The Sunday Times Economic Analysis

The Sunday Times Economic Analysis By the Economist

The dream: A million tourists and a thousand million dollars
The Prime Minister once again articulated the dream of a million tourists and a thousand million dollars in the next few years. His visit to Galle, a world acclaimed historic city, and the current strong wave of tourists into the country, prompted him to express these hopes and expectations.

Could the country reach this goal: a goal that was first expressed in the 1980's, when tourism gained momentum? The history of tourism in the past two decades has been one of fluctuations; good years followed by disastrous ones, revivals followed by declines and then an upturn once again.

We are currently on the crest of a wave that began about 12 months ago. In the first half of this year tourist arrivals amounted to over 200,000 giving a strong expectation of 450,000 tourists for the year. Even the more optimistic expectations of reaching the one half million mark is not ruled out. However it is just at such times of hope for tourism that the worst calamities have occurred.

The 1980's saw tourist traffic rising fast. By 1983 tourist arrivals reached a peak 407,200.Then the ethnic disturbances ruined the industry. The terrorist attacks and the JVP insurgency that followed created a security situation that ensured the contraction of tourism. By 1989 tourist arrivals were less than one half of what it was in 1983 at only 184,700.

Good days returned to the industry after the insurgency was quelled. Despite the continued terrorist attacks, tourist arrivals increased. In 1995 it reached almost the peak of 1983 when 403,401 tourists brought in 236 million US dollars. Then another dip occurred and tourist arrivals fell to 302,265. From 1996 there was a recovery. The up-trend continued till 1999 when it reached a new high of 436,440 tourists and earnings increased to 274 million US dollars.

Once again there was a dip in tourist arrivals in 2000 owing to the unsettled conditions in the country. The arrivals declined to around 400,000 Just as it was picking up in the first six months of 2001, the airport bombing in July, followed by the September 11 attacks in the US ruined the industry again. In 2001, tourist arrivals declined by 16 per cent owing to the prevailing security conditions in the country, as well as globally. This was followed by a further sharp decline of tourists by 24 per cent in the first half of 2002.

There was a dramatic reversal in the second half of 2002 when tourist arrivals doubled. Consequently the number of tourists last year increased to 393,171. The second half of last year witnessed another revival mainly owing to the much improved security situation in the country and the gradual recovery of the international economy. The increase in tourism this year is a continuation of that revival in tourist traffic.

The insecurity of many other tourist destinations and the relatively much greater safety in Sri Lanka accounts for the increasing tourist traffic. This increasing trend is expected to continue and the prospects are that the second half of this year would bring in a larger number of tourists with the large influx of English cricket supporters.

If these expectations are realised a new record in tourist arrivals of around 450,000, exceeding the previous largest number of tourist arrivals of 436,400 in 1999 may result. The fluctuations in the fortunes of the tourist industry in recent years have been a serious constraint to the development of the industry. Tourism is highly vulnerable to global economic conditions, world security situation and most of all to the security situation in the country.

It is to the credit of investors that in the face of recurring setbacks that they continued investing and the number of hotels and room capacity have expanded. The Prime Minister's hope that the million tourists would bring in a thousand dollars may still seem distant.

However, tourist earnings grew by 28 per cent in the first six months of this year to bring in US $ 140 million. It is noteworthy that the earnings from tourism have now exceeded the rate of growth of tourist arrivals. This is a significant gain in per capita tourist earnings. If the end year figure were to exceed US$ 300 million, it would be a substantial contribution to the country's foreign exchange earnings.

The realisation of the hopes and aspirations of the PM requires action on many fronts. Frequent flig-hts into Colombo from tourist demand locations, adequate accommodation, competitive rates and quality hospitality services, better roads and improved rail services are among these requisites. Foremost though is a peaceful and secure Sri Lanka.

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