Democratic Socialist Republic of Sri Lanka
Area: 65,610 sq. km. (25,332 sq. mi.); about the size of West Virginia.
Cities: Capital--Colombo (pop. est. 1.3 million--urban area). Sri Jayewardenepura-Kotte is the officially designated capital and is the site of Parliament, but it is currently only an administrative center. Other cities--Kandy (150,000), Galle (110,000), Jaffna (100,000).
Terrain: Coastal plains in the northern third of country; hills and mountains in south-central Sri Lanka rise to more than 2,133 meters (7,000 ft.).
Climate: Tropical. Rainy seasons--light in northeast, fall and winter, with average rainfall of 50 in.; heavy in southwest, summer and fall, with average rainfall of 200 in.
Nationality: Noun and adjective--Sri Lankan(s).
Population (2003): 19.4 million.
Annual growth rate: 1.3%.
Ethnic groups (2002): Sinhalese (74%), Tamils (18%), Muslims (7%), others (1%).
Religions: Buddhism, Hinduism, Islam, and Christianity.
Languages: Sinhala and Tamil (official), English.
Education: Years compulsory--to age 14. Primary school attendance--96.5%. Literacy--91%.
Health: Infant mortality rate--15/1,000. Life expectancy--71 yrs. (male); 76 yrs. (female).
Work force: 7.2 million.
Independence: February 4, 1948.
Constitution: August 31, 1978.
Suffrage: Universal over 18.
Branches: Executive--president, chief of state and head of government, elected for a 6-year term. Legislative--unicameral 225-member Parliament. Judicial--Supreme Court, Court of Appeal, High Court, subordinate courts.
Administrative subdivisions: Nine provinces and 25 administrative districts. (The northern and eastern provinces, however, have been technically jointly administered since 1988.)
Political parties: Janatha Vimukthi Peramuna, Jathika Hela Urumaya, Sri Lanka Freedom Party, Tamil National Alliance, United National Party, several small Tamil and Muslim parties, and others. The Sri Lanka Freedom Party and the Janatha Vimukthi Peramuna, along with several small leftist parties, operate under an umbrella organization known as the "United People's Freedom Alliance." The United National Party and several other smaller parties operate as the "United National Front."
GDP: $18.4 billion (est. 2003).
Annual growth rate: 5.9%.
Natural resources: Limestone, graphite, mineral sands, gems, and phosphate.
Agriculture (20.1% of GDP): Major products--rice, tea, rubber, coconut, and spices.
Services (53.6% of GDP): Major types-tourism, transport, telecom, banking and finance.
Industry (26.3% of GDP): Major types--garments and leather goods, food processing, chemicals, refined petroleum, wood products, basic metal products, and paper products.
Trade: Exports--$5.1 billion: garments and footwear, tea, rubber products, jewelry and gems, refined petroleum, and coconuts. Major markets--U.S. ($1.8 billion), U.K., Germany, Japan, Belgium. Imports--$6.4 billion. Major suppliers--India, Hong Kong, Singapore, Japan, Taiwan, South Korea, U.K., U.S. ($155 million). [U.S. data]
The Democratic Socialist Republic of Sri Lanka (formerly known as Ceylon) is an island in the Indian Ocean about 28 kilometers (18 mi.) off the southeastern coast of India with a population of about 19 million. Density is highest in the southwest where Colombo, the country's main port and industrial center, is located. The net population growth is about 1.3%. Sri Lanka is ethnically, linguistically, and religiously diverse.
Sinhalese make up 74% of the population and are concentrated in the densely populated southwest. Ceylon Tamils, citizens whose South Indian ancestors have lived on the island for centuries, total about 12% and live predominantly in the north and east.
Indian Tamils, a distinct ethnic group, represent about 5% of the population. The British brought them to Sri Lanka in the 19th century as tea and rubber plantation workers, and they remain concentrated in the "tea country" of south-central Sri Lanka. In accordance with a 1964 agreement with India, Sri Lanka granted citizenship to 230,000 "stateless" Indian Tamils in 1988. Under the pact, India granted citizenship to the remainder, some 200,000 of whom now live in India. Another 75,000 Indian Tamils, who themselves or whose parents once applied for Indian citizenship, now wish to remain in Sri Lanka. The government has stated these Tamils will not be forced to return to India, although they are not technically citizens of Sri Lanka. In October of 2003, an act of Parliament granted citizenship to several thousand of these "tea estate" Tamils.
Other minorities include Muslims (both Moors and Malays), at about 7% of the population; Burghers, who are descendants of European colonists, principally from the Netherlands and the United Kingdom (U.K.); and aboriginal Veddahs. Most Sinhalese are Buddhist; most Tamils are Hindu. The majority of Sri Lanka's Muslims practice Sunni Islam. Sizable minorities of both Sinhalese and Tamils are Christians, most of whom are Roman Catholic. The 1978 constitution, while assuring freedom of religion, grants primacy to Buddhism.
Sinhala, an Indo-European language, is the native tongue of the Sinhalese. Tamils and most Muslims speak Tamil, part of the South Indian Dravidian linguistic group. Use of English has declined since independence, but it continues to be spoken by many in the middle and upper middle classes, particularly in Colombo. The government is seeking to reverse the decline in the use of English, mainly for economic but also for political reasons. Both Sinhala and Tamil are official languages.
The actual origins of the Sinhalese are shrouded in myth. Most believe they came to Sri Lanka from northern India during the 6th century BC. Buddhism arrived from the subcontinent 300 years later and spread rapidly. Buddhism and a sophisticated system of irrigation became the pillars of classical Sinhalese civilization (200 BC-1200 AD) that flourished in the north-central part of the island. Invasions from southern India, combined with internecine strife, pushed Sinhalese kingdoms southward.
The island's contact with the outside world began early. Roman sailors called the island Taprobane. Arab traders knew it as "Serendip," the root of the word "serendipity." Beginning in 1505, Portuguese traders, in search of cinnamon and other spices, seized the island's coastal areas and spread Catholicism. The Dutch supplanted the Portuguese in 1658. Although the British ejected the Dutch in 1796, Dutch law remains an important part of Sri Lankan jurisprudence. In 1815, the British defeated the king of Kandy, last of the native rulers, and created the Crown Colony of Ceylon. They established a plantation economy based on tea, rubber, and coconuts. In 1931, the British granted Ceylon limited self-rule and a universal franchise. Ceylon became independent on February 4, 1948.
Sri Lankan politics since independence have been strongly democratic. Two major parties, the United National Party (UNP) and the Sri Lanka Freedom Party (SLFP), have generally alternated rule.
The UNP ruled first from 1948-56 under three Prime Ministers--D.S. Senanayake, his son Dudley, and Sir John Kotelawala. The SLFP ruled from 1956-65, with a short hiatus in 1960, first under S.W.R.D. Bandaranaike and then, after his assassination in 1959, under his widow, Sirimavo, the world's first female chief executive in modern times. Dudley Senanayake and the UNP returned to power in 1965.
In 1970, Mrs. Bandaranaike again assumed the premiership. A year later, an insurrection by followers of the Maoist "Janatha Vimukthi Peramuna" (JVP, or "People's Liberation Front") broke out. The SLFP government suppressed the revolt and declared a state of emergency that lasted 6 years.
In 1972, Mrs. Bandaranaike's government introduced a new constitution, which changed the country's name from Ceylon to Sri Lanka, declared it a republic, made protection of Buddhism a constitutional principle, and created a weak president appointed by the prime minister. Its economic policies during this period were highly socialist and included the nationalization of large tea and rubber plantations and other private industries.
The UNP, under J.R. Jayewardene, returned to power in 1977. The Jayewardene government opened the economy and, in 1978, introduced a new constitution based on the French model, a key element of which was the creation of a strong executive presidency. J.R. Jayewardene was elected President by Parliament in 1978 and by nationwide election in 1982. In 1982, a national referendum extended the life of Parliament another 6 years.
The UNP's Ranasinghe Premadasa, Prime Minister in the Jayewardene government, narrowly defeated Mrs. Bandaranaike (SLFP) in the 1988 presidential elections. The UNP also won an absolute majority in the 1989 parliamentary elections. Mr. Premadasa was assassinated on May 1, 1993 by the Liberation Tigers of Tamil Eelam ("LTTE" or "Tigers"), and was replaced by then-Prime Minister Dingiri Banda Wijetunga, who appointed Ranil Wickremesinghe Prime Minister.
The SLFP, the main party in the People's Alliance (PA) coalition, returned to power in 1994 for the first time in 17 years. The PA won a plurality in the August 1994 parliamentary elections and formed a coalition government with Chandrika Bandaranaike Kumaratunga as Prime Minister. Prime Minister Kumaratunga later won the November 1994 presidential elections and appointed her mother (former Prime Minister Sirimavo Bandaranaike) to replace her as Prime Minister. President Kumaratunga won re-election to another 6-year term in December 1999. In August 2000, Mrs. Bandaranaike resigned as Prime Minister for health reasons, and Ratnasiri Wickramanayaka was appointed to take her place. In December 2001, the UNP assumed power, led by Prime Minister Ranil Wickremasinghe. Chandrika Kumaratunga remains as President. In November of 2003, President Kumaratunga suddenly took control of three key ministries, triggering a serious cohabitation crisis. In January 2004, the SLFP and the JVP formed a political grouping known as the United People's Freedom Alliance (UPFA). In February, President Kumaratunga dissolved Parliament and called for fresh elections. In these elections, which took place in April 2004, the UPFA received 45% of the vote, with the UNP receiving 37% of the vote. While it did not win enough seats to command a majority in Parliament, the UPFA was able to form a government and appoint a cabinet headed by Prime Minister Mahinda Rajapakse.
Historical divisions continue to have an impact on Sri Lankan society and politics. From independence, the Tamil minority has been uneasy with the country's unitary form of government and apprehensive that the Sinhalese majority would abuse Tamil rights. Those fears were reinforced when S.W.R.D. Bandaranaike triumphed in the 1956 elections after appealing to Sinhalese nationalism. His declaration that Sinhala was the country's official language--an act felt by Tamils to be a denigration of their own tongue--was the first in a series of steps over the following decades that appeared discriminatory to Tamils. Tamils also protested government educational policies and agriculture programs that encouraged Sinhalese farmers from the south to move to newly irrigated lands in the east. The decades following 1956 saw intermittent outbreaks of communal violence and growing radicalization among Tamil groups. By the mid-1970s Tamil politicians were moving from support for federalism to a demand for a separate Tamil state--"Tamil Eelam"--in northern and eastern Sri Lanka, areas of traditional Tamil settlement. In the 1977 elections, the Tamil United Liberation Front (TULF) won all the seats in Tamil areas on a platform of separatism. Other groups--particularly the Liberation Tigers of Tamil Eelam (LTTE or Tamil Tigers)--sought an independent state by force.
In 1983, the death of 13 Sinhalese soldiers at the hands of the LTTE unleashed the largest outburst of communal violence in the country's history. Hundreds of Tamils were killed in Colombo and elsewhere, tens of thousands were left homeless, and more than 100,000 fled to south India. The north and east became the scene of bloodshed as security forces attempted to suppress the LTTE and other militant groups. Terrorist incidents occurred in Colombo and other cities. Each side in the conflict accused the other of violating human rights. The conflict assumed an international dimension when the Sri Lankan Government accused India of supporting the Tamil insurgents.
By mid-1987, India intervened in the conflict by air-dropping supplies to prevent what it felt was harsh treatment and starvation of the Tamil population in the Jaffna Peninsula caused by an economic blockade by Colombo. Under a July 29, 1987, accord (the Indo-Lanka Accord) signed by Indian Prime Minister Rajiv Gandhi and President Jayewardene, the Sri Lankan Government made a number of concessions to Tamil demands, which included devolution of power to the provinces, merger--subject to later referendum--of the northern and eastern provinces, and official status for the Tamil language. India agreed to establish order in the north and east with an Indian Peace-Keeping Force (IPKF) and to cease assisting Tamil insurgents. Militant groups, although initially reluctant, agreed to surrender their arms to the IPKF.
Within weeks, however, the LTTE declared its intent to continue its armed struggle for an independent Tamil Eelam and refused to disarm. The IPKF found itself engaged in a bloody police action against the LTTE. Further complicating the return to peace was a burgeoning Sinhalese insurgency in the south. The JVP, relatively quiescent since the 1971 insurrection, began to reassert itself in 1987. Capitalizing on opposition to the Indo-Lankan Accord in the Sinhalese community, the JVP launched an intimidation campaign against supporters of the accord. Numerous UNP and other government supporters were assassinated. The government, relieved of its security burden by the IPKF in the north and east, intensified its efforts in the south. The JVP was crushed but at a high cost in human lives.
From April 1989 through June 1990, the government engaged in direct communications with the LTTE leadership. In the meantime, fighting between the LTTE and the IPKF escalated in the north. India withdrew the last of its forces from Sri Lanka in early 1990, and fighting between the LTTE and the government resumed. Both the LTTE and government forces committed serious human rights violations. In January 1995, the Sri Lankan Government and the LTTE agreed to a cessation of hostilities as a preliminary step in a government-initiated plan for peace negotiations. After 3 months, however, the LTTE unilaterally resumed hostilities. The government then adopted a policy of military engagement with the Tigers, with government forces liberating Jaffna from LTTE control by mid-1996 and moving against LTTE positions in the northern part of the country called the Vanni. An LTTE counteroffensive begun in October 1999 reversed most government gains and by May 2000 threatened government forces in Jaffna. Heavy fighting continued into 2001.
In December 2001, with the election of a new UNP government, the LTTE and government declared unilateral cease-fires. In February 2002, with Norwegian Government facilitation, the two sides agreed to a joint cease-fire accord. The peace process has continued apace, affecting Sri Lankans politically, economically, and socially in numerous and overwhelmingly positive ways. After holding six rounds of talks, the LTTE withdrew from the negotiation process in April 2003. At this time, the informal peace process continues on the ground and both sides continue to observe the February 2002 ceasefire. In May 2004, the new UPFA government and the LTTE committed themselves in public and in discussions with the Norwegian facilitators to resuming the negotiation track.
LTTE violence, including the assassination of approximately 40 Tamil alleged opponents from 2002 through 2003, is largely confined to the north and eastern provinces, which are 6 to 8 hours by road from the capital. Before the advent of the peace process, LTTE-perpetrated terrorist bombings directed against politicians and civilian targets were common in Colombo, Kandy, and elsewhere in the country. In July 2001, an LTTE suicide squad attacked the Bandaranaike International Airport outside of Colombo and destroyed a large number of military and civilian aircraft. In early March 2004, a faction of the LTTE from the east of the country broke off from the main organization and declared itself an independent body. In April, the main LTTE largely subdued this factional uprising in fighting that left up to 30 people dead.
In October 1997, the U.S. Government designated the LTTE as a foreign terrorist organization under provisions of the Anti-Terrorism and Effective Death Penalty Act of 1996 and has maintained this designation since then, most recently redesignating the group in October of 2003.
Per the 1978 constitution, the president of the republic, directly elected for a 6-year term, is chief of state, head of government, and commander in chief of the armed forces. Responsible to Parliament for the exercise of duties under the constitution and laws, the president may be removed from office by a two-thirds vote of Parliament with the concurrence of the Supreme Court.
The president appoints and heads a cabinet of ministers responsible to Parliament. The president's deputy is the prime minister, who leads the ruling party in Parliament. A parliamentary no-confidence vote requires dissolution of the cabinet and the appointment of a new one by the president.
Parliament is a unicameral 225-member legislature elected by universal suffrage and proportional representation to a 6-year term. The president may summon, suspend, or end a legislative session and dissolve Parliament. Parliament reserves the power to make all laws.
The 1978 constitution clearly envisaged a system where the president and the prime minister were from the same party. Since the December 2001 parliamentary elections, however, the president and the prime minister have been from different parties. This has led to serious cohabitation strains. In November 2003, for example, President Kumaratunga suddenly took over three key ministries (Defense, Interior, and Mass Communications), precipitating a serious cohabitation crisis between the two sides. In February of 2004, President Kumaratunga dissolved Parliament and called for fresh elections. The UPFA, while receiving enough seats in Parliament to form a minority government, fell short of the 113 seats necessary for a majority in Parliament. Mahinda Rajapakse of the SLFP became Prime Minister and former Prime Minister and UNP Leader Ranil Wickremesinghe became Leader of the Opposition.
Sri Lanka's judiciary consists of a Supreme Court, Court of Appeal, High Court, and a number of subordinate courts. Sri Lanka's legal system reflects diverse cultural influences. Criminal law is fundamentally British. Basic civil law is Roman-Dutch. Laws pertaining to marriage, divorce, and inheritance are communal.
Under the Indo-Sri Lankan Accord of July 1987--and the resulting 13th amendment to the constitution--the Government of Sri Lanka agreed to devolve significant authority to the provinces. Provincial councils are directly elected for 5-year terms. The leader of the council majority serves as the province's chief minister; a provincial governor is appointed by the president. The councils possess limited powers in education, health, rural development, social services, agriculture, security, and local taxation. Many of these powers are shared or subject to central government oversight. Predating the accord are municipal, urban, and rural councils with limited powers.
Principal Government Officials
President--Chandrika Bandaranaike Kumaratunga
Prime Minister--Mahinda Rajapakse
Foreign Minister--Laskhman Kadirgamar
Ambassador to the United States--Devinda Subasinghe
Ambassador to the United Nations--Bernard Goonetilleke, Acting
Sri Lanka maintains an embassy in the United States at 2148 Wyoming Avenue NW, Washington, DC 20008 (tel. 202-4834025).
Sri Lanka's two major political parties--the UNP and the PA--embrace democratic values, international nonalignment, and encouragement of Sinhalese culture. Past differences between the two on foreign and economic policy have narrowed. The SLFP, however, envisions a broader role for the state in general.
Sri Lanka has a multi-party democracy that enjoys considerable stability despite relatively high levels of political violence. LTTE terrorist activities, generally aimed at destabilizing Sri Lanka politically and economically, have included assassination of politicians--killing the Industrial Development Minister by suicide bombing in June 2000; the December 1999 attempted assassination of current President Kumaratunga; bombing of economic targets such as the central bank in January 1996, the World Trade Center in October 1997, and the airport in July 2001; as well as attacks on Buddhist religious sites. In January 1998, the LTTE detonated a truck bomb in Kandy, damaging the Temple of the Tooth relic, the holiest Buddhist shrine in the country.
With an economy of $18.4 billion (est.), and a per capita gross domestic product (GDP) of about $950, Sri Lanka has mostly enjoyed strong growth rates in recent years. Sri Lanka began to shift away from a socialist orientation in 1977. Since then, the government has been deregulating, privatizing, and opening the economy to international competition. The ethnic disputes of 1983 precipitated a slowdown in economic diversification and liberalization. The JVP uprising in the late 1980s caused extensive upheavals and economic uncertainty.
Following the quelling of the JVP, increased privatization, reform, and a stress on export-oriented growth helped revive the economy's performance, taking GDP growth to 7% in 1993. Economic growth has been uneven in the ensuing years as the economy faced a multitude of global and domestic economic and political challenges. Overall, average annual GDP growth was 5.2% over 1991-2000. In 2001, however, GDP growth was negative 1.4%--the first contraction since independence. The economy was hit by a series of global and domestic economic problems and affected by terrorist attacks in Sri Lanka and the United States. The crises exposed the fundamental policy failures and structural imbalances in the economy and the need for bold reforms. The year ended in parliamentary elections in December, which saw the election of a more pro-business government.
The recently elected UPFA coalition government, headed by President Kumaratunga's SLFP party, is likely to continue with pro-growth strategies, though it will likely go slower on certain economic reforms fronts, such as privatization, shrinking the public sector and agricultural liberalization. It is currently formulating its economic policies and working on its poverty reduction and growth facilitation programs. The previous government of Prime Minister Ranil Wickremesinghe of the United National Party (which also ruled the country from 1977 to 1994) had a strong commitment to economic and social sector reforms, deregulation, and private sector development. In 2002, Sri Lanka commenced a gradual recovery. Early signs of a peace dividend were visible throughout the economy--Sri Lanka was able to reduce defense expenditures and began to focus on getting its large, public sector debt under control. In addition, the economy benefited from lower interest rates, a recovery in domestic demand, increased tourist arrivals, a revival of the stock exchange, and increased foreign direct investment (FDI). In 2002, economic growth bounced up to 4%, helped by strong service sector growth. Agriculture staged a partial recovery. Industrial sector growth, however, faltered for the second consecutive year due to weak demand and lower prices for Sri Lanka's exports. The government was able to exert fiscal control, and inflation trended down. Total FDI inflows during 2002 were about $246 million and--although final figures are not yet available--are expected to exceed $300 million for 2003. The largest share of FDI has been in the services sector. Good progress was made under the Stand By Arrangement, which was resumed by the International Monetary Fund (IMF). These measures, together with peaceful conditions in the country, helped restore investor confidence and created conditions for the government to embark on extensive economic and fiscal reforms and seek donor support for a poverty reduction and growth strategy.
Foreign exchange reserves, which fell by 11% in 1999, decreased further in 2000. In response, the government floated the rupee on January 23, 2001. This led to a significant nominal depreciation in 2001, but the rupee has since stabilized and reserves have been replenished.
The year 2003 was another eventful year for Sri Lanka. Continued peace allowed further progress on macroeconomic stabilization during the first half of the year. Some progress was reversed, however, during the political uncertainty in November and December 2003. Economic growth was 5.9% for the year. This growth was largely driven by the services sector (particularly telecom and tourism) and trade. Both exports and imports rose over 9% in the first 10 months. Interest rates declined. The inflation rate fell under 9%. External reserves were sufficient to cover 5.6 months of imports. The Colombo Stock Exchange (CSE) rebounded to become one of the better performers in the area. The CSE rose 45% in 2002 and hit a record high in June 2003 but performance declined at the end of the year. Fortunately, the severe acute respiratory syndrome (SARS) epidemic did not spread to Sri Lanka, and tourism was not severely affected. Sri Lanka's garment exporters reported a surge in orders, shifted from China due to SARS. On the negative side, in mid-2003 Sri Lanka experienced its worst floods in 50 years, which caused extensive damage in south and southwestern parts of the country. The government is relying on donor funding to reconstruct the flood-damaged areas, avoiding recourse to government finances. The adverse impact from floods on overall growth for 2003 is estimated to be marginal.
Early projections for 6.5% growth in 2004 did not account for political instability, which will negatively impact performance.
The future of Sri Lanka's economic health is uncertain but is primarily dependent on political stability, continuation of the peace process, and continued policy reforms--particularly in the area of fiscal discipline and direct management. Implementation of major reforms in the civil service and education sectors and more disciplined spending and improved revenue collection would help generate stronger economic growth. If export orientation strengthens, weaknesses in government will have less impact on growth. Real growth is expected to continue in the 4%-6% range beyond 2003 but may remain below the 8%-9% growth needed to move quickly into the status of a middle-income or newly developed country.
All major sectors of the economy are expected to expand. Recovery in the global economy also is important as well as effective aid utilization. According to the Finance Minister, the fiscal deficit was forecast to decline to 7.5% of GDP in 2003, with the government instituting more controls on fiscal management. Given Sri Lanka's high debt burden (101% of GDP), fiscal consolidation is central to budget planning and macroeconomic programming. Stagnant government revenue, however, remains a big worry in 2004.
Other challenges include diversification from Sri Lanka's key exports--tea and garments. Garment exports will face increased competition in a quota-free era when the Multi Fiber Arrangement expires in 2005. The future of the tea industry is threatened by a shortage of plantation labor and growing competition. There are new efforts to diversify exports, explore tourism potential, and improve competitiveness. The previous government had an ambitious information and communications technology strategy to connect and service every corner of the country. This project, if continued and implemented successfully, could change Sri Lanka's economy and social fabric and would take it into the information age. The government hopes to take advantage of Sri Lanka's strategic location on shipping routes, make use of the Indo-Lanka Free Trade Agreement, and sign free trade agreements with other countries to achieve regional trading hub status. If peace returns and all these efforts bear fruit, real growth could be in the 6%-7% range beyond 2004, and will help realize the government's intention of making Sri Lanka the gateway to South Asia.
The service sector is the largest component of GDP (54%). In 2003, the service sector continued its strong expansion, fueled primarily by strong growth in telecom, tourism, and financial services. Public administration and defense expenditures have remained steady. Repatriated earnings of Sri Lankans working abroad continued to be strong. There also is a small but growing information technology sector, especially information technology training and software development and exports.
Manufacturing accounts for about 16% of GDP. The textile, apparel, and leather products sector is the largest, accounting for 44% of total industrial output. The second-largest industrial sector, at 24% of total manufacturing output, is food, beverages, and tobacco. The third-largest industrial sector is chemical, petroleum, rubber, and plastic products. Agriculture has lost its relative importance to the Sri Lankan economy in recent decades. It accounts for 20.1% of GDP and provides employment to 33% of the working population. Rice, the staple cereal, is cultivated extensively. The plantation sector consists of tea, rubber, and coconut; in recent years, the tea crop has made significant contributions to export earnings and saw production slightly decrease in 2003. Tea prices have remained stable. The construction sector accounts for 7.4% of GDP and mining and quarrying 1.8%. In recent years, the government has eliminated many price controls and quotas, reduced tariff levels, eliminated most foreign exchange controls, and sold more than 55 state-owned companies and 20 estate-holding companies. Colombo boasts one of the most modern stock exchanges in the region, and the Sri Lankan Government offers a range of tax and other incentives to attract potential investors.
Trade and Foreign Assistance
Exports to the United States, Sri Lanka's most important market, were estimated at $1.8 billion in 2003, or 38.5% of total exports. For many years, the United States has been Sri Lanka's biggest market for garments, taking more than 63% of the country's total garment exports. India is Sri Lanka's largest supplier, with exports of $835 million in 2002. Japan, traditionally Sri Lanka's largest supplier, was its fourth-largest in 2002 with exports of $355 million. Other leading suppliers include Hong Kong, Singapore, Taiwan, and South Korea. United States exports amounted to $155 million in 2003. Sri Lanka is highly dependent on foreign assistance, and several high-profile assistance projects were launched in 2003. The most significant of these resulted from an aid conference in Tokyo in June 2003; pledges at the summit, which included representatives from the IMF, World Bank, Asian Development Bank, Japan, the European Union, and the United States totaled $4.5 billion. This funding was in response to a poverty reduction strategy program laid out in "Regaining Sri Lanka," an action paper authored by the Sri Lankan Government, and a number of studies commissioned by the donor community that, together, provide a basic framework for economic revival. While implementation of previous aid projects has been spotty, the government believes it can improve this record by streamlining tender processes and improving project management skills.
More than 20% of the 6.1 million-strong labor force, excluding the north and east, is unionized. Trade union membership is on the decline. There are more than 1,650 registered trade unions, many of which have 50 or fewer members, and 19 federations. Many unions have political affiliations. The Ceylon Workers Congress (CWC) and Lanka Jathika estate workers union are the two largest unions representing workers in the heavily unionized plantation sector. The president of the CWC also is Minister of Livestock Development and Estate Infrastructure. The CWC's agenda includes political issues, such as citizenship status for stateless Indian Tamils. Some of the stronger and more influential trade unions include the Ceylon Mercantile Union, Sri Lanka Nidhahas Sevaka Sangamaya, Jathika Sevaka Sangayama, Ceylon Federation of Trade Unions, Ceylon Bank Employees Union, Union of Post and Telecommunication Officers, Conference of Public Sector Independent Trade Unions, and the JVP-aligned Inter-Company Trade Union. The unemployment rate has declined in recent years and hovers at 10%. The rate of unemployment among high school and college graduates, however, remains proportionally higher than the rate for less-educated workers. The government has embarked on educational reforms it hopes will lead to better preparation of students and fewer mismatches between graduates and jobs. In addition, it also has begun a youth corps program to provide employment skills to the unemployed.
Sri Lanka traditionally follows a nonaligned foreign policy but has been seeking closer relations with the United States since December 2001. It participates in multilateral diplomacy, particularly at the United Nations, where it seeks to promote sovereignty, independence, and development in the developing world. Sri Lanka was a founding member of the Non-Aligned Movement (NAM). It also is a member of the Commonwealth, the South Asian Association for Regional Cooperation (SAARC), the World Bank, International Monetary Fund, Asian Development Bank, and the Colombo Plan. Sri Lanka continues its active participation in the NAM, while also stressing the importance it places on regionalism by playing a strong role in SAARC.
U.S.-SRI LANKAN RELATIONS
The United States enjoys cordial relations with Sri Lanka that are based, in large part, on shared democratic traditions. U.S. policy toward Sri Lanka is characterized by respect for its independence, sovereignty, and moderate nonaligned foreign policy; support for the country's unity, territorial integrity, and democratic institutions; and encouragement of its social and economic development. The United States is a strong supporter of ethnic reconciliation in Sri Lanka and the peace process that began in December 2001.
U.S. assistance has totaled more than $1.63 billion since Sri Lanka's independence in 1948. Through the U.S. Agency for International Development (USAID), it has contributed to Sri Lanka's economic growth with projects designed to reduce unemployment, improve housing, develop the Colombo Stock Exchange, modernize the judicial system, and improve competitiveness. At the June 2003 Tokyo Donors' Conference on Sri Lanka, the United States pledged $54 million, including $40.4 million of USAID funding.
In addition, the International Broadcast Bureau (IBB)--formerly Voice of America (VOA)--operates a radio-transmitting station in Sri Lanka. The U.S. Armed Forces maintain a limited military-to-military relationship with the Sri Lanka defense establishment.
Principal U.S. Embassy Officials
Ambassador--Jeffrey J. Lunstead
Deputy Chief of Mission--James F. Entwistle
Head of Political Section--Patricia Mahoney
Head of Economic/Commercial Section--Dean Thompson
Management Officer--Jane Ross
Consular Officer--Marc Williams
Defense Attach�--Lt. Col. Richard Girven
Director, USAID--Carol Becker
Public Affairs Officer-- Philip Frayne
IBB Station Manager--Glenn Britt
The U.S. Embassy in Sri Lanka is located at 210 Galle Road, Colombo 3 (tel: 94-11-2448007, fax: 94-11-2437345). U.S. Agency for International Development offices are located at the American Center, 44 Galle Road, Colombo 3 (tel: 94-11-2472855; fax: 94-11-2472850/2472860). Public Affairs offices also are located at the American Center (tel: 94-11-2421270/2422121, fax: 94-11-2449070).
IBB offices are located near Chilaw, 75 kms north of Colombo (94-32-55931/32/94-72-285860, fax: 94-32-55822).
For the most current version of this Note, see Background Notes A-Z.