US embassy cable - 05COLOMBO1898

UNCLAS COLOMBO 001898 
 
SIPDIS 
 
E.O 12958: N/A 
TAGS: ECON, CE, ECONOMICS 
SUBJECT:  Government approves tourism reforms 
 
1.  Summary:  The Sri Lankan Parliament recently approved a 
key piece of legislation to reform the tourist sector.  The 
new law seeks to reduce government control over the tourism 
industry and infuse private sector involvement in the 
tourism regulatory and promotion bodies.  The USAID- 
sponsored tourism cluster (part of USAID?s Competitiveness 
Program) through its member associations has been lobbying 
for these tourism reforms.  End Summary. 
 
2.  On October 18, the Sri Lankan Parliament approved a 
long-delayed tourism bill, promoted by key private sector 
players in the tourism industry.  The law will create three 
new agencies to take over the functions of the current 
government-run tourism authorities.  More importantly, the 
bill facilitates greater private sector participation in 
the new agencies and tourism promotion.  The new 
institutions are the Sri Lanka Tourism Authority (SLTA), 
Sri Lanka Tourist Promotion Bureau (SLTPB) and the Sri 
Lanka Institute of Tourism Management (SLITM).  The bill 
also provides for the creation of a Tourism Promotion Fund 
(TPF) to channel private sector funds to the three 
institutions.  The TPF will be funded by an existing tax 
levied by tourist hotels.  Previously, these funds were 
credited to the Government run Ceylon Tourist Board, and 
there were allegations of misuse. 
 
3.  According to Prema Cooray, CEO of the Ceylon Chamber of 
Commerce and the chairman of the tourism cluster, although 
the private sector plays a pivotal role in Sri Lanka?s 
tourist industry running hotels, restaurants and tour 
companies, the state-owned Ceylon Tourist Board, being the 
key agency responsible for promotions and regulation, 
wields heavy control over the entire sector.  As a result, 
promotion and marketing activities were dictated by the 
government and did not meet industry needs.  Under the new 
law, the private sector will have a greater role in tourism 
policy, product development and destination promotions. 
 
4.  The proposed SLTPB with a majority of private sector 
representatives from the hotel and travel industries will 
take over promotion and marketing functions of the Ceylon 
Tourist Board.  According to Cooray, an important reform 
will be the private sector access to tax collections.  The 
private sector will have direct control of the TPF, as 75 
percent of its collections are to be channeled to the 
SLTPB.  Therefore, tourism promotion campaigns could be 
designed to meet industry needs.  Under the new 
arrangements, the current Tourist Board will be converted 
to a much smaller Tourism Authority with both public and 
private sector representatives and will be tasked with 
regulation, monitoring and resort area development.  The 
new authority will be allocated 15 percent of funds 
collected by the TPF.  The training school, SLITM, will get 
10 percent of TPF funds, and take over functions of the 
current government run Ceylon Hotel School.  SLITM will 
also have private sector representatives on its board. 
 
LUNSTEAD