Sri Lanka to revive south with investment

By Rohan Gunasekera

COLOMBO (Reuter): Sri Lanka's restless south, the source of two insurgencies, has a long reputation for entrepreneurship, with many of the island's businessmen proudly tracing their roots to the region.

Not that anyone would see much evidence of thriving business down there. The area's fortunes have flagged over recent years because of a lack of investment and high unemployment.

But the government is hoping to change this with an ambitious development plan that will also shift some of the investment focus from the Sri Lankan capital Colombo.

"Our aim is to create the necessary infrastructure for private investment," Sirisena Amarasekera, the Finance Ministry's director, regional development, told Reuters in a recent interview.

Amarasekera is helping to set up the Southern Area Development Authority to speed up the government's economic plan to revive the region, home to 2.5 million of the island's 17.5 million people.

"The proposed authority is to help the private sector to get things done quickly," Amarasekera said. "We've had several rounds of talks with the private sector."

The region had potential for the development of tourism, agro- industries and fisheries, Amarasekera said.

At present, the south is dominated by plantation agriculture, mainly tea, rubber and coconut, and irrigated rice cultivation.

Amarasekera said the government was negotiating with foreign aid donors for money to build projects, including a $2 billion oil refinery and power plant to be built by a consortium of foreign multinationals.

Other major projects include plans to modernize the Galle district port at an estimated cost of $600 million, extend the main highway from Colombo to Matara district at a cost of about $300 million and a $300 million river diversion project for power and irrigation.

The government has also set up an export processing zone and wants to modernize two airports in the region.

Deputy Finance Minister G.L. Peiris last week announced plans by two development banks to support private sector investments to create jobs in the south and another province.

"The private sector is anxious to come in," Peiris said. "A great deal of entrepreneurship in and around Colombo are by people who came from the south.

"The idea is to divert the thrust (of investment) away from Colombo and its environs," Peiris added. "The government is very interested in regional development."

Unemployment in the south is an estimated 21 percent against a national average of 14 percent.

One southern district, Matara, had the island's highest unemployment rate -- an estimated 28 percent, Amarasekera said. Unemployment is believed to have been the root cause of the 1988- 90 leftwing youth uprising, brutally crushed by government death squads, in which up to 60,000 people died or disappeared.

The same group staged an abortive insurrection in 1971. The government is hoping development of the long-neglected region would cure most the unrest as well as being a lure for foreign investors.

Previously, a number of small southern rural development projects meant to create more jobs and improve living standards had not succeeded, Amarasekera said.

This time, it is hoped things will be different.