Tourism is one of the major foreign exchange earners and main growth sector for many countries especially the small islands which are rich with required natural and cultural resources. The world tourism market has grown at an average of 3.7 per cent overthe past five years and is projected to grow by an average of [...]

The Sundaytimes Sri Lanka

Russian and East European involvement in Sri Lankan economy


Tourism is one of the major foreign exchange earners and main growth sector for many countries especially the small islands which are rich with required natural and cultural resources. The world tourism market has grown at an average of 3.7 per cent overthe past five years and is projected to grow by an average of 4.9 per cent over the next five years, with Asia and the Pacific regions recording the fastest growth rate. According to the WTTC (World Travel and Tourism Council 2012), travel and tourism activity was hit hard by the global slump, Even so, the sector worldwide still provided over 255 million jobs last year. Sri Lanka entered the international tourism market in the 1960s. Since then, this industry has been growing steadily as a promising sector for economic development, subject to periodical setbacks especially the civil war in Sri Lanka, world terrorist attacks and natural disasters. For example, international tourist arrivals to Sri Lanka increased from 18,969 in 1966 to 855,975 in 2011.

The tourism contribution to Sri Lanka’s Gross Domestic Product (GDP) in 20121 was 8.4 per cent (Rs. 541.3 billion).
In terms of employment, tourism generated 590,000 jobs in 2011, and is expected to grow up to 700,000 jobs, 8.5 per cent of total employment by 2022.

Tourism remains the fastest growing service industry in the economies of most developing countries and plays a major role in the generation of foreign exchange which directly facilitates the improvement of foreign reserves.

The sector has shown great improvements in employment generation (direct and indirect), revenue accruing to tourist sites, and increase in the number of hotels and similar establishments and other tourism supply establishments.

Eastern European tourists

After the end of the civil war in Sri Lanka many Eastern European investers are looking to invest in the country in the tourism sector.
Russian investor Michail Snegirev, owner of ‘Nebesa’ Russian Restaurant in Colombo, said, “I was coming to Sri Lanka as a tourist few years ago. I was attracted to the country very much and identified the benefits of investing in the tourism field in Sri Lanka. I saw many Chinese and Indian restaurants in Sri Lanka but I didn’t notice any single Russian restaurant in the country. So I decided to start the first Russian restaurant in Sri Lanka in April 2013”.

Russian investors have agreed to invest in nine tourist hotels in Sri Lanka, according to the Ambassador of the Russian Federation in Sri Lanka, Alexander Karchava. The hotels are expected to be built in the vicinity of the Bandaranaike International Airport at Katunayake, the Central Province and the Northern and Eastern Provinces among other areas.


According to statistics, Russia and East Europe are the largest markets for the Sri Lankan tea industry. Sri Lanka and Russia have recently ramped up cooperation on expanding the tea trade between the two nations. Currently, approximately 17 per cent of Sri Lanka’s tea exports go to Russia where Sri Lankan teas account for 30 per cent of that market.
Loans and investment
Nowadays there are many development projects such as highways, harbours, airports, energy generation projects, etc in Sri Lanka which however is not financed from local funds. We are not a rich country and thus need the help of other international parties.

Russia and Sri Lanka has signed a US$300 million loan to buy armaments and dual purpose technology for Sri Lanka’s military. It is a 10-year loan with LIBOR plus 3.5 per cent interest. The arms deal will cover not only purchases but also extensive repairs of Russian military equipment previously delivered to Sri Lanka.

The Russian Federation has provided Sri Lanka humanitarian aid several times since 2009. In 2009 Russia gave $500,000 to the United Nations Office of the High Commissioner for Refugees for financing programmes aimed at assisting internally displaced persons. Then in a spirit of traditional friendship and being concerned by the problems Sri Lankans were faced with, they sent a special aircraft with humanitarian aid worth of $400,000 to Colombo in 2010. In 2011 demining equipment consisting of four machines, 100 bullet proof vests, 100 protective helmets and 100 metal detectors were sent by the International Civil Defense Organization, which was a contribution from the Russian Federation.

Last month, Russia said it was providing eight large helicopters to Sri Lanka as a donation, the Sri Lanka’s Prime Minister Office said quoting visiting Head of the Federal Agency for the Commonwealth of Independence States-Russia Konstantin Kosachev.

International relations

International relations directly and indirectly impact on the domestic economy. All international funds and aid depend on these relations. Russia and most other Eastern European countries have favourable diplomatic relations with Sri Lanka. In the 202 UN Human Rights Council against Sri Lanka, Russia voted against the resolution and supported Sri Lanka.

Overseas students

Every year a significant number of Sri Lankan students migrate for their higher education with statistics showing that 20 per cent of the graduates go abroad. Sri Lanka is ranked in 27th position in terms of global student migration. This reflects a negative effect on the local economy because parents are sending money for students’ tuition fees and living expenses. Most of the students who want to do medicine go to Russia and Eastern Europe because they have the quality education and lower tuition fees for medicine compared to other countries. To preserve this money we have to open more new quality private universities in Sri Lanka. In order to do that some government policies and hypocritical minds need to change.

Ukraine to invest in Sri Lanka

While Ukraine is looking forward to invest in Sri Lanka it also welcomes Sri Lankan investors who are keen on investing in Ukraine, Ambassador Leonid Kozhara, Member of the Ukraine Parliament, Deputy Head, International Relations Committee, Party of regions and Advisor to the Ukraine President said. “Ukraine welcomes Sri Lanka’s traditional products and is also willing to set up its market in Sri Lanka for high-tech equipment, helicopters and military hardware,” he said adding, that “peace prevails throughout Sri Lanka and it is a positive sign to foreign investors to invest in the country”.

Investments from Poland

Polish investors met Sri Lankan officials to assess possible investments in power generation and pharmaceuticals manufacture. There is potential for investment in Sri Lanka in key areas where Polish enterprises have comparative advantages, notably in power generation and pharmaceuticals manufacture as well as interest in alternative medicine, spas and related products including Ayurveda based products and services.

Bilateral trade between
Belarus and Sri Lanka

Bilateral trade between Belarus and Sri Lanka in 2012 totalled $42.6 million while Sri Lanka’s exports to Belarus only amounted to $9.1 million. Sri Lanka’s major export to Belarus is tea, amounting to 82.6 per cent of its total exports. Gloves, tires and raw tobacco are the other exports. A major portion (99.8 per cent) of Sri Lanka’s imports from Belarus is potash fertilizers.

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