Conflict-torn Sri Lanka is banking on foreign cash to rebuild shattered infrastructure as the island emerges from decades of ethnic civil war, officials say.
Analysts are expecting a large investment peace dividend in the country where bomb attacks and fighting dented investor confidence and kept high-spending tourists away from the tropical South Asian island.
There will be plenty of opportunities for investment once the former war zone in the north and east is open for business, said Chinthaka Ranasinghe, head of Research at John Keells Stock Brokers in Colombo.
"These areas have been virtually bombed out. This throws up enormous potential" for investment, Ranasinghe told AFP in an interview.
"A large number of houses need to be built" along with "new roads, schools, telephone and electricity lines… the investment rebound will be spectacular," he said.
Three months after the end of the war against the Tamil Tiger rebels, the government has yet to announce a timetable for when the once-embattled region will be fully open for business.
But the government hopes to resettle at least 80 percent of the nearly 300,000 people in the north who were displaced during the last stages of the conflict by the end of 2009 as mine clearing work progresses.
The treasury estimates nearly three billion dollars will be spent by international donors and the government over the next three years to rebuild roads, bridges, electricity, water and sewer lines in the once troubled regions. No breakdown of the money has been given.
Through donors, public and private partnership projects, more than two billion dollars of that money will be spent in the north where the final battles of the war were fought in May, the treasury said.
The rest of the money will be spent in the east which was wrenched back from the rebels in 2007.
Dialog Telekom, the Sri Lankan unit of Malaysia’s Axiata Group Berhad, was the first international company to set foot into the former war zone, by launching a mobile phone network — initially meant for use by government troops there.
Dialog will spend up to 10 million dollars this year to install 60 base stations in the former war-torn areas, said chief executive Hans Wijayasuriya.
"We see pent-up demand once the government’s resettlement plans get underway," Wijayasuriya said.
Home to about 14 percent of Sri Lanka’s 20 million population, the island’s north also has fertile farmland, fishing and mineral deposits, said Ranasinghe.
With a 2.6-billion-dollar bailout package granted by the International Monetary Fund to shore up the economy following the war that left tens of thousands dead, the central bank plans to tap overseas markets in September to raise 500 million dollars through a sovereign bond.
The funds will be used to help offset the government’s share of the rebuilding costs in the conflict areas, the bank said.
"There’s strong investor interest in Sri Lanka now that the war is over," said the bank’s assistant governor Nandalal Weerasinghe.
Sri Lanka is also forecasting a 20 percent increase in foreign investment to one billion dollars this year, mostly in IT and telecoms-related sectors.
Singapore-based HSBC economist Prakriti Sofat says Sri Lanka is on the foreign investor radar.
"Tourism, BPO (business process outsourcing) and manufacturing are key sectors ripe for foreign direct investments," she said.
The Manila-based Asian Development Bank also has announced plans to raise Sri Lanka’s annual loan allocation to 300 million dollars in 2010 from 200 million dollars.
"Mainly this would be spent on infrastructure development in roads, power, and water sectors," the bank’s Colombo-based economist Narhari Rao said.
Colombo’s benchmark stock index has climbed 33 percent since the Tigers were defeated.
Securities and Exchange Commission chief Channa de Silva said he expects further gains.
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