Sri Lanka Country Brief - May 2008
Introduction
Sri Lanka (formerly Ceylon) is an island in the Indian Ocean, lying east of the southern tip of the Indian subcontinent, from which it is separated by the Palk Strait. Sri Lanka is about the size of Tasmania, with an area of 66,000 square km, including 870 square km of inland waters. The population of Sri Lanka is 20 million with 2.2 million living in the capital city, Colombo. Other major cities include Gampaha (2 million), Kurunegala (1.4 million) and Kandy (1.2 million). Sri Lanka’s official languages are Sinhala and Tamil although English is commonly used in government and is spoken competently by about 10% of the Sri Lankan population. The major religious groups in Sri Lanka are Buddhist 69%, Hindu 15%, Christian 8% and Muslim 7%. The currency is the Sri Lankan Rupee.
History
The Sinhalese, of Indo-Aryan origin, first came to the island from north India about 500 BC. Buddhism was brought to the island from the subcontinent in the third century BC and became the bedrock of the culture and civilisation of the Sinhalese. The Tamils, Sri Lanka's most significant minority, are of Dravidian origin. Mercantile patterns indicate that they came to the island in two waves, the first as traders about 300 BC. The Tamils largely remained loyal to Hinduism.
The first colonial power in Sri Lanka was Portugal, which established its authority in the coastal regions for 150 years, before being expelled in 1658 by the Dutch. The Dutch, in turn, capitulated to the British in 1796. Christianity came to the island during the colonial era and it was under the Portuguese and Dutch that Sri Lanka's Muslims emerged as an identifiable ethnic community. Sri Lanka became independent in 1948.
Civil conflict
Since mid 1983 Sri Lanka has been afflicted by a serious civil conflict between the government and the Liberation Tigers of Tamil Eelam (LTTE). Hundreds of thousands of people have been displaced by the fighting and it is estimated that over 70,000 people have been killed.
The conflict began in July 1983 following the most destructive explosion of communal rioting in the history of Sri Lanka. The riots proved a turning point in Tamil militancy. Through a ruthless strategy of elimination of any opposition, the LTTE, under the leadership of Velupillai Prabhakaran, became the largest and most powerful Tamil group. It began a major military campaign against the Sri Lankan Government, with its main aim the establishment of a separate Tamil state, Tamil Eelam, in the north and east.
Since then, the LTTE, still under the leadership of Prabhakaran, has established itself as one of the most ruthless guerrilla groups in the world. Notable aspects of the LTTE’s operations include the use of suicide bombers and child soldiers, and not admitting responsibility for terrorist acts.
On 21 December 2001, the Minister for Foreign Affairs gazetted the LTTE as a terrorist organisation for asset freezing purposes in accordance with Australia's obligations under United Nations Security Council Resolution 1373 of 28 September 2001. Consequently, it is a criminal offence in Australia to use or deal with assets owned or controlled by the LTTE, or to provide assets to the LTTE, whether directly or indirectly.
In February 2002 the Sri Lankan Government and the LTTE signed an agreement for an indefinite ceasefire. Supervised by a small peace monitoring mission led by Norway, the ceasefire resulted in the gradual return of a degree of normalcy across the country. Six rounds of peace talks were held between September 2002 and April 2003 when the LTTE suspended participation, citing dissatisfaction with the pace of progress towards granting interim regional autonomy in the north and east.
The ceasefire came under mounting pressure in 2004, following a split between the eastern and northern ‘wings’ of the LTTE, violence between the two, allegations by the LTTE leadership of government involvement in the split, and threats of a return to war. The then Sri Lankan Foreign Minister, Mr Lakshman Kadirgamar, was assassinated on 12 August 2005 in Colombo. The violence escalated in December 2005 and January 2006, including attacks by the LTTE in the north and east.
The Sri Lankan Government and the LTTE met in Geneva in February 2006 for talks on the implementation of the ceasefire agreement. However further surges in violence in April and May 2006 led to the cancellation of talks scheduled to take place in Geneva in April 2006. Since then, violence has continued to escalate with a number of LTTE attacks, including air and suicide attacks, in Colombo. Sri Lankan armed forces have mounted aerial and ground attacks on LTTE positions in the east and north of the country, and have captured Vakarai in the east. On 2 November 2007, the LTTE’s political head, SP Thamilselvan, was killed in a Sri Lankan military air raid. According to the UN, around 400,000 civilians have been displaced and are living in refugee camps in Sri Lanka’s north and east.
In early January 2008 the 2002 ceasefire agreement was abrogated and the end of the ceasefire came into effect on 16 January 2008 making immediate prospects for a resumption of peace talks bleak. Since then, violence has continued to escalate primarily in the north of the country, but also in the east of the country. There has also been an increase in the number of terrorist attacks in and around central Colombo, the capital city, where key military, political and economic facilities, and major hotels, are located. International media and commentators report that freedom of expression has been seriously diminished in Sri Lanka.
Since the outbreak of hostilities in the mid-1980s, several hundred thousand Tamil civilians are estimated to have fled Sri Lanka and more than 200,000 Tamils have sought refuge in western countries including Australia.
Political overview
Political life in the Democratic Socialist Republic of Sri Lanka since independence in 1948 has been marked by a commitment to the democratic process. Power has fluctuated between two main political parties - the leftist Sri Lanka Freedom Party (SLFP), which is the major party in the present People's Alliance (PA) coalition of President Mahinda Rajapaksa, and the centre-right United National Party (UNP). The current Prime Minister is Mr Ratnasiri Wickremanayake. The president is considered both the head of state and head of government.
Constitutional changes since independence include the conversion in 1972 by the SLFP-led government of the late Prime Minister, Mrs Sirimavo Bandaranaike, from a constitutional monarchy to a republic, but with the retention of a Westminster style of government. In 1978, the newly-elected UNP government of Mr J R (Junius Richard) Jayawardene introduced a presidential system in which executive power was concentrated in the hands of a president elected for a six-year term. The office of prime minister, and a cabinet drawn from Parliament, were retained but were clearly subordinate to the president.
Mr Rajapaksa, the ruling People’s Alliance candidate, was elected president on 17 November 2005. Defections to the government of 18 disaffected UNP members and the six Sri Lankan Muslim Congress members in January 2007 means that Mr Rajapaksa’s centre-left government is now able to govern with a slim majority.
The last parliamentary election was held on 2 April 2004 and the next is due before December 2010.
Economic overview
Sri Lanka is characterised by high levels of literacy (93 per cent), life expectancy (74 years) and infant mortality that are comparable to those of developed countries. Its success in generating economic growth, however, has not been commensurate with its social progress.
Sri Lanka began economic liberalisation, and a move away from socialism, after the UNP's defeat of the left-leaning SLFP government in 1977. Sri Lanka's export-oriented policies have seen a shift from a reliance on agricultural exports to an increasing emphasis on the services and manufacturing sectors. The service sector accounts for over 55 per cent of GDP. Manufacturing, the fastest growing sector, is dominated by the garment industry. The agriculture sector, though decreasing in importance to the economy, nevertheless accounts for around 18 per cent of national output and employs more than one third of the workforce. The public sector remains large, with the state continuing to dominate in the financial, utilities, health and education sectors.
Sri Lanka, a contracting party to the General Agreement on Tariffs and Trade (GATT) from 1948, ratified the Marrakesh Agreement in June 1994 to become a founding member of the World Trade Organization (WTO). The country historically has been one of the driving forces for trade liberalisation in the region and is particularly active in the South Asian Association for Regional Cooperation (SAARC). In 1998, Sri Lanka signed a free trade agreement (FTA) with India, the first stage of which came into force in February 2000. Sri Lanka is one of a number of countries that have expressed an interest in joining APEC (Asia Pacific Economic Cooperation), but the moratorium on new membership was confirmed at the Sydney APEC meeting in September 2007.
Sri Lanka’s GDP is estimated to have grown by 6.5 per cent in 2007, after growth of 7.4 per cent in 2006, 6 per cent in 2005, 5.4 per cent in 2004 and 6 per cent in 2003. Economic growth in 2006 was driven by strong export performance, and growth in the agriculture and industries sectors. Consumer price inflation is estimated at 17 per cent in 2007, driven by demand, higher oil prices and depreciation of the rupee.
Approximately 800,000 Sri Lankans work abroad, 90 per cent in the Middle East, and send home about AUD1 billion a year.
December 2004 tsunami
The 26 December 2004 tsunami devastated Sri Lanka. Approximately 31,000 people were killed (with 4,000 still missing) and approximately 418,000 were displaced. Around 65 per cent of the country’s fishing fleet of 29,700 boats was either damaged or destroyed. The tsunami affected economic activity, particularly in the fishing, hotels and restaurants, banking, small industry, domestic trade and transport sectors. The Sri Lankan Government’s Reconstruction Strategy has estimated the total recovery cost to be US$2.2 billion.
Bilateral relationship
Australia enjoys warm bilateral relations with Sri Lanka, underpinned by development cooperation, trade and investment flows, and people-to-people links. Based on the 2006 Australian Census, Australia’s Sri Lankan community is estimated at over 80,000 people. Australia is also committed to assisting the economic and social development of Sri Lanka. The 2007-08 budget estimate for aid to Sri Lanka is $25 million. For further information please see the AusAID website.
Bilateral economic and trade relationship
Two-way trade between Australia and Sri Lanka in the 2007 calendar year was valued at $232 million per annum. Vegetables and dairy products are Australia’s main merchandise exports. Tea, mate and other food products, as well as textiles, clothing, rubber tyres and articles of iron and steel are Australia’s main imports from Sri Lanka.
Education continues to play a significant role in the relationship, with Australia the leading provider of tertiary education services to Sri Lanka. The number of Sri Lankans studying in Australia has been increasing and over 5,000 Sri Lankan students currently attend Australian tertiary institutions. Three Australian tertiary providers have launched distance education facilities in Sri Lanka: Monash College, an affiliate of Monash University; the Australian College of Business and Technology, an affiliate of Edith Cowan University; and Royal Melbourne Institute of Technology (RMIT). The University of Southern Queensland provides a distance learning program in Sri Lanka which is offered by the Sri Lanka Institute of Chartered Accountants.
Among the largest Australian investments is Pacific Dunlop's Ansell Lanka rubber products plant in Biyagama, which is the largest foreign investment in an industrial plant in Sri Lanka and the largest single industrial employer in the country.