The hosting of CHOGM in Sri Lanka has generated high expectations. This is especially so as it was held after the end of a most brutal civil war. Host countries of such events boast of multiple benefits from holding such extravagant events, but expectations of substantial economic benefits from them are unrealistic. Show casing Sri [...]


Economic expectations from C’wealth summit


The hosting of CHOGM in Sri Lanka has generated high expectations. This is especially so as it was held after the end of a most brutal civil war. Host countries of such events boast of multiple benefits from holding such extravagant events, but expectations of substantial economic benefits from them are unrealistic.

Show casing Sri Lanka

CHOGM was expected to showcase the country’s achievements after four and a half years of peace. The impressive reconstruction, restoration and return to normalcy of the devastated areas were to be shown to the world. In the words of former Foreign Secretary H.M.G.S. Palihakkara, if managed well it could provide a favourable picture of Sri Lanka. Conversely, it may prove an opportunity to rake up the country’s poor record of human rights and the rule of law.


The North and the East have done well in bringing life back to normalcy. Economic life of the North is quite robust and vibrant and people are living their daily lives without the scourge of terrorism, bombs falling and constant fear of losing their lives. Only those who refuse to see will not see the significant strides the two regions have made in four and a half years of peace. These have to be assessed from the reference point of the war, when these lands were virtually uninhabitable, where both sides pummeled each other, children were taken away by the LTTE to become child soldiers and there were regular massacres of civilians.

Much of the North and the East has been restored and there is a thriving economy. The recent election of the Northern Provincial Council lends further hope for economic strides in the region. If the delegates and the large number of journalists report what they actually see, then Sri Lanka may be extolled on the speed with which reconstruction has been achieved. Despite the restoration, reconstruction and rehabilitation that has occurred in a very short period, some reports will seek and find blemishes as they cater to the militant Sri Lankan Diaspora in their countries.

Economic benefits

Excessive economic expectations from holding CHOGM and allied activities in Sri Lanka are unrealistic. CHOGM does not represent the economic power houses of the world. The largest economies are not in the Commonwealth: economic giants USA, Japan, China and European Union countries (except the UK) are not here. Therefore, by its very composition, the delegates are not from the big economic powers. 

Moreover, business links are not made from such events but by contacts over time and analysis of economic conditions and business potential. The World Bank’s Ease of Doing Business Index that places Sri Lanka in the 85th position is of more significance for investor interest.

No doubt there would be certain economic benefits. Tourist earnings are likely to rise and the travel trade is likely to benefit, not only during the short period of the conference, but also in the longer run from publicity about the country’s beauty and facilities for holidaying. Such a boost in tourism would also have backward linkages to the arts and crafts and gems and jewelry trade and other tourist dependent activities. 

Foreign investment

Will the CHOGM and the related events increase foreign investment? The argument that the conference would bring in large investments are based on the notion that delegates and other visitors will see for themselves that Sri Lanka is not a war torn country; that the country’s infrastructure is developed and that therefore there is good investment potential in the country. 

Increasing FDI

The expectation that the holding of a conference, however important, would encourage foreign investment ignores the fundamental realities that determine foreign investor decision making. Foreign investments are determined by the investment climate and business opportunities in the country.

A number of perquisites must be fulfilled to develop an attractive investment climate to attract FDIs. These include macroeconomic stability, predictability of economic policies, security of foreign investments and honest efficient public administration. Straightforward rules and procedures in institutions dealing with foreign investors and effective dispute settlement mechanisms are also necessary.

The rule of law and ensuring law and order and good governance are vital. Besides this, quality manpower at middle levels, work ethics and labour legislation conducive to investment flexibility are essential.

It is these that matter in foreign investor decision making. Sri Lanka has to do better than other countries in the region in these to attract foreign investors. Grand conferences and business forums satisfy the national psyche, evoke patriotic emotions, lift the nation’s spirits and pride, but are insufficient to attract significant foreign investments. They are not of much economic value.

Economic Costs

CHOGM will confer certain benefits to the economy. However the cost of holding it has been immense. In an already weak fiscal situation, the high costs will add to the fiscal deficit. Consequently, it is likely that the fiscal deficit would go beyond the target and the much needed fiscal consolidation would not be achieved. Other government financial liabilities would also increase. This would have serious short term and long term adverse repercussions.

Since much of the expenditure would be on imports or consumption that has high import content, the trade deficit is likely to widen to above US$ 9 billion this year. Capital inflows and tourist incomes are likely to offset a part of the increased import expenditure, but not all of it. If some of the imports are on deferred payments agreements, the burden is being shifted to future years.


CHOGM would hopefully improve the image of the country and bring in some tangible benefits. Yet expectations of large inflows of foreign investments are unrealistic, as these depend on a number of ground realities that have to be improved. The government must turn its attention to these to improve the investment climate. 

The large public expenditure and increased imports for the conference will widen the fiscal deficit and increase the trade deficit. The economic challenges would be tougher next year.

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