POLITICAL-ECONOMY PROFILES

A Brief Report on the Business Environment of Bandarawela Town

Produced by Michael Calavan and staff of The Asia Foundation, Colombo

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Political-Economy Profiles

A Brief Report on the Business Environment of Bandarawela Town

Produced by Michael Calavan and staff of The Asia Foundation, Colombo

Introduction Now in its second phase, The Asia Foundation’s Local Economic Governance (LEG) program aims to directly improve economic governance practices in 15 towns in five of the nine provinces in Sri Lanka. LEG facilitates discussion between the public and private sectors, which in most cities are historically uncoordinated at best, and at worst mired in disputes over regulations and services, by convening local government officials, businesspeople, and citizens to address how to improve commerce and trade. LEG focuses on the capacity of LAs to support economic growth while encouraging the private sector to take the lead in pursuing opportunities to create jobs, increase profits, and expand the critical revenue base for LAs. The Public-Private Dialogues (PPDs) established in partner LAs by the first phase of LEG resulted in the identification and prioritization of issues, and the joint design and implementation of innovative and replicable solutions, such as improved physical infrastructure, or rationalized processes to help bring businesses into regulatory or tax compliance. To complement and measure these achievements, LEG introduced the profiling of private sector-local government relations and interaction through a rapid appraisal in LEG towns. The method was semi-structured, in-depth interviews with a representative cross-section of the business community, capturing the prevailing status of the business climate, its “business-friendly” and “unfriendly” attributes. By interviewing the same 12-18 business-owners at intervals, the profiles will provide a baseline for LEG’s progress in strengthening public-private relationships and economic growth. The profiles will be used to develop a survey instrument for a survey, using quantitative methods. The surveys will arrive at a numerical scale and data used to make comparisons among communities in a particular year and to track a single location over time. The reports will generate discussion in the partner communities as well as at the national level about what steps government can take to improve the local business environment. Both the PPDs and profiles identify micro and macroeconomic issues by clarifying the challenges and interests of businesspeople. But PPDs are highly structured, action-oriented, susceptible to dominance by certain voices, and often geared toward a specific consensus-based outcome. While PPDs can secure the momentum and interest for both long-term partnerships and short-term ‘quick wins,’ the open-ended and individualized format of the profiles adds nuance, identifying concerns and insights that may not come forward in a facilitated group session. Under the comfort of anonymity and free of the sense of ethnic or political obligations, respondents state their level of agreement or disagreement on 10 statements about the local economy. These interviews, lasting 45 minutes to an hour, enable not just yes or no answers, but informative explanations. By inviting feedback and analysis on a range of economic subjects, the profile allows the respondents to step outside their traditional roles, speaking not only as an expert or advocate regarding issues specific to their business, but also to greater trends, future prospects, and the status of the community as a whole. The profiles allow LEG consultants and field staff to collect detailed information in just a few days, capturing the distinctiveness of the locality in a way that a formal quantitative survey, using random sampling and a predetermined range of answers, would not. The open-ended nature of the profiles is more appropriate in situations where limited knowledge of the local context inhibits the creation of a truly useful standardized instrument, but one which we are working toward. Panelists who are interviewed have been known to actually change their positions during the discussion. In this sense, the profiles reveal the short-comings of traditional surveys in documenting such dynamics. While the Foundation works with local partners to purposefully identify panelists and ensure appropriate representation of female business-owners and the variety of industries, a third of interviews are ad hoc, increasing the opportunity for previously untapped perspectives. For respondents familiar with LEG, the profiles

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confirm the value of their participation and demonstrate the Foundation’s continued engagement. In contrast, the spontaneous interviews pique new interest and optimism for collaboration. For example, during one interview, a shop owner accused the local Chamber of Commerce of a lack of openness, and observed that notifications from the LA were frequently not in Tamil. Though he complained about the responsiveness of these groups, the conversation appeared to heighten his interest in engaging with both his peers and the LA to advocate for his rights—while also highlighting for the Foundation issues that may not have been captured by traditional methods. Another respondent drove home the differing conditions in Colombo by presenting first-hand documentation of the length of time required to secure a business license in the capital (half an hour) versus his city (two months), information which he may not have felt comfortable pressing in a meeting with government, but which speaks to an explicit aim of LEG: to improve the business environment in localities outside of the Western Province, which enjoys disproportionate growth and investment compared to the rest of the country. Though the BEBs conducted to date have already enlightened program staff on whether a city is progressing, stagnating, or declining, and the contributory factors, the real value of the profile will be shown in the coming months. One purpose of the profiles is to provide Sri Lankan policymakers with timely, accurate information about the sub-national business environment, pinpointing common challenges that should be addressed island-wide. But the most valuable outcome of the findings, when disseminated to Local Authorities and private sector partners, will be the resulting new discussions and cooperative initiatives aimed at streamlined and supportive local government services, innovative partnerships, and other, perhaps unanticipated, challenges and opportunities for inclusive economic growth.

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SECTION 1—Methodology

As part of this series, we have prepared political-economy profiles of 15 towns. In alphabetical order, they are:

• Ampara • Badulla • Bandarawela • Batticaloa • Galle • Hambantota • Jaffna • Kalmunai • Kandy • Mannar • Matale • Matara • Nuwara Eliya • Trincomalee • Vavuniya

In the 12 interviews in Bandarawela that comprise this profile, business and local government leaders were asked to elaborate on why they agreed or disagreed with 10 broad statements:

• There is observable economic growth • Existing businesses are expanding • New businesses are being established • Opportunities to expand or start new businesses are increasing • The people in Bandarawela are more prosperous • Businesses are trying for more positive influence on government • The MC is taking practical steps to improve business • The government policies that affect business operations are improving • The basic resources needed to run a successful business are improving • The long-term outlook for business in Bandarawela is promising

We have not tried to attach numerical scores for each of the ten components because of the small sample sizes. We want to discourage the temptation to draw comparison between towns based on these small samples. The statements below represent the opinions of 12 business people selected as panel members in Bandarawela. The information must be interpreted with some care; the samples are not large enough to use as the basis for generalizations. However, they do offer a useful snapshot of the psychological state and institutional setting of Bandarawela business at a point in time, in this case July 2011. Later, when qualitative observations are used in conjunction with survey data, they can provide rich, comparative insights into the business environment. Asia Foundation staff have made every effort to present opinions and information gathered during interviews accurately. However, we cannot guarantee that all information provided by panelists is accurate, or that their opinions are internally consistent. We can vouch for their strong commitment to providing their views as openly and accurately as possible. These individuals include: owners and managers of retail shops and service providers—groceries, jewelers, clothing and textiles, electronics, mobile phones, photographic and printing services, beauty shops, furniture, training institutes, and private schools; small-scale manufacturers—handicrafts, food products, garments, mechanical products; wholesalers—of agricultural commodities, food products, and beverages; and others—bank managers, contractors.

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SECTION 2—Panelist Observations

1) “There is observable economic growth in this community.” Panelists were in agreement on this issue, strikingly so in comparison to other Sri Lankan communities. All either agreed or strongly agreed with the statement. In explaining their answers they referred to experiences in their own businesses, observations on other firms, and broad changes in the town. Notable observations by panelists include:

• Vegetable farmers are getting a good price and “have money in their hands.” • Travel time to Colombo has been nearly halved. • The tea estates, “English vegetable” cultivators, and government workers all pour money into

the local economy. • This is a “tourist hot spot.” • This is the main business center for Uva Province [not Badulla or Moneragala]. • “I can get any type of dress in preparation for the festival system.”

Panelists spoke of their town with 1) a note of pride in their voices: the town is the main business center for Uva Province; the main street has been widened from 12 feet to 20; there are numerous quality schools; even the interior roads are carpeted; new bus stand and market projects are under way; there is unity across ethnic groups; because of a cool climate, the town shares the title of “little England” with Nuwara Eliya; a big agricultural water project is under way; then noted 2) some causes of economic growth: the main roads are much improved; travel time to Colombo has been greatly reduced; winter vegetable prices have risen dramatically; tourism is growing; the town is a transit point to Nuwara Eliya; banks are lending to farmers and small industries; and described 3) the results of growth: new shopping complexes and supermarkets established; new vehicles available for sale or lease; taller buildings constructed; and a vast range of consumer products available. The near universal praise was leavened with 1) a few minor complaints: politicians don’t understand the situation well; there are some lean months when business declines. Responses to this statement set the tone for business in Bandarawela. The challenge for the business community and leaders of the newly-established Municipal Council is to build on and maintain the momentum of an emerging business success story.

2) “Existing businesses in this community are expanding.”

Again, panelists were in agreement on this issue. All either agreed or strongly agreed and presented detailed examples from their own businesses, general observations on other firms, and remarks on the benefits and possible risks of business expansion. Notable observations [mostly positive, some negative] included:

• Textile, grocery, hardware, jewelry, and medicine shops are expanding and adding new products.

• A communication shop has expanded by adding an internet café, computer repairs, and phone accessories.

• Places like Food City have influenced business. “We now need to arrange goods to make the consumer happy.”

• Bandarawela is the national center of “English vegetable” production. • Shop and warehouse rents are very high.

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Panelists made observations about 1) expansion of their own businesses: a dress shop has added floor space to sell men’s clothing; a motorcycle mechanic has progressed from a shed to a cement building; a hardware shop has rented a warehouse for additional inventory; a food dealer is now stocking Basmati rice; then offered 2) general remarks regarding other businesses: buildings are being expanded up [to two or three stories] or sideways; businesses are expanding their premises and adding new products; and finally noted 3) how business practices have changed: TV is pushing the demand for new products; customers have specific style preferences, and need to see many different garments before making a selection; owners feel forced to expand, even though rents and other overhead costs are high; and customers who previously traveled to Colombo for shopping are now able to meet their needs in Bandarawela; the Municipal Council now feels compelled to refurbish market stalls before re-tendering them. Only one panelist raised 1) a matter of concern: many exporters in other Asian countries ship sub-standard goods—lowest quality electronics items, expired food items—to Sri Lanka. Business expansion is proceeding apace in Bandarawela. Unlike some other towns, panelists perceived this as a positive trend, a normal response to sustained growth. There were no cautionary notes about businesses likely to fail because loan payments are in arrears.

3) “New businesses are being established in this community.” Again, panelists were consistently in agreement on this issue. All either agreed or strongly agreed. They mentioned the introduction of branches of outside firms—banks, finance companies, leasing companies, and showrooms—and also establishment of new businesses by local investors. Notable observations included:

• New businesses have modern technology and management. Young people like to join them. • “Every day, one or two shops are opening!” • Damro has brought a new furniture outlet, while Dialog is offering new phone services. • A new clothier has brought new ways of displaying clothes for sale. • Overheads are going up, profits are coming down. • “There is hardly any industry here.”

In responding to the statement, panelists were again ebullient regarding the future of the town. They mentioned: 1) the presence of newly-established branches of national or international firms: banks, finance companies, leasing agencies; insurance firms; consumer goods show rooms; vehicle dealers; and also enumerated 2) new businesses of local people: a large new fish shop; a jeweler who has moved his business from Haputale; hotels; phone services; photo studios; tailors; restaurants; garages; shops selling textiles, dresses, and fancy goods. Particularly interesting new businesses, presumably indicative of growing wealth, are: tutoring services for English, IT skills, and “O” and “A Level” exams; a book shop; bridal dressing centers, and video services for weddings and other events. They also mentioned 3) conditions favorable to establishing new businesses: skyrocketing vegetable prices; the new status of the local authority and an MC; new commercial spaces constructed by the Municipal Council; and peaceful and collaborative relations among ethnic groups. Only 1) a few negative observations were offered: there is hardly any industrial development; there may be too many firms, and thus too much competition, in some business sectors. New businesses introduced from outside and new firms initiated by local business people demonstrate that Bandarawela is regarded as a promising locale for investors.

4) “Opportunities to expand new businesses and start new ones are increasing in this community.” Panelists were broadly in agreement in their responses regarding this issue. Five sixths either agreed or strongly agreed with the statement; only one sixth disagreed. Some mentioned specific products or services that might be offered in Bandarawela with success, while others identified pre-conditions that are either needed or are already in place to support innovative business ventures. Notable observations by panelists included:

• Bandarawela is “a nice place to start a business.” • Business people are optimistic and ready to expand and try new things.

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• All types of businesses are here. There is no need for new ones. • There is no space for expansion. • “Since my only son lives in Colombo, there is no need to expand the family business.” • To support new business opportunities we need better parking, improved drainage, sidewalks,

an airport, and an improved water supply. Panelists offered 1) an extensive list of retail and service businesses likely to do well in the town, some novel, some potential competitors to existing firms: textiles; beauty salons; private English classes; book shop; eating houses; hardware; vehicle sales center; petrol station. Some turned their minds to 2) tourism: hotels; golf course; 3) regional services: private hospital; international school; private university; and 4) value added industry: processing units for flowers, vegetables, and fruit; a cold storage plant to support those efforts. Perhaps due to the perceived promise of tourism and a favorable climate, Bandarawela business people seemed particularly conscious of “quality of life” issues. They want a good business environment, but they also want their town to be beautiful, and a pleasant place for residents and tourists alike.

5) “The people of this community are more prosperous.” Panelists professed two differing views regarding this issue. Two thirds agreed that all or most residents of the town have more money to spend, while a quarter disagreed with this view. Those in agreement identified recent economic trends—higher vegetable prices, growing tourism—as the sources of greater prosperity, while those disagreeing offered sociological analyses of the local population that stressed the presence of an under class. Notable observations by the panelists included:

• People have some money in hand due to high vegetable prices, but that may not be permanent. • “Even unskilled people have jobs in this city.” • Remittances are sent by relatives living abroad. • The very poor are 25% of the population. The others are middle and upper middle class.

VS • The “lower levels” are about 60-65%. • About half of the farmers think short-term, over invest in fertilizer and insecticide, and will

have unpaid debt if crops fail. Panelists who agreed with the statement noted: 1) the sources of prosperity: high tea and vegetable prices; tourism; increased government salaries; remittances from abroad; better education of local residents; and 2) the results: higher land prices; more tutorial classes; improved quality of life. Both those agreeing and disagreeing with the statement offered 1) their own socio-economic analyses of local prosperity and poverty: estimates of the proportion of local poor ranging from 25% to 65%, and categories of the poor that include day laborers, shop employees, and [some] farmers. Most panelists are convinced that a solid majority of local citizens are sharing in the general prosperity. A few are not.

6) “Businesses are trying for more positive influence on relevant government units including the LA, DS, GA. and PC.”

Panelist responses were more widely varied than on previous issues. However, two thirds agreed or strongly agreed there are identifiable efforts in their community to advocate for business-friendly policies and programs, while only one third were unaware of such efforts or specifically denied they exist. Notable observations by panelists included:

• “Some businesses in the center of town get together in trade associations and work with the MC.”

• The business community has been able to influence the MC and in general “get the job done.” • “Our political authority is the mayor, there have been regular dialogues.”

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• “Before the local government intervenes on behalf of local businesses, they need to know their concerns are legitimate—i.e. they are paying their taxes legally and treating employees fairly.”

• Big businesses may get facilities. “We small people are neglected.” • “We have full freedom to do businesses; there is no reason to pressurize government.”

Panelists agreeing with the statement 1) described specific advocacy efforts and dialogues: discussions regarding solid waste management and an unsanitary vegetable sales depot; clarification of policies on posting banners and posters; requests for removal of pavement sellers; denial of permits to outsiders to sell cheap furniture during the festival season. They also 2) offered spontaneous praise for a responsive, activist Municipal Council: the business community has been able to influence the MC; there has been “friendly dialogue”; the MC is business-friendly, provides efficient services, and prevents destructive competition from outside. They also 3) had praise for other government institutions: the Divisional Secretariat is business-friendly and the Secretary organizes public service programs that businesses willingly support; the Provincial Councils have focused more positive attention on business. Panelists not in agreement with the statement either: 1) denied the existence of advocacy efforts: there is no “organized pressure” on government, business people are “happy with what they have,” no influence can be seen; or 2) suggested it is of little value: there is “politics” behind such efforts, undercutting their usefulness; there is little advocacy compared to Colombo.

A solid majority of panelists recognize the existence of business advocacy in Bandarawela. Equally significant, they believe such efforts have paid off. This is an excellent base for future collaboration.

7) “The MC/UC is taking practical steps to improve the business environment.” In a significant departure from responses in other Sri Lankan communities, all panelists agreed that the Urban Council [soon to be a Municipal Council] is “taking practical steps” to improve conditions for business. Three quarters agreed with the statement and one quarter strongly agreed. Panelists cited favorable performance on multiple dimensions—services, infrastructure, improved procedures, and a willingness to listen and collaborate. Notable observations by the panelists included:

• For the last ten years the MC has been business-friendly. • Over the last four to five years, the MC has constructed more than 300 business premises for

lease. • Solid waste management, including sorting separation of biodegradable waste, and production

of fertilizer from the waste, is “a model for Sri Lanka.” • Dengue patients are few, due at least in part to a successful mosquito-control campaign. • The [previous] mayor intervened and settled disputes. • Parking is the most difficult issue.

Panelists consistently praised the MC for 1) effective service delivery: adequately maintained roads and drainage; timely garbage collection and street cleaning; an effective anti-dengue campaign; adequate provision of water; careful attention to cemetery, crematorium, and children’s park. Likewise, they were favorably impressed by 2) other initiatives: close collaboration with the trade associations; provision of commercial space and reasonable rents, including current construction of a new bus stand and market; replacement of 22 shops destroyed by a landslide; the [previous] mayor’s active role in settling commercial disputes. Amid the praise, panelists issued 1) a few challenges to the newly-elected MC: the water supply is not always sufficient; parking remains a problem, particularly during the weekly pola, when buyers and sellers clog city streets. The readily apparent good will between business people and the MC can lay the groundwork for Bandarawela to become one of the most prosperous and best-governed cities in Sri Lanka.

8) “The government policies that affect business operations in this community—laws, regulations, procedures, outreach to the business community—are improving.”

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Panelists offered a range of responses on this issue, though none expressed particularly strong sentiments. More than half agreed that some improvements have been made. The remainder either denied that significant improvements have been made or noted that they are waiting for announced policies to be effectively implemented. Notable observations by the panelists included:

• With the help of the MC and the Provincial Council, the business community is organizing a “tourism summer.”

• “Our local economy is based about 60% on agriculture and plantations. Our policy should be to support ‘value added’ industry.”

• Before, tax collectors solicited bribes by being “hard.” Now they are gentler and are collecting more.

• State policies are of paramount importance. Businesses are affected by the tax structure, incentives, and subsidies.

• New “business friendly” laws and regulations are really only friendly to those connecting to ruling cliques.

• Valuation of properties [for the “assessment tax’] has been increased six-fold. Panelists agreeing with the statement 1) praised specific policy initiatives: simplification of income taxes to two payments; special efforts such as the “Tourism Summer”; customs tariffs that protect local farmers; regulations allowing the Divisional Secretariat to issue driving licenses and national identification cards and accept passport applications; new, less intrusive tax collection procedures. Some of those less favorably disposed toward current policies 2) lodged complaints: enforcement by Labor Department and Price Control officers is “too severe”; the current national policy framework is neither flexible nor strong [thus ineffective]; price control officers also need to prevent sale of expired goods; the Provincial Council—a tax collecting entity, is “totally useless.” Panelists also offered 3) a variety of general observations: some products are taxed three or four times, which is surely excessive; sometimes businesses clamor for policy change because they don’t want to follow legitimate laws and regulations; MC taxes “are used to improve the business environment”; Sri Lanka’s export sector has progressively weakened over the past 20 years. Panelists varied considerably in their knowledge of policy initiatives and understanding of their purpose. Overall, however, they showed a relatively high level of sophistication.

9) “The basic resources needed to run a successful business in this community—roads, banks, transportation, parking and traffic management, street lighting, phone and internet services, electricity, water—are improving.”

Panelists were broadly in agreement in their responses regarding this issue. Three quarters either agreed or strongly agreed, generally by starting with a blanket statement, then mentioning two or three resources they particularly approve of, and one or two that need improvement. The one sixth of panelists that didn’t agree apparently were strongly disappointed by at least one of the resources mentioned. Notable observations by panelists included:

• The mobile phone has done good service to business. • When called, city employees come to replace the bulbs in street lamps. • “There is no proper timetable for buses due to the absence of a proper bus stand.” • Electricity is not continuous. ”Sometimes there is an 18-hour power cut!” • Before, banks were a “service provider.” Now they’re a business placing “unreasonable

requirements” on 60% of borrowers. Panelists made 1) favorable comments regarding: main roads; banks; phone and internet services; and transport facilities. They made 2) unfavorable comments regarding: electric service; street lighting; side roads, vehicle parking, the absence of traffic lights, and overall traffic control. They also made 3) specific complaints regarding: bus service

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[no bus stand, covered waiting area, or timetable available in the south end of the town]; banks [higher overdraft fees]; and electric service [power cuts]. Overall, Bandarawela residents are satisfied with the basic resources need to run their businesses. Their primary complaints—parking, traffic management, electric services—are the norm in towns across the country.

10) The long-term outlook for business in this community is promising.” Panelists were broadly in agreement that the future for business in their community is promising, with 11 out of 12 either agreeing or strongly agreeing with the statement. However, a few tempered their optimism by noting pre-conditions that are needed, or by mentioning threats to sustained development. Notable observations by panelists included:

• “The war is over. Tourism has started. This is an attractive place where the government needs to intervene [e.g., with improved infrastructure]. ”

• The city will be well served by the Hambantota Airport and seaport. • “Businesses would like to establish flower gardens in roundabouts and railway land.” • There’s a good network of surrounding villages and the possibility of a circuit bungalow tour. • Children go abroad and learn, then earn, then come back and apply what they’ve learned. • “I have great expectations for the new leadership of the MC.”

Panelists catalogued 1) the strengths of their town: physical beauty; favorable climate; tourism; the Hambantota Port; educated young people; a pleasant lifestyle; and 2) proposed a few measures to enhance future prospects: business-supported flower gardens; organic vegetable production; additional infrastructure improvements; commercial flower production. Only a few 1) pessimistic comments were offered: a seer has predicted a global disaster in 2012; it is likely there will be “more robbers and thieves.” Most panelists in Bandarawela foresee a promising future for themselves and their children, and many seem prepared to play an active role in ensuring movement in the right direction.

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SECTION 3—Asia Foundation Comments

In the future, when constructing a quantitative measure or index of the business environment in secondary cities, for purposes of comparison, we may want to employ the use of tiers. This is because a few points of difference should not be considered important, but assignment to the same or different tier should be noted. For example, seven of the towns are in provinces that were most severely affected by the war, and are now proceeding through roughly equivalent recovery processes. It is only where communities are separated by one or two tiers that substantial psychological and institutional differences should be inferred. Asia Foundation consultants and staff members who participated in interviews in Badulla and Bandarawela, for example, can attest to such differences. The two towns are in the same district and separated by a brief one hour drive. But the content and tone of panelist responses varied dramatically. Bandarawela business people were almost invariably upbeat and enthusiastic, while those in Badulla were inclined to be pessimistic and cynical. The contrast between Bandarawela and Matale, four tiers apart, is even more dramatic. It is striking that respondents in three towns located well outside the war zone—Galle, Matale, and Badulla—were generally less positive in their outlook than respondents in seven towns more directly affected by fighting and militarism—Jaffna, Mannar, Ampara, Vavuniya, Trincomalee, Kalmunai, and Batticaloa. Lacking an obvious break in the routine of managing their businesses, panelists in Galle, Matale, and Badulla were inclined to focus on their own problems and on shortcomings in their community. Panelists in the Northern and Eastern towns had experience of a clear “line in the sand.” They described the end of the war as a fundamentally important turning point for business and daily life. Compared to the recent past, there are broad opportunities to invest and innovate. This optimism and “sense of the possibilities” is a positive resource, one that can be harnessed in planning and implementing a comprehensive development strategy. In contrast, towns lacking a clear “line in the sand” [such as Galle, Matale, and Badulla] need to build such support. A preliminary strategy is needed to help business people and government officials to discover their “sense of the possibilities.” Bandarawela is the third largest town in Uva, a province routinely described as Sri Lanka’s poorest and regarded by many as an economically backward area. The town is not located on a major national highway, and even lacks the distinction of being a significant administrative center. Badulla is the district town. Yet, panelists were the most positive of any encountered in the eight towns so far surveyed. They frequently asserted that theirs is the most dynamic business community in the district or even in the province. Business people foresee a promising future in producing and processing winter vegetables, are witnessing substantial growth in tourism, and are confident the municipality and business community can work together toward a promising future. Panelist responses have given Bandarawela high marks for six of the ten statements:

• There is observable economic growth: The most striking features of panelist observations were their unity [all agreed or strongly agreed with the statement], and the note of pride in the their voices as they described their town and its business community: e.g., the town is the main business center for Uva Province; there are numerous quality schools; new bus stand and market projects are under way; there is unity across ethnic groups; a big agricultural water project is under way.

• Existing businesses are expanding: Once again, panelists were united in voicing their firm support for

this statement. Another striking feature was their cheerfulness in acknowledging the “costs” of business success, e.g., outside investors have brought new levels of competitiveness. Rents and property prices have risen dramatically.

• New businesses are being established: Once again, panelists were ebullient in making their

observations, clearly convinced that establishment of new businesses is a sign of significant, sustainable economic growth. Two themes were touched on several times: local farmers have benefited greatly from current high vegetable prices; and the town’s government was recently upgraded from an Urban Council to a Municipal Council.

• The people in Bandarawela are more prosperous: In a striking departure from panelists in all other

towns, two thirds of those in Bandarawela firmly agreed with the statement, and listed the sources of

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prosperity: high tea and vegetable prices; increased government salaries; remittances from abroad; new jobs in tourism; better education of local residents.

• The MC is taking practical steps to improve business: Again, panelists gave dramatically different

responses from those in all the other towns. All agreed or strongly agreed with the statement. In all other towns, it was a minority, often a small minority, which responded positively. Business people appear to be convinced that local government is “on their side.” The elements of this trusting relationship are not readily apparent to outside visitors, and a detailed case study of the situation seems justified.

• The government policies that affect business operations are improving: The collective responses of

panelists in Bandarawela were mildly positive, a significant exception to the negativism that dominated responses in six of the eight communities so far surveyed. The majority who agreed mentioned specific actions by government—dialogues conducted, committees formed, or simpler tax payment procedures. The minority who disagreed or were neutral often mentioned government pronouncements that have not been followed up by concrete actions. While business people in Bandarawela are hardly enthusiastic supporters of government policies, they appear to have sufficient trust for building dialogue mechanisms and partnerships with various government units.

A new Municipal Council and new Mayor: The outgoing Mayor received strong praise from several panelists as a responsive and business-friendly executive. Yet, he has been relegated to the position of opposition leader in the newly-created, newly-elected Municipal Government. His displacement seems to have been the result of three circumstances: 1) there was a pro-Government electoral landslide in local governments across the country; 2) the geographic area and number of voters of the local government were significantly expanded as the boundaries of the town were extended outward into the adjacent pradeshya sabha; 3) the newly-elected Mayor was very popular in suburban areas surrounding the town. The town and its business community will benefit greatly if the new Mayor and his predecessor can cross party boundaries and develop an effective working relationship