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Tourism: Maldivian and Nepali business leaders urge collaboration to revive industry

PRISTINE MOUNTAINS OF NEPAL – The country struggles with getting visitors back on the slopes

ECONOMYNEXT -The post COVID- 19 revival of the tourism industry across South Asia will require more regional collaboration, even as each country devises its own strategies in dealing with internal challenges.

Indeed, for countries such as the Maldives and Nepal, whose economies are heavily dependent on the tourism sector, getting their countries back on the ‘safe destinations’ list is of utmost importance. The revival of the tourist industry will certainly depend on all stakeholders, governments and the private sector working in tandem.

Participating in an online business dialogue, ‘Restart Asian Economies – Ideas and Actions for the Hotel Industry,’ organized by the Friederich Neumann Foundation for Freedom, South Asia, on September 21, Dr Mariyam Shakeela of the Maldives and Bhawani Rana of Nepal shared the challenges faced and initiatives taken their respective governments and on regional cooperation to boost the troubled tourism industry.

Shakeela, a former Cabinet Minister is the CEO of SIMDI Group, while Rana is currently the President of the Nepalese Chamber of Commerce and Industry and also the Managing Director of Hotel Sneha Pvt. Ltd.

Both presenters agreed that regionally, it is time to end airline price wars, so travel within the SAARC region, in particular, would be more affordable. Such an initiative could, for one, promote more travel between South Asian nations and be especially attractive for middle-income earners.

In the case of Nepal, pointed out Rana, direct and low-cost flights would ensure more Nepalese visiting Sri Lanka and the Maldives and vice versa. Currently having to take a connecting flight to both these countries, means more Nepalese limiting their travel to neighbouring India or Thailand. Travel via ship and crossing borders through other modes of transport too should be explored.

Here, they point out that better government to government cooperation is essential, leaving aside political agendas and biases, to open up more regional travel. Following the EU example may be one way to go, says Shakeela. She also suggests a regional hub that could address pandemic situations, similar to that brought about by COVID- 19.

They point out that South Asia itself has a rich multicultural heritage and is home to much biodiversity.

Therefore, more package tours encompassing two or three countries within South Asia could be one initiative. For instance, one package could promote visiting the sunny beaches of the Maldives and the serene mountains of Nepal. There is also much potential in introducing a Buddhist circuit encompassing Nepal, India, Sri Lanka etc. or the Hindu package, Ayurveda and meditation, which Rana suggests could be promoted as life-line as opposed to lifestyle tourism.

Says Shakeela, providing regional rehabilitation centres and geriatric facilities would be another option, while also promoting each other’s countries as wedding or conference destinations. The South Asian Association for Regional Cooperation (SAARC) and The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) too need to explore more strategies that would boost regional tourism, the two pointed out.

Current health guidelines the world over requires a two week quarantine period on arrival and on return to home countries. How would this now work for travellers taking time off from work? Would governments and private sector employers adjust vacation leave to include these requirements?

Government to government Memorandums of Understanding on safety protocols too should be explored, they added.

TOURIST DEPENDENT – Nepal and the Maldives want to reduce dependancy on the Tourist Industry


With working from home now a trend, would governments extend visas to allow tourists to move to their preferred destinations and convert their stays to long working holidays?

Meanwhile, both countries are addressing challenges peculiar to them; for the Maldives, just as it works on winning back source markets, it is also about developing their human resources, particularly in the health care system so they would be better prepared if and when another emergency situation such as COVID-19 occurs.

Says Shakeela, the government has lost no time in launching various campaigns, such as “Rediscover Maldives” and their ‘ Sun will Shine again’ Facebook project introduced just prior to reopening the airport, to jump-start the industry. Given that most of their islands are resorts, their ‘One Island, One Resort” campaign points to their ability to ensure social distancing and limiting visitors to a resort island and upholding safety standards from the moment of booking a vacation to baggage handling and beyond. It’s about government and private sector working hand in hand to come up with solutions. Private sector initiatives could include more networking between country to country tour operators.

Looking at the most immediate initiatives, the Maldives is concentrating on making rooms safe and hygienic by limiting the items that can be touched or introducing touch-free toiletries for instance. In short, the country is working towards investing in the Maldives Brand, and creating a sustainable, eco-friendly tourism experience.

As Shakeela pointed out, the effect of the pandemic on the Maldives has been worse than the Tsunami or the Global financial crisis. With close to 90% of the country’s businesses directly or indirectly connected to the tourism industry, its economy has contracted significantly. While most staff on the resorts has been made redundant or retained with no pay or reduced pay, and services of vendors and suppliers to the hotels temporarily discontinued, most former profitable business ventures have closed down or are on verge of doing so. It is now an issue of balancing ‘lives to livelihood,’ she pointed out. Fully projected recovery of the sector is expected around 2024.

The Maldives is hopeful, however; having opened their borders to international travel in mid-July, tourists are slowly but surely trickling in, and according to Shakeela, September 18 had recorded 708 arrivals, the highest since the reopening.

The situation is no better in Nepal, where tourism is a major foreign exchange earner. Following two years of political turmoil, and a new constitution just three years old, Nepal had identified 2020 as the Year of Tourism. The government’s monetary policy was focussed on the tourism sector and geared to attracting more foreign investment and providing tax holidays, stated Rana.

Nepal, which attracts nearly 1.2 million tourists yearly, sees more than a thousand arriving in the country to go trekking in the Himalayas and Everest mountains. But COVID- 19 has put most trekkers and tour operators out of work and negatively impacted hotel staff. Also affected are industries indirectly connected to the hospitality trade, for example Spa’s and handicrafts. A country which had a 65% occupancy rate pre-COVID, had seen it drop to 20% during the lockdown, and has been at zero since, she said.

Nepal too has now reopened its borders and has also recommenced domestic flights. Says Rana, it is time to diversify. Nepal needs to focus more on promoting its other attributes such as its rare fauna and flora and birds, while also targeting more high spending tourists. She explained that tripartite agreements have been introduced between the government, private sector and the employees to avoid retrenchment. Government loans have been offered to meet staff wages, and support has also come in from the Hotels Association. As well, staff has been put on a 15 day on-off rotational shift, where even though their earnings are reduced they continue to be employed.

Preserving the environment too is crucial for the two countries that are heavily dependent on their natural resources to attract tourists; climate change has destroyed some islands in the Maldives and Nepal has been experiencing erratic weather patterns and melting ice.

Both Shakeela and Rana also explained the various barriers women entrepreneurs face in striking out on their own, in heavily male dependent cultures.

If COVID-19 has proved one thing, it is that both countries have realised that being heavily dependent on tourism to boost their economy is not quite prudent. And even as various measures are being considered and adopted to revive that industry, both Nepal and the Maldives has begun investing in other resources such as fishery and agriculture and development projects that will ensure smooth cash flow and enhance economic activity in other sectors. (Colombo, September 28, 2020)

Kshama Ranawana is a freelance contributor

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Sri Lanka central bank appoints two Deputy Governors

ECONOMYNEXT – Sri Lanka’s central bank said Assistant Governors A A M Thassim and J P R Karunaratne were promoted to the post of Deputy Governor.

The full statement is reproduced below:

APPOINTMENT OF NEW DEPUTY GOVERNORS OF THE CENTRAL BANK OF SRI LANKA

In terms of the provisions in the Central Bank of Sri Lanka Act, No. 16 of 2023, Hon. Minister of Finance, as recommended by the Governing Board, has appointed Mr. A A M Thassim, Assistant Governor and Secretary to the Governing Board, and Mr. J P R Karunaratne, Assistant Governor, as Deputy Governors of the Central Bank of Sri Lanka with effect from 20.06.2024 and 24.06.2024, respectively.

Mr. A A M Thassim

Mr. A.A.M. Thassim has over 31 years of service at Central Bank of Sri Lanka (CBSL) in different capacities in the areas of Supervision and Regulation of Banking Institutions, International Operations, Communication, Payments and Settlements, Employees Provident Fund, Finance, Risk Management, Deposit Insurance, Security Services and Information Technology.

He has served as the Director of Bank Supervision (DBS), Director of International Operation (DIO) and Director of Communications (DCM) and has contributed towards strengthening the legal framework, governance, implementation the Basel 3 international guidelines for capital and liquidity and adoption of International Financial Reporting Standards (IFRS) 9 to the banking sector, thereby strengthening the resilience of the Financial Sector.

Further, as the DIO, Mr. Thassim was responsible for the investments and management of foreign reserves of the country and exchange rate management. Mr. Thassim has also gained experience and knowledge in the field of payment systems and was involved in the implementation of the Cheque Imaging and Truncation System. In addition, he has also served on several high-level internal committees including in the areas of monetary policy, financial system stability and international reserves.

Prior to the appointment as the Deputy Governor, Mr. Thassim held the position of Assistant Governor and was in charge of several key departments including the Bank Supervision Department. He also served as the Secretary to the Governing Board, Monetary Policy Board, Audit Committee, Board Risk Oversight Committee, Ethics Committee and Financial Sector Crisis Management Committee.

At present, Mr. Thassim is a board member of the Sri Lanka Export Credit Insurance Corporation and the Vice Chairman of the Institute of Bankers of Sri Lanka (IBSL). Further, he has also served as a board member of the Credit Information Bureau of Sri Lanka and LankaClear (Pvt) Ltd.,

Mr. Thassim is an Associate member of the Chartered Institute of Management Accountants (ACMA) United Kingdom and possesses a Masters in Business Administration (MBA) from the Postgraduate Institute of Management (PIM), University of Sri Jayewardenepura (USJ). He has also completed a programme on Gold Reserves Management from Hass School of Business, University of California, Berkeley, USA.

He is also an Alumni of Harvard University, USA having successfully completed the executive programme on Leaders in Development conducted by the John F. Kennedy School of Government.

Mr. J P R Karunaratne

Mr. J P R Karunaratne has over 33 years of service at the Central Bank of Sri Lanka in different capacities in the areas of supervision and regulation of Banks and Non-Bank financial institutions, Currency management, public debt, Secretariat, Finance, policy review and monitoring. He has served as the Director of Supervision of Non-Bank Financial Institutions (DSNBFI) and the Superintendent of Currency (SC) and has contributed towards strengthening the legal and regulatory framework in the Non-Bank Financial Institutions sector and has played a prominent role in the consolidation of the Non-Bank Financial Institutions sector. Prior to the appointment as a Deputy Governor, Mr. J P R Karunaratne held the position of Assistant Governor and was in-charge of the Department of Supervision of Non-Bank Financial Institutions, Finance Department and the Facilities Management Department.

As an Assistant Governor Mr. Karunaratne has previously overseen several other departments namely, Macroprudential Surveillance, Resolution and Enforcement, Foreign Exchange, Currency, Regional Development, Legal and Compliance, Risk Management, Center for Banking Studies, Security Services and Staff Services Management.

He has also served as the Secretary to the Monetary Board, Secretary to the Board Risk Oversight Committee, Monetary Board Advisory Audit Committee and the Ethics Committee. Further, He was on release to the Ministry of Defence, where he served as a Financial Advisor. He was also appointed as the Chief Operating Officer for the Secretariat of Committee of Chartered Accountants appointed by the Supreme Court in 2009.

He has served as the Chairman of the Sri Lanka Accounting and Auditing Standards Monitoring Board and has been a Council Member of the Certified Management Accountants (CMA) of Sri Lanka. Mr. Karunaratne was awarded the CMA Sri Lanka Business Excellence Award at the CMA Sri Lanka National Management Accounting Conference 2023 in recognition of his service to the profession. He has also received “Long Service Award” of the IBSL in 2019 in recognition of his long career and contribution as a resource person at IBSL.

He was the Project Team Leader of the South East Asian Central Banks (SEACEN) Malaysia, research project on “Implementation of Basel III Challenges and Opportunities in SEACEN Countries” and SEACEN published the research in 2013. He serves as a member of several internal and external committees at present.

Mr. Karunaratne holds a Master of Commerce Degree in Finance from the University of New South Wales, Australia and a Postgraduate Diploma in Applied Statistics and a Bachelor of Science (Physical Science) Degree with a First class from the University of Colombo. He is a Fellow Member of the Chartered Institute of Management Accountants (CIMA), UK and a Chartered Global Management Accountant (CGMA). Further, he is an Associate Member of the CMA Sri Lanka.

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Sri Lanka opposition questions claims that IMF housing tax is only for kulaks

ECONOMYNEXT – Sri Lanka’s opposition has questioned claims made by government spokesmen that a tax on housing proposed in an International Monetary Fund deal is only limited to rich people but if as promised by President one house is exempt, it is welcome, legislator Harsha de Silva said.

Sri Lanka President Ranil Wickremesinghe made a promise in parliament that the first house of a citizen will be excluded from the property tax.

Related Sri Lanka to exempt one house from imputed rent wealth tax: President

But opposition legislator Harsha de Silva pointed out that the IMF program documents clearly says taxes will be levied on owner occupied houses on ‘imputed taxes’, not second houses.

Under current inland revenue laws, actual rent income from a second house is already captured as part of taxable income.

The IMF document mentions a threshold value from which taxes will be exempt but not that a whole owner-occupied primary residence will be exempt.

“The tax is imposed on the income of individuals (rather than real property itself) and thus raises central government revenue in accordance with the constitution,” IMF staff said in their report.

“A similar tax was previously included in the Inland Revenue Act. No. 10 of 2006.

“Under this regime, primary residences were exempt and the assessed values for rating purposes were used to determine the base.

“Given the broad exemption and the use of outdated and downward biased annual values, the tax generated hardly any revenue.”

Meanwhile Sri Lanka has promised to impose the housing tax from April 01, 2025.

“…[W]e will introduce an imputed rental income tax on owner-occupied and vacant residential properties before the beginning of the tax year on April 1st, 2025,” the memorandum of economic policies agreed with the IMF said.

“An exemption threshold and a graduated tax rate schedule would make this tax highly progressive.

“The full revenue yield from this tax is estimated at 0.4 percent and would materialize in 2026 (with a partial yield of 0.15 percent in 2025).

“This yield would still fall short by 1 percent of GDP relative to the expected yield of 1.2 percent of GDP from the property tax envisaged for 2025 onwards.”

Presidential Undertaking

“Whatever the President said the IMF agreement says owner occupied house,” De Silva told in parliament.

“It is not the second house that is mentioned in the agreement.

“But there is one thing. I am happy as Samagi Jana Balawegaya, that we have been able to save the middle class in society from a massive tax that was to be imposed.”

In Sri Lanka there is a belief that the most productive citizens are fair game for excessive or expropriationary taxation, just like kulaks were targeted in the Soviet Union for actual expropriation, critics say.

Wealth taxes have had disastrous effects on some US cities like Baltimore, leading to falling populations and dilapidated houses.

Sri Lanka is currently facing a brain drain due to high income tax after on top of depreciation from severe monetary debasement from a flexible exchange rate, which is neither a hard peg nor a clean float.

Sri Lanka has imposed a wide range of taxes on the people to maintain a bloated state, after inflationists engaged in extreme macro-economic policy (tax and rate cuts) glorified in Saltwater-Cambridge doctrine to boost growth, throwing classical economic principles and monetary stability to the winds and driving the country into external default.

The IMF itself gave technical assistance the central bank to calculate potential output inviting the agency to cut rates to close the perceived econometric ‘output gap’.

In the run up to the default, rate cuts triggered multiple external crises, leading to output shocks as stabilization programs were implemented.

Macro-economic Policy

Macro-economic policy as known now was devised by Cambridge academic J M Keynes in the wake of the Great Depression triggered by the Federal Reserve after it invented open market operations and policy rates in the 1920s and also popularized by Harvard academic Alvin Hansen among others.

Macro-economic policy started to de-stabilize countries in peacetime in the interwar years and after World War II it led to the collapse of the Bretton Woods system.

The Great Depression was also a peacetime collapse of what was later known as the roaring 20s’ monetary bubble.

“They have blithely ignored the warnings of economists,” classical economist Ludwig von Mises wrote of European nations which got into trouble from rate cuts and Keynesian stimulus, which brought currency depreciation and protectionism in its wake from the 1930s.

“They have erected trade barriers, they have fostered credit expansion and an easy money policy, they have taken recourse to price control, to minimum wage rates, and to subsidies.

“They have transformed taxation into confiscation and expropriation; they have proclaimed heedless spending as the best method to increase wealth and welfare.

“But when the inevitable consequences of such policies, long before predicted by the economists, became more and more obvious, public opinion did not place the blame on these cherished policies…”

Who….?

In Sri Lanka however there is some understanding of the role played by macro-economists in the most recent crisis.

There are rumblings of unhappiness about ‘central bank independence’ given to an agency to create 5 to 7 percent inflation and currency debasement under a flexible exchange rate and its constitutional status relating to parliamentary control of public finances.

Sri Lanka’s central bank’s current flexible inflation targeting (inflation targeting without a floating rate) regime as well as its 1980s money supply targeting without floating rate has busted the national currency for decades and made it impossible to run budgets, made it difficult for people build houses which are now to be taxed, and also for millions to live and work in the country of their birth.

Fiscal metrics deteriorate each time rate cuts drive the country into currency crises and new taxes are brought in stabilization programs, ousting reformist governments and leading to policy reversals.

Sri Lanka’s citizens have suffered for decades from the privilege given to a few macroeconomists to print money to cut rates with inflationary open market operations and trigger forex shortages.

Related How Sri Lanka’s elections are decided by macro-economists and the IMF: Bellwether

Critics have pointed out that since 1954 in particular, central bank rates cuts which drive the country into external crises and the stabilization programs that follow, have been the main determinant of elections in the country and election of fringe political parties. (Colombo/June13/2024)

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India supports Sri Lanka Coast Guard to boost maritime security

ECONOMYNEXT – India has given 1.2 million US dollars’ worth spare parts to Sri Lanka’s Coast Guard to be used in a vessel also gifted to the Indian Ocean Island on an earlier occasion, the Indian High Commission in Colombo said.

“Handing over of the large consignment of spares symbolizes India’s commitment to support capability building towards addressing the shared challenges of Maritime Security in the region,” the Indian High Commission said

The spare parts were brought to Sri Lanka on the Indian Coast Guard Ship Sachet, an offshore patrol vessel that was on a two-day visit to the island.

The spares were formally handed over to the Sri Lanka Coast Guard Ship Suraksha which was gifted to Sri Lanka in October 2017 by India.

India has gifted spare parts for the ship in June 2021 and April 2022 and also provided assistance in refilling of Halon cylinders in January 2024. (Colombo/June23/2024)

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