Financial Times

World Bank project in the balance

Tourism industry facing problems
By Natasha Gunaratne, Pic by J. Weerasekara.

A crisis in the tourism industry may jeopardise a US$20 million World Bank (WB) funded capacity building project for the institutions which fall under the Ministry of Tourism in what is the first time, the world over, the WB has been involved in a tourism project.

Tourism Promotion Minister Faizer Musthapha and Sri Lanka Tourism Promotion Bureau Chairman Bernard Goonetilleke in conversation at a tourism event in Colombo on Thursday. The tourism industry has expressed concerns over recent changes in this sector.

Industry sources told the Sunday Times FT that the WB had agreed to provide the funding mainly due to the reforms made in the Tourism Act in 2007 which led to the creation of public - private sector entities, those being the Sri Lanka Tourism DevelopmentAuthority (SLTDA), the Sri Lanka Tourism Promotion Bureau (SLTPB), the Sri Lanka Convention Bureau (SLCB) and the Sri Lanka Institute of Tourism and Hotel Management (SLITHM). The WB agreement which was to have been signed this month has now been put off until November. The changes taking place after the newly appointed Minister of Tourism Nandana Goonetilleke took office, are being closely followed by the WB, one source said, adding “the WB has unofficially said it would consider withdrawing if the reforms are tampered with.”

A few weeks back, Chairman of the SLCB, Prema Cooray and Chairman of the SLITHM Cornel Perera resigned in the first sign of possibly far-reaching changes to come. They were replaced by K.A.S.

odituwakku who will head the SLCB and Saman Navaratne from the University of Peradeniya who will head the SLITHM although the Ministry has yet to formally announce the appointments. Sources further stated that the WB project was specifically aimed at improving the SLTDA, SLTPB, SLCB and SLITHM in order to make them more private sector driven, improve efficiency and eliminate red tape in approvals for projects. The WB was also prepared to offer matching grants to small and medium enterprises (SME’s).

Despite assurances by the Ministry that the fate of public private partnerships (PPP’s) are not under threat, the industry remains anxious about possible changes in policy direction. In an interview with the Sunday Times FT this week, Secretary to the Ministry of Tourism George Michael said there should be no concern about the fate of PPP’s. He said the changes in the SLCB and SLITHM was the decision of the Minister and is routine when someone new takes office.

Mr. Michael said the tourism industry is driven by the private sector. “These partnerships have been built up with a lot of pain. The industry cannot do without private sector involvement.” However, he added that the partnerships must work within the government policy framework.

The Tourist Hotels Association of Sri Lanka and the Sri Lanka Association of Inbound Tour Operators met this week for discussions to express their concerns over the changes and come up with a plan of action. One member said the concerns of the two associations have already been conveyed to the Minister. Although not revealing the direction they will take, the members are hopeful that a solution will be found.

Mr. Michael also addressed trade union concerns that were brought to the attention of the Ministry. He said he advised the unions not to stage public protests as it will accomplish little but instead engage in productive discussions with the Ministry. The unions are requesting that the Sri Lanka Tourist Board be re-established and a merging of the SLTDA and SLTPB but Mr. Michael said the industry cannot be piecemeal for satisfying everyone. He explained that the Ministry will try to address their concerns and bring about a resolution.

Chairman of the SLTDA and the SLTPB Bernard Goonetilleke said it is his understanding that the Tourism Minister wants to curb excessive expenditure, particularly in promotional activities. He said the unions want to see a merging of the SLTDA and the SLTPB because most belong to the SLTDA although there is more funding currently allocated to the SLTPB. Mr. Goonetilleke added that the unions have made representations to the Ministry and will be taken into consideration.

This week in a letter addressed to the President, employees of the Joint Front of Sri Lanka Tourism called for the re-establishment of the Sri Lanka Tourism Board which they say has rendered a great service to the tourism industry for over 41 years and ae also asking for the Tourism Act to be repealed.
The employees said that among the problems are - lack of an institution to take responsibility in the tourism sector; tourism promotion and the improvement of facilities vested in two different institutions; 70% of funds being used for tourism promotion instead of new infrastructure facilities, and development activities being affected due to the allocation of 14% of funds to the SLTDA.

They say no money was allocated for national tourism projects such as Kalpitiya island, the Dedduwa environmental friendly project, the Passikudah tourism zone project, the local tourism resort development project as well as projects identified under the Eastern awakening programme. The letter further states that there was no coordination between tourism promotion and development and that a sum of Rs.148 million was wasted for the ‘Small Miracle’ promotional campaign.

Mr. Michael said the Tourism Act pertaining to the disbursement of the Development Fund is being studied in order to make some adjustments. The purpose behind the evaluation will be to determine if more funds should be used for promotional purposes or product development.

Meanwhile, calls for proposals by the Minister to replace the tagline ‘Small Miracle’ have garnered a huge response according to Mr. Michael. A special committee will be appointed to screen the proposals. He added that the cost of the entire re-branding exercise totaled Rs.17 million. Phoenix Ogilvy, the advertising agency chosen through a tender process, was given an annual one year retainer contract and paid for the work that has been done including brand manifestos and stationary.

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