare its willingness to
explore measures for a peaceful settlement to the
conflict. The expression came shortly after the
September 11 attacks, sparking fears of direct US
support of the Sri Lankan government as part of the
War on Terror.
The peace process evolved with the election of the
United National Party, the country’s right-leaning,
pro-Western government that had promised to end
the war during its campaign. On December 19, 2001,
amidst efforts by Norway to bring the government and
the Tamil Tigers to the negotiating table, the LTTE
announced a 30-day ceasefire with the Sri Lankan
government. The newly elected government
reciprocated, announcing a month-long ceasefire and
agreeing to lift a long-standing economic embargo on
rebel-held territory. On February 22, 2002, the sides
formalized a memorandum of understanding. Norway
was named as mediator, committing to facilitate talks
between the parties until a peace was reached.
In September 2002, at a naval base in Thailand, the
Colombo government and the LTTE held their first
peace talks in seven years. On the third day, the LTTE
announced that it would settle for “internal self-
determination” for the Tamil population rather than
full independence—a major shift in the rebels’
position. In a second round of talks, both sides agreed
on a framework for seeking foreign aid to rebuild the
country (estimated at US$500 million). A multilateral
donor conference in Oslo in late November brought
numerous pledges of external assistance, with the
United States promising to “play its part” toward
implementation of a peace plan. 45
43
“Sri Lankan Civil War - Eelam War III - Early Peace Efforts,”
http://www.liquisearch.com/sri_lankan_civil_war/eelam_war_iii/ea
rly_peace_efforts (July 27, 2016).
44
“International Tourism, Number of Arrivals,” World Bank,
http://data.worldbank.org/indicator/ST.INT.ARVL?locations=LK
(July 27, 2016).
45
“Sri Lanka: Background and U.S. Relations,” Library of
Congress, 2008,
 Manny Fassihi
In the run-up to the planned sixth round of talks, three
co-chairs were assigned in addition to Norway: the
European Union, Japan, and the United States. By
December 2002, Norwegian mediators announced
that after six rounds of negotiations, the Sri Lankan
government and the LTTE had come to an
agreement:
The parties have agreed to explore a political
solution founded on the principle of internal
self-determination in areas of historical
habitation of the Tamil-speaking peoples,
based on a federal structure within a united
Sri Lanka. 46
Having delivered on its promise, the UNP-led
government received praise from the international
community. In its 2002 evaluation of the country, the
World Bank wrote:
Today, Sri Lanka has a great window of
opportunity. The United National Front
Government that came to power in
December 2001 with a mandate to secure
peace and accelerate economic growth has
already embarked on a bold program of
peace/reconciliation and a comprehensive set
of economic policy/institutional reforms to
promote private sector-led growth. 47
Comprising many cosmopolitan, Western-educated
cabinet ministers, the UNP government was deft in
navigating the international landscape of donors and
investors. Moreover, the party had the support from
Sri Lanka’s business classes, whose success in turn
depended on limiting the impact of uncertainty and
instability that the conflict had created.
http://oai.dtic.mil/oai/oai?verb=getRecord&metadataPrefix=html
&identifier=ADA486249 (July 27, 2016).
46
“Breakthrough in Sri Lanka Peace Negotiations,” Regjeringen.no,
https://www.regjeringen.no/no/aktuelt/breakthrough_in_sri_lanka
_peace/id248914/ (January 19, 2017).
47
“Report No. 25937-CE,” World Bank, 2003, http://www-
wds.worldbank.org/external/default/WDSContentServer/WDSP/
IB/2003/05/27/000012009_20030527131045/Rendered/INDEX/
25937.txt (July 27, 2016).
48
“Aid, Conflict, and Peacebuilding in Sri Lanka,” World Bank,
2006, http://www-
8
To attract investment, the Sri Lankan government
knew it would have to adopt liberal macroeconomic
reforms that matched the policy stance of the major
development partners (i.e., the International
Monetary Fund, World Bank, Asian Development
Bank, and the Japanese government). This included
cutting 300,000 recipients from Samurdhi (the
government’s poverty alleviation scheme), curtailing
fertilizer subsidies, revising electricity charges,
introducing a pricing system on petrol, and privatizing
the People’s Bank. 48
The Sri Lankan government once again pinned its
hopes on the tourism industry to be a key driver of the
country’s economic recovery. In 2002, the government
sought the support of USAID to improve the country’s
tourism destination promotion capacities. Just a year
prior, Sri Lanka was on the verge of becoming a “non-
presence post” for the United States, with staff and
funding being withdrawn. With the situation
improving, the US government allocated US$19.5
million targeting three main areas: increasing the
country’s competitiveness in global markets (37
percent); building constituencies for peace through
transition initiatives (31 percent); and democracy and
governance reform (23 percent). 49
J.E. Austin Associates, subcontractors for USAID, led
the “Competitiveness Initiative,” a global USAID
program targeted at boosting economic growth
through private sector development. For Sri Lanka,
J.E. Austin focused on boosting firm-level
competitiveness in eight industry “clusters”: jewelry,
ceramics, coir, 50 information technology, rubber,
spices, tea, and tourism. 51 Working with the Tourist
Board, the team prompted the government to increase
its tourism promotion budget from less than
wds.worldbank.org/external/default/WDSContentServer/WDSP/
IB/2008/08/26/000333037_20080826023300/Rendered/PDF/451
260WP0Box331tAssessment01PUBLIC1.pdf (January 19, 2017).
49
Wendy Chamberlin, “Implementation of USAID Development
Programs,” USAID, March 20, 2003, http://2001-
2009.state.gov/p/sca/rls/rm/18961.htm (July 27, 2016).
50
Derived from the outer husk of coconuts, coir fiber is used to
make rope, mats, and brushes.
51
“Competitiveness Interventions: A Review of J.E. Austin and
Associates,” USAID, December 2001,
http://pdf.usaid.gov/pdf_docs/Pdacl176.pdf (January 19, 2017).
 Tourism Development: A Path to Peace in Sri Lanka?
US$500,000 a year to approximately US$10 million. 52
John Varley, the chief of party for the Competitiveness
Program, saw endless potential for Sri Lanka’s capacity
as a destination, confident that the Sri Lanka Tourist
Board could “more than double” its current target of
one million tourists by the end of the decade. 53
The UNP was deft at both mobilizing donor financing
and leveraging it to ensure that LTTE would cave to
their demands. By the time negotiations with the
LTTE began in March 2002, the government was
holding parallel negotiations with the International
Monetary Fund (IMF) and World Bank for US$692
million in loans. 54 The agreement to support the peace
process through multi-donor pledging conferences
also served to keep the LTTE, eager to improve the
conditions of the Tamil people, at the negotiating
table. Donors articulated a shared belief in achieving a
“peace dividend”—referring to “the improved social
and economic outcomes that are expected to
materialize in the transition to peace” —that would
underpin the political commitments to the peace
process. 55
To gain access to these funds, the government would
have to draft a “Poverty Reduction Strategy Plan,” a
series of World Bank and IMF-sanctioned reforms to
increase labor market flexibility, strengthen property
rights, and privatize the power and banking sectors. 56
Between March and December 2002, the Ministry of
Policy Development and Implementation
commissioned the drafting of the government’s
comprehensive economic master plan, called
Regaining Sri Lanka (RSL). The ministry ultimately
submitted the document to the IMF and the World
Bank in December 2002. Many of the details of this
plan and its drafting process were kept private and not
divulged to the public or parliament. 57 The IMF’s
52
Naomi Klein, The Shock Doctrine: The Rise of Disaster Capitalism
(New York: Metropolitan /Henry Holt, 2007).
53
Ibid.
54
“IMF Approves US$567 Million in PRGF/EFF Credit
Arrangements for Sri Lanka,” International Monetary Fund, April
18, 2003,
http://www.imf.org/external/np/sec/pr/2003/pr0354.htm (January
5, 2017); “World Bank Gives $125 Million,” Agence France
Presse, June 18, 2003.
55
“Sri Lanka - Development Policy Review,” World Bank,
December 8, 2004,
http://documents.worldbank.org/curated/en/2004/12/9875554/sri-
lanka-development-policy-review (January 12, 2017).
56
Debayani Kar, “The IMF-World Bank Plan for Sri Lanka: Will
It Help or Hinder South Asian Success?” Center for Economic Policy
9
endorsement of RSL opened the way for the next stage
of Sri Lanka’s integration into the circuit of global
finance—at the Sri Lanka Donors’ Conference,
convened in Tokyo in June 2003. With the active
political backing of the United States and considerable
financial input from Japan, the conference
participants, representing some 50 countries and more
than 20 international financial institutions, pledged
$4.5 billion over the next four years towards Sri
Lanka’s reconstruction. 58
When the RSL details became public in January 2003,
the plan quickly inspired controversy. Opposition
politicians, civil society members like the Alliance for
Protection of National Resources and Human Rights
(ANRHR), and trade unions decried the reforms as
excessive—and overly subservient to the agenda of the
private sector and donors. 59 To many Sri Lankans,
RSL was fundamentally anti-democratic, and had
failed to include Sri Lankan voices. The program
demanded that millions of citizens, primarily small-
scale fishers, leave traditional villages to free up the
beaches for tourists and make more land available for
resorts and highways. The fishing activity that
remained would be dominated by large industrial
trawlers operating out of deep ports.
By late 2003, Sri Lanka began approaching a political
crisis. President Kumaratunga of the minority People’s
Alliance (a joint party led by the SLFP) challenged
Prime Minister Wickremasinghe (of the ruling UNP)
for acting too leniently towards the LTTE during the
peace discussions. In November 2003, the president
declared a state of emergency, taking over three key
ministries (Defense, Law and Order, and Media), and
suspended parliament, precluding any possibility of
peace talks resuming. Kumaratunga then called for a
snap election for the 225-seat legislature—more than
Research, April 2003,
http://cepr.net/documents/publications/Sri_Lanka.pdf
(January 12, 2017).
57
Nihal K. Atapattu, “Sri Lanka - Mainstreaming Trade
Policy,” Foreign Law Guide,
http://www.fao.org/docrep/014/i2305e/i2305e15.pdf
(January 12, 2017).
58
K. Alan Kronstadt, Sri Lanka: Background and U.S. Relations,
U.S. Library of Congress, Congressional Research Service,
RL31707 (2008).
59
“Regaining Sri Lanka and PRSP: Compelling the Poor to
Subsidize the Rich,” Movement for National Land and
Agricultural Reform, 2016,
http://www.oocities.org/monlarslk/publications/Economic/PRSP_
Analysis_2004.pdf (January 12, 2017).
 Manny Fassihi
three years ahead of schedule—amid the political feud
with the prime minister.
The LTTE also faced an internal crisis as the
charismatic military leader of the Eastern Tamils,
Karuna Amman, began to break off with the LTTE
after he alleged that they were ignoring the interests of
the Eastern Tamil people. The move hemorrhaged the
LTTE’s strength and marked a key turning point in
the battle, reducing the total number of LTTE troops
in half.
In April 2004, the RSL agenda was effectively
defeated at the polls when the people voted into power
the left-of-center United People’s Freedom Alliance
Party (UNFP), which, in addition to promising more
stringent measures against the LTTE, vowed to
discard the RSL plan along with a reduced
commitment to the economic reforms proposed in it. 60
Much of the Tamil population boycotted the election,
which helped produce the UNFP victory.
V. PHASE III: BOUNCE BACK
SRI LANKA
Just months after the election, disaster struck. On
December 26, 2004, an earthquake with a 9.0
magnitude rocked the northwest coast of the
Indonesian island of Sumatra. The subsequent
tsunami was one of the deadliest in history, devastating
12 Asian nations. Indonesia and Sri Lanka were the
worst affected. The widespread impact of the tsunami
left most of Sri Lanka’s coastal regions in tatters,
causing much suffering. There were 35,322 people
dead (including 210 tourists), 4,115 missing
(including 65 tourists), over 500,000 homeless, and
275,000 livelihoods lost (particularly among the small
boat fishing communities). 61
60
“Evaluation of Donor-Supported Activities in Conflict Sensitive
Development and Conflict Prevention and Peacebuilding in Sri
Lanka,” OECD, October 2009,
https://www.oecd.org/countries/srilanka/44138006.pdf
(January 12, 2017).
61
Helgeson, op. cit.
62
“World Bank Response to the Tsunami Disaster,” February 2,
2005,
10
Tourism, which was just on the rebound, was one of
the worst-hit industries. An assessment by the World
Bank in 2005 estimated tourism asset losses at US$250
million, with projected output losses estimated at
US$130 million. 62 Weeks earlier, the country had hit
a historic high of 565,000 foreign arrivals, with arrivals
expected to reach 600,000 in 2005. Around 40 percent
of these foreign guest stays were spent along the
beaches of the island’s southern and eastern coasts—
the areas that had incurred severe damage during the
tsunami. Over three-fourths of the coastal belt was
filled with debris, and nearly half of the hotels had
been ruined by the destructive waves.
Responding to the magnitude of the disaster, the
international donor community, including the United
States, pledged approximately US$1.2 billion in
immediate relief. These funds were channeled to
various entities involved in implementing relief and
reconstruction efforts, including the United Nations,
International Red Cross, bilateral donors and their
contractors in affected areas, and the governments of
affected countries. 63
President Chandrika Kumaratunga formed three task
forces to oversee coordination of relief efforts: the
Task Force for Rescue and Relief (TAFRER); Task
Force for Logistics, Law and Order (TAFLOL); and
the Task Force for Rebuilding the Nation
(TAFREN).
TAFREN, tasked with rebuilding infrastructure, was
composed mainly of individuals from the private
sector; there were no representatives from civil society
or any grassroots fishing organizations. Along with
two government officials, the special task force team
was led by two bank directors, a textile-industry
entrepreneur, and five top managers of large tourism
companies. The group was housed within the
Presidential Secretariat, which meant its decision-
making was highly centralized. The US State
Department backed the task force with contracts to
US-based companies.
http://www.gfdrr.org/sites/gfdrr/files/publication/World%20Bank
%20response%20to%20the%20Tsunami%20Disaster.pdf
(January 12, 2017).
63
U.S. Government Accountability Office, Foreign assistance:
USAID has begun tsunami reconstruction in Indonesia and Sri Lanka,
but key projects may exceed initial cost and schedule estimates, GAO-
06-488, 2006, http://www.gao.gov/assets/250/249723.pdf
(January 12, 2017).
 Tourism Development: A Path to Peace in Sri Lanka?
Within days of the tsunami, the National Physical
Planning Department (NPPD), under the Ministry of
Urban Development and Water Supply, declared the
coastal area “unsafe.” As one of its first measures,
TAFREN introduced buffer zones, which effectively
barred many individuals from rebuilding their homes
or businesses on coastal land. A TAFREN notice
published on March 2, 2005, stated that the
government would not allow any new building in
“conservation” buffer zones, which extended back 100
meters from the sea in the south and west coasts (in
the provinces of Kilinochchi, Mannar Puttalam,
Gampaha, Colombo, Kalutara, Galle, Matara, and
Hamabntota)—and 200 meters in the east and north
coasts (in the provinces of Jaffna, Mullaitivu,
Trincomalee, Batticaloa, and Ampara). Existing
undamaged structures within the zone would be
allowed to remain, and buildings with less than 40
percent damage would be allowed to rebuild as well.
The entire affected zone would be a “no new-build
area,” however. The zones, officials argued, were put
in place to ensure the safety of fishing communities
and residents from future tsunamis. 64
A month later, the government released plans to
transform 15 coastal towns around the island into
tourist resorts as part of the post-tsunami
reconstruction process. The Sri Lanka Tourist Board
announced the plans:
In a cruel twist of fate, nature has presented
Sri Lanka with a unique opportunity, and out
of this great tragedy, will come a world class
tourism destination. 65
The Arugam Bay Plan
The first of these plans was to take place in Arugam
Bay. Covering a stretch of land measuring 17
kilometers by 5 kilometers, Arugam Bay was located
on Sri Lanka’s remote eastern coast. The population
of the village was primarily Muslim, an ethnic
minority (90 percent). Sinhalese (6 percent) and Tamil
(4 percent) residents made up the remainder of the
local population.
64
Lyn Robinson and Jim K. Jarvie, “Post-disaster Community
Tourism Recovery: The Tsunami and Arugam Bay, Sri Lanka,”
May 13, 2008, Disasters, 32: 631-645:
http://onlinelibrary.wiley.com/resolve/doi?DOI=10.1111%2Fj.146
7-7717.2008.01058.x (July 27, 2016).
11
Prior to the tsunami, Arugam Bay was part of an
emerging independent travel market, attracting
individuals (or couples) who planned their own
itineraries without the assistance of a travel agency. In
spite of its proximity to areas of LTTE activity,
incidents of violence in the area were rare. Because of
its pristine beaches, the village attracted a strong
clientele of surfers, mainly from Australia and
England, with a short seasonal market for Israeli
tourists. Exact data about visitor volume was
unknown, as most of the establishments kept no
occupancy data, and did not report revenues to avoid
paying government taxes. 66
The tsunami struck this area with devastating effect,
killing more than 200 people, destroying 500 houses,
and severely damaging the local economy, which was
centered around fishing and tourism. The government
saw supporting small businesses, including safari
operators, surf board rental and repair outlets, and a
specialty shop that made custom board shorts and
surfboard covers, as central not only to economic
recovery but also as a way to preserve the character of
the area.
However, most of these businesses fell within the
restricted buffer zones set forth by TAFREN. With
their land under the control of the government, the
small businesses were prevented from rebuilding in
their original locations. NPPD then worked closely
with the Rebuild Sri Lanka Trust, a Colombo-based
business, to redevelop high-end tourism in the area.
The Trust, funded by wealthy, Colombo-based
entrepreneurs, contracted a number of international
and local consultants to work on the plan: Arcadis, an
engineering consultancy company from the
Netherlands; ECOPLAN-Z Limited from New
Zealand; and Environment & Management Lanka
(EML) Consultants from Sri Lanka. All had
previously worked on World Bank or Asian
Development Bank infrastructure projects. According
to the EML Consultants website, the local company
normally worked to facilitate investment from the
United States in water and environmental services,
65
Alison Rice, “Post-tsunami reconstruction and tourism: a second
disaster?” Tourism Concern, October 2005,
http://www.naomiklein.org/files/resources/pdfs/tourism-concern-
tsunami-report.pdf (January 12, 2017).
66
Robinson and Jarvie, op. cit.
 Manny Fassihi
carbon trading, plantation agriculture, and
floriculture.
After two weeks, the consultants produced their
report, The Arugam Bay Resource Development Plan.
The introduction of the plan stated that “it has been
prepared under unusual circumstances to hastily meet
an urgent necessity.” 67 The plan envisioned a
transformation of the area into a tourism hub, with
hotels for anyone from a “low budget windsurfer to a
5-star tourist.” What were once traditional agricultural
and fishing communities would now become a
“shoppers’ paradise,” a yachting marina, a float plan
pier, and a helipad. Aspects of “sustainable” tourism,
including the creation of a natural ecotourism zone,
were to play a central role, with both ocean views, and
ocean access guaranteed. On April 25, President
Kumaratunga approved the project, and noted that she
was “keen to see the action projects proposed in the
report implemented without delay.” 68 In order to carry
out this plan, the Tourist Board obtained government
approval to acquire land within the buffer zone,
powers which were extended to the Rebuild Sri Lanka
Trust.
To finance the project, the Trust had a budget of
US$80 million, part of the foreign aid money raised
for post-tsunami reconstruction. 69 Of that, US$50
million was earmarked for a bridge over Arugam
Lagoon that would, according to the Plan, “stand as
an inspirational symbol that shows progress towards
the achievement of prosperity for Arugam Bay...as the
gateway to a tourist paradise.” 70 CH2M Hill, a US-
based company that had worked on reconstruction
projects in Iraq, won the contract to build the bridge.
The rest of the budget would be allocated to rebuild
the road, water systems, and inland houses. Earlier
that month, USAID published a pre-solicitation
notice for a contract to construct the bridge, road,
water supply, and wastewater systems. 71 In addition,
they hosted a pre-bid conference for potential
contractors in Colombo on May 10, 2005.
67
Ibid.
68
“After the Tsunami: Rebuilding for Tourists,” Social Watch,
2005, http://old.socialwatch.org/en/informesTematicos/94.html
(July 27, 2016).
69
For full breakdown of donor appropriations, see:
http://www.adb.org/sites/default/files/publication/155980/adbi-
wp125.pdf (January 12, 2017).
12
During the planning, there was limited engagement of
local residents. Arcadis conducted an assessment of
the Plan, stating that:
…the most important shortcoming is that it
has largely been produced in isolation in
Colombo, with little or no stakeholder
involvement. It is evident that the team spent
only two days in Pottuvil-Arugam Bay, and
apart from the Government Agent officer in
Ampara and the District Secretary in
Pottuvil, they met only with international
non-governmental organization staff. 72
The residents of the area first heard of the plan at a
meeting organized by the Sri Lanka Tourist Board
(SLTB) and the Sewalanka Foundation, an NGO that
worked with rural communities, on May 17. During
the meeting, the chair of SLTB stated that the plan
was designed to spur the growth necessary for
recovery:
The land belongs to the Government. Maybe
your forefathers lived in that area, but the 860
acres belong to the Government. It will be
developed as a tourist zone. We will put up
buildings and develop the area and we will
ask you to come and work there… 73
The 5,000 or so families who were displaced from the
area were asked to cooperate. In exchange for their
land—that they had no legal deeds to—they would
receive housing at one of five separate inland locations,
with their assignment determined via a lottery system.
These locations were all situated over one kilometer
from the sea, and also a similar distance from a lagoon
behind the tourist zone. If the displaced families
attempted to build any illegal structures elsewhere, the
authorities would immediately remove them.
70
Robinson and Jarvie, op. cit.
71
Ibid.
72
Ibid.
73
Ibid.
 Tourism Development: A Path to Peace in Sri Lanka?
Former businesses in the restricted zone, like the small
souvenir and surf rental shops, could not continue to
rebuild their establishments. These owners could
nevertheless work in the new, higher-end hotel and
restaurant establishments set up by the Board.
Ultimately, the Tourist Board was not receptive to the
community’s grievances, indicating that it did not
recognize any of the tourism businesses as they were
not registered with SLTB. Following the meeting, the
owners of several establishments received demolition
notices saying that armed forces would tear down their
reconstructed businesses within three days.
Many Sri Lankans, including the community of
Arugam Bay, termed reconstruction “the second
tsunami.” “We see this economic agenda as a bigger
disaster than the tsunami, which is why we had been
fighting so hard to prevent it before and why we
defeated it in the last elections [in April 2004],” said
Sarath Fernando, a Sri Lankan land-rights activist. 74
Feeling alienated from the decision-making process,
the community organized to stop the plan from being
imposed. Later, in May 2005, the community led a
peaceful protest march with nearly 1,000 local
residents. The protest became part of a campaign led
by the community that encompassed both national
and international media. The combination of local and
international pressure led the government to abandon
all attempts to move forward with the Arugam Bay
Resource Development Plan in July 2005. 75
VI. THE CIVIL WAR RESUMES
The fragile peace that had been hard-won just three
years earlier unraveled in 2005. In August 2005,
LTTE militants assassinated Sri Lanka’s foreign
minister, a moderate Tamil politician named
Lakshman Kadirgamar. The assassination, the first
major act of terrorism by the LTTE since the ceasefire,
reignited tensions between the government and Tamil
minority. President Mahinda Rajapaksa of the SLFP
party, elected in November 2005, initially invited the
LTTE to a new round of talks but, amid mounting
74
Klein, op. cit.
75
Robinson and Jarvie, op. cit.
76
Jon Lee Anderson, “Death of the Tiger,” The New Yorker,
January 2011,
http://www.newyorker.com/magazine/2011/01/17/death-of-the-
tiger (January 12, 2017).
77
Ibid.
78
Matthew Weaver and Gethin Chamberlain, “Sri Lanka Declares
End to War with Tamil Tigers,” The Guardian, May 19, 2009,
13
violence, withdrew the invitation. In July 2006, after
the LTTE blocked a reservoir that supplied water to
thousands of farmers, Rajapaksa authorized a new
military offensive against the rebel group. 76 The war
had begun again.
Hoping to smother the rebels, Rajapaksa tripled the
army’s recruitment efforts, boosting the armed forces
from 120,000 soldiers to nearly 300,000. The army
worked with LTTE defectors to take over the east, and
then moved the offensive north. After capturing
Kilinochchi, the de facto capital of the rebel forces, the
army then proceeded to pursue the LTTE leader,
Velupillai Prabhakaran, to the small coastal town of
Mullaittivu. On May 18, 2009, the army announced
that the Tamil leader had been killed, along with 250
others, during an overnight escape attempt across the
Nandikadal Lagoon. Images were released of his body
lying at the feet of army troops, a handkerchief over
his forehead to conceal a gaping wound. 77
The morning after, President Rajapaksa delivered a
victory address to parliament, declaring that the
country had been “liberated” from terrorism:
We have liberated the whole country from
LTTE terrorism…. We all must now live as
equals in this free country…. We must find a
homegrown solution to this conflict. That
solution should be acceptable to all the
communities. We have to find a solution
based on the philosophy of Buddhism. 78
A US Senate report on strategies to rebuild Sri Lanka
noted that the Sri Lankan president declared this not
just a victory for the country, but a victory for the
world:
Ending terrorism in Sri Lanka means a victory for
democracy in the world. Sri Lanka has now given
a beginning to the ending of terrorism in the
world. 79
https://www.theguardian.com/world/2009/may/18/tamil-tigers-
killed-sri-lanka (July 27, 2016).
79
U.S. Congress, Senate, Sri Lanka: Recharting US Strategy After
the War, 111th Congress, 1st session, 2009, S. Prt. 111-36,
https://www.gpo.gov/fdsys/pkg/CPRT-
111SPRT53866/html/CPRT-111SPRT53866.htm
(July 27, 2016).
 Manny Fassihi 14

VII. PHASE IV, SRI LANKA: “THE relationship with Washington to be on a downward
WORLD’S NEWEST FIVE- trajectory, dismissing the US posture as “no carrots
and all sticks.” 83 This growing rift could be seen in
STAR DESTINATION”
Colombo’s realignment toward non-Western
countries that placed greater value on security over
After enduring decades of trauma, Sri Lanka now
freedoms. The Rajapaksa leadership cultivated ties
stood at a critical juncture in its efforts to secure a
with Myanmar, China, Iran, and Libya. The Chinese
lasting peace. With the fighting between the
had invested billions of dollars in Sri Lanka through
government and LTTE over, President Rajapaksa was
military loans, infrastructure loans, and port
confident that he had ushered in a period of peace. “I
development—with few of the strings attached by
have brought peace to this country. Eliminated
Western countries. 84
terrorism and brought peace,” President Rajapaksa
said in an interview with The Hindu, an Indian
And in late 2014, having changed the Constitution to
national newspaper, in 2010. “Now, my aim is to
allow for a third term in office, President Rajapaksa
develop the country. Now Sri Lanka is one country;
was gearing up to hold a snap election for an
it’s not divided. So what we want is to see that the
unprecedented third term as president. Sri Lanka
whole nation gets all the benefits, not only one area,
looked ready to become the world’s newest “five-star
not only one community. To develop the economy so
destination.” Five years after the civil war, the country
that all people benefit.” 80
was enjoying its longest period without conflict in
nearly 40 years. What’s more, there was a sizzle of
The international community, on the other hand, was
prosperity. The economy was one of the fastest
more reluctant to join President Rajapaksa in
growing in the world, according to the Economist
celebration. While the war was over, many believed
Intelligence Unit. 85 Driving around Colombo, there
that the underlying conflict still simmered. A year after
were numerous new construction sites for five-star
the military victory in 2010, the Obama
hotels and glossy frontages for international fashion
administration was focused on the humanitarian crisis
chains. US hotel chains, including Hyatt and
in the north, pressing the Sri Lankan government to
Sheraton, seemed back on track to continue building
take meaningful steps towards political reconciliation
luxury properties they had announced after the
and press freedom. At the time, the United States was
tsunami. 86
one of the largest donors of humanitarian aid to Sri
Lanka, including food aid and assistance for the
Tourism was also hitting record numbers. Couples like
removal of explosive mines in the north. 81 In 2011, a
Gladstein and Nathan were flocking in to see Sri
panel of UN-commissioned experts found “credible
Lanka’s offerings (see Appendix 5). Visitors were
allegations” of war crimes by both sides, but held the
confident that the danger of the civil conflict was over,
Sri Lankan military “responsible for the majority of the
freeing foreigners to enjoy the island’s attractions.
estimated 40,000 civilian deaths that occurred during
From 2009-2014, tourist arrivals more than doubled. 87
the final months of the war.” 82
The country was aiming to log 2.5 million annual
visitors by 2016.The government also announced a
Most of these criticisms, however, fell on deaf ears. In
number of mega-tourism projects, earmarking 45
Colombo, the government considered the bilateral
tourism zones, including areas in the northeast. After

80
“N. Ram Interviews Sri Lanka's President Mahinda Rajapaksa,” https://www.foreignaffairs.com/articles/china/2016-05-23/chinas-
The Hindu, November 23, 2010, investments-sri-lanka (January 12, 2017).
http://www.thehindu.com/news/resources/n-ram-interviews-sri- 85
"Sri Lanka Economy, Politics and GDP Growth Summary,”
lankas-president-mahinda-rajapaksa/article906009.ece Economist Intelligence Unit, http://country.eiu.com/Sri%20Lanka
(January 12, 2017). (July 27, 2016).
81
U.S. Congress, Sri Lanka, op. cit. 86
“International Hotel Chains’ Confidence in Sri Lanka Tourism
82
“U.N. Panel Says War Crimes Likely Committed in Sri Lanka Continues to Grow,” April 4, 2005,
War,” Reuters, April 18, 2011, http://www.reuters.com/article/us- http://ehotelier.com/news/2005/04/04/international-hotel-chains-
srilanka-un-idUSTRE73H2WI20110418 (July 27, 2016). confidence-in-sri-lanka-tourism-continues-to-grow-2/
83
U.S. Congress, Sri Lanka, op. cit. (January 12, 2017).
84
Jeff M. Smith, “China’s Investments in Sri Lanka,” Foreign 87
“International Tourism, Number of Arrivals,” World Bank,
Policy, May 23, 2016, http://data.worldbank.org/indicator/ST.INT.ARVL?locations=LK
(July 27, 2016).
 Tourism Development: A Path to Peace in Sri Lanka?
25 years of no service, the rail link between Colombo
and the northernmost city of Jaffna was finally restored
and reopened. 88
As officials glowed about tourism’s potential for peace
and prosperity, there were signs that many Sri Lankans
did not share this outlook. A 2014 report from The
Society for Threatened Peoples, a Swiss-based human
rights organization, highlighted systematic human
rights abuses taking place as a result of tourism
development: “fishermen have seen their access to the
sea blocked, land grabbing has taken place, and the
local population are insufficiently, if at all, informed
about planned tourism projects.” 89 The report looked
closely at three regions ravaged by the civil war—
Kuchchaveli, Passikudah and Kalpitiya, in the north
and east of the island—that the government was now
promoting as post-conflict destinations. In all three
regions, tourism provided “only a very limited income
for the local population.” The majority of hotel
employees “originated from other, often far away
regions.” Seafood for the hotel restaurants was
purchased through intermediaries, for instance, with
local fishermen largely ignored.
Moreover, questions lingered as to whether the
government was promoting a somewhat false image of
stability and unity in a nation that remained fractured
from its civil war. Many of Sri Lanka’s Tamils believed
there had yet to be any reconciliation between the two
sides. They viewed the government as taking a Sinhala
triumphalist attitude, “behaving as if it were not the
LTTE that was defeated but the entire population.” 90
The army set up numerous checkpoints in Tamil areas
and instituted extensive surveillance, intent on
eliminating any remaining Tamil resistance. As a
result, the country’s tourism industry remained
concentrated largely in the southern and western
provinces, which were predominantly Sinhalese.
Visitors were slowly beginning to explore the battle-
scarred northeast, the area occupied by Tamil
populations. And, with an oversupply of Sinhalese
soldiers and less need for their services, military
88
Simon Usborne, “Sri Lanka by Train,” The Independent,
November 16, 2015, http://www.independent.co.uk/travel/asia/sri-
lanka-by-train-the-formerly-war-torn-north-is-rebuilding-
a6736001.html (January 12, 2017).
89
“Dark Clouds over the Sunshine Paradise: Tourism and Human
Rights in Sri Lanka,” Society for Threatened Peoples, 2015,
http://assets.gfbv.ch/downloads/pdf_e_langversion.pdf
(January 12, 2017).
15
personnel were now engaged in staffing resorts,
restaurants, and other tourist-focused activities. 91
As 2015 rolled around, President Rajapaksa continued
to deny any wrongdoing. All of these claims had not
hurt his popularity with the non-Tamil population.
Buoyed by the country’s success and ongoing
development as a tourist destination, he had called for
an early presidential election in October 2014. All the
signs looked auspicious for his third term.
But, while voters credited President Rajapaksa with
ending the civil war and boosting the economy, many
felt that he was becoming increasingly authoritarian
and corrupt. Moreover, he had failed to tackle the
legacy of Sri Lanka’s civil war, leaving Tamil areas in
the north largely impoverished and embittered. And
so, to everyone’s shock, President Rajapaksa was
defeated in the presidential election by Maithripala
Sirisena, a former ally and minister under the
incumbent. The events were stunning not just because
of the peaceful transition of power, but because much
of the voter intimidation and vote-rigging of the past
were absent. Democracy had worked.
Sirisena had risen to power on promises to combat
corruption and strengthen institutions while keeping
Sri Lanka open to business. However, investors were
rattled early on when he introduced tax increases and
scrapped major tourism projects, including the US$1.4
billion Chinese-backed Colombo Port City
development. Unlike his predecessor, President
Sirisena was intent on not letting Sri Lanka’s
relationship with China crowd out strategic
relationships with the United States, India, Japan, and
key international institutions.
Tourism, though, remained a priority for the Sirisena
administration. Riding the wave of double-digit
growth of European and American visitors, the
government looked to continue developing its luxury
hotel market. Improving infrastructure remained a
priority, as tourist growth began to put a strain on
90
“Sri Lanka After the Tigers,” Human Rights Watch, February
19, 2016, https://www.hrw.org/news/2016/02/19/sri-lanka-after-
tigers (July 27, 2016).
91
Shubhajit Roy, “In Sri Lanka, Underworked Army Runs
Resorts, Shops, Salons, and Travel Agencies,” Indian Express,
March 16, 2015,
http://indianexpress.com/article/world/neighbours/in-sri-lanka-
underworked-Army-runs-resorts-shops-salons-and-travel-
agencies/ (January 12, 2017).
 Manny Fassihi 16

roads, railways, and airports, which were already

running over capacity.

There was every indication to believe that Sri Lanka,

now more than ever, could finally deliver on G.S.
Kovach’s 50-year-old vision for the country as a
premier tourist destination.

 Could Sri Lanka’s tourism continue to grow

and generate economic development?

 And would this progress be enough to keep

the country’s still fragile peace?

Case Discussion Questions:

1. Is it enough for a country to be “beautiful” to be considered a tourist

destination?

2. How do tourism and development goals interlink? How can they diverge?
How can tourism play a role in poverty alleviation?

3. Did tourism help Sri Lanka meet its development goals? What went
right/wrong?

4. Look up Sri Lanka’s current tourism statistics. What do the numbers suggest?
 Tourism Development: A Path to Peace in Sri Lanka? 17

Appendix 1: Map of Sri Lanka (with languages mapped)

Source: Sergey Kondrashov, Creative Commons (based on 1981 census data),

https://commons.wikimedia.org/wiki/File:Distribution_of_Languages_and_Religious_groups_of_Sri_Lanka_1981.jpg.
 Manny Fassihi 18

Appendix 2: Sri Lanka Attractions (Ministry of Tourism, 2016)

Source: Sri Lanka Tourism Development Authority

http://www.sltda.lk/sri_lanka_touris_attractions.
 Tourism Development: A Path to Peace in Sri Lanka? 19

Appendix 3: Tourism Clusters from the Ceylon Tourism Plan (1967)

Source: Ceylon Tourism Plan (1966).

 Manny Fassihi 20

Appendix 4: Proposed Inducements from the Ceylon Tourism Plan (1967)

 Tourism Development: A Path to Peace in Sri Lanka? 21

Source: Ceylon Tourism Plan (1966).

 Manny Fassihi 22

Appendix 5: Tourism Arrivals in Sri Lanka (1966-2010)

Source: Sriyantha Fernando, Jayatilleke S. Bandara & Christine Smith (2013) Regaining Missed Opportunities: The
Role of Tourism in Post-war Development in Sri Lanka, Asia Pacific Journal of Tourism Research, 18:7, 685-711,
DOI: 10.1080/10941665.2012.695284.