Leisure and tourism: Need to nurture and stimulate

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By our Special Correspondent

The attempt by the National Government to achieve too much in too short a space of time, as evidenced in the National Budget 2016, is, in my opinion, not the right approach both from an economics perspective of human behavior and from an angle of tactics.

The economist view of human behavior is that “the ends are many but the time and means to achieve these ends are limited and have the capacity for alternative application”. The Government and the people have a myriad of desires. The instinctive tendency is to strive to achieve them all in the shortest possible time. However, the time in which these tendencies can be expressed and fulfilled, and the means to achieve them, is limited.

On the basis of the current strengths and weaknesses of Sri Lanka’s balance sheet, choices have to be made. It is not possible to embark on everything at one time.

In terms of a policy and a work plan, the Government must establish and consolidate positions of strength prior to attempting radical reform, particularly those reforms which negatively disturb the status quo of the majority of the people.

I believe that the Government should focus on a few key areas and plan its action on a phased, selective, basis.Obviously, when choices are made there are bound to be winners and losers. Choices cannot be purely political, because they are, in general, not sustainable. Neither can choices be solely based on economic expedience. There has to be balance. This means a “prioritisation” of objectives in the best interest of the country.

It is in the above light that I fail to understand why the Government is not supporting, nurturing and stimulating the tourism and leisure industry which, arguably, is Sri Lanka’s lowest hanging fruit.The authorities seem to be suffering from the illusion that this industry is well established, is making tonnes of money and therefore is ripe for taxation. It certainly is not making tonnes of money when judged by the Return on Capital stated in many published financial statements and other reports.

Anchor industry

However, if allowed to have the right mix of attractions/experiences, it can be the anchor industry providing Sri Lanka with much wanted foreign currency in the short to medium term. Tourism and leisure has a very high multiplier effect and is an industry which avails significant opportunities for Small and Medium Enterprises.

The tourism and leisure industry is what we must focus on as our foreign exchange earner till we create other industries where we can have competitive and comparative advantages through a mixture of planned education and skills development, astute foreign relations and our proximity to the big populations in India and China. Don’t kill the goose which is currently laying eggs which can become golden in the shortest span.

In terms of the key success factors for this industry, Sri Lanka has most of it. Location, attractions, climate, beaches, culture, history, fauna/flora, a relatively literate workforce, a non-extremist society, etc. are all there.

Of course, we can do much better in providing more diverse experiences to the more affluent and modern traveler in the manner Singapore has done. Unfortunately, our false sense of morality and values, coupled with the wrong card played by the politicians in condemning casinos rather than condemning the tax-free status of casinos has resulted in Sri Lanka missing the immediate bus.

However, it is not too late to correct this situation and for the men in power to play the more logical economic card rather than the political card.

In this respect, the Government will do well to take a leaf from South Korea’s economic strategy in the 1960s where it invested heavily, and fearlessly, in the steel industry with an eye on future Industries such as ship-building and automotive. Steel was chosen as the Industry of priority and was given preferential treatment for a stated period of time. History has recorded South Korea’s success in the steel and other affiliated industries.

Similarly, Sri Lanka also needs to focus on quick economic growth through the labour intensive leisure and tourism industry and create a competitive advantage in addition to its comparative advantages. We have to enhance our market standing against our competitors such as Thailand, Malaysia and Vietnam. There is little to gain by trying to be a jack of all trades.

Since 2010, Sri Lanka’s room capacity in both Colombo and the rest of Sri Lanka has increased significantly. Though the room capacity has increased, the industry is not achieving the desired tourist spends. We are still attracting the low spending tourists. The occupancies in the city-based hotels are low and if something is not done quickly to make Colombo an attractive destination to affluent tourists, we will be burdened with infrastructure giving sub-optimal returns. An inevitable result of this would be lower foreign exchange receipts and lower tax collections.

Megapolis

The Patali Champika Ranawaka driven Megapolis initiative is a step in the right direction and challenges our vision of a future Colombo. We need to ask ourselves whether we want Colombo to be part of a New World. Do we want Colombo to be a global city attracting talent from around the world; lively, vibrant and fun to live and work in. Yes, we want Colombo to be a city of first choice having the same excitement that you get in Singapore, London, Paris or New York.  The ideas to do so are plentiful but realising them is not so easy. I guess that the Megapolis blueprint will shed more light and give us the answers.

There is no denying that the rhetoric against casinos in 2014 was designed to gain political mileage. However, the casino rhetoric and accompanying hysteria also resulted in integrated resorts being viewed as pure casinos.

An integrated resort has a variety of amenities such as hotels, restaurants, shopping malls, convention space, theatres, museums and theme parks. They generally attract hundreds of thousands of visitors per year. The great majority of them are tourists, executives and businessmen who come to enjoy the resort or attend conventions or conferences.

But within this large development and slew of activities, there is one small but essential part which offers gaming and which usually helps to make the entire project financially viable. The investors will put in the money and take the commercial risk.

It is in this respect that one must take heed of the transformational leadership of Lee Kwan Yew who, addressing the Singapore Parliament, said: “I respect those who oppose the integrated resorts and their views. We have decided to proceed but not because we think those against the integrated resorts are wrong, or their views unimportant. Their reservations are valid and shared by the ministers; even those who support the integrated resorts. These reservations are the reason why the government has said no to casinos for so long. But now we are confronted by a new situation and the overriding need to remake our city and our economy.

“I will meet community and religious leaders to explain why we have to move what safeguards we propose and to ask them to work together with the Government to minimise the social impact. I encourage MPs to speak up in this debate, explain your stand, whether for or against integrated resorts, and help Singaporeans better understand what is at stake.”

Sri Lanka is not short of a transformational leader who is prepared to, principally, drive an economic agenda which, in the medium to long term, will produce a better standard of living for all people. The right balance between an economic and political agenda will inevitably ensure his political longevity.

As the adage goes, ‘Rome was not built in a day’. A similar thinking is necessary to pull Sri Lanka out of its current economic malaise. Let us not try to be everything to everyone. Let us focus and let us make the hard calls in a few selected areas.

See more at: FT

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