25 APRIL 2003

Current Trends in Sri Lanka:

Making Major Headway in the Quest for Peace

and Economic Reconstruction

It gives me great pleasure to speak on the topic "The Current Trends in Sri Lanka" at the University of Pittsburgh, a university with a rich history that has evolved over the past 200 years. I am also delighted to note the university's Asian studies program, and the commitment of the Asian Studies Center to foster a better understanding of the East, South and Southeast Asia and the Pacific.

I wish to express my sincere appreciation to Dr James V. Maher, Provost, Senior Vice Chancellor for sponsoring this visit and hosting the wonderful luncheon with participation from the University of Pittsburgh and Carnegie Mellon University; Dr William Brustein, Director, University Center for International Studies for sponsoring this event; Professor Richard J Cohen, Associate Director, Center for Asian Studies for coordinating the visit; and Dr. Vijai Singh Vice Chancellor representing Chancellor Mark A. Nordenberg for the invitation to address the students and faculty at this prestigious University. It gives me great pleasure to be here today.

I look forward to working with the Asian Studies Center to incorporate Sri Lanka in the university curriculum as well as to facilitate educational exchanges between the students of Sri Lanka and the University of Pittsburgh, to promote educational, social and cultural relations between the universities as well as relations between our two countries.

Today, I come to you bearing good news on current trends in Sri Lanka from different fronts -political, economic, legal reforms and democratic governance, and tourism. Politically, we are a nation forging and building peace with our Tamil brothers within our borders. For over two decades, ethnic conflict raged in Sri Lanka, ravaged the country, and weakened the economy. But last year, we committed ourselves to lasting peace through political dialogue and economic reconstruction and we achieved a major breakthrough in securing the peace - the Government of Sri Lanka together with the Government of Norway as facilitator, as well as the Governments of the United States, India and Japan, embarked on peace talks with the Liberation Tigers of Tamil Eelam (LTTE).

Over the past 15 months, the Government of Sri Lanka has been pursuing a negotiating strategy with the LTTE to arrive at a peaceful solution. The Government recognizes the need to involve the international community in the quest for a durable and lasting peace. While the role of the Japanese Government has been primarily that of economic development, the U.S. Government has been directly involved in the peace process and reconstruction of the country.

On 14th April 2003, Deputy Secretary of State Mr. Richard Armitage hosted a seminar in Washington D.C. to drum up international political and economic support for the peace process. This seminar was attended by high level representatives from the European Union, Canada, France, Germany, the Russian Federation, China, Denmark, Finland, Iceland, India, Japan, Norway, Pakistan, Saudi Arabia, Thailand and the United Kingdom, an indication of the wide support of the international community led by Norway to achieve a lasting solution to the ethnic conflict. The seminar will be a good segue to the Tokyo Conference on Reconstruction and Development of Sri Lanka to be hosted by the Japanese Government in Tokyo, Japan in June 2003.

The meeting in Washington discussed the need for development and reconstruction assistance and how this may assist in consolidating the ceasefire and reinforcing the peace process in Sri Lanka. The reconstruction and development efforts would focus on five areas in need of immediate attention: locating and neutralizing one million landmines scattered in the nation, rebuilding whole towns and villages, providing shelter and simple agricultural equipment to an estimated one million displaced persons, rebuilding and refurbishing schools, and securing jobs for displaced people impacted by the war.

This week, the Liberation Tigers of Tamil Eelam announced their decision to suspend the peace talks with the Government of Sri Lanka, but added that they were still committed to a negotiated end to the conflict. Understandably, the process of achieving peace will not be an easy task, but will require time, commitment and effort on the part of both parties to reach a lasting solution.

The United States is completely backing up Sri Lanka's quest for peace. President Bush deeply understood our situation when he said during his acceptance of my credentials in February: "We both know it takes courage and determination to fight a war. As the peace process in Sri Lanka reaches a stage where difficult issues have to be addressed and real compromises have to be made, it becomes clear that it takes no less courage and no less determination to pursue peace. Let me assure you that the United States wholeheartedly supports Sri Lanka's efforts to transform violence and bloodshed into peace."

On good news on the economic front, Sri Lanka was one of the first South Asian countries to introduce free market economic policies in 1977, thus fully integrating itself into the global economy and the international regimes on trade, finance and investment. The Sri Lankan Government introduced liberal trade policies, low tariff levels, privatization, encouragement of foreign direct investment, and the liberalization of capital accounts. All these efforts have been intensified over the years to increase foreign trade flows and capital movement which have resulted in the expansion of health and educational facilities, better housing and greater access to consumer goods.

The close ties between the U.S. and Sri Lanka underscores the important economic, trade and investment ties between our two countries. The U.S. is one of Sri Lanka's main export markets and biggest trade partner with exports in 2002 amounting to US $ 1,810 million and imports from the United States totaling US $ 171.9 million. We are committed to deepening and broadening the relationship between our two countries encompassing the diplomatic, political, security, cultural and economic areas to secure greater access to U.S. markets for our exports, access to capital markets and to increase the level of U.S. investment to Sri Lanka.

The government is committed to continuing the process of achieving greater market access in developed and developing countries, an important requirement to sustain our development efforts through economic reform and economic development efforts to put the economy on a path of sustained high growth and move the country to become a regional trade hub in South Asia, as well as to attract U.S. investments in sectors such as infrastructure, the Information Communication Technology (ICT) industry, shared services/call centers and back office operations.

Recently, the U.S. and Sri Lanka concluded a Trade and Investment Framework Agreement (TIFA) signed between the U.S. and Sri Lanka in July 2002, which provides a structure to discuss bilateral and multilateral issues relating to Sri Lanka and the U.S. Sri Lanka is one of a select number of Asian countries and the only South Asian country with which the U.S. has signed such an agreement. This arrangement provides for expanded economic relations between the US and Sri Lanka and would further accelerate economic reform in our country. This may also be considered the first step towards a possible Free Trade Agreement with the United States.

In addition, Sri Lanka has also signed a Free Trade Agreement with India, which has resulted in bilateral trade reaching US $ one billion and Sri Lanka's exports to India increasing from 70.8 million in 2001 to 176.7 million dollars in 2002, thus reducing the balance of trade that favored India. A Free Trade Agreement with Pakistan and also with the countries of the regional grouping BIMST-EC, Bangladesh, Myanmar and Thailand is also underway. As a result, the 18.5 million domestic market of Sri Lanka has expanded into a 1.1 billion market, and investment figures over the past year has indicated a total of $240 million in investments, the highest in ten years. Today, Sri Lanka serves as the economic gateway to a vast regional market in South Asia, especially India.

The Sri Lankan Government has embarked on a "Regaining Sri Lanka" program of economic recovery and development that seeks to increase economic growth and reduce conflict-related rural poverty. Plans are also being implemented to strengthen rural infrastructure and improve access of the poor to quality education and health services. The key elements of this program are infrastructure development including road construction and repair and increasing power generation with the aim of making Sri Lanka a transport, logistics and financial hub for the Indian Sub-continent. The program also aims to establish a strong information and communications technology sector, improve education and health care delivery systems, increase agricultural productivity, bolster fisheries and small businesses; environmental preservation; tourism and eco-tourism promotion, and public sector reform. The recent approval of US $ 567 million credit for Sri Lanka by the International Monetary Fund's (IMF) Executive Board is an indication of the organization's support for this effort and for the government's peace negotiations. This also recognizes the need for donor financing to support economic initiatives required to strengthen the peace process and rebuild the nation. Tangible results of this program include a return to economic growth of 3.5 to 4 percent last year and a decline in the rate of inflation from 14 percent to 9.5 percent.

Continuing on the good news track, we are continuing efforts for legal reform and strengthening democratic governance. Sri Lanka is one of the oldest practicing democracies with a tradition of democratic governance, independent judiciary and free press. In April 2002, the government repealed the Criminal Defamation Law which was part of the substantive criminal law of Sri Lanka, to develop an environment for a fully liberalized media functioning without fear of repercussions. This is a clear demonstration of the government's commitment to uphold democratic rights and fundamental freedoms.

The policies to develop the social infrastructure and social benefits have resulted in a high degree of success in the fields of health, nutrition, education and social welfare and the best socio-economic indicators including life expectancy, infant and maternal mortality, literacy and near universal primary school enrollment in all of Asia.

Tourism is one of the major industries in my country, and I would like to share the good news on this sector. Sri Lanka is known as a prime tourist destination throughout the world. The rich cultural and historical heritage of the island offers a fascinating experience to the visitor from archaeological sites dating back to before 247 BC, to unique ecological sites such as the rain forests of Sinharaja, to wildlife parks, captivating tropical beaches and the wide array of water sports. The places of interest include the ancient cities of Anuradhapura, Polonnaruwa and Kandy, the rock temple at Dambulla, the Fort at Galle and the citadel kingdom of Sigiriya that have been designated World Heritage sites by UNESCO and the rain forest at Sinharaja, one of the biodiversity hot spots of the world.

The national carrier Sri Lankan Airlines has won the award for the best Airline of the year in Central Asia for the third consecutive year. This consolidates our airlines' position in Asia's international airline industry. In the recent past, with the climate of peace, the country has seen an increase in the number of tourist arrivals, an increase of 23.4% for the month of February 2003 in comparison to February 2002 when the peace negotiations commenced.

As you can see, there are a lot of positive developments in my country, and there are numerous reasons to feel more hopeful about our future than in many years. When I met President Bush, he told me something I find very encouraging. He said, "Sri Lanka stands out as an island of optimism in this troubled world." It is our pleasure to do so. Recently, the President also noted that, "Sri Lanka has enormous economic potential, which has been impeded by war. Now, with peace on the horizon, with bold economic reforms being put in place, and with a literate society and an educated workforce, Sri Lanka stands on the threshold of prosperity." Current trends in Sri Lanka do indicate that we are on the threshold of prosperity - a prosperity for our people and our children's children and together with all Sri Lankans, and the help and support of the international community and the United States, we are indeed on our way. Thank you very much.


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