Sri Lanka is still dealing with the aftermath of the Easter Sunday attacks. The Sri Lanka tourism industry, in particular, has taken a hard beating. As stakeholders throughout the tourism industry go into recovery mode, the government has opted to lend a helping hand. This is in the form of a relief package.
What the relief package entails
The cabinet approved a “relief package” as a means of boosting the tourism sector in Sri Lanka. The said relief package has quite a few things to offer. So let’s break it down.
First, the VAT on the travel and tourism sector is down to 5% from 15% until the 31st of March, 2020. It was reported that the tourism industry contributed an estimated LKR 18 billion as VAT in 2018.
Enterprise Sri Lanka loans
Under the Enterprise Sri Lanka scheme, the government has granted a one-year moratorium for loans pertaining to the travel and tourism sector. This includes Jaya Isura, Green Loan, etc. and will be considered on a case by case basis.
With regards to loans, the Central Bank will direct banks not to seek capital and interest repayment of loans taken by all registered travel and tourism businesses till 31st March 2020. Loans granted to the tourism sector as of 18th April 2019 will be applicable here.
The interest subsidy will be borne by the government on outstanding credit facilities, both capital and interest, granted to the tourism sector in the performing category as at 18th April 2019.
Under Enterprise Sri Lanka, travel and tourism loans registered on or before 18 April will be granted before 31st of March 2020. The interest subsidy borne by the government will continue to these loans from the date of grant.
The borrowers’ repayment will start from 1 April 2020, and capital and interest payments falling due during the moratorium can be recovered from July 2020 onwards. Alternatively, the repayment period can be extended for the number of months it was falling due during the moratorium.
Working Capital loans
Businesses in the tourism sector can obtain a fresh working capital under the Enterprise Sri Lanka scheme. The repayment period will be 2 years with a 75% interest subsidy borne by the government from the effective interest rate until 31st of March 2020. The applicable interest rate will be at 3.4%.
The maximum working capital available for a business with less than or equal to LKR 100 million annual turnover, would be LKR 20 million. If turnover falls between more than LKR 100 million and less than or equal to 250 million, the maximum working capital would be LKR 50 million. Similarly, annual turnover between more than LKR 250 million and less than or equal to 750 million, would mean maximum LKR 150 million working capital. If turnover exceeds LKR 750 million, it would be LKR 250 million.
Security equipment concessions
Imported security equipment will be duty-free (except for NBT), effective from 7th of May 2019. These include handheld metal detectors, walk-through metal detectors, vehicle scanners, etc.
LKR 464 million promotional campaign from Sri Lanka Tourism
As per Kishu Gomes, Chairman of Sri Lanka Tourism Promotion Bureau, stated that they will invest in a roughly LKR 464 million short term promotional campaign. He further stated that, “we have searched for an international agency and have picked a company. Its name has been forwarded to Cabinet for approval.”
Are the employees ignored?
The tourism industry seems to have reacted positively to the announcements made by the government. However, Sanath Ukwatte, President of The Hotels Association of Sri Lanka, and M. Shanthikumar, President of the City Hotels Association, stated that there has been no official communication from the Tourism Development Ministry to the industry as of yet.
“We haven’t got any official statement from the Tourism Development Ministry on the relief package approved by the Cabinet on Tuesday.”– Saman Ukwatte, M. Shanthikumar
Upon inquiry, Ukwatte and Shanthikumar mentioned that the Ministry refrained from any official statement on the detailed measures.
There are also concerns with regards to the employees of the tourism industry being ignored from the announced relief package. This is because there was no mention of moratoriums on hotel staff loans obtained via companies.
“Our request to waive off all personal loan interests, and reschedule the loans obtained by hotel employees for a period of two years, is missing. This was one of the top requests, as we cannot operate without our staff”Saman Ukwatte
As per the Sri Lanka Tourism Development Authority, the tourism industry employed a little over 169,000 direct employees and over 380,000 in total, by the end of 2018. Commenting on the omission of employee perspective from the relief package Ukwatte added, “we earnestly urge the authorities to reconsider our plea and not to forget our employees, as they are the lifeline of our industry.”
Will this be enough to revive Sri Lanka Tourism?
Perhaps. It’s challenging, to say the least, to regain that image Sri Lanka built as a top travel destination in the recent years. It would probably take years for the industry to fully recover. But measures like these would surely help the rebuilding process for the industry. It’s also encouraging to see that authorities seem to have the right idea to go about this.
After all, this is an industry that contributed $4.4 billion to the GDP last year. But the announced relief package is yet to be officially communicated via the tourism ministry. It also fails to offer any consideration for the employees of the tourism industry. So whether all of this is enough, is a question only time will answer. But for the moment, it looks like things might be heading in the right direction.