Sri Lanka’s Jaffna Lures Investments After Defeat of Rebels

April 26 (Bloomberg) -- Sri Lanka’s Jaffna peninsula, a former stronghold of the Tamil Tiger rebels in the country’s north, is attracting investments by Indian companies in construction and agriculture after the defeat of the separatists, an industry official said.

As many as 10 Indian companies have this month expressed interest to set up factories for food processing, plastics and glass recycling, garments and ready-mix concrete, Kanagasabai Poornachandran, president of the Jaffna Chamber of Commerce and Industry, said in a telephone interview today from his office in Jaffna city.

The end of the 26-year civil war in Sri Lanka has encouraged Indian Oil Corp. and Bharti Airtel Ltd., India’s biggest state-run refiner and largest mobile-phone operator respectively, to expand in the island nation. Sri Lanka could benefit from its proximity to India just as Hong Kong profits from being a trade hub to China, HSBC Private Bank said after the war ended in May last year.

“We have great expectations for investments now that we are a peaceful land,” Poornachandran said. He did not reveal the names of Indian companies investing in Jaffna or the size of their investments.

Indian Investments

President Mahinda Rajapaksa, who ended the Liberation Tigers of Tamil Eelam’s struggle for a separate homeland for ethnic Tamils in May last year, is counting on Indian companies to take the lead in investing in Sri Lanka as he tries to improve people’s livelihood.

Sri Lanka lies 31 kilometers (19 miles) south east of India, the world’s fastest-growing major economy after China.

The LTTE held the Elephant Pass, a causeway connecting Jaffna peninsula to the Sri Lankan mainland, since 2000. The group also controlled the A-9 highway, linking Jaffna to the south, forcing the government to supply weapons and food to soldiers and civilians in the Jaffna city by air and sea.

The army captured the pass and road in early 2009 as it pushed the Tamil Tigers toward the northeastern coast before finally eliminating them.

Sri Lanka’s $41 billion economy may grow 6.5 percent in 2010, the fastest pace in three years, led by construction, higher farm output and tourism, the central bank estimates.

Poornachandran said government programs to rebuild transport networks and provide concessionary loans to promote exports has spurred cultivation and fishing around Jaffna and encouraged investments.

Ref: http://www.bloomberg.com/apps/news?pid=20601091&sid=aVqDqa1X6hN8