Economy and energy
The end of the civil war, in May 2009, allowed Sri Lanka to start a more rational and systematic planning of the national economy. Despite the unfavorable international economic situation, the main production sectors are starting to register positive values. The greater political stability, the integration of the provinces of the north and east within the national system and the gradual financial and economic opening towards foreign countries have earned the country the status of ‘middle income emerging country’, a rank officially conferred on it by the International Monetary Fund (Imf) in 2010. However, the recent successes are accompanied by elements of fragility such as heavy public debt, a negative trade balance, high rates of poverty and clear economic discrepancies between the country’s provinces.
The GDP maintains a growth rate of around 6%. In particular, the tourism sector is growing strongly, which in the period January-September 2015 grew by 18.8% compared to the same period of the previous year. In particular, there are many entries of tourists from China (73.6%) and India (29.4%). In addition to the strong contribution of the tourism industry, the tertiary sector (56.3%) of the GDP enjoys the positive contribution of the telecommunications, commerce and financial services sectors. The industrial sector (33.8% of GDP) marked an increase in the production of textiles, clothing and leather goods, while the agricultural sector (9.9% of GDP), remains the least developed, despite having enjoyed good rice harvests and sesame, cardamom and cashew crops in recent years, thanks to the favorable climatic conditions and the contribution of the northern provinces. Exports of goods produced by these sectors are destined not only to India, but above all to the western market and in particular to the United States, the United Kingdom and Italy.
Remittances from abroad (more than six billion dollars), coming from about one and a half million Sinhalese workers, half of whom are in the countries of the Middle East and the Arabian Peninsula, also contribute significantly to the growth of GDP. and to contain the state balance of payments. To the proceeds from foreign remittances must then be added the loans sent by India and China (main trading partners for imports together with the United Arab Emirates and Singapore), by donor countries and by international financial institutions (World Bank, Imfand Asian Development Bank), which approved a $ 2.6 billion 20-month loan in 2009 in exchange for Sri Lanka’s alignment with international fiscal, monetary stability and reserve standards. Among the major trading partners, the United Arab Emirates have repeatedly expressed their willingness to play a key role in the development of Sri Lanka, a country with which in 2012 they had a volume of trade equal to 1.5 billion dollars and on which they are over 440 million dollars have been invested.
The following are fundamental for the Sinhalese economy: the free trade agreement with India, in force since 2001, which generates an exchange equal to four billion dollars; the free trade agreement with Pakistan, in force since 2005; the Agreement for the South Asian Free Trade Area (Safta), in force since 2006. The latter was born within the South Asian Association for Regional Cooperation (Saarc) which, in addition to Sri Lanka, it sees the participation of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal and Pakistan. Active in various fields of cooperation, Saarc deals with social development, trade, finance, energy, environment and tourism.
In the energy sector, according to indexdotcom, the country largely depends on imports, while for the internal production of energy it relies on hydroelectric plants, located mainly in the central province. However, the energy plan for the period 2015-2034 drawn up by the central energy authority foresees the construction of several coal-fired power generation stations, to be built with the contribution of Indian and Chinese funding.
Finally, in order to decrease the country’s energy dependence, exploration projects are underway off the country’s northwest coast, where oil and gas reserves are believed to exist.
Defense and security
Sri Lanka can boast one of the most numerous and technologically advanced armies in the whole of South Asia. This is linked to the involvement of the armed forces in the internal conflict against the well organized and equipped Tamil Tigers. Also due to the long civil war, Sri Lanka is one of the countries in the region to invest more resources in military spending. The war between government forces and the Tamil Tiger organization has been the top priority in Sri Lanka’s defense and security policy for decades, and only after 2009 was the country able to direct its policies in other directions as well. As a direct consequence of the civil war, the military still retains some degree of political influence, especially in Tamil areas.
The long struggle against the Tamil insurgent forces helps explain Sri Lanka’s strategic cooperation with another international actor specializing in counter-guerrilla activities: Israel. Not surprisingly, the latter was the country’s third largest military partner between 1983 and 2009, during the years of internal conflict.
China and Israel are the country’s largest arms suppliers. Strategic relations are also good with Pakistan and India, which in the 1980s intervened directly – albeit unsuccessfully – in the war against Tamil forces.