A case of private investment in Colombo airport | Representative image/ pexels
Tourism has been a major source of foreign exchange for Sri Lanka. Prior to the pandemic, Sri Lanka’s annual revenue from tourism had reached nearly $4.3 billion. The advent of the pandemic has reduced this amount to approximately $500 million in 2021. This sharp drop has been one of the main factors in the current currency crisis.
It would be essential to restart this flow of income as soon as possible, in particular because the entries will be immediate and easily accessible.
The Maldives has adopted a very effective and innovative strategy to support tourist flows during the pandemic by focusing on the Indian market. It entered into an air bubble agreement with India as early as September 2020. This ensured relatively healthy tourist arrivals, mostly made up of Indian tourists throughout the pandemic period. Aided by the rebound in the tourism sector, the Maldives has managed to achieve healthy growth rates unlike Sri Lanka.
Like the Maldives, India has been the biggest source of tourists for Sri Lanka. In 2019, nearly 3,55,000 Indian tourists visited Sri Lanka. This trend has continued since Sri Lanka reopened tourist travel. In 2021, 29% of total tourist arrivals to Sri Lanka were Indian visitors. In the first quarter of 2022, Indian tourists again made up the largest group with a total of 56,389 arrivals.
However, Sri Lanka has made little visible effort to exploit the Indian market or create special dispensation for Indian tourists during or after the pandemic. There seem to be efforts now to try to open up new routes to allow for a greater flow of tourists from India. One such initiative is the proposed resumption of Chennai-Jaffna flights. This could be complemented by launching ferry services between India and Sri Lanka and starting with services between KKS and Karaikal. There have been recent announcements regarding cabinet approvals for both. These are steps in the right direction and must be implemented quickly and decisively.
With moderating global tourist flows and competition between destinations to attract a limited number of international travellers, it is imperative that Sri Lanka goes beyond the usual tourism promotion and focuses on creating facilities and world-class infrastructure for tourists. However, it is evident that the government cannot do much in this regard due to the constraints it is facing due to the current economic crisis. Therefore, it will be essential to be able to use the private sector or external funding to help maintain and further develop facilities such as airports, which are an important consideration for every tourist.
For example, the Bandaranaike International Airport in Colombo is one of the most important entry points for tourists and requires constant maintenance as well as expansion for the future. Privatization of this airport would not only help provide better services to users but also reduce the financial burden on GoSL while ensuring stable revenues in the form of fees and profit sharing.
India’s investment in the BIA comes across as a logical and natural choice considering that it is the biggest source of tourists for Sri Lanka and also has entities that are well versed in the development and management of similar airports. This would benefit not only tourist arrivals from India, but the overall economic partnership and be mutually beneficial.
It would also ensure that Sri Lanka would engage in investment-based solutions in a priority sector with its closest neighbor and largest trading partner.
Investment-driven solutions are not only sustainable and beneficial in the long term, but also enable the development of synergies in related areas.