Economy insulated from conflict

Singaporean news agency says Lanka attracting record investments :

SINGAPORE: Sri Lanka has recorded its highest economic growth rate in 30 years despite the prolonged ethnic strife mainly due to the theatre of conflict being far removed from the country's economic epicentre, according to Bloomberg, a Singaporean news agency.

"This is a conflict that the country has learnt to live with," the article quotes Agost Benard, credit analyst at Standard & Poor's in Singapore as saying.

"Businesses still invest, factories still produce. The main reason is because the conflict is localised," he told the agency .

According to the article Sri Lanka, which is also recovering from the December 26, 2004 tsunami, saw its gross domestic product grow 7.4 per cent last year, buoyed by a 10 per cent expansion in the Western province, the home of the textile and clothing industries, the biggest export earners.

The Central Bank of Sri Lanka maintains its 2007 growth forecast of 7.5 percent. Manufacturing, which includes tea processing, rubber-based products and construction, grew 7.2 per cent in 2006 from a year earlier, while services, such as cargo handling and telecommunications, expanded 8.3 per cent. Sri Lanka's garment industry, responsible for about 4 percent of the economy, supplies for brands such as Gap Inc., Banana Republic and Marks & Spence Group Plc.

According to the article Sri Lanka last year attracted a record overseas investment of US$ 600 million, mostly from garment makers and telecommunications companies in Colombo, which is also located in the Western province.

The benchmark Colombo All-Share Index reached a record 3016.42 on Feb. 13, 2007. The index fell to 2,729.21 points on March 16 and has since recovered about 1.5 per cent.

"Entrepreneurs know what risks to take and foreign investment players who are active, already know the situation,"' the article quotes Dr. Saman Kelegama, executive director of Sri Lanka's Institute of Policy Studies as saying.

"If the Government gets more control over the East, it can be uplifted closer to other provinces," said Kelegama.

"The people, who are sick and tired of the conflict, will appreciate economic activity increasing."

Sri Lanka expects to receive US$ 4.5 billion in overseas aid in the next three years for highways, expanding the Colombo port, and building its second coal-fired power plant in Trincomalee, the Government said on January 30.