Trade support schemes

Proposed relief to the tourism industry

In 2008, the TDL collection was nearly Rs.300 million and in view of the down turn of the economy the estimated amount for 2009 is Rs.250 million.

In view of the seriousness of the situation, and with a view to assisting the industry it is proposed to defer the collection of the first and second quarter TDLs by three and six months respectively, without charging the one percent default interest.

The proposed scheme is expected to impact on the cash flow situation of the four institutions and need to be managed by delaying payments to the creditors.

Procedure to be followed:

Step1 Obtain the approval of the Board of Management of SLTDA
Step 2 Obtain the concurrence of the SLTPB, SLITHM, and SLCB
Step 3 Obtain the approval of the Cabinet and the Parliament

The above three steps, need to be completed before the end of March 2009.

Crisis situation Fund

Tourism is a key and priority sector of the Sri Lankan economy, which provides employment opportunities for people in the rural areas and develop regions that are undeveloped, to reduce poverty. In 2007, tourism was the fourth largest foreign exchange earner and contributed nearly 8 per cent of the total foreign exchange earnings of Sri Lanka.

As per the Finance Act No. 38 of 2004, the Tourism Development Fund (TDF) was created on September 1, 2004. It consists of one third of the Embarkation Levy (EL) and Tourism Development Levy (TDL) (1 percent of the turnover of establishments registered with the Sri Lanka Tourism Development Authority). During the first eleven months of 2008, the TDF was Rs. 900 million and was estimated to reach rupees one billion by end of 2008. In terms of section 24(8) of the Tourism Act No. 38 of 2005[More], the TDF is distributed among the four institutions as follows:

Prior to September 1, 2004, the former Ceylon Tourist Board was operating on a grant received from the General Treasury, which is now of the opinion that after the creation of TDF, all activities of the above four organizations should be managed out of the TDF, without additional funds from the General Treasury.

Tourism is a highly sensitive industry, operations of which are affected by the internal and external factors such as the security situation in the country, world financial crisis, natural disasters such as tsunami etc. During such crisis situations, decrease in tourist arrivals occur, which results in loss of income for those who have invested in tourism related activities.

In the current economic context, stake holders in tourism are requesting the Ministry of Tourism and the establishments coming under it, to provide financial support so that they will continue to be in tourism business. If a business establishment is forced to close down, it results in loss of revenue and unemployment. Therefore, to assist investors in tourism in crisis situations, it is proposed to create a Crisis Management Fund.

Objectives

As per section 44 (4) of the Tourism Act No. 38 of 2005, all establishments providing services to tourists need to be registered with the Sri Lanka Tourism Development Authority (SLTDA), provided those establishments meet the minimum quality standards. There is also a scheme implemented by the SLTDA to incorporate all informal sector tourism establishments into the formal sector. Therefore, the objective of the Sri Lanka Tourism is to ensure that all tourism service providers are registered with the SLTDA.
All tourist establishments registered with the SLTDA contribute one percent of their turnover to ensure growth and for the long term sustainability of this industry.

The objective is to provide funds to assist stake holders during crisis situations, so that they will continue to be in business, provide revenue to the state and not be forced to retrench their employees.

Creation of a fund to manage crisis in tourism

In terms of section 12 of the Finance Act No. 25 of 2003 and section 24(1) of the Tourism Act No. 38 of 2005, it is the responsibility of the SLTDA to collect TDF.

The total amount collected as TDF is distributed among the four institutions as per the section 24 (8) of the Tourism Act No. 38 of 2005.

It is proposed to set aside a percentage of annual income prior to the distribution of resources from the TDF, which will be used to assist crisis situations.

The table below provides information on funds available for the four institutions, if sums of Rs.20 M to 120 M is set aside for the proposed Fund, if Rs.1 billion is available to the TDF.

Informal Tourism Sector

Over the years, the Informal Tourism sector in Sri Lanka has grown to an extent almost out-numbering the formal sector and continues to grow unabated, contravening all government regulations and hitherto not complying with regulatory standards. In some tourism zones it has already reached saturation levels. E.g. Hikkaduwa, Unawatuna and Negombo.

Efforts made by the SLTB in the past has not been successful, mainly due to lack of enforcement by the relevant authorities which has resulted in haphazard development, predominantly in tourist resorts. However, the sector is believed to be contributing a sizeable percentage of foreign exchange. Some of this valuable foreign exchange earned by foreign nationals owning small villa type accommodation never reaches and benefits Sri Lanka.

Some data in respect of informal sector establishments have already been compiled and is available. Initially all informal establishments can be regularized provisionally for a period of six months within which all technical assistance required should be made available to facilitate compliance with regulations. A policy to accommodate them to the mainstream, is strongly recommended, as we stand to gain by this move

It has been revealed that informal sector often helps proliferate unethical and anti social activities.

Table below is a comparison of the two sectors which is indicative of the magnitude of informal sector.

Strengthening the capacities of SMAPs

Sri lanka Tourism is pleased to announce to you that is a new initiative to help small and medium accommodation providers (SMAPs) of Sri Lanka together with our partners Hilfswerk Austria and European Commission.

We are particularly targeting SMAPs in order to enhance to enhance the quality of your product and services offered to tourist and provide assistance in training and marketing of your product through the website of Hilfswerk Austria and Sri Lanka Tourism.