13 August, 2022


Role Of Private Sector In Post War Sri Lanka : Challenges & Lessons

By Eranga Amunugama –

Eranga Amunugama

Eranga Amunugama

Promoting Private Sector Development as a tool for Economic Recovery in the Post-Conflict  North & East of Sri Lanka

Why is Private Sector Development Important?

The end of the armed conflict in Sri Lanka in 2009 has brought in a new wave of optimism within the country, sparking hopes for new found economic stability and prosperity, especially in the conflict affected North East. However 5 years later, the economic performance of these regions has been poor, The Private Sector, both domestic and foreign, is expected to play a key role in the promoting the long term economic resurgence and development of conflict affected societies.  As the World Development Report (2011) cites, long term development and peace in post-conflict societies rely on a healthy and vibrant private sector, “especially if creating jobs and incomes is to out-last donor-funded, short-term emergency works[1].”The DCED Report on Private Sector Development in Post Conflict Countries claims “The private sector is a powerful and adaptable vehicle for reconstruction and regeneration in even the most difficult of situations[2], Similarly Suresh De Mel formerly of Business for Peace Alliance, Sri Lanka is a clear proponent of Business’s  role in helping to usher a peaceful and stable country. He contends,

The Private Sector can foster peace, stability and good governance by, “maintaining  fair and competitive markets, ensuring that all segments of our society has easy access to economic opportunity, productive employment and credit, nurturing enterprises that generate the most jobs and opportunities,  attracting investment and helping to transfer knowledge and technologies, playing by the rule of law, providing incentives for human resource development, and protecting the environment and natural resources”.

It is clear the Private Sector has a role to play in economic recovery and development. This article looks at prospects and challenges facing private sector development in the North-East regions of Sri Lanka, proposing ways to further improve and facilitate further private sector development so as to better benefit the macro economy and populations in these regions.

Prospects for private sector development

The government has taken some steps to open up the North- East to private investors: The Sri Lankan Government for its parts has taken many measures to encourage Private Sector ventures in these districts to generate much needed employment and capital infusion. State led projects, Public Private Partnerships, PPPs and Private ventures have begun to take root in many of the district hubs especially in Jaffna. Special infrastructure and trade incentives, concessions are on offer to investors willing to come in to support Post War Development.  Infrastructure development of utilities such as electricity and roads have been ongoing and penetrated many areas in this region, however more time is needed for completion. Demining progress has been accelerated to clear areas for community resettlement. The state security apparatus has taken steps meanwhile to consolidate their foothold in these districts by establishing bases and more high security zones[3]. Protests by large number of people and organizations in Courts has led to certain high security lands being given back to legitimate owners however many cases still remain unresolved.

Army selling vege - colombo telegraph pic thehinduLarge scale projects by companies have taken place some of which have been supported by donor agencies. Some examples of these are the large apparel factory of MAS Holdings established in Omanthai and Collection Centre established by Cargills in Killinochchi. These projects have been supported by USAID with technical support and funding to generate employment for youth. Various initiatives on Vocational Training of youth are taking place by various service providers to develop the human skill capital in the region to engage with such opportunities. INGOS and NGOs are working with some Private Actors to support marginalized youth and communities to benefit from such ventures by mobilizing community based structures and facilitating discussions. The skills training received has enabled diffusion of technology and created value chains in Colombo and with export markets particularly in sectors such as Fisheries and Agriculture. A large number of new projects and establishments have sprung up in the Tourism Sector particularly in the Eastern Province in areas such as Passikudah, Nilaweli etc. The Military for its part has also been setting up Tourism ventures run by forces personnel in the North & East which has raised issues by certain quarters.  New Industrial zones have been setup in Jaffna and upcoming ones in Sampur are expected to generate employment options. The Sampur zone however has come in for criticism due to displacement of local families.

Challenges to Private Sector Investment in the North-East

Certain private firms and chamber associations while supporting this endeavour have raised number of concerns with the authorities that should be addressed if economic growth is to be sustainable. The underlying issues of Land Ownership, Militarization, Local Political maneuvering by government henchmen for area biased projects have compounded fears of private enterprises of a level playing field. Firms remain wary of not aggravating ethnic and economic sensitivities of the region which is suspicious of investments originating from the South.

The Political Economy of the North remains closely linked to land issues which was a major tipping point in creating and aggravating the three decade long war. As such the surge of state and private sector ventures in the North have raised tensions with local communities who have concerns for their livelihoods and land entitlements. The Fisheries sector has seen a number of instances where private projects supported by State and Military officials have had mixed reactions. Another pressing issue is fishing rights of coastal fishers having to compete with larger well resourced fishing vessels from Southern Sri Lanka and Indian Trawlers.  At a governance perspective the Provincial Council election results have meant a political stalemate for the Central Government whose representative the Governor, continues to operate despite protests by the Provincial Government. This policy incoherence has sent mixed messages for any Private Sector investor keen on setting up in the Northern Province.

The selection of communities and households for private sector and development projects are also clouded by local political Interests and military authorities who sometimes override the decisions of civilian officials appointed for these tasks. The divergent policy and political objectives of stakeholders on the future has meant that a holistic view and collective action is unlikely to take place anytime soon.

Buthpitiya, 2013 in a LST position paper claims

“Despite acknowledging the importance of holistic development in the National Development Framework, Sri Lanka’s development trajectory continues to inadvertently contribute to the exclusion and marginalisation persons in the name of achieving economic targets”.

The Local Chambers of Commerce are still establishing themselves and need to work in cohesion with the socio political governance systems and actors to claim a more vigorous involvement and contribution of their members for regional economic development.

The Way Forward

The need for the government to strengthen institutions (institutional reform) and establish legal frameworks and governing bodies to create an enabling environment for private sector development

The need to strengthen local cooperatives and chambers so they are equipped to engage with large private sector actors.

Regulated access to finance and credit, with proper financial counseling. Private sector partnerships with donors and government work.

Resolving the land issues of communities to engage in desired livelihoods and partner with enterprises for this purpose. Government action is key in this regard.


Buthpitiya, V, 2013, Reconciling Rights Responsibilities and Disjunctures: An Assessment of Sri Lanka’s Post-War Development Drive, LST Position Paper, PP 13http://www.lawandsocietytrust.org/PDF/resource/srilanka_post_war.pdf

http://www.ft.lk/2010/11/10/big-guns-go-north/ (Last accessed on 17/09/2014)

De Mel, Suresh.  Role of Business Community in Post-conflict Rebuilding Efforts: Lessons and Challenges, Full Paper for Business for Peace Alliance, PP 1 http://webcache.googleusercontent.com/search?q=cache:QSGiHxbwYRMJ:www.bpa-srilanka.com/files/Full_Paper_Role_of_Business_Community_in_Rebuilding_Presentation.doc+&cd=1&hl=en&ct=clnk&gl=lk

SRI LANKA’S NORTH II: REBUILDING UNDER THE MILITARY, ICG Report, March 2012 http://www.crisisgroup.org/~/media/Files/asia/south-asia/sri-lanka/220-sri-lankas-north-ii-rebuilding-under-the-military.pdf



[3] International Crisis Group Report

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Latest comments

  • 1

    The military should be downsized and right sized for peace time and should not be competing with the private sector because it is STATE SUBSIDIZED. The military businesses have a chilling effect on the private sector.

    More importantly, poor people and coastal communities are being impoverished by the current development model which is an environmental DISASTER. At the UN Mahinda Jarapassa talked of a green transport policy, but there is no decent PUBLIC TRANSPORT which is environmentally friendly. Rather the regime and sport car mad Namal is catering to the automobile industry and selling cars that are far more polluting of the environment.. The Colonbo roads are clogged with too many cars today because there is no decent public transprot.

    Sri Lanka civil society organizations should ask for the ENVIRONMENTAL and SOCIAL IMPACT ASSESSMENT of the Chinese Port city in Colombo.

    It is well known that tides and wave patterns can change and cause huge erosion to other parts of the country due to such land reclamation. Also, questions arise as to where the earth/ sand for the so called Colombo port city will be sourced from. What will be the ENVIRONMENTAL AND SOCIAL COSTS FOR COASTAL COMMUNITIES THAT MAY EXPERIENCE MASSIVE EROSION DUE TO THE NEW CONSTRUCTION. Sri Lanka civil society has been asleep for too long and needs to wake up and act for the people of the country and not merely dance to western and Japanese donors tunes!

  • 2

    Ernaga has pointed out several area of concern but has not mentioned the 900lb gorilla in the room.

    Very simply said, the perception that the rule of the family trumps the rule of law and the primacy of the defence establishment over the needs of civil society are well known. This has in turn knocked the confidence of the private sector and deflected much FDI into neighbouring states.

    That the playing field is not level is the general perception! That is the main reason.

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