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Phuket Finance: Sri Lanka could be the next frontier for investors

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PHUKET: When most Westerners think of Sri Lanka, the island nation off the coast of South India that was once known as Ceylon, they probably think of tea (as the country has long been a major tea exporter), science fiction author Arthur C Clarke (who spent most of his adult life living there) or the now defeated Tamil Tiger guerillas (who were notorious for suicide bombings) – seemingly not an up and coming frontier market for tourists and investors alike.

However, Sri Lanka has a recorded history dating back some 3,000 years, as its strategic location, along with deep harbors, has always made the island an important stop for travellers (like Marco Polo who wrote that it was the finest island in the whole world), explorers and traders for centuries. With Portuguese explorers arriving in the 1500s, followed by Dutch traders in the 1600s and ultimately the

British who took over the island from the Dutch during the Napoleonic Wars. The British stayed until after World War II, when independence led to simmering tensions, and ultimately, a very destructive civil war between the majority Buddhist Sinhalese and the Hindu/Christian Tamil minority.

No one knows for sure how many Sri Lankans died or were displaced during the 26-year civil war that lasted until 2009, but the conflict is estimated to have cost the country more than $200 billion or five times the country’s 2009 GDP. To add to the country’s miseries, the 2004 Indian Ocean tsunami killed some 35,000 people, displaced hundreds of thousands more and devastated the infrastructure in the areas it hit.

Today, Sri Lanka is once again open for business and is increasingly coming onto the radar of both foreign tourists and investors alike – something I observed on a recent two week holiday there. But is Sri Lanka set to become the next hot frontier market for all investors and how might retail investors take advantage of the growing number of investment opportunities there?

Why visit or invest in Sri Lanka?

My flight to Mattala International Airport in Southern Sri Lanka took about a three and a half hours and I arrived at the new international airport built to bring in more tourists like myself along with business travellers. In fact, I was told the new airport (just opened in early 2013 and one of three in the country) cost over $200 million (financed by the Chinese) and will be able to handle up to 6 million passengers per year once the second phase is completed, plus it’s located near a recently completed port (also financed and built by the Chinese) – meaning the airport is also part of an important cargo and logistics hub. Nevertheless, I did not see any foreigners at the new Southern airport (but then again, it’s not yet fully serviced by international airlines) and like most tourists who do venture to Sri Lanka, I headed straight to a beach area immediately for surfing. After I arrived at the beach, I still did not see many other foreigners and while locals told me they are seeing more foreign tourists since the end of the civil war, I never once saw a single McDonald’s, Pizza Hut or KFC in the South, albeit, I was told that some Western fast food chains now have locations in the big city of Colombo.

I should mention that the Sri Lankan economy has traditionally revolved around commodities like gems, tea, spices, rubber and coconuts, along with apparel making, rather than services like tourism, that’s starting to change because the end of the civil war has led to new hotels and other infrastructure (like the new airport I arrived at) to be built, upgraded or planned, so that modern day Marco Polos can rediscover the island. After all, there are plenty of reasons for foreign tourists to visit Sri Lanka when you consider that the island is small enough to be crisscrossed in a few days and has:

1. Eight world heritage sites, both natural and man-made.

2. Hundreds of other historical sites.

3. A number of scenic national parks with impressive biodiversity including everything from elephants to leopards and a vast variety of birds.

4. Plenty of festivals and religious places, as the country is home to Buddhists, Muslims, Hindus and Christians, all who revere Adam’s Peak as a sacred mountain.

5. Sporting activities including everything from land activities like golf to water activities like surfing and diving.

6. Beaches for year-round swimming or surfing depending upon which side of the island you are on.

More importantly, Sri Lankans are friendly, fairly well educated (a 94% literacy rate) and almost everyone you meet there can speak English. These qualities have helped the country to develop and grow a niche outsourcing industry (including publicly-traded Indian BPOs who have set up operations there) serving Fortune 500 companies globally. In fact, Sri Lanka has the highest number of UK-qualified accountants outside of the UK and this has attracted the attention of financial services firms who have set up their portfolio and analytics divisions there.

However, before Sri Lanka can truly live up to its branding as a “knowledge island”, the country still needs to work on improving basic infrastructure like roads and internet or telco bandwidth – especially outside of Colombo. With that said, Sri Lanka is apparently the only country in South Asia that can supply electricity to customers throughout the entire day without blackouts, plus it has the most liberalized economy in the region because foreign investors receive preferential tax rates, constitutional guarantees on investment agreements and exemptions from foreign exchange controls – plus 100% repatriation of profits and 100% foreign ownership is allowed in most areas of the economy.

Don Freeman is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket, Thailand. He and provides personal financial planning and wealth management to expatriates. Specializing in UK and US pension transfers. Call 089-970-5795 or email: freemancapital@gmail.com

— Don Freeman

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Archiving articles from the Phuket Gazette circa 1998 - 2017. View the Phuket Gazette online archive and Digital Gazette PDF Prints.

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Governments & old media versus social media – who will win? | VIDEO

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Governments & old media versus social media – who will win? | VIDEO | The Thaiger

We look at the recent changes made by the Australian and Indian governments to except control over the world’s biggest social media platforms. India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social. There is now an open battle between the rise of social media platforms and the governments and ‘old’ media that have been able to maintain a certain level of control over the ‘message’ for the last century. Who will win?

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told. The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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The social media giants in battle with ‘old’ media and world governments | VIDEO

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The social media giants in battle with ‘old’ media and world governments | VIDEO | The Thaiger

“The rules signal greater willingness by countries around the world to rein in big tech firms such as Google, Facebook and Twitter that the governments fear have become too powerful with little accountability.”

India has issued strict new rules for Facebook, Twitter and other social media platforms just weeks after the Indian government attempted to pressure Twitter to take down social media accounts it deemed, well, anti social.

The rules require any social media company to create three roles within India… a “compliance officer” who ensures they follow local laws; a “grievance officer” who addresses complaints from Indian social media users; and a “contact person” who can actually be contacted by lawyers and other aggrieved Indian parties… 24/7.

The companies are also being made to publish a compliance report each month with details about how many complaints they’ve received and the action they took.

They’ll also be required to remove ‘some’ types of content including “full or partial nudity,” any “sexual act” or “impersonations including morphed images”

The democratisation of the news model, with social media as its catalyst, will continue to baffle traditional media and governments who used to enjoy a level of control over what stories get told.

The battles of Google and Facebook, with the governments of India and Australia will be followed in plenty of other countries as well.

At the root of all discussions will be the difference between what governments THINK social media is all about and the reality about how quickly the media landscape has changed. You’ll get to read about it first, on a social media platform… probably on the screen you’re watching this news story right now.

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Never miss out on future posts by following The Thaiger.

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Turbulence ahead for Thailand’s aviation industry | VIDEO

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When the airlines, in particular, were asking the government to put their hands in their pockets for some relief funding in August last year, it was genuinely thought that international tourists would be coming back for the high season in December and January. At the very least local tourists and expats would head back to the skies over the traditional holiday break. And surely the Chinese would be back for Chinese New Year?

As we know now, none of that happened. A resurge in cases started just south of Bangkok on December 20 last year, just before Christmas, kicking off another round of restrictions, pretty much killing off any possibility of a high season ‘bump’ for the tourist industry. Airlines slashed flights from their schedule, and hotels, which had dusted off their reception desks for the surge of tourists, shut their doors again.

Domestically, the hotel business saw 6 million room nights in the government’s latest stimulus campaign fully redeemed. But the air ticket quota of 2 million seats still has over 1.3 million seats unused. Local tourists mostly skipped flights and opted for destinations within driving distance of their homes.

As for international tourism… well that still seems months or years away, even now.

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