POLITICAL-ECONOMY PROFILES

A Brief Report on the Business Environment of Hambantota 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 Hambantota 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 Hambantota 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 Hambantota 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 Hambantota 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 Hambantota. 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 Hambantota 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 broadly in agreement in their responses regarding this issue. Three quarters of them strongly agreed or agreed with the statement. Only one sixth of respondents disagreed. Positive responses generally referred to causes of economic growth, notably the end of the war, or specific examples such as improvements in their own business. Notable observations by the panelists [some positive, some negative] included:

• People want to be “part of” the ongoing economic development, even if they haven’t benefited yet. • “In the past, people couldn’t find ten rupees. Now they can earn 1,000 per day.” • Daily transactions in a bank branch have doubled, while lending has doubled and deposits have tripled. • “Even average people are buying frozen chickens.” • Due to closure of the direct road to Tangalle [as part of port development], firms in the old town are

losing customers. • The details of the Government’s plans for Hambantota are unknown to local citizens.

Several panelists chose to put current economic development in 1) historical perspective: “The first brick houses were built in 1961; before there was only adobe.” “Formerly a village, Hambantota has become a city with well-developed infrastructure, businesses, even educational resources.” “The trend toward local development was given significant momentum by post-Tsunami recovery activities.” They routinely reiterated 2) the mega-projects currently reshaping the town and region: seaport, airport, fishing harbor, oil refinery, convention center, cricket stadium, athletic training facilities, four lane highways; then enumerated 3) the emerging economic benefits of those projects: easier travel to Colombo; well-paid jobs for laborers; extension of the business day into the evening; a heavy demand for building materials, timber, and gravel for roads; plans to build tourist hotels; increased demand for beauty services and frozen chickens; recovery of the local fishing industry. Few panelists disagreed with these optimistic assessments, but almost all also expressed reservations about the current growth path. A major concern, repeated often during interviews, is a 1) lack of practical information: Business people suspect even major decisions can be over-turned from one month to the next. They are unclear about the role to be played by the current business district when all construction is completed. They assume there will be a “new town” north of the port, but remain unclear about its location, how much land will be reserved, and whether they will be aided in moving their businesses to the area. Another reservation focuses on 2) equity and fairness: Many businesses in the “old town” have been badly affected by closure of the direct road Matara road. For example, some former customers now shop in Ambalantota. Furthermore, there is a strong suspicion that outsiders, particularly those with close ties to powerful politicians, will benefit disproportionately from future business opportunities. Most business people are satisfied with Hambantota’s longer-term growth path; half are very pleased. At the same time they are uneasy about the current situation. Notably, they are in the dark about the ultimate physical layout of their town. Many have put expansion plans on hold until they have a clearer idea of where their businesses will be located and what government assistance they can expect.

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

Panelists took two differing approaches in their responses. Two thirds either agreed or strongly agreed with the statement. One third disagreed. In either case, answers typically referred to panelists’ personal business experiences as well as observations on other firms. Notable observations by panelists included:

• “Because of increasing competition, existing businesses have to be improved.” • “At our hotel we built an additional hall, renovated rooms and other facilities, and recruited new

employees.” • A metal crusher [gravel producer] has purchased tractors, one truck, one “tipper,” more land, and a

crushing machine, and has added new employees. • “My handbag business has expanded. I have purchased sewing machines and hired new employees.” • Many businesses are not expanding due to lack of customers and uncertainty.

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• Although loan facilities are available, many business people are not taking advantage. Observations agreeing or strongly agreeing with the statement generally emphasized: 1) expansion of panelists’ own businesses: In addition to hotel, metal crushing, and handbag businesses mentioned above, expanding firms included a computer shop [“We started with accessories. Six months ago we moved to a larger space with improved storage and display, added more accessories, and began selling computers.”] and a beauty salon [increased business in wedding preparation]. Panelists also mentioned 2) other expanding businesses: a shoe store that expanded their sales space and opened another shop down the road; clothing and gift shops that remodeled their sales premises and added employees; three businesses identified by a local banker that have tripled or quadrupled their monthly sales. Comments offered by those disagreeing with the statement, and by a few who were mainly in agreement, portray 1) the downside of the current mega-projects: “My business is on a road that has been closed. In addition to losing customers, I must now have the additional expense of providing transport to my employees.” “Our printing business in the ‘old town’ has lost customers in outlying areas. We were planning to expand, but will now ‘rethink’ those plans until we have a clearer picture of the final layout of the town.” A family operating a large snack shop relocated to the new main highway at considerable expense, and has experienced reduced sales. Furthermore, they fear they will be forced to move again. Several panelists are rather pleased about expansion in their own businesses and across the town. However, uncertainty has discouraged some from moving ahead with their plans.

3) “New businesses are being established in this community.” Panelists offered two varied responses on this issue. Two thirds agreed or strongly agreed with the statement, with most mentioning the presence of new financial institutions, vehicle dealers, leasing companies, and a range of other businesses. One third disagreed. Notable observations by panelists included:

• Some shops are opening on the newly opened roads. • The Urban Development Authority is considering establishment of a “banking zone”; at least 11 banks

have shown some interest. • With many new leased and purchased vehicles, there are opportunities for repair shops and other

services. • When the mega-projects are finished there will be many business opportunities; for now, uncertainty

prevails. Panelists responded by naming: 1) outside firms, generally Colombo-based, that have established local branches: banks [Commercial Bank, DFCC]; finance companies; super markets [Food City]; leasing firms; vehicle dealers; training and tuition centers. They also noted: 2) local initiatives: communication shops [one panelist noted that these routinely open and close]; repair centers and spare parts dealers for heavy machinery; clinics and channeling services; catering services; guest houses; restaurants; reception halls; digital printing; pharmacies; computer sales; bakeries; clothing. Finally, panelists noted: 3) other signs of business development: banks are undertaking feasibility studies preliminary to opening branches; large hotels [by Jet Wing and the Insurance Corporation] are in the planning stages. Those disagreeing with the statement noted: 1) negative trends: land plots are being granted to outsiders with high level contacts; big business opportunities such as supplying ships are being “grabbed” by Colombo people; the government is spending “big money” of an international beach volleyball tournament that could be spent more productively on small tourism projects. New businesses are being established, but there are some indications that many outside and local business people will wait for completion of the mega-projects before moving ahead aggressively.

4) “Opportunities to expand new businesses and start new ones are increasing in this community.”

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Most panelists were in agreement in their responses to this statement. Five sixths either agreed or strongly agreed. Only one individual strongly disagreed. Answers ranged from proposals for promising new businesses to mention of human, natural, cultural, and land resources that are available, to favorable conditions that are required for full realization of opportunities. Notable observations by panelists included:

• There are opportunities both in international and domestic tourism. • With more people traveling from Jaffna and Trinco, the Katharagama festival will offer opportunities

for Hambantota businesses to offer complementary services. • Lands are available for large factories. • “We would like to add air conditioning and additional sales space, but are uncertain whether we will

have to move.” • Opportunities are mainly available for a certain group.

Panelists enumerated opportunities in 1) tourism: hotels, guest houses, hospitality services, event planning; spas, ayurvedic medicines and treatments; handicrafts [batiks]; private transport; catering; guide services; and in 2) other businesses: private construction of homes and business premises; construction materials; heavy equipment sales and leasing; banking services for international customers; gold and gems [Chinese customers are buying, and it is rumored some will stay to manage the port]; curd, dodhole and other snacks; communications and IT. They also identified 3) pre-conditions for businesses to take full advantage of opportunities: notably, ready availability of practical information on physical plans [What functions will be assigned to “old” and “new” town areas? How will access roads be aligned?]. Panelists also noted 1) barriers to full realization of business opportunities: reiterating their concerns that outsiders with close ties to powerful national figures will have unfair advantages. Business people in Hambantota are scanning local resources and trends in market demand and identifying significant opportunities, despite ongoing uncertainty.

5) “The people of this community are more prosperous.” Panelists professed differing views regarding this issue. Half agreed or strongly agreed with the statement, apparently influenced by the availability of well-paid laboring jobs. One quarter disagreed or strongly disagreed, while another quarter chose to “neither agree or disagree.” In some cases panelists offered socioeconomic descriptions of the local population. Many also cited the rapidly rising cost of living for all residents as an important factor in shaping local prosperity. Notable observations by panelists included:

• Laborers can earn Rs.1,000 per day. • The demand for beauty products and services is increasing. • “People are having more lavish weddings.” • Incomes are up, but so is inflation. • Laborers in the salt pans receive steady income, but have no extra resources for luxuries. • People are only now recovering from the Tsunami disaster.

Those agreeing with the statement considered the 1) welfare and income of various occupational groups: i.e., laborers on mega-projects, fishermen, salt pan workers, farmers, three wheeler drivers, and concluded most have adequate incomes. They also noted 2) expenditure patterns indicating improved incomes: use of beauty products and salons; purchase of motorcycles, mobile phones, computer pen drives, and frozen chickens; and 3) other evidence of higher incomes: rapidly increasing land prices [a plot that didn’t sell at Rs.700,000 a few years ago recently commanded Rs.5,000,000.]; the arrival of the “rolling credit culture”; the restoration of rice fields [now yielding an annual green gram crop as well as paddy]; generally high living standards—roads, schools, and a hospital “better than Matara.” Those disagreeing with the statement noted 1) the inherent threats in current prosperity: over-dependence on credit; loss of traditional habits of saving and household-level investment. Some also 2) challenged the assumption that people are better off: some families are only now recovering from the Tsunami; many families spend primarily on food; incomes from fishing and three wheelers are unstable.

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Hambantota’s business people pay close attention to the welfare of their fellow citizens. We can assume two reasons for this: They are genuinely, humanely concerned for others; and they pay close attention to their customer base.

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

Panelists professed two differing views regarding this issue. By agreeing or strongly agreeing, seven indicated they are aware of at least some advocacy efforts by the business community. By stating that they disagree or “neither agree or disagree,” other panelists indicated they are unaware of such efforts. Although the statement doesn’t specifically call for a judgment regarding the success of advocacy efforts, several mentioned their distress at the unwillingness of government units to respond to business concerns. Notable observations by the panelists included:

• Business people expect basic service provision and also support for business development. • Organized efforts are being made through the Chamber of Commerce and Trade Associations. • The Chamber is pressuring for construction of a new business complex. • The Trade Association is lobbying against shifting the main business center to another site. • “The biggest lobbying issue is about knowledge of the central government’s plans for the town. But the

Municipal Council is no more aware than we are.” • “We are disheartened. We are respectable traders but they treat us as if we are ‘irregular.’”

Observations agreeing with the statement described 1) advocacy efforts on a range of issues: agitation against razing business places without providing compensation or new premises; dialogue regarding improved garbage collection, electricity services, water supply, and telecom services; lobbying for relief from taxes on razed or abandoned structures. Occasionally they mentioned 2) results of lobbying efforts: some businesses received compensation; more frequent information sharing and redress mechanisms have been promised. Those disagreeing with the statement either: 1) denied knowledge of advocacy efforts: “I have no idea; I don’t see such organized efforts.” “We are not involved in the Trade Association.” “We feel no government presence, other than the need to register our business at the DS office.” or offered 2) cynical observations on the value of advocacy: organized efforts have had no results; local decision makers only respond to those with political clout; only outsiders will get the benefits of local development; the town is being “used”; plans for the [2013] South Asian games, and the possibility of hosting the Commonwealth Games in 2018, are being used as plausible reasons for removing certain business people from their current shops. In explaining their positions, panelists expressed diverse views on advocacy. Some are unaware of recent or ongoing efforts, and pessimistic about the results of any such efforts. Others are aware of specific efforts, but cynical as a result of perceived indifference by public officials. Relatively few are both knowledgeable about ongoing efforts and convinced such efforts are worthwhile. Fortunately, the latter group includes a few respected business leaders in Hambantota.

7) “The MC/UC is taking practical steps to improve the business environment.” Panelists were not enthused about the performance of the Municipal Council [which was recently upgraded from Urban Council status]. Two thirds disagreed or strongly disagreed with the statement. Negative responses implied elected leaders and administrators are virtually absent from public life, and are more concerned with political maneuvering than rendering public service. Positive responses focused on adequate delivery of some services. Notable observations by the panelists included:

• They are providing basic services. • “As a business man, I have never visited the MC building. My brother procures the trade license.” • “The MC should conduct regular consultations with business people.” • “The MC has no influence with the national government. They just exist with their routine work.”

Observations disagreeing or strongly disagreeing with the statement focused most often on 1) inaction by the Council: Officially, the town is competing [against the Gold Coast in Australia] to host the 2018

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Commonwealth Games. In reality, the Mayor has no knowledge of this effort. Business people are disappointed by the Mayor and Council’s inability to intervene on their behalf in obtaining practical information on national government’s management of mega-projects. Despite campaign promises to intervene with national government of behalf of business people with buildings damaged by construction, no action has been taken. There were also 2) accusations of impropriety and excessive political partisanship: government party members of the new Council have each received two houses; city contracts go the Mayor/Chairman’s son or other relatives. They also sketched ideas for 3) desired actions on behalf of business: release public lands for business expansion; organize efficient business licensing; regularize land ownership; support timely release of loans from banks; organize technical advisory services. There was a specific request to 4) support women in business: by providing working space, training, and awards. Those agreeing with the statement, and some who didn’t, noted that the MC offers 1) adequate basic services: garbage collection, street cleaning, water, and street lighting. Hambantota businesses expect more of their city government. Support was seldom more than lukewarm, while some criticisms were couched in strong language. There was no appreciation of the problems the MC faces—inadequate funding, antiquated personnel policies, needed clearances and mandates—in accomplishing its work. There is a clear need for bridge building between the two sides.

8) “The government policies that affect business operations in this community—laws, regulations, procedures, safety and security—are improving.”

Panelists held varying views regarding this statement. Seven agreed, two were unsure of their views [thus selecting “neither agree or disagree”], and three disagreed. Those in agreement often mentioned specific government actions—dialogues conducted, committees formed, or simpler tax payment procedures. Those who disagreed or were neutral often mentioned government pronouncements that have not been followed up by concrete actions. But, above all, panelists want practical information on the future of their town. Policies regarding the mega-projects are all-important at this time. Notable observations by panelists included:

• We had meetings with the Speaker of Parliament regarding development of the “Old Town.” • If the whole town shifts across the harbor, that would be good. • “I’m not clear if I will be required to shift my shop. My preferred strategy would be to have shops in

both places.” • The government has reduced the BTT. That is helpful. • “The city development plan [of the Urban Development Authority] is not known to business people.” • “I don’t see any ministers playing a significant role in managing the mega-projects. It seems to be a few

individuals.” Observations agreeing with the statement essentially 1) reiterated business people’s faith that they will benefit from the mega-projects eventually: Thus, several panelists expressed willingness to move their business premises, or stay where they are. Occasionally, 2) other initiatives were praised: health and pricing regulations [beneficial for a chicken-and-egg business]; programs and policies supporting tourism; decentralization policies. At the same time, both those agreeing and disagreeing with the statement repeated their desire for 3) practical information: For example, there is a general understanding that thousands of acres have been reserved for private use, but information is lacking on how land will be released, or for what purpose. Business people want more frequent dialogues, and clearer information on the upcoming beach volleyball tournament, planned South Asian Games, and bid for the Commonwealth Games. Those disagreeing with the statement noted 1) specific and general shortcomings in mega-project management: “The President’s policies are good, but the work is not happening the way he talks.” Certain “henchmen” are undermining humane government policies, for example by demanding Rs.25,000 to release land the government has already granted to individuals. The great majority of panelists believe supportive government policies are essential to their success and all are hoping for greater, more consistent support. Most are optimistic that better, more coherent policies can be elicited from various levels of government, some are not.

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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 strongly in agreement on this issue. Eleven of 12 agreed or strongly agreed with the statement. While nearly all mentioned at least one source of dissatisfaction—poorly maintained interior roads, inadequate street lights, parking problems—virtually all feel their businesses are no longer significantly hampered by inadequate basic services. Notable observations by panelists included:

• Both government and private transport services are improving. • “Street lighting is good in the town. We are hoping for lights on the new roads.” • The internet is now accessible through use of a dongle. • The water supply is continuous. • Closure of the direct road to Matara has hurt businesses in the Old Town. • “Traffic management has not yet been “formalized.”

Panelist observations agreeing or strongly agreeing with the statement offered 1) specific praise for: main roads; telephone and internet service; transport services; banks; electricity; parking. However, most panelists also registered 1) a few complaints: inadequate street lighting; poorly maintained interior roads; insufficient off-street parking; poor traffic management; unreliable electricity service. A few panelists offered: 2) specific recommendations for improving services: deliver potable water through the pipes; extend light poles to newly-completed roads. In general, business people are content with the physical and banking support they receive. But there are still areas of glaring inefficiency—street lighting along commercial roads away from the business core, interior road repairs, overall management of parking and traffic management—where the Municipal Council can improve their performance and gain the support of the business community.

10) “The long-term outlook for business in this community is promising.” Panelist responses were uniformly positive on this issue; a solid majority strongly agreed with the statement; the remainder agreed. While responses to previous statements make it clear that most panelists are still awaiting the full benefits of ongoing mega-projects, they expressed no doubts that these will be forthcoming in the coming years. Notable observations included:

• “We are optimistic and planning for the future.” • When everything is finished, the benefits are going to flow to the ordinary people. • “Even now, some friends in Colombo are asking me to find land plots.” • “If there is no Tsunami or other major disaster, it will be like another America.” • Hambantota has “huge potential” for tourism—beaches, wildlife, history. • But certain conditions have not yet been met.

Given that Hambantota is envisioned as a major working port, panelists focused a striking amount of attention on 1) tourism: Beaches, wildlife, historical sites, botanical gardens, safari parks, and the cricket stadium will draw tourists. Tourist-oriented businesses will include hotels, fashion houses, antique dealers, and spas. “A boom in international tourism will increase demand for my product [handbags].” “There will be more international sporting events.” In addition, panelists enumerated 2) other potential benefits of the mega-projects: introduction of more modern business techniques through outside competition; long-term opportunities for construction firms and workers; a concentration of financial and technological resources; an increased demand for computers and accessories; establishment of a “metro-city” incorporating Suriyawewa and Ambalantota. They also mentioned a few 3) pre-conditions for a promising future: timely land allocation in the New Town; reserving at least some contracts for local firms; provision of practical information on plans; designation of a spokesman to give clear answers.

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One individual expressed a 1) lingering doubt that a number of panelists seemed to feel: “Only a ‘certain group’ will get most of the benefits.” The current status of Hambantota business people can be described as a “cautious, but very optimistic, wait-and-see” attitude.

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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.” Hambantota, formerly a sleepy place, is a district town in the Southern Province. Business people across the country are inclined to see their counterparts in Hambantota as uniquely privileged. After all, they can expect to benefit greatly from mega-projects—seaport, airport, convention center, power station, highway network—to be completed within a few years. However, panelists demonstrated sharply mixed feeling about their presumed good fortune. When looking several years ahead, Hambantota business people agree this view. But, when assessing their current situation, they are less sanguine. They cite two main causes for their pessimism: 1) a lack of practical, timely information as project construction moves forward; and 2) a suspicion that favored outsiders will benefit far more than they will from the construction. Hambantota panelist interviews yielded particularly positive responses on three items:

• The people in Hambantota are more prosperous: Although there were a few doubters, Hambantota panelists were more optimistic about the level of prosperity in their town than counterparts elsewhere. Several mentioned high wages [up to Rs.1,000 per day] earned by laborers on construction projects. They were similarly optimistic that other workers—fishermen, salt pan workers, farmers, three wheeler drivers—have adequate incomes. They also proffered evidence on changing expenditure patterns: more lavish weddings; use of beauty products and salons: purchase of motorcycles, mobile phones, computer pen drives, and frozen chickens; and opined that local living standards are “better than Matara.”

• The basic resources needed to run a successful business are improving: Panelists offered specific praise

for main roads, telephone and internet service, transport services, banks, electricity, water service, street lighting, and parking. They also registered a few complaints: inadequate street lighting; poorly maintained interior roads; insufficient off-street parking; poor traffic management; unreliable electricity service. The most frequently repeated complaint was that closure of the direct road link to Matara [a permanent change essential for harbor construction] has altered traffic flows and denied many businesses in the Old Town access to their previous customer base.

• The long-term outlook for business in Hambantota is promising: Panelists responded to the statement

about the future of business in their town with the following comments: When everything is finished, the benefits are going to flow to the ordinary people. “Even now, some friends in Colombo are asking

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me to find land plots.” “If there is no Tsunami or other major disaster, it will be like another America.” Hambantota has “huge potential” for tourism. But they balanced their ardor by mentioning a few pre-conditions for a promising future: timely land allocation in the New Town; reserving at least some contracts for local firms; provision of practical information on plans; designation of a Government spokesman to give clear answers.

Interviews yielded particularly negative responses on two other items.

• Existing businesses are expanding: While some panelists noted specific changes in their own businesses and elsewhere in the town, several also mentioned a range of barriers to expansion. The most prominent of these are continuing uncertainty and physical changes in the town, as captured in these observations: “My business is on a road that has been closed. In addition to losing customers, I now have the additional expense of providing transport to my employees.” “Our printing business in the ‘old town’ has lost customers in outlying areas. We were planning to expand, but will now ‘rethink’ those plans until we have a clearer picture of the final layout of the town.” A family operating a large snack shop relocated to the new main highway at considerable expense. Now they fear they will be forced to move again.

• New businesses are being established: Panelists mentioned outside firms that have established local

branches: banks; finance companies; super markets; leasing firms; vehicle dealers; training and tuition centers. However, the firms they enumerated are probably fewer than in most of the towns included in the political-economy profiles. Panelists also noted local initiatives: communication shops; repair centers and spare parts dealers for heavy machinery; clinics and channeling services; catering services; guest houses; restaurants; reception halls; digital printing; pharmacies; computer sales; bakeries; clothing. But several panelists echoed an important point: When the mega-projects are finished there will be many new business opportunities; for now, uncertainty prevails due to lack of information and actions by powerful outsiders.