Business Times

Jaffna may have the spoils, but it may not be the true picture

By Duruthu Edirimuni Chandrasekera

JAFFNA -- By the side of the Jaffna- Kankesanthurai Road, two newly opened commercial bank branches gleam. Further up the road a three- wheeler stand, teaming with one too many tuk-tuks all awaiting their turn.

Lost-looking businessmen from Colombo and executives walk about or are in posh vehicles rushing for their next meeting with some Jaffna land owner who might ‘let or lease’ his land for their next business venture.


A fishermen in Jaffna throws his net. Pic by J. Weerasekera

The legacy of the feudal era still exerts a definite influence on Jaffna’s modern society, the ultra nationalism is still very much intact and the state military troops dot the landscape in their armed trucks.
Jaffna, the bountiful land of the Palmyrah, the blue lagoons, authentic crab curry and insular geography is struggling to rise out of the devastation of war.

In this milieu, some Colombo based businesses, both local and foreign are scurrying to bag the goodies – many saying that it’s not a secret that Jaffna is ‘full’ of wealth and riches.
As one banker who started business recently in the peninsula said, “The businessmen here are very humble, but they are loaded.”

Another Colombo-based businessman said that despite Jaffna businessmen’s attire being modest, they are wealthy. “They may be wearing sarongs and slippers, but they’re very rich,” he said.
So Jaffna has the spoils.

But does the story end there? Analysts are quick to point out that only the service sector firms have so far come to Jaffna – a repetition of the 2002-2004 era when the peace process was on. “This does not necessarily mean there is sustainable development,” an analyst said, adding that industrial and manufacturing ventures are still not lured by Jaffna and its imminent boom. He noted that such businesses provide jobs while firms in banking, supermarkets and trading can ‘get out’ just as fast as they set up.

“Remember that Jaffna’s monies are essentially from the inward remittances by the Tamil expats who ran away during the height of the war. There is no income ‘generation' in this area,” an economist noted.
He said in order to generate income in this region, there has to be investment in industries and the like.
As one Jaffna citizen said, “There is no ‘sustainable’ development as many are still watching the situation.”

What does this mean? “Industries are what generate employment and the funds for our people. We still cannot see any investment in these areas, due to the uncertainty that’s still prevailing,” Stephen Leonard, Director Yarlpanam Chamber of Industries told the Business Times.

He noted that the concern about the uncertainty is that there is still no political solution. “Many rushed into Jaffna during the 2002 peace time, but they rushed back when the problems erupted. It is true that the war is over, but past experience and no clear political solution are keeping the industries away,” he explained.

In Colombo, Jaliya Wijeratne, Director SMB Securities noted that the argument is true for a sustainable development there must be active participation from all sectors (whether industrial or manufacturing). “What we have seen and heard up to now is mostly service organizations such as banks entering the large untapped market. For more companies from wide sectors to enter there must be development within those areas.

There must be income generation and money rotation. There for development within those areas is over the long run we should not expect overnight changes. And over time more companies and ventures will enter then only we will see development,” he said.

The government says that there is potential for agriculture, construction and tourism. However some say that it's a different scenario compared to the peace-process times as there was an element of uncertainty while now it is not.

Waruna Singappuli, Head of Research NDB Stockbrokers said that fisheries and agriculture segments are already progressing in the peninsula. “Once the basic infrastructure is in place (e.g. - roads) more investments will go in. Cement manufacturing plant in Kankasanthurai is also expected to be functional by next year, which will also help,” he said.

Central Bank Governor, Nivard Cabraal recently said that during the conflict period, the Northern Province accounted for 10 % of the paddy production, 40% of Red Onions, 10% of Chilies, 14% of Green Gram and 25% of Ground Nuts. He said that 129,000 fishemen, representing 20 % of the total number of fishermen in the country, live in 219 fishing villages in the Northern Province. In the year 2006, the total fish production from the North stood at 25,900 MT, representing 12 % of the country’s total production. “There is so much potential in this area and the government is putting moneys to set the infrastructure such as roads, etc in place,” he said.

Sarath Rajapakse, Director Capital Trust Securities also agreed, saying that the service infrastructure must be in place for the industries to consider moving to a new location. “Therefore it is logical for the services sectors to precede the industries when moving to Jaffna, Kilinochchi, and Batticaloa etc.
Remember we had no access (at least by road) to these areas for nearly 30 years and the services available were pretty basic and not at all suitable for any industries to move in,” he noted.

Charitha Kamaladasa, Research Analyst Lanka Securities noted that the practicality and the feasibility of putting up industrial and manufacturing ventures in a region which has been in the doldrums for a good part of three decades will not be easy and straight forward as it may look and sound. “The service sector ventures are much easier to project and evaluate and hence, the time frames are much smaller. Having said that it will be a matter of time when the North and East region will be exploited by the potential companies in a bid to cash in on the immense opportunities which exist there,” he said.

He noted that a conducive business environment and strong positive direction towards good infrastructure development in the area will be the key in attracting investors in the long run.
The economist said that the worst for the peninsula is over, but the people are crying out for normalcy and economic freedom, while trying to erase the shackles of the war.

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