Srilanka

SRILANKA

LOCATION, SIZE, AND EXTENT
TOPOGRAPHY
CLIMATE
FLORA AND FAUNA
ENVIRONMENT
POPULATION
MIGRATION
ETHNIC GROUPS
LANGUAGES
RELIGIONS
TRANSPORTATION
HISTORY
GOVERNMENT
POLITICAL PARTIES
LOCAL GOVERNMENT
JUDICIAL SYSTEM
ARMED FORCES
INTERNATIONAL COOPERATION
ECONOMY
INCOME
LABOR
AGRICULTURE
ANIMAL HUSBANDRY
FISHING
FORESTRY
MINING
ENERGY AND POWER
INDUSTRY
SCIENCE AND TECHNOLOGY
DOMESTIC TRADE
FOREIGN TRADE
BALANCE OF PAYMENTS
BANKING AND SECURITIES
INSURANCE
PUBLIC FINANCE
TAXATION
CUSTOMS AND DUTIES
FOREIGN INVESTMENT
ECONOMIC DEVELOPMENT
SOCIAL DEVELOPMENT
HEALTH
HOUSING
EDUCATION
LIBRARIES AND MUSEUMS
MEDIA
ORGANIZATIONS
TOURISM, TRAVEL, AND RECREATION
FAMOUS SRI LANKANS
DEPENDENCIES
BIBLIOGRAPHY

Democratic Socialist Republic of Sri Lanka

Sri Lanka Prajathanthrika Samajavadi Janarajaya

CAPITAL: Colombo

FLAG: The national flag contains, at the hoist, vertical stripes of green and saffron (orange-yellow) and, to the right, a maroon rectangle with yellow bo leaves in the corners and a yellow lion symbol in the center. The entire flag is bordered in yellow, and a narrow yellow vertical area separates the saffron stripe from the dark maroon rectangle.

ANTHEM: Sri Lanka Matha (Mother Sri Lanka).

MONETARY UNIT: The Sri Lanka rupee (r) of 100 cents is a paper currency with one official rate. There are coins of 1, 2, 5, 10, 25, and 50 cents and 1 and 2 rupees, and notes of 10, 20, 50, 100, 500, and 1,000 rupees. r1 = $0.00998 (or $1 = r100.19) as of 2005.

WEIGHTS AND MEASURES: The metric system is the national standard, but British weights and measures and some local units also are used.

HOLIDAYS: Independence Commemoration Day, 4 February; May Day, 1 May; National Heroes Day, 22 May; Bank Holiday, 30 June; Christmas Day, 25 December; Bank Holiday, 31 December. Movable holidays include Maha Sivarathri Day, Milad-an-Nabi, Good Friday, 'Id al-Fitr, Dewali, and 'Id al-'Adha'; in addition, the day of the rise of the full moon of every month of the Buddhist calendar, called a Poya day, is a public holiday.

TIME: 5:30 pm = noon GMT.

LOCATION, SIZE, AND EXTENT

Sri Lanka (formerly Ceylon) is an island in the Indian Ocean situated s and slightly e of the southernmost point of India, separated from that country by the 23 km(14 mi-) wide Palk Strait. Including 870 sq km (336 sq mi) of inland water, Sri Lanka has a total area of 65,610 sq km (25,332 sq mi), extending 435 km (270 mi) ns and 225 km (140 mi) ew. Sri Lanka's total coastline is 1,340 km (833 mi). Comparatively, the area occupied by Sri Lanka is slightly larger than the state of West Virginia. Sri Lanka's capital city, Colombo, is located on the southwest coast.

TOPOGRAPHY

The south-central part of Sri Lanka is a rough plateau cut by a range of mountains whose highest peak is Pidurutalagala, 2,524 m (8,281 ft). Narrow coastal plains skirt the mountainous section on the east, south, and west, but in the north the extensive coastal plain fans out, reaching from the eastern to the western shores of the island. Five-sixths of the land is less than 300 m (1,000 ft) in elevation. Numerous rivers and streams flow seaward in all directions from the central mountain area; the longest river, flowing northeastward, is the Mahaweli Ganga (332 km/206 mi).

Both the eastern and western coasts of Sri Lanka were hit by a catastrophic tsunami on 26 December 2004. Stemming from an underwater earthquake 324 km (180 mi) south of Indonesia's Sumatra island, waves reaching 12 m (40 ft) rolled onto the coasts, killing almost 40,000 residents and tourists. More than 1.5 million were left without homes.

CLIMATE

The climate, although tropical and monsoonal, varies from warm in the coastal plains and lowlands to temperate in the hill and mountain regions. The lowlands in the northeast receive an average rainfall of about 130 cm (50 in), and the hill country in the southwest has an average of 254 to 508 cm (100 to 200 in), most of the rain coming during the monsoon season. Elsewhere, average rainfall varies from 63 cm (25 in) to 190 cm (75 in). Located only 879 km (546 mi) north of the equator, Sri Lanka has neither summer nor winter but only rainy and dry seasons. Average temperature is 27°c (80°f).

FLORA AND FAUNA

Most plants and animals are those common to southern India, but there are additional varieties. The plant life ranges from that of the equatorial rain forest to that of the dry zone and the more temperate climate of the highlands. Tree ferns, bamboo, palm, satinwood, ebony, and jak trees abound. The wide range of mammals, birds, and reptiles once found in Sri Lanka has been reduced by the conversion of forests into rice fields, but water buffalo, deer, bear, elephants, monkeys, and leopards are among the larger animals still present. The Ceylon elk (sambhur ) and the polonga snake are unique to Sri Lanka. Birds are numerous, many varieties from colder countries wintering on the island. Sri Lanka has well organized game and bird sanctuaries. Insects abound and numerous fish are found in the shallow offshore waters. As of 2002, there were at least species of 88 mammals, 126 species of birds, and over 3,300 species of plants throughout the country.

ENVIRONMENT

Sri Lanka's principal environmental problem has been rapid deforestation, leading to soil erosion, destruction of wildlife habitats, and reduction of water flow. The government began a reforestation program in 1970, and since 1977, it has banned the export of timber and the felling of forests at elevations over 1,500 m (5,000 ft) and the export of timber. Nevertheless, between 1981 and 1985, some 58,000 hectares (143,000 acres) of forestland were lost each year. From 19902000, the annual rate of deforestation was 1.6%.

The nation's water has been polluted by industrial, agricultural, and mining by-products along with untreated sewage. Air pollution from industry and transportation vehicles is another significant environmental concern. The main environmental agency is the Central Environmental Authority within the Ministry of Industry and Scientific Affairs.

Although legislation to protect flora and fauna and to conserve forests has been enacted, there has been inadequate enforcement of the laws, and the nation's wildlife population has been reduced by poaching. According to a 2006 report issued by the International Union for Conservation of Nature and Natural Resources (IUCN), the number of threatened species includes 21 types of mammals, 16 species of birds, 8 types of reptiles, 44 species of amphibians, 23 species of fish, 2 species of invertebrates, and 280 species of plants. Threatened species include the Asian elephant, green labeo, spotted loach, and four species of turtle (green sea, hawksbill, olive ridley, and leatherback). Over a dozen species of amphibians have become extinct.

POPULATION

The population of Sri Lanka in 2005 was estimated by the United Nations (UN) at 19,722,000, which placed it at number 53 in population among the 193 nations of the world. In 2005, approximately 6% of the population was over 65 years of age, with another 27% of the population under 15 years of age. There were 103 males for every 100 females in the country. According to the UN, the annual population rate of change for 200510 was expected to be 1.3%, a rate the government viewed as satisfactory. The projected population for the year 2025 was 22,208,000. The overall population density was 301 per sq km (779 per sq mi); however, about 50% of the population is concentrated in the southwestern quarter of the island.

The UN estimated that 30% of the population lived in urban areas in 2005 and that urban areas were growing at an annual rate of 1.13%. The capital city, Colombo, had a population of 648,000 in that year. Other urban centers and their estimated populations are Dehiwala-Mt. Lavinia, 209,787; Moratuwa, 177,910; Jaffna, 145,600; Kotic, 109,000; and Kandy, 161,395.

MIGRATION

Under an agreement signed in 1964, India pledged to repatriate 525,000 of the 975,000 persons of Indian origin (Tamils) then on the island, while Ceylon agreed to absorb 300,000 and grant them Ceylonese citizenship. Of the remaining 150,000, 75,000 were repatriated by a separate agreement concluded in 1974, and an equal number became citizens of Sri Lanka. Due to military activities in 1995 and 1996, an estimated 650,000 people have been internally displaced. As of May 1997, India's Tamil Nadu state had around 56,000 refugees from Sri Lanka, with another 36,000 throughout India. Repatriation to Sri Lanka has ceased since the military conflicts started again in 1995. Over 54,000 refugees have returned from southern India since 1992. In 2004, there were 63 refugees and 48 asylum seekers in Sri Lanka. However, there were also 352,374 internally displaced persons (IDPs), 33,370 returned IDPs, and 170,00 stateless persons.

In 2003, worker remittances to Sri Lanka were estimated at $1.3 billion a year, equivalent to 8% of Sri Lankan GDP. Most remittances are from maids in the Middle East; there are about 350,000 Sri Lankans in Saudi Arabia, followed by 80,000 in Lebanon, 40,000 each in Kuwait and Oman, 30,000 each in Qatar and Jordan, and about 160,000 in the United Arab Emirates. Annually, some 200,000 Sri Lankans go abroad to work in Middle Eastern countries, Western Europe, Australia, and North America. By some estimates, about 600,000 of the one million Sri Lankans abroad are domestic helpers.

In 2005, the net migration rate was an estimated -1.27 migrants per 1,000 population. The government views the migration levels as satisfactory.

ETHNIC GROUPS

According to data from 2002, the Sinhalese constitute the largest population group, making up 74% of the total population. Sri Lankan Tamils (descendants of medieval invaders from India) total 18%; Sri Lankan Moors 7%; Burghers (descended from the Dutch), Malays (mostly of Arab extraction), and Veddas account for 1%. The Veddas are a small aboriginal tribe located in the most inaccessible forest regions of southeastern Sri Lanka.

LANGUAGES

English was the official language under the British and remained so until 1956, when Sinhala became the nation's official language. This measure was bitterly opposed by the Tamil minority. Riots, disorders, and dissension grew, leading to a Tamil civil disobedience campaign and a temporary state of emergency. Tamil was added as an official language in 1988.

Sinhala is a member of the Indo-Aryan subgroup of the Indo-European language family, related to Pali. Tamil is a Dravidian language spoken in northern and eastern Sri Lanka and in southern India. Sinhala is spoken by approximately 74% of the population; Tamil is spoken by 18%. English is also commonly used in government and is spoken by about 10% of the population.

RELIGIONS

Of the total population, Buddhists constitute nearly 70% of the people and are almost without exception ethnic Sinhalese who practice Theravada Buddhism; Hindus amount to 15% of the total population and are almost exclusively ethnic Tamils; Muslims account for 7% (and may or may not be Tamil speakers) and include the Moor and Malay communities; and Christians, accounting for 8%, are to be found in the Sinhalese, Burgher/Eurasian, and Sri Lankan Tamil communities (not to be confused with the so-called Indian Tamils, who were imported as plantation workers in the last century and are exclusively Hindu). A majority of Christians are Roman Catholic, with Anglicans and Baptists also significant, the latter the result of American missionary activity in the north in the 19th century.

The 1978 constitution established Sri Lanka as a secular state and guarantees freedom of religion; however, the document also stipulates that Buddhism enjoys the foremost place in the republic, and there have been some restrictions on religious freedom. In 2003, a bill was presented to the cabinet that would make all religious conversions illegal. Though there has been much debate about the bill, by late 2005 it had not yet been enacted.

TRANSPORTATION

In 2002, the country had an estimated 11,650 km (7,246 mi) of highways, of which 11,068 km (6,884 mi) were paved. Registered motor vehicles numbered 695,330 in 2003, including 321,330 passenger cars and 374,000 commercial vehicles.

In 2004, there were 1,449 km (901 mi) railroad track, all broad gauge, and all state owned and state operated.

Colombo, one of the great commercial seaports of Asia, formerly was an open roadstead, but the construction of breakwaters has made it one of the world's greatest artificial harbors. In 2005, the merchant fleet consisted of 23 ships of 1,000 GRT or more, totaling 120,924 GRT. Ports of the open roadstead type are Trincomalee, Galle, Batticaloa, Kankesanturai, Kayts, and Jaffna. A car ferry service links Mannar Island with the Indian mainland. As of 2004, Sri Lanka had 160 km (99 mi) of navigable inland waterways, primarily on rivers in the southwestern part of the country.

Sri Lanka had an estimated 14 airports in 2004, of which 14 had paved runways as of 2005. The principal international airport is Katunayaka, 39 km (24 mi) north of Colombo. Air Lanka (formerly Air Ceylon), the national airline company, serves international routes only. Upali Travels, a private carrier, provides domestic service. In 2003, about 1.958 million passengers were carried on scheduled domestic and international flights.

HISTORY

The Sinhalese, early Indo-European-speaking settlers, arrived in what is present-day Sri Lanka, in the 6th century bc, probably from northern India. Later arrivals from India brought Buddhism beginning about 240 bc. The practice of Buddhism set Sri Lanka apart from southern India, where Hinduism was the major religion. The presence of Tamil Dravidian speakers is noted in many ancient texts from the region, and for much of the first millennium ad, the Sri Lankan peninsula was controlled by Tamil Dravidians, whose primary religion was Hinduism. However, following a series of civil wars between the Sinhalese and Tamils, Vijayabahu reestablished the Sinhalese dynasty in the 11th century. In the 12th century, the Sinhalese king Parakrma Bahu I united the entire island.

The Portuguese East India Company brought the first European rulers in the early 16th century, and in time, the Portuguese conquered the entire island, with the exception of the Sinhalese kingdom in Kandy in the central plateau. By the middle of the 17th century, the Portuguese had been driven out of Sri Lanka (and southern India) by the Dutch East India Company, which governed for more than 100 years, introduced plantation agriculture, developed trade, and left a legacy that includes Roman-Dutch law and a group of people of Dutch-Sinhalese ancestry known as Burghers. But they, too, found themselves displaced.

Having won their struggle with France for mastery in India (and in North America), the British laid claim to Sri Lanka, which they called Ceylon, at the end of the 18th century after the Netherlands fell under French control. After a brief period as part of the British East India Company's Indian domain, Ceylon was designated a Crown colony in 1802, and by 1815, the entire island was united under British rule. The British introduced coffee, tea, coconut, and rubber plantations, and their own form of administration.

With the development of a nationalist movement across the Palk Strait in India in the 20th century, nationalists in Ceylon also pressured for greater self-rule, leading to further democratic political reforms in constitutions enacted in 1910, 1920, 1924, 1931, and 1947; included in the 1931 enactment was limited self-rule under universal suffrage. In 1948, with little actual struggle, and a year after Indian independence, Ceylon became a self-governing dominion within the British Commonwealth.

The period from 1948 through 1970 saw the evolution of Ceylon's multiparty parliamentary system, in which orderly and constitutional elections and changes of government took place. Beginning in 1970, executive power began to be highly centralized under Prime Minister Sirimavo Bandaranaike, who from 1971 to 1977 ruled with the use of unpopular emergency powers in support of her socialist, pro-Sinhalese policies. She introduced a new constitution in 1972, converting the dominion of Ceylon to the republic of Sri Lanka, reaffirming a parliamentary system under a weak, ceremonial presidency, and making the protection of Buddhism a constitutional principle.

The defeat of the Sri Lanka Freedom Party (SLFP) in the July 1977 elections brought Junius Richard Jayewardene of the more moderate United National Party (UNP) to power. He became Sri Lanka's first elected executive president in February 1978, under a constitutional amendment of fall 1977 establishing a presidential form of government. Seven months later, a new, more liberal constitution came into effect. As his prime minister, Jayewardene chose Ranadive Premadasa, a long-time follower with lower-caste support. In October 1982, Jayewardene was popularly elected to a new six-year term, and two months later, in a successful effort to avoid general elections, the life of the sitting parliament was extended through July 1989 by means of a constitutional amendment endorsed by popular referendum.

Since 1978, rising tensions and violence between the majority (mostly Buddhist) Sinhalese and minority (mostly Hindu) Sri Lankan Tamil communities that have long shared the island have dominated political life. The strife dates to 1956, when the Sinhalese-dominated government had declared Sinhala the official language and replaced English with separate language tracks in education for Sinhala and Tamil speakers. In the late 1970s, moderate Sri Lankan Tamils looked to the leadership in the Tamil United Liberation Front (TULF) and to negotiations with the new UNP government in 1978 to pursue changes aimed at protecting their cultural heritage by giving greater control to elected officials in areas where Sri Lankan Tamils were in the majority.

By the early 1980s, their efforts had failed. Participation in parliament as a responsible opposition had brought no changes, and many rounds of talks with Jayawardene and the majority Sinhalese community had netted no progress in redressing Tamil grievances. Violence was on the rise, and a spasm of communal bloodletting in summer 1983 left hundreds, if not thousands, dead in Colombo and elsewhere. By 198485, Sri Lankan Tamil leadership had fallen into the hands of extremists advocating violence, dooming to failure before it began the government's eleventh-hour convening of an all-party conference in 1984 to seek a political solution to the ethnic conflict.

Fighting between the Sinhalese-dominated army and Sri Lankan Tamil separatists escalated in 1986 and 1987, with no solution in sight. It should be noted that the insurgency is limited to the larger group of Sri Lankan Tamils. A different group of Tamils, known as Indian Tamils or Estate Tamils, has little role in the insurgency. These communities consist of plantation workers brought to Sri Lanka from India to work in the highlands at the center of the island.

In the spring of 1987, the government began a military offensive against Tamil forces in the Jaffna Peninsula in the Northern Province. India, sensitive to its own large Tamil population just across the strait, served as a base for rebels. Earlier, the Indian government had attempted to negotiate a settlement between the Sri Lankan government and the rebels, but in 1987, India reacted to the offensive by airlifting food and supplies to the rebels, creating considerable tension between the two countries. On 29 July, Jayewardene and Prime Minister Rajiv Gandhi of India signed an agreement by which the Sri Lankan government reluctantly accepted the need for devolution of power to the provinces, agreed that Tamil would have official status, and conceded that a semiautonomous administrative unit would be created for the Tamils in the Northern and Eastern provinces, subject to a vote by the Eastern Province on joining such a unit. An Indian peacekeeping force, which eventually grew to more than 100,000 troops, was sent to Sri Lanka to implement the agreement and enforce a cease-fire. But in the fall of 1987, Tamil separatistsorganized as the Liberation Tigers of Tamil Ealam (LTTE)resumed their attacks, killing about 300 people. When they refused the protection of the Indian Peacekeeping Force (IPKF), the IPKF launched an offensive against the rebel stronghold in Jaffna. Fighting continued, inconclusively, between the IPKF and (mainly) the LTTE for 18 months thereafter, with heavy casualties on both sides.

Meanwhile, through 1988 and 1989, the government was under attack from the militant Sinhalese nationalist political party, Janatha Vimukhti Peramuna (JVP), which sought its overthrow for agreeing to the presence of Indian forces in Sri Lanka. The rebellion was put down firmly and brutally by President Premadasa, who succeeded Jayewardene in 1988 in a close race against Sirimavo Bandaranaike.

In 1990, V. P. Singh, who had replaced Rajiv Gandhi as Indian prime minister, agreed to Sri Lanka's request that India pull its forces out of the country. With the JVP opposition eliminated and the Indians gone, Premadasa turned his attention to the possibility of expanding the new situation, including a de facto cease-fire with the LTTE, into a negotiated settlement. But a new spasm of LTTE violence in the Eastern Province led him to order an all-out army and air force campaign against the north in the second half of 1990, and guerrilla warfare resumed. Through 1991 and 1992, Premadasa's government continued to pursue the possibility of a negotiated settlement with the LTTE, denying it sought a military solution. But the LTTE's Velupillai Prabhakaran, dominating the separatist side, rejected most government terms.

Fighting between the LTTE-led rebels and the Sri Lankan army continued through the 1990s and early part of the 21st century, despite repeated efforts to forge a cease-fire.

In late January 1998, following a suicide bombing in Kandy at the "Temple of the Tooth," Sri Lanka's most sacred Buddhist shrine, the government formally outlawed the LTTE. Following a spate of bombings and the assassinations of moderate Tamil leaders in Jaffna, the government declared a national state of emergency in August 1998.

The Sri Lankan government's war against the LTTE has fared badly. By 2005, the LTTE controlled much of the northern and eastern coastal areas of Sri Lanka. As of February 2003, the number of people killed in the fighting was approximately 65,000, and the number displaced was 1.6 million. In February 2002, Sri Lanka and the LTTE signed a cease-fire agreement that implied the two sides would move toward peace talks. The LTTE insisted the government lift its ban on the group before peace talks could begin. In May, the two sides held their first direct talks in seven years. In early September, the Sri Lankan government lifted its ban on the LTTE, and on 16 September formal peace talks were held in Thailand. The most difficult issue to be resolved, whether the north and east would be independent or autonomous, was initially shelved. However, in four days of peace talks held in Oslo, Norway, in December, the government and the LTTE agreed to share power in a federal system. The Tamils would have autonomy in the north and east of the island, but not a separate state.

Despite repeated threats of a renewal of violence, the fragile cease-fire held through 2005. However, the LTTE continued to press for an independent Tamil homeland, much to the frustration of the Sinhalese majority government. On 26 December 2004, the Indian Ocean tsunami hit Sri Lanka, leaving more than 30,000 people dead and devastating much of the area that the LTTE controlled. Although the government and LTTE bickered over distributions of foreign aid, a mechanism for sending assistance to rebel-held areas was in place in mid-2005. However, elections in 17 November 2005 appeared to compromise that agreement, leading many to fear that Sri Lanka might once again fall into civil war. The new president, Mahinda Rajapakse, promised to take a hardline stance against the LTTE. The rebels responded in late December with a series of attacks that prompted Hagrup Haukland, head of a cease-fire monitoring team, to warn that if the violence did not stop, "war may not be far away."

GOVERNMENT

The constitution of September 1978 established the Democratic Socialist Republic of Sri Lanka as a free, sovereign, independent state based on universal suffrage at 18 years of age. The president of the republic is directly elected for a six-year term and serves as head of state and as executive head of government, appointing and heading the cabinet of ministers, whom he or she chooses and who are (or must quickly become) members of parliament. A prime minister, similarly selected, serves mainly as parliamentary leader.

Legislation approved by parliament cannot be vetoed by the president, and the president may be removed by parliament upon a two-thirds majority vote, following a finding by the Supreme Court of incapacity, treason, corruption, or intentional constitutional violation. The constitution can be amended by a two-thirds majority vote in the parliament, subject to ratification (for certain provisions) by popular referendum. The constitution provides that popular referenda also may be held on issues of national importance, but the normal business of legislation is in the hands of a unicameral parliament consisting first of 168now 225members elected for six-year terms under a proportional representation system. The sitting parliament elected in July 1977 took the unusual step of extending its own life for another six years by a national referendum in 1982, thus avoiding elections in which the competition for places on the ballot might have weakened the United National Party's (UNP) constitution-amending two-thirds majority.

In June 1994, the Wijetunga government scheduled "snap" elections for parliament on 16 August 1994, six months earlier than would have been required; elections to the presidency followed parliamentary polling. Paced by the electoral appeal of Sri Lankan Freedom Party (SLFP) deputy leader Chandrika Bandaranaike Kumaratunga, the People's Alliance of seven leftist parties won a clear plurality in the elections, ousting the UNP after 17 years in power. To the 91 parliamentary seats the alliance won directly were added an additional 14 under the proportional system, and with the further support of 9 members of the Sri Lanka Muslim Congress, the new People's Alliance government was able to command a majority of 114 seats in the 225-member house and to elect Kumaratunga as leader of the house, facilitating her prompt appointment as prime ministeran office previously held by both her ailing 80-year old mother and her late father, S.W.R.D. Bandaranaike.

Because the presidential system incorporated in the 1978 constitution vests the substantial powers of head of state and head of government in the hands of the president, Kumaratunga's capacity for independent action remained limited. As prime minister, she was actually little more than leader of the house, but in the November 1994 presidential elections, Kumaratunga, who is the daughter and the widow of prominent Sri Lankan politicians (both of whom were assassinated) was elected president by a sizeable majority. After assuming office, she appointed her mother, Sirimavo Bandaranaike, prime minister. Upon being elected, she made her primary issue a negotiated peace with the Tamil separatists. Kumaratunga's repeated offers of limited sovereignty within a greater Sri Lankan state were spurned by the Tamils. Attempts to subdue the Tamils by military force also failed, with the Sri Lankan army suffering serious reversals in November 1999. Despite this, in December 1999, Kumaratunga won a second six-year term in office as Sri Lanka's president. Kumaratunga's People's Alliance party was defeated in parliamentary elections held in December 2001, and Ranil Wickremasinghe of the UNP became prime minister. A cease-fire between the Tamils and the government was signed in February 2002, and peace talks began later that year. As of February 2003, there was friction between the People's Alliance and its partner, the People's Liberation Front, and Wickremasinghe's government, largely over the terms of the agreements being made with the Liberation Tigers of Tamil Eelam (LTTE). Elections on 17 November 2005 installed Mahinda Rajapakse as president. The fragile truce between the LTTE and the government began to unravel shortly thereafter. Although Rajapakse offered to resume talks, the LTTE portrays him as a pro-Sinhala chauvinist. Rajapakse's victory also resulted from his appeals to Sri Lanka's proSinhala majority to take a hard line against the rebels. The next presidential elections are scheduled for 2011.

POLITICAL PARTIES

Political life in Sri Lanka is open and vigorous, with a wide range of views represented among the political parties, many of which have their roots deep in the pre-independence era. In the time since independence, considerations of religion, language, and culture have largely displaced ideology as the issues around which multi-ethnic Sri Lanka's political life evolves. In the last decade, ethnic struggleand violencebetween the government, dominated by majority Sinhalese, and militant minority Tamil separatists has dominated the political process.

The United National Party (UNP) was the main party of the independence movement, and its widely respected leader, D. S. Senanayake, as head of a coalition of which the UNP was the chief unit, became Ceylon's first prime minister after independence. He won a major victory in 1952 and continued in power until he died in 1956. The divided opposition failed to agree on a leader until 1951, when Solomon Bandaranaike left the UNP to form the Sri Lanka Freedom Party (SLFP). Over the years, the SLFP became the island's other major political party, advocatinglike the UNPa nonaligned foreign policy, with the UNP friendlier to the West, the SFLP to the former Eastern bloc. Both find their support from within the majority Sinhalese community, and like most other parties, both are led mostly by high-caste Sinhalese.

Shortly before the 1956 elections, Bandaranaike formed the People's United Front (Mahajana Eksath PeramunaMEP), composed of his own SLFP, the Trotskyite Lanka Sama Samaja (LSSP), and a group of independents. The MEP called for the extension of state control, termination of British base rights, nationalization of tea and rubber plantations, and a foreign policy of strict nonalignment. In the elections, the MEP won 51 seats, and Bandaranaike became prime minister, holding power until September 1959 when he was assassinated by a Buddhist monk.

In the elections of March 1960, the UNP won 50 of the 151 seats at stake; the SLFP, 46 seats; and other parties, the remaining 55. UNP leader Dudley Senanayake failed to muster a majority, and new elections were called for July. In this second round of polling, the UNP won a majority of the popular vote but only 30 seats. The SLFP, led by its slain leader's widow, Sirimavo Bandaranaike, won 75, and with her supporters on the left, she was able to form a government, becoming the first woman in the world to hold office as prime minister. She committed her government to pursuing continuation of her husband's agenda, including nationalization of enterprises.

In the 15 years that followed, the UNP and the SLFP alternated in power for periods no longer than seven years. In 1965, Dudley Senanayake became prime minister after the UNP won 66 of the 151 legislative seats, but the SLFP's Sirimavo Bandaranaike was returned to power in the 1970 elections as the head of a coalition that included the Trotskyite LSSP and the pro-Soviet Ceylon Communist Party (CCP). In response to an insurrection fomented in 1971 by the Janatha Vimukhti Peramuna (JVP), a militant Sinhalese party in the south, Bandaranaike imposed a state of emergency on the island that lasted for six years. She pushed through a new constitution in 1972.

By 1977, Banderanaike's public image had declined. No longer supported by her former coalition partners, she was humiliated at the polls by J. R. Jayewardene's UNP, which was returned to power with 51% of the popular vote and 142 of 168 seats in parliament. The moderate Tamil United Liberation Front (TULF), which had swept Tamil areas of the north and east, became the major opposition party in parliament with 16 seats, and the SLFP representation in the house fell to a bare eight seats.

Jayewardene's sweeping victory enabled him to fulfill the UNP's campaign pledge to introduce a French-style presidential system of government. Forsaking the now-eclipsed office of prime minister, he set out as president to use his new powers to open the economy and to make a new effort to reconcile with the increasingly disaffected Tamil minority. In the local elections and parliamentary by-elections of May 1983, the UNP strengthened its commanding position by gaining control of a majority of municipal and urban councils and winning 14 of 18 parliamentary seats contested.

The CCP and two other leftist groups, the People's Liberation Front and the New Socialist Party, were banned in 1983 on charges of playing a role in the ethnic riots that swept the island in July; leaders of the Communist Party were subsequently arrested. In August 1983, TULF members of parliament, after several fruitless years of negotiations with Jayewardene aimed at devolving power to local levels, were confronted with a constitutional amendment aimed at them by the UNP's two-thirds majority that required all MPs to pledge their allegiance to a unitary state. They abandoned parliament, and by now most have been killed, as the leadership of the Tamil movement fell into the hands of those advocating violence and complete independence as the only sure ways to protect Tamil ethnicity. The TULF was decimated in parliamentary elections in February 1989, which saw the emergence of several small Tamil parties with reputed ties to the rebels.

In presidential elections held in December 1988, Prime Minister Premadasa beat the SLFP's Sirimavo Bandaranaike in a close race marred by ethnic violence. He was sworn in as Jayewardene's successor on 2 January 1989. In February, he led the UNP to a strong victory in parliamentary polling, capturing 125 of the 225 seats under a new proportional voting system; he then named Dingiri Wijetunga as prime minister. These elections also saw the debut of the United Socialist Alliance (USA), a new political grouping set up in 1987 and composed of the SLFP's former coalition partners on the far left, including the CCP, the LSSP, and the Sri Lanka Mahajana Party (SLMP); the USA took 4 seats, while the SLFP won 67.

In the summer of 1991, Premadasa beat back a sudden challenge to his position by leading members of his party in parliament, suspending the parliament for a month to delay debate on a motion they had filed to impeach him for abuse of his authority. But in a rising tide of violence and assassinations of governmental officials across the island, President Premadasa himself became a victim of a Tamil bomber on 1 May 1993. The Parliament unanimously elected Prime Minister Wijetunga as his successor on 7 May 1993.

A "snap" election called six months early by President Wijetunga as part of his campaign for reelection in November 1994 backfired on 16 August 1994 when the voters rejected the UNP by a small margin. In its place, they elected a seven-party leftist coalitionnow dubbed the People's Alliance (PA)led by the SLFP's Sirimavo Bandaranaike and Chandrika Bandaranaike Kumaratungamother and daughter, 80 and 49 years of age, respectively. More vigorous but less experienced, the younger Kumaratunga promptly became prime minister.

Kumaratunga won election on the promise of ending the civil war. Her offers of limited regional autonomy for Tamils within the Sri Lankan state were initially turned down by the LTTE leader, Velupillai Prabakaran (most of the moderate Tamil leaders have been assassinated). Her attempts at a military solution were also unsuccessful until a cease-fire and peace talks emerged in 2002. Citing parliament's rejection of her proposals for strengthening the prime minister's powers and for granting regional autonomy to the Tamils, Kumaratunga called for presidential elections ahead of schedule in December 1999. The race between the president and her UNP rival, Ranil Wickremasinghe, was close. However, three days before polling, Kumaratunga was injured in an assassination attempt, bringing out a sympathy vote. She was returned to office with 51.1% of the votes compared to her opponent's 42.7%. In November 1994, presidential elections were held. UNP leader Gamini Dissanayake fell victim to the island's endemic violence and his widow Srima Dissanayake was appointed to run against the younger Kumaratunga. While the latter's political party won only a slim plurality and had to govern by coalition, in the presidential race she won a commanding majority (6336%) and, upon becoming president, appointed her mother prime minister. Despite criticisms over the handling of Sri Lanka's tsunami relief efforts, the SLFP retained its leadership on 17 November 2005 when Mahinda Rajapakse won a slim majority.

The results of the 2 April 2004 parliamentary elections were as follows: SLFP and JVP, 45.6% (105 seats); UNP, 37.83% (82 seats); TNA, 6.84% (22 seats); JHU, 5.97% (9 seats); SLMC, 2.02% (5 seats); UPF,. 54% (1 seat); EPDP,. 27% (1 seat), and other,. 93%.

The next parliamentary elections are scheduled for 2010.

LOCAL GOVERNMENT

Although Sri Lanka is a unitary state, it is divided into eight provinces whose borders follow historical and traditional lines. The key administrative unit has traditionally been the district, into which the provinces are further divided. There are a total of 25 districts under the control of senior civil servants, who are district officers responsible to the government in Colombo for ensuring justice, maintaining law and order, collecting revenues, and allocating development funds. There is, in addition, a system of district ministers that was created after 1978 to assist the district officers and to provide political input at the district level. Appointed by the president, district ministers are members of parliament but from a constituency other than one in the district for whom they bear district responsibility. Not full members of the cabinet, they nonetheless sit with the president in the Council of Ministers and otherwise enjoy ministerial perquisites.

Districts are also served in rural areas by popularly elected district councils which have limited powers but which assist the district officer and the district minister in assessing public views and mood and in setting development priorities. Municipal councils, urban councils, and Pradeshiya Sabhas perform a similar function in urban and rural areas. Their term of office is four years. Currently there are 14 municipal councils, 37 urban councils, and 258 Pradeshiya Sabhas. In general, municipal councils are established for cities and large towns, urban councils for less urbanized areas, and Pradeshiya Sabhas for rural areas.

In conformity with an Indo-Lankan agreement in 1987 to devolve power to the provinces, the parliament voted to establish, at the provincial level, elected councils headed by chief ministers. In the presence of the IPKF in 1988, elections were held to these provincial councils (PC), and the UNP took control of seven in nonTamil areas; the Eelam People's Revolutionary Liberation Front (ERPLF), a new, anti-LTTE Tamil party, supported at the time by the IPKF, took control of the two in the Tamil north and east. While unsettled conditions have slowed progress on devolution, elections to the seven PCs in non-Tamil areas in 1993 reportedly produced more mixed results, with gains and losses for all parties, including the UNP, the SLFP, and the ERPLF. Although the PA was successful in gaining control of provincial councils in elections held in 1997 and 1999, its share of the popular vote showed it running neck and neck with the opposition. For example, in elections held in April 1999 in non-Tamil areas, the PA gained control of all the provincial councils contested, but only achieved 43% of the votes compared to the UNP's 41%. However, district elections for Colombo held on 10 October 2000 saw the UNP take 43.45% of the vote to the People's Alliance's 38.86%. In local elections held in March 2002, the UNP won a sweeping victory, taking all but 5 of the 222 councils that voted.

JUDICIAL SYSTEM

Civil law is based on Roman-Dutch law introduced during the period of Dutch rule, but in the area around Kandy, an indigenous type of law prevails. Criminal law is British. Tamil Hindus and Muslims have their own laws governing property disposition and certain observances. Sri Lanka's judicial system includes district courts, magistrates' courts, courts of request (restricted to civil cases), and rural courts.

In criminal cases, the Supreme Court (composed of a chief justice and 6 to 10 associate justices, all appointed by the president) has appellate jurisdiction. Under the 1978 constitution, the other high-level courts are the Court of Appeal, High Court, and courts of first instance. The president also appoints judges to the Court of Appeals and the High Court. A judicial service commission appoints transfers and dismisses lower court judges. Sinhala is the official language of the courts.

The constitution declares the independence of the judiciary, and the courts appear to be independent in practice.

Defendants are guaranteed a number of procedural due process protections, but trials under the Emergency Regulations (ER) and the Prevention of Terrorism Act (PTA) lack significant procedural safeguards.

ARMED FORCES

In 2005, Sri Lanka's armed forces had 111,000 active personnel, with 5,500 reservists. The Army numbered 78,000. Equipment included 62 main battle tanks, 15 reconnaissance vehicles, 62 armored infantry fighting vehicles, 192 armored personnel carriers, and 963 artillery pieces. The Navy had personnel numbering 15,000, manning five bases with up to 113 patrol/coastal vessels and four amphibious landing craft. The Air Force had 18,000 personnel and operated 21 combat-capable aircraft that included 13 fighter ground attack aircraft, in addition to 14 attack helicopters. The country's paramilitary forces had an estimated 88,600 active personnel in a police, national guard, or home guard role. Sri Lankan forces are deployed in four countries as United Nations peacekeepers. In 2005, the defense budget totaled $564 million.

INTERNATIONAL COOPERATION

Sri Lanka was admitted to the United Nations (UN) under the name Ceylon on 14 December 1955; it is a member of ESCAP and several nonregional specialized agencies, such as the FAO, UNESCO, UNIDO, UNCTAD, the World Bank, IAEA, ILO, and the WHO. The nation is also a member of the Asian Development Bank, the Commonwealth of Nations, the Colombo Plan, the WTO, G-15, G-24, and G-77. Sri Lanka is a member of the South Asian Association for Regional Cooperation (SAARC), which promotes economic and social development for its South Asian member states. The country holds observer status in the OAS.

Sri Lanka was a founding member of the Nonaligned Movement. The government has offered support to UN missions and operations in Western Sahara (est. 1991), Burundi (est. 2004), Haiti (est. 2004), and the Democratic Republic of the Congo (est. 1999). In environmental cooperation, Sri Lanka is part of the South Asia Cooperative Environment Program (SACEP), the Basel Convention, the Convention on Biological Diversity, Ramsar, CITES, the Kyoto Protocol, the Montréal Protocol, MARPOL, the Nuclear Test Ban Treaty, and the UN Conventions on the Law of the Sea, Climate Change, and Desertification.

ECONOMY

Since 1977, the Sri Lankan economy, once dominated by agriculture, has experienced strong growth in its industrial and services sectors. While annual growth in agricultural output averaged only 2% between 1988 and 1998, industry and services expanded at annual rates of 7.1% and 5.4%, respectively. From 1988 to 2000, agriculture's share of gross domestic product (GDP) declined from 26.3% to 21%, although employing still about 35% of the labor force. In 2004, agriculture made up an estimated 19.1% of GDP and employed about one-third of the workforce. Overall, real GDP grew at an average annual rate of 5.2% from 1991 to 2000. Over the 200105 period, the GDP growth rate averaged 3.8%.

Economic expansion has been led by manufactures, particularly textiles and apparel, which is also the leading net earner of foreign exchange. The textile sector grew 16.25% in 2000 (up from 7.5% in 1999), which in turn contributed to a 20% growth in exports. Privately owned export-oriented factories produce over 95% of manufacturing output. Manufacturing is generally the leading growth area of the economy. In addition to the textile industry, the production of food and beverages, as well as that of chemical and rubber-based goods, is also important. Services, accounting for 54.7% of GDP in 2004, are led by tourism, the second-largest foreign exchange earner.

From 1973 to 1977, the channeling of resources into social welfare programs, combined with high oil prices and frequent droughts, helped depress the economy and business growth. In 1977, the new United National Party (UNP) government lifted most price controls, shifted government spending into capital investment, liberalized foreign exchange and import restrictions, and eliminated some government monopolies to permit more business competition. These policies help raise the average annual increase in real GDP to 6% from 1978 to 1981, compared to 3% from 1971 to 1977. However, coinciding with the second oil shock (197879), a high level of inflation accompanied the increased growth. From 1980 to 1985, though exports continued to grow at an average 20% a year, real GDP growth slowed to an average 4.7% a year. In 1983, countrywide riots that left nearly 400 dead and 79,000 homeless signaled the beginning of what proved to be years of separatist violence by the Tamil Tigers. In the latter half of the 1980s, the national economy was faced with grave challenges: escalating defense expenditures to combat the insurgency; recurrent drought; depressed world prices for major export crops, tea, and coconut-based goods; and stagnant government revenues. These conditions produced a resurgence of inflation, increasing unemployment, critical current account deficits, and stagnating economic growth. By 1989, GDP growth had fallen to 2%, while annual export growth fell to 5% and the official unemployment rate reached 18%. Worsening economic indicators spurred renewed stabilization and structural adjustment efforts by the government with emphases on tightened monetary and fiscal policies, and privatization to stimulate investment.

In the 1990s, average economic growth rebounded to above 5%, led by expansions in manufactures and services. As was true for much of the rest of the world, strong growth in 2000 foundered in 2001 due to a number of factors, including the global economic slowdown; an attack on Colombo's international airport by the Liberation Tigers of Tamil Eelam (LTTE), which harmed the tourism industry; a severe drought; and the 11 September 2001 terrorist attacks on the United States, which sharply reduced foreign direct investment and resulted in reductions in travel and spending. Unemployment swelled, as did the budget deficit, which reached 10.9% of GDP. A moderate recovery was brought about in 2002, due in part to a Norwegian-brokered peace agreement with the LTTE, revived consumer and business confidence, which led to increases in domestic demand and tourism, and an easing of the drought, which brought down agricultural prices. Imports of goods and services still increased faster than exports, however, and the current account deficit averaged -1.8% of GDP over the 200105 period. In 2001, the government switched to a flexible exchange rate system. Inflation averaged 9.7% over the 200105 period.

The conflict between the Sinhalese government and the Tamil Tigers of the north and east for a largely independent homeland overshadows the economy. In April 2004, the United People's Freedom Alliance (UPFA, of which the People's Alliance, PA, is the largest constituent), won the parliamentary election; it has been less willing to make compromises with the LTTE than the UNP, which won the December 2001 parliamentary election and ushered in a cease-fire in 2002. Mahinda Rajapakse of the PA won the presidential election in November 2005, and was expected to take a hard line on negotiations with the LTTE. Increased political volatility following the presidential election was likely to have a dampening effect on the tourism industry. Average annual real GDP growth was forecast to stand at 5.7% in 200607.

INCOME

The US Central Intelligence Agency (CIA) reports that in 2005 Sri Lanka's gross domestic product (GDP) was estimated at $86.7 billion. The CIA defines GDP as the value of all final goods and services produced within a nation in a given year and computed on the basis of purchasing power parity (PPP) rather than value as measured on the basis of the rate of exchange based on current dollars. The per capita GDP was estimated at $4,300. The annual growth rate of GDP was estimated at 4.7%. The average inflation rate in 2005 was 11.2%. It was estimated that agriculture accounted for 17.7% of GDP, industry 27.1%, and services 55.2%.

According to the World Bank, in 2003, remittances from citizens working abroad totaled $1.438 billion (about $75 per capita) and accounted for approximately 7.9% of GDP. Foreign aid receipts amounted to about $35 per capita.

The World Bank reports that in 2003 household consumption in Sri Lanka totaled $13.92 billion (about $725 per capita) based on a GDP of $18.2 billion, measured in current dollars rather than PPP. Household consumption includes expenditures of individuals, households, and nongovernmental organizations on goods and services, excluding purchases of dwellings. It was estimated that for the period 1990 to 2003, household consumption grew at an average annual rate of 4.8%. In 2001, it was estimated that approximately 43% of household consumption was spent on food, 7% on fuel, 4% on health care, and 8% on education. It was estimated that in 1997, about 22% of the population had incomes below the poverty line.

LABOR

In 2005, Sri Lanka's workforce was estimated at 8.08 million. As of 2003, the agricultural sector accounted for 34.3% of the labor force, with 23.4% in industry, 38.7% in the service sector, with the remaider in undefined occupations. Unemployment in 2005 was estimated at 8.4%.

The country has a strong trade union tradition, and the constitutional right to form unions is respected by the government. Approximately 25% of the nationwide labor force are union members, with over 70% of agricultural workers unionized as well. The largest trade union federations are the Ceylon Workers' Congress, the National Workers' Union, the Democratic Workers' Congress, and the Ceylon Federation of Labor. With the exception of essential workers, employees have the right to strike. It is illegal for an employer to discriminate against those who engage in union activity. Collective bargaining is widely practiced.

Thousands of Sri Lankan workers are employed abroad, mostly in Saudi Arabia, Kuwait, the United Arab Emirates, Singapore, Hong Kong, Bahrain, Qatar, and Oman, many of them as housemaids and nannies valued for their literacy and English-language skills.

There is no national minimum wage, but there are minimum wages set in individual sectors and industries. The average such wage was $33.52 per month in industry, commerce, and the service sector, and $1.42 per day in agriculture as of 2001. It was estimated that 16,500 children younger than the minimum legal age of 14 were employed full time, with many thousands more employed in domestic service. The legal workweek is set at 45 hours.

AGRICULTURE

Agriculture, the mainstay of the economy, employs about 35% of the working population and contributes 19% to GDP. About 75% of those working in agriculture are engaged in the production of tea, rubber, and coconuts, the three crops that represent nearly 60% of Sri Lanka's agricultural land. Tea production in 2004 was 303,000 tons. Rubber production was 92,000 tons, and coconut production totaled 1,950,000 tons.

Rice is the major staple crop, produced over much of the country. The major growing districts are Kurungala in the Northwestern Province, Ampara in the Eastern Province, Polonnaruwa and Anuradhapura in the North Central Province, and the Mahaweli area; together these areas account for 55% of production. The maha rice season crop (63% of production) is planted in the fall and harvested in the spring, while the yala rice crop (37%) is planted in the summer and harvested in the fall. Production of rice reached 2.5 million tons in 2004. Lesser crops include sugar, pepper, cinnamon, chilies, sesame, cardamom, tobacco, cashew nuts, betel leaves, coffee, and cocoa.

Under the Land Reform Law of 1972, all property holdings exceeding 20 hectares (50 acres), except for property controlled by publicly owned companies, were vested in the Land Reform Commission for redistribution; a total of 226,373 hectares (559,377 acres) were redistributed, including one-fifth of the land under tea. Under the Land Reform Amendment Bill of 11 October 1975, all publicly owned estates (including the major British-owned tea and rubber plantations) were nationalized. The Janatha Estate Development Boards and the Sri Lanka Plantation Corporations account for 60% of total tea production and 30% of the total area under rubber cultivation.

ANIMAL HUSBANDRY

Sri Lanka's livestock population is comparatively small; in 2005 there were 1,218,000 head of cattle, 316,000 water buffalo, 425,000 goats, 83,000 hogs, 12,000 sheep, and 11,600,000 chickens. Animals are not of high quality, partly as a consequence of religious considerations and primitive agricultural conditions. The natural pasturage lacks both nutritional value and palatability, and prospects for new pastures are not promising. In 2005, milk output was 174,100 tons and 52,000 tons of eggs were produced.

FISHING

Fishing produces less than the country's needs and yields a meager income to fishermen, most of whom use primitive boats and gear in the shallow waters surrounding the island. In 2003, the total fish catch was estimated at 289,949 tons, up from 165,397 tons in 1990. Exports of fish products were valued at nearly $99.5 million in 2003.

FORESTRY

About 30% of the total land area consists of forests. In 2004, 6,340,000 cu m (224 million cu ft) of roundwood were cut. Forestry products included 61,000 cu m (2.1 million cu ft) of sawn timber and 5,646,000 cu m (199 million cu ft) of firewood for domestic use.

MINING

Sri Lanka's major mineral commodities are graphite and colored gemstones. However, 18 years of civil war, prolonged drought, high oil prices, and an electricity crisis have crippled its economy. In 2003, the country's gross domestic product (GDP) grew by 5.5%. Mining and quarrying accounted for 1.8% of GDP in 2003. Graphite production (all grades) totaled 3,387 metric tons in 2003, down from 3,619 metric tons in the previous year. The island's gem industry is world famous. In the Ratnapura district, there are considerable deposits of sapphire, star sapphire, ruby, star ruby, cats eye, chrysoberyl, beryl, topaz, spinel, garnet, zircon, tourmaline, quartz, and moonstone. A lapidary industry was established for the international marketing of cut and polished precious and semiprecious gemstones. Although output of star rubies and star sapphires were not available for 2003, production of cat's-eye totaled 45,228 carats, while production of rubies came to 12,934 carats; sapphires to 773,547 carats; and all other gemstones (other than diamonds, precious and semiprecious), came to 1,828,400 carats in 2003.

Large quantities of kaolin and apatite have been found, and there are large surface deposits of quartz sand, with kaolin and quartz sand mined. Limestone dating from the Miocene era is quarried from the Jaffna peninsula and used in the manufacture of cement. In the dry-zone coastal areas, salt is manufactured by solar evaporation of seawater. In addition, Sri Lanka produces clays (brick, tile, and for cement production), feldspar, and phosphate rock, and presumably produces varieties of stone and sand and gravel. Cement production and petroleum refining were among the Sri Lanka's leading industries in 2003, with diamonds and petroleum products import exports. The beach sands contain large quantities of ilmenite, rutile, monazite, and zircon, although none were produced from 2000 through 2003. There are plans to revive mineral sands operations, including of garnet sands discovered along the southern coastline. No rare earth metals were produced from 2000 through 2003. The cerium, yttrium, zirconium, niobium, tantalum, thorium, and uranium groups have been found, and thorianite appears to be widely distributed.

ENERGY AND POWER

Sri Lanka, as of 1 January 2004, had no proven reserves of crude oil or dry natural gas, nor any coal reserves as of 2003. All hydrocarbon needs were met by imports.

As of 1 January 2004, Sri Lanka had only a modest crude oil refining capacity at 48,000 barrels per day. In 2002, refined petroleum product output averaged 46,510 barrels per day. Imports of all petroleum products, including crude oil, averaged 78,030 barrels per day. Demand that year for refined oil products averaged 77,500 barrels per day. There were no imports or demand for natural gas in 2002. Coal imports and consumption that year each totaled 1,000 tons of hard coal.

Electric power generating capacity in 2002 totaled 2.224 million kW, of which hydropower accounted for 1.161 million kW of capacity, followed by conventional thermal capacity at 1.060 million kW, and geothermal/other at 0.003 million kW. Power generation in 2002 totaled 6.669 billion kWh, of which 59.9% was from fossil fuels and 39.96% from hydropower. Geothermal/other made up the rest. Consumption of electricity in 2002 was 6.202 billion kWh.

Sri Lanka meets all of its crude oil requirements with imports.

INDUSTRY

Since 1977, the government's market-oriented economic policies have encouraged industrial growth in the private sector, particularly in textiles, food and beverages, wood products, rubber and plastics, and other consumer goods. While most small- and medium-sized enterprises are now privately owned, state ownership continues to predominate in basic industries such as oil refining and electric power generation. In the period 1990 to 2001, 38 manufacturing companies were privatized, including Lanka Lubricants (sold to Caltex in 1994), Colombo (bottled) Gas Co. (sold to Shell Oil in 1995), Ceylon Steel Corp. (sold to Hanjung of Korea in 1996), and Sri Lanka's only flour mill (sold to Prima Ltd. of Singapore). In 2004, industry accounted for about 26.2% of GDP, of which manufacturing made up about 16%; construction, 7.5%; mining, 2%; and electrical power and water, 1%.

Textiles and apparel is the largest industrial sector, accounting for 40% of manufacturing output, and, with 350,000 textile workers, the largest industrial employer. There are about 800 textile factories, the largest 100 accounting for about half of production. The sector is the leading net earner of foreign exchange. Apparel, which accounts for about 35% of industrial output and 34% of manufacturing employment, makes up 50% of total exports. The United States is Sri Lanka's main apparel market, buying up to 65% of Sri Lanka's apparel exports. In 2005, quotas under the world Multi-Fiber Agreement (MFA) were phased out, and now Sri Lanka's garment industry faces the challenge of a more competitive world market, although only the largest operations appear to have the technological and marketing capacities to effectively compete.

Food, beverages, and tobacco, the second-largest manufacturing sector, accounting for about 22% of industrial output, depends largely on the domestic market. The third-largest industrial sectorchemicals, petroleum, and rubber productsaccounts for some 19% of industrial output. Sri Lanka's only oil refinery is a state-owned facility with a capacity of 68,000 barrels per day. The nonmetallic mineral sector is important, as are other nontraditional sectorssmaller fabricated metal products and basic metal products. Paper industries have grown in recent years.

The government's industrial policy includes encouraging investment in industries in which it believes Sri Lanka has a comparative advantage. The Board of Investment (BOI) offers various incentives for investment in five industry segments: electronics and components for electronic assembling, industrial and machine tools (a new emphasis), ceramics and glassware, rubber-based industries, and light and heavy engineering. Another key policy element is deregulation, and in 2001, a committee on deregulation was formed to study regulatory impediments to Sri Lanka's industrial development.

SCIENCE AND TECHNOLOGY

With the launch in 1978 of a free-trade zone north of Colombo, Sri Lanka was able to establish such high-technology enterprises as the manufacture of integrated circuits and control and relay panels. In 1982, two US electronics manufacturers contracted to build semiconductor assembly plants in the zone. The textile industry, located there, ranked nineteenth in 1985 as a supplier to the United States. For the period 19902001, there were 46 technicians and 191 scientists and engineers per million people engaged in research and development. In 2002, high technology exports were valued at $19 million, or 1% of the country's manufactured exports.

The Sri Lanka Association for the Advancement of Science, founded in 1960, is located in Colombo. Also in the city are the Ceylon Institute of Scientific and Industrial Research, founded in 1955; Natural Resources, Energy, and Science Authority of Sri Lanka (founded originally in 1968 as the National Science Council); Colombo Observatory, founded in 1907; and the National Academy of Sciences of Sri Lanka, founded in 1976. The country also has research institutes devoted to coconuts, horticulture, medicine, rice, rubber, tea, and veterinary science. The Royal Botanic Gardens was founded in 1821 at Peradeniya, and a natural history museum was founded at Colombo in 1985. Sri Lanka has 13 universities and colleges offering courses in basic and applied sciences. In 198797, science and engineering students accounted for 34% of college and university enrollments.

DOMESTIC TRADE

Sri Lanka's economy is highly dependent on domestic trade. Wholesale and retail trade is the largest single sector of the economy, accounting for 21% of GDP. Most retail stores are small and unspecialized. Marketing and distribution are dominated by the strong and well-developed cooperative movement, which the government assists with loans, price guarantees, and supervision. Although government monopolies played a major role in the wholesale distribution of imported goods, as well as many domestic commodities, during the 1970s and 1980s, liberalization policies since the late 1980s have decreased direct state involvement in domestic trade. The government still controls much of the food sector as a matter of national security.

Colombo is the nation's commercial center, with a large business section adjoining the traditional bazaar, a large area of small retail shops and stalls. Kandy is a market center for locally produced tea, rubber, rice, cacao, and handicrafts. Galle is an agricultural market center and Negombo is a major market center for fishing and handicrafts. Jaffna hosts a number of local markets for fishing, agriculture, and industries, including textiles, tobacco processing, and chemical and cement production. The city also serves as a trading place for elephants, peppers, and other commodities. There are several advertising firms in Colombo, some of which have connections abroad. Products are advertised in newspapers, trade journals, motion picture theaters, and on commercial radio and television.

The usual business hours are from 9 am to 5 pm, Monday through Friday. Banks are open from 9 am to 1 pm or 3 pm, Monday through Saturday. Shops are open from 10 am to 7 pm, Monday through Friday, and on Saturdays from 10 am to 3 pm. Sundays and full moon Poya days are nonworking days in Sri Lanka.

FOREIGN TRADE

Clothing and apparel is now the country's leading foreign exchange earner, accounting for over half of export receipts. Sri Lanka's traditional primary exports have been tea, natural rubber, and coconut products, especially desiccated coconut and coconut oil. However, the share of total export earnings accounted for by these three commodities declined steadily from 87% in 1972 to 48% in 1985 and 16% in 1999; tea decreased from its 58% share of total export value in 1972 to a low of 8.2% in 1995. Tea increased to 12.8% of export value in 2004, however. Declining export shares for the country's agriculturally based exports are due to adverse weather conditions as well as rapid growth in the export earnings of industrial products.

Sri Lanka still produces a large portion of the world's tea exports (25%). In 2004, Sri Lanka's major exports were garments and textiles (48.8% of total exports); tea (12.8%); diamonds and gems (4.3%); and petroleum products (1.7%). The country's primary imports in 2004 were textiles (19.2% of total imports); mineral products (16.7%); machinery and transportation equipment (14.1%); and chemicals (2.6%). Sri Lanka's leading markets in 2004 were the United States (32.4% of total exports); the United

Country Exports Imports Balance
World 4,723.0 6,038.7 -1,315.7
United States 1,762.9 218.3 1,544.6
United Kingdom 590.0 262.7 327.3
Belgium 258.1 168.3 89.8
Germany 199.2 121.5 77.7
India 170.3 834.0 -663.7
Japan 140.2 355.0 -214.8
Russia 126.5 126.5
United Arab Emirates 119.4 265.9 -146.5
France-Monaco 93.5 78.6 14.9
Netherlands 77.5 50.6 26.9
() data not available or not significant.

Kingdom (13.5%); Germany (4.8%); and Japan (2.7%). Leading suppliers included India (18% of total imports); Singapore (8.7%); Hong Kong (7.7%); and Japan (5.1%).

BALANCE OF PAYMENTS

Sri Lanka's balance-of-payments position is highly sensitive to price changes in the world market because it has traditionally depended in large part on a few export crops to pay for its imports. Since 1983, sharply rising defense expenditures, a decline in tourism caused by continuing civil violence, and slumping world tea and coconut prices have combined to exert pressure on the balance of payments. The deficit has also been partially offset by substantial foreign exchange earnings from tourism and from remittances by Sri Lankans working abroad. The current account deficit has declined each year since 1994, when it stood at $860 million.

Current Account -159.8
     Balance on goods -871.6
         Imports -6,004.8
         Exports 5,133.2
     Balance on services -301.2
     Balance on income -192.6
     Current transfers 1,205.3
Capital Account 61.4
Financial Account -221.9
     Direct investment abroad -27.3
     Direct investment in Sri Lanka 228.7
     Portfolio investment assets 15.5
     Portfolio investment liabilities -13.9
     Financial derivatives
     Other investment assets -93.8
     Other investment liabilities -331.1
Net Errors and Omissions -32.3
Reserves and Related Items 352.6
() data not available or not significant.

Export growth in 1999, however, slowed considerably to 2%, and earnings from tea exports declined 40% due to the impact of the Russian economic crisis in 1998.

In 2000, exports increased by close to 20% to $5.5 billion, and exports of garments and tea did very well. Other exports, such as food, rubber products, machinery, and processed diamond exports, also performed well that year. Sri Lanka floated the rupee in 2001, and the central bank began employing currency controls. Since then, the controls have been relaxed. In addition, the government imposed an import duty surcharge to stem the flow of imports. The country's external debt stood at $10.85 billion at the end of 2004. The trade deficit widened from some $900 million in 2003 to $1.4 billion in 2004, as exports increased to $5.8 billion and imports rose to $7.2 billion. The current account deficit, estimated at $587.3 million in 2004, was forecast to widen to 3.9% of GDP in 2006 as the debt relief related to the 26 December 2004 Indian Ocean tsunami is withdrawn and the current transfers surplus falls in line with lower inflows of aid. The current account deficit was projected to narrow to 3.1% of GDP in 2007. Over the 200105 period, the current account balance averaged -1.8% of GDP.

BANKING AND SECURITIES

The Central Bank of Sri Lanka, established in 1949, began operations in 1950 with a capital of r15 million contributed by the government. The sole bank of issue, it administers and regulates the country's monetary and banking systems.

Although Sri Lanka has a fairly well-diversified banking system, the two largest banks, the Bank of Ceylon and Peoples Bank, are state owned and operate inefficiently. They are considered to be incompetent, primarily owing to excessive government influence in their lending operations and overstaffing. The World Bank has identified the dominance of these two banks as a major constraint on the development of the financial sector. The simple solution, privatization, is not an option given the current political climate. Together, they accounted for two-thirds of commercial bank deposits in 1999.

In addition to the central bank and the two state-owned banks, there are 9 private domestic commercial banks, 14 foreign banks, a national savings bank, 6 regional rural development banks, 2 large development finance institutions, a mortgage bank, and 13 merchant banks. US banks operating in Sri Lanka include Citibank and American Express. The International Monetary Fund reports that in 2001, currency and demand depositsan aggregate commonly known as M1were equal to $1.4 billion. In that same year, M2an aggregate equal to M1 plus savings deposits, small time deposits, and money market mutual fundswas $6.1 billion. The money market rate, the rate at which financial institutions lend to one another in the short term, was 21.24%.

The Colombo's Brokers Association operates an organized stock market, whose transactions have grown significantly since the 1984 tea export boom increased liquidity in the economy. The Colombo Stock Exchange (CSE) was established by the Association of Stock Brokers in 1987 and has established itself as one of the most efficient in the region. In 2001, there were 238 companies listed on the exchange, with a combined market capitalization of $1.3 billion. The turnover ratio was 13.2%. The exchange was adversely affected by the pullout of foreign investors from the region after the nuclear tests in India and Pakistan. The market was also affected by the Asian economic crisis and the Russian financial crisis, suffering a 14% decline in 1998 and a 26% decline in 2000. The CSE Milanka was up 47.6% in 2001, at 1,031. As of 2004, a total of 245 companies were listed on the CSE, which had a market capitalization of $3.657 billion. The turnover ratio in that same year was 18.4%. In 2004, the CSE Milanka rose 9.3% from the previous year to 2,073.7.

INSURANCE

Insurance was almost wholly a foreign enterprise until 1 January 1962, when the life insurance business was nationalized. The stateowned Insurance Corp. of Sri Lanka now has a monopoly on life insurance and all other insurance. In 1997, there were six insurance companies (two of which were state owned), the National Savings Bank, and two pension funds. Foreign insurers operate in the market in reinsurance and shareholding. In 2003, the value of all direct insurance premiums written totaled $239 million, of which nonlife premiums accounted for $137 million. In that same year, Sri Lanka's top nonlife and life insurer was the Insurance Corp. of Sri Lanka, with gross written nonlife premiums of $54.4 million and gross written life insurance premiums of $33.9 million.

PUBLIC FINANCE

Fiscal targets are of particular concern because the government's chronic high fiscal deficits have led to problematic national debt. Total government debt as a percent of GDP rose from 85.8% in 1997 to 113.6% in 2002. By 2005, it had dropped slightly to 98.5% of GDP. The main causes of the persistent high budget overruns are an associated combination of welfare and pension expenditures, weak tax administration, and loses by the Ceylon Electricity Board (CEB). In September 2002, the government enacted a Welfare Benefit Law aimed at clarifying welfare eligibility and establishing penalties to reduce politicization and mistargeting. In

Revenue and Grants 266,998 100.0%
     Tax revenue 221,786 83.1%
     Social contributions 2,630 1.0%
     Grants 7,079 2.7%
     Other revenue 35,503 13.3%
Expenditures 388,861 100.0%
     General public services 133,679 34.4%
     Defense 49,163 12.6%
     Public order and safety 14,972 3.9%
     Economic affairs 69,261 17.8%
     Environmental protection
     Housing and community amenities 11,916 3.1%
     Health 24,946 6.4%
     Recreational, culture, and religion
     Education 37,209 9.6%
     Social protection 47,715 12.3%
() data not available or not significant.

January 2003, the government passed the Fiscal Management Responsibility Act (FMRA), setting medium-term deficit targets and mandating "preelection budget reports" to discourage preelection handouts, as well as a new Board of Investment (BOI) Law eliminating the BOI's power to grant extralegal incentives. These measures helped secure International Monetary Fund (IMF) approval on 8 April 2003 for a three-year program under the combined Poverty Reduction and Growth Facility and Extended Fund Facility (PRGF and EFF). The PRGF-EFF program was in direct support of the government's program for 200306 aimed at poverty reduction through private-sector growth. Historically, Sri Lanka, though low on per capita income, has been relatively high on other social welfare indicators such as adult literacy (90%), school enrollment, infant morality, and life expectancy (72 years). The country faced a significant challenge to find ways to maintain welfare and educational standards while bringing the budget deficit under control.

The US Central Intelligence Agency (CIA) estimated that in 2005 Sri Lanka's central government took in revenues of approximately $3.8 billion and had expenditures of $5.4 billion. Revenues minus expenditures totaled approximately -$1.6 billion. Public debt in 2005 amounted to 98.5% of GDP. Total external debt was $11.59 billion.

The IMF reported that in 2002, the most recent year for which it had data, budgetary central government revenues in millions of rupees were 266,998 and expenditures were 388,861. The value of revenues in millions of US dollars was $2,791 and expenditures $4,065, based on a market exchange rate for 2002 of 95.662 as reported by the IMF. Government outlays by function were as follows: general public services, 34.4%; defense, 12.6%; public order and safety, 3.9%; economic affairs, 17.8%; housing and community amenities, 3.1%; health, 6.4%; education, 9.6%; and social protection, 12.3%.

TAXATION

Sri Lanka, as of 2005, had a standard corporate income tax rate of 30% for companies with taxable incomes of over r5 million. Companies with taxable income under that amount are taxed at a 20% rate. However, publicly listed companies that have taxable incomes over r5 million are taxed at a rate of 28.5%. Also, those companies with taxable incomes exceeding r5 million are subject to a 2.5% Human Resource Endowment Fund tax. Profits generated from so-called priority sectors are taxed at rates of 15% and 20%. The higher rate is applied to specialized housing banks, while the lower rate is applied to tourism, agriculture, livestock, fisheries, construction, and exports. Capital gains are not taxed. Dividends distributed out of taxable income and paid to residents and nonresidents are subject to a 10% withholding tax. However, dividends paid to a resident or nonresident company are not considered part of taxable income if any of the following apply: the dividend is already exempt from income tax; the withholding for tax has already been made; or the dividend is part of the dividends received by the payer from another resident firm. Interest income is subject to either a 10% withholding rate or a 15% rate, depending upon the amount of interest received and its source. The 10% applies to interest received that is in excess of r108,000 and is from a bank deposit. The 15% rate applies to interest paid to nonresidents on a loan.

Individual income taxes are graduated, with rates of 0% up to $2,500; 10% for income between $2,500 and $4,300; 20% for income between $4,300 and $6,000; and 30% on the balance. Noncitizens employed in enterprises licensed by the Board of Investment (BOI) are taxed at a flat concessional rate of 15%.

The value-added tax (VAT) is the most important source of government revenue. The VAT has a standard 15% rate for most goods and services supplied in or imported into Sri Lanka. Exports and international transportation are zero rated. In 2003, the government also introduced a new debits tax of 0.1%, to be applied to all current account debits, savings account transactions, and certificates of deposit (when they are cashed in). Exempt from the debits tax are the accounts of the government and international organizations, accounts at foreign currency banking units and accounts maintained for stock exchange transactions, and share investment external rupee accounts (SIERAs), through which foreign purchases on the Colombo Stock Exchange are directed.

Other taxes include excise taxes on over 250 items, local property taxes, and a 6.5% national security levy.

CUSTOMS AND DUTIES

Sri Lanka has a two-band import tariff schedule based on the Harmonized System of Classification. As of 2005, the standard import tariff rates were 10% and 25%, although a few items carried tariffs of 5% or 35%. The tariff on automobiles is 25%. All imports of textile materials, yarn, and related intermediate and capital goods required for the garment export industry are free of import duty, as are a number of products critical to economic development, such as computers, medical and dental equipment, telecommunications equipment, and agricultural seeds and machinery. Within Sri Lanka's free trade zone, imports of industrial and construction equipment, base metals, and coal and coke are duty free. Export duties are levied on tea, rubber, and coconut products.

FOREIGN INVESTMENT

The great agricultural enterprises, insurance companies, and banks were developed originally by foreign capital. In 1959, foreigners owned almost 36% of the country's rubber acreage and 6% of the tea plantations; 80% of the insurance business was written by foreign companies, and the banking business was largely a monopoly of British and Indian firms. After 1961, when nationalization became widespread, private investors were reluctant to place new funds in Sri Lanka. Consequently, during the 1960s, the country had to depend almost entirely on loans and short-term credits. During the 197077 period, foreign companies, principally Japanese, were more willing to collaborate with public-sector enterprises.

With the change of direction in the government's economic policy since 1977, foreign investment has flowed more freely into the private sector. The Greater Colombo Economic Commission (GCEC)replaced in 1992 with the current Board of Investment (BOI)and the Foreign Investment Advisory Committee promoted outside investment in export-oriented and high-technology industries, largely through joint ventures in which majority equity was held by Sri Lankan companies. Exceptions to this policy were the large luxury hotels and construction projects for the Mahaweli development program, in which foreign partners hold majority shares. The GCEC's Investment Promotion Zone, the country's first free-trade zone (established in 1978), attracted 116 foreign companies by 1985; 96 firms operating in the zone, chiefly clothing manufacturers, employed 35,786 workers and made capital investments with a total value of r286 million during that year. Sri Lanka now has six free-trade zones, also called export processing zones, administered by the BOI, plus three industrial parks that contain both export-oriented and nonexport-oriented enterprises.

The main law governing foreign investment is Law No. 4 of 1978, amended in 1980, 1983, and 1992, after which it has been generally known as the BOI Act. Under the BOI Act, foreign companies are separated into two categories: Those that fall under Section 16 are subject to the "normal" laws, and those falling under Section 17 qualify for special BOI-specified incentives. In general, incentives are targeted at investments that are export oriented, infuse substantial capital into the economy, and/or transfer advanced technology. In 2002 the BOI announced a new investment incentive structure for Section 17 enterprises that consists of two incentive programs, one for medium-sized investments and one for large infrastructure projects. Incentive Program 1 is focused on "designated industries"nontraditional export sectors for which the government has determined Sri Lanka has a comparative advantage, which are electronics, industrial and machine tools manufactures, ceramics, glassware, mineral-based industries, rubber-based industries, and light and heavy engineering industriesplus export-oriented services, IT-related companies, regional operating headquarters, agribusiness investments over r5 million (about $51,000) and small-scale infrastructure projects. These are eligible for a three-year tax holiday, preferential income tax rates of 10% in the fourth and fifth years, and a preferential income tax rate of 15% thereafter, as well as duty-free imports during the project. Incentive Program 2 is for projects over r1.2 billion (about $15.5 million) involving electrical power, highways, airports, seaports, railways waterways, etc. According to the size of the investment, infrastructural projects qualify for tax holidays of 510 years, a preferential 15% tax rate thereafter, and duty-free imports of capital goods. All BOI-approved projects include no restrictions on the repatriation of profits and dividends, and free transferability of shares. The BOI's new structure of incentives is part of Sri Lanka new program of initiatives designed to attract more foreign direct investment (FDI), averaging about $125 million per year. FDI inflows averaged 207% of GDP over the 200105 period. The total stock of FDI in Sri Lanka has been estimated at about $3 billion. The largest investments have been in the power sector, followed by the textiles, telecommunications, and chemises. Reliable statistics on FDI by country are not available, but the US State Department estimates that the largest investors have been South Korea, Japan, the United States, Australia, Hong Kong, Singapore and the United Kingdom. Sri Lanka has negotiated bilateral investment treaties (BITs), including investment protection provisions, with a number of countries.

A major step toward increasing investor confidence was taken with the institution of the peace process following the cease-fire between the government and the LTTE in February 2002. At the end of 2002, the government relaxed its investment rules, allowing 100% foreign equity in a number of servicesbanking, finance, insurance, stock brokerage, construction of residential buildings and roads, supply of mass transportation, telecommunications, production and distribution of energy and professional services. Other sectors remain restricted and subject to case-by-case approval for foreign equity exceeding 49%, including most plantation enterprisestea, rubber, cocoa, sugar and spicesand there remains a short prohibited list, which, except for franchises, keeps foreigners out of small scale enterprises. The government's policy of deregulation of the investment climate reflects pressure from the IMF, the World Bank, the Asian Development Bank (ADB), and its own precarious foreign reserve position.

ECONOMIC DEVELOPMENT

Since independence, successive governments have attempted ambitious economic development programs with mixed results. The nationalization in 1962 of three Western oil companies and in 1975 of large rubber and tea plantations was intended to end the nation's economic dependence and neocolonialism, and to create an egalitarian socialist society. The goals of the last five-year plan for 197276to achieve an economic growth rate of 6% annually, to create new jobs, and thereby to ameliorate unemploymentwere not met, in part because of drought and unexpected increases in the costs of crude oil, fertilizer, and other imports.

The United National Party (UNP) government, elected in 1977, chose as the centerpiece of its development strategy the Mahaweli hydroelectric irrigation resettlement program, the largest development project ever undertaken in Sri Lanka. The project involved diverting the Mahaweli Ganga in order to irrigate 364,000 hectares (900,000 acres) and generate 2,037 million kwh of hydroelectricity annually from an installed capacity of 507 Mw. Launched in 1978, construction was largely completed by 1987, at a cost of about $2 billion. Even as the UNP government launched this massive capital program, it sought to encourage private investors, limit the scope of government monopolies, and reduce subsidies on consumer products. Foreign trade, investment, and tourism were all encouraged by the government authorities. In 1986, foreign aid rose 23% in real terms over 1985, largely to finance further massive hydroelectric projects.

While government development policies resulted in moderate growth during the late 1970s and early 1980s, the outbreak of civil war in 1983 led to a rapid rise in defense spending (from 1% of GDP in 1980 to over 4% in 1996), exacerbating structural weaknesses in the Sri Lankan economy. By 1989, rapidly declining economic growth and worsening fiscal and balance-of-payment problems reached crisis proportions, prompting renewed stabilization and adjustment efforts. Corrective policies involved stimulating savings through new banking regulations and other monetary-tightening measures, reduction of subsidies on wheat and fertilizers, government expenditure reductions, currency devaluation, privatization of many state enterprises, and other incentives for private investment. These measures resulted in greatly improved economic performance in the early 1990s, despite unfavorable weather and the ongoing insurgency.

In 1996, as the market showed signs of weakening, the government reaffirmed its free-market policies. From 1997 to 2001, however, the economy was whipsawed between a series of exogenous shocks and political pressures to maintain welfare expenditures. In 1998, the insecurity arising from the Tamil Tiger separatist campaign was aggravated by Pakistan's and India's nuclear tests, and the aftermath of the Asian financial crisis. Recovery in 1999 and 2000 was cut short in 2001 by the global economic slowdown, the LTTE terrorist attack on the country's international airport in July, the 11 September terrorist attacks on the United States, and the onset of severe drought, all of which combined to produce Sri Lanka's first year of economic contraction on record. The year 2002, by contrast, was marked by hopeful developments. In February, the Norwegian-brokered cease-fire between the LTTE and the government was reached, and in May, the end of drought conditions meant the restoration of reliable power supplies, which also helped bring down agricultural prices.

Laws encompassing welfare reform, tax reform, and investment deregulation were passed, and, in January 2003, the Financial Responsibility Act (FRA) was adopted, setting a course to bringing the budget deficit down to below 5% of GDP by 2006, and limiting government borrowing to less than 10% total revenue. In all, 36 new laws were introduced by the government to buttress the economy's financial stability and the government's economic program adopted for 200306. The three-year program aimed at the reduction of poverty through private-sector growth. The strategy focuses on creating conditions conducive to private-sector growth and a sound fiscal position, and for helping establish lasting peace through relief, rehabilitation, and reconstruction (RRR). The program is being pursued in close conjunction with a three-year arrangement with the IMF under its Poverty Reduction and Growth Facility and Extended Fund Facility (PRGF/EFF) with a credit line of $567 million approved in April 2003. Although aiming at sustained growth of 810% in the long run, the medium term goal is an average 6.5% real GDP growth for 200306. To achieve program's objectives, government policies are focused on four areas: (1) restoring fiscal sustainability, including raising revenues by 2.5% of GDP; (2) implementing structural reforms mainly involving deregulation and privatization; (3) creating opportunities for the poor to share more fully in the benefits of economic growth through improvements in infrastructure and education; and (4) garnering resources for reconstruction, including though donor assistance and government investments.

With the election of a government dominated by the United People's Freedom Alliance (of which the People's Alliance, PA, is the largest constituent) in April 2004, the chances for a lasting peace between the government and the Tamil Tigers were jeopardized. Mahinda Rajapakse of the PA won the November 2005 presidential election, and he was expected to take a hard line on negotiations with the LTTE. If the peace process is to succeed, however, the constitution will require substantial revision. The failure to agree to a joint mechanism to distribute aid related to the 2004 Indian Ocean tsunami increased tensions between the government and the rebels. By 2006, Sri Lanka had made impressive progress on privatization and reform of the tax, tariff, and foreign investment regimes. Reducing the fiscal deficit and government debt and containing inflation remain key economic policy objectives.

SOCIAL DEVELOPMENT

Through a provident fund system, the government pays monthly allotments to the aged, sick, and disabled, to destitute widows, and to wives of imprisoned or disabled men. The program is financed by 8% employee contributions and 12% employer contributions. Old-age benefits are paid as a lump-sum grant equal to total contributions plus interest. Medical care is available free of charge in government hospitals and clinics. The law provides for a system of family allowances for families earning less than 1,000 rupees per month.

Although women have equal rights under law, their rights in family matters, including marriage, divorce, child custody, and inheritance are often dictated by their ethnic or religious group. Recent legislative changes have strengthened the rights of women. Sexual harassment is a criminal offense, but it is rarely enforced. Discrimination against women in hiring, promotion, and salary practices remains. Changes to the penal code make the burden of proof more equitable in rape cases. Sexual assault and spousal abuse continue to be serious problems.

Sri Lanka's Tamil population, numbering one million, is not entitled to either Indian or Sri Lankan citizenship, and face systemic discrimination. Human rights abuses are committed by both the government and Tamil separatist forces as part of ongoing hostilities between the two sides. These include poor prison conditions, torture, and arbitrary arrests, including mass arrests.

HEALTH

The government provides medical service free or at a nominal cost to almost everyone, but its health program is hampered by a worsening shortage of trained personnel and hospital beds. Medical standards, traditionally British, are considered excellent, but many Sri Lankan physicians and surgeons have moved their practices abroadparticularly to the United States and the United Kingdom, where remuneration is much higher. There are limited numbers of private hospitals and medical practitioners. Approximately 83% of the population had access to safe drinking water and the same percentage had adequate sanitation. Total health care expenditure was estimated at 3.5% of GDP. As of 2004, there were an estimated 43 physicians, 79 nurses, 3 dentists, and 5 pharmacists per 100,000 people.

Malaria, smallpox, cholera, and plague have been virtually eliminated. Malnutrition, tuberculosis, and the gastrointestinal group of infectious diseases are the chief medical problems. It was estimated that 38% of children under five years of age were malnourished. Immunization rates for children up to one year old were tuberculosis, 89%; diphtheria, pertussis, and tetanus, 91%; polio, 91%; and measles, 88%. Rates for DPT and measles were 99% and 95%, respectively.

The infant mortality rate in 2005 was 14.35 per 1,000 live births. Birth control was used by 66% of married women. As of 2002, the crude birth rate and overall mortality rate were estimated at 16.4 and 6.4 per 1,000 people, respectively. Average life expectancy in 2005 was 73.17 years. The HIV/AIDS prevalence was 0.10 per 100 adults in 2003. As of 2004, there were approximately 3,500 people living with HIV/AIDS in the country. There were an estimated 200 deaths from AIDS in 2003.

HOUSING

Rapid population increase, coupled with a lag in construction during and immediately following World War II, led to an acute housing shortage, high rents, high building costs, and many unsanitary and unfit houses in Sri Lanka's first decades after independence.

Preliminary results from the 2001 census indicated a total of 4,687,157 housing units nationwide. As of 2000, the average household had 4.5 members. About 64% of all households were nuclear families. About 96% of urban dwellings and 73% of rural dwellings had access to safe drinking waters. Only 73% of all households had access to safe sanitation systems. In the tsunami of 2004, about 88,544 housing units were completely destroyed or severely damaged.

EDUCATION

All education from kindergarten up to and including university training is free. Education is compulsory for 10 years, except when schools are not within walking distance of the pupil's home.

Since 1986, the educational system has been separated into two systems based on language, one in which Sinhalese is the medium of instruction and the other in which the medium is Tamil. The public educational system consists of five years of elementary school, three years of junior secondary school, three years of senior secondary school, and two years of preparatory school for those wishing to attend university.

Primary school enrollment in 2001 was estimated at about 99% of age-eligible students. The same year, secondary school enrollment was less than 80% of age-eligible students. It is estimated that about 98% of all students complete their primary education. The student-to-teacher ratio for primary school was at about 23:1 in 2003; the ratio for secondary school was about 20:1.

In 1986, there were nine universities: Colombo, Peradeniya, Moratuwa, Sri Jayawardhanapura, Kelaniya, Jaffna, Ruhuna, Open University, and Batticaloa. These universities operate as independent units under the University Grants Commission, which is funded by the Ministry of Education. Included in the consolidated university system are the former Vidyalankara University (established 1959), previously known as the Vidyalankara Pirivena (established 1875), a celebrated seat of learning for Oriental studies and Buddhist culture; the former Vidyadaya University (established 1959); and the former University of Ceylon (founded 1942). In 1995, universities and equivalent institutions had 2,636 teachers and 63,660 students. The adult literacy rate for 2004 was estimated at about 90.4%, with 92.2% for men and 88.6% for women. As of 2003, public expenditures on education were estimated at 3.1% of GDP.

LIBRARIES AND MUSEUMS

The National Library in Colombo holds 206,300 volumes and is the largest public library in the country. Apart from the libraries in Anuradhapura, Jaffna, Kandy, and a few other towns, most public libraries have only small collections of books. In 2004, there were about 925 public libraries in the country. The University of Peradeniya has holdings of 670,000 volumes, while the University of Colombo has 240,000. There are several special libraries in Colombo, including the National Museum Library, which contains 681,000 volumes (147,000 which are monographs) and has been a depository for Ceylonese and Sri Lankan publications since 1885.

In 2004, there were 15 university libraries, and 67 special libraries in the country.

The five national museums, at Colombo, Galle, Jaffna, Kandy, and Ratnapura, contain collections pertaining to paleontology, zoology, prehistory, archaeology, and ancient art. One of Asia's finest zoological collections, as well as the largest known collection of Sinhala palm-leaf manuscripts, is in the Colombo National Museum. There are Archaeological Site Museums in Anuradhapura (ancient city). Isurumuniya, Mihintale, Veheragala, Vavuniya, Jaffna, Sigiriya, Kandy, Dedigama, Yapahuwa, Panduwasnuwara, Kotte, Matara (Star-Fort), Deegavapiya, and Kataragama. The Dutch Period Museum, the Art Gallery of the Sri Lankan Society of Art, the Natural History Museum, and a university archaeological museum are all in Colombo. There is a National Maritime Museum in Galle.

MEDIA

The central government owns and operates all telephone, telegraph, cable, and radio facilities, except in a few rural districts, which are served by private exchanges. Domestic telephone service is reportedly inadequate, while international service is good. In 2003, there were an estimated 49 mainline telephones for every 1,000 people; about 257,700 people were on a waiting list for telephone service installation. The same year, there were approximately 73 mobile phones in use for every 1,000 people.

The government operates both commercial and noncommercial radio broadcasting services in Sinhala, Tamil, and English and began television service in 1982. The state-owned Sri Lanka Broadcasting Corporation airs broadcasts on AM, FM, and shortwave. There are several privately owned broadcasting stations. As of 1999, there were 12 AM and 5 FM radio stations and 21 television stations. In 2003, there were an estimated 215 radios and 117 television sets for every 1,000 people. The same year, there were 13.2 personal computers for every 1,000 people and 12 of every 1,000 people had access to the Internet. There were 30 secure Internet servers in the country in 2004.

As of 2002, Sri Lanka had more than 10 daily newspapers. The principal morning and evening dailies (with language of publication and 2002 daily circulation) were: Daily Lankadeepa (Sinhala, 259,172), Dinamina (Sinhala, 140,000), Divaina (Sinhala, 100,000), Dawasa (Sinhala, 108,000), The Island (English, 80,000), Daily News (English, 65,000), and Virakesari (Tamil, 48,500). Sri Lanka also has several weekly and monthly publications.

The constitution provides for free speech and a free press and these rights are generally respected by the government. However, in the past the government has imposed restrictions on the media on the grounds of national security. In 2002, several criminal defamation laws were eliminated.

ORGANIZATIONS

Chambers of commerce include the National Chamber of Commerce of Sri Lanka, the Ceylon Chamber of Commerce, the Indian Chamber of Commerce, and the Moor Chamber of Commerce. There are numerous trade and industrial organizations.

The Royal Asiatic Society of Sri Lanka promotes national history, culture, and the arts. National youth organizations include the Ceylon Student Federation, YMCA/YWCA, Communist Youth Federation of Sri Lanka, General Union of Youth and Students, Sri Lanka Catholic Student Movement, Sri Lanka Freedom Party Youth Organization, Girl Guides Association, Sri Lanka Mahajana Youth Federation, and the Sri Lanka Scout Association. Women's organizations include the Hindu Women's Society, the Muslim Women's Research and Action Front, and the Center for Women and Development.

Social action organizations include the Center for Society and Religion and the Civil Rights Movement of Sri Lanka. There is a national chapter of the Red Cross Society.

TOURISM, TRAVEL, AND RECREATION

The tourism industry took a big hit in 2004 when a tsunami severely damaged hotels and facilities, causing many resorts to close. Damage occurred mainly in the eastern and southern areas of Sri Lanka; Colombo and the Cultural Triangle remained unaffected. The principal tourist attraction is the sacred city of Anuradhapura, home of the Seated Buddha, Buddhist temples, palaces, and the sacred Bo tree, grown from a sapling of the tree under which the Buddha is said to have attained enlightenment. Other popular sites include the ancient cities of Polonnaruwa and Kandy, with its Dalada Maligawa temple, where a sacred tooth relic of the Buddha is preserved. The Paradeniya Gardens near Kandy and the Dehiwela Zoo at Colombo are also popular. In 2005, flights running three times a week began service to China through Sri Lankan Airlines.

Sri Lanka's recreational facilities include the beach resorts of Bentota and Negombo, which, like Colombo, have modern hotels. Popular water sports are swimming, fishing, sailing, surfing, water-skiing, and skin diving. The island has excellent facilities for golf, tennis, squash, football (soccer), rugby, and cricket.

Visitors must have a valid passport. All foreign nationals are required to carry a visa, except those of the South Asian Association for Regional Cooperation (SAARC).

In response to the government's promotion of the industry, international tourism has grown in Sri Lanka. In 2003, there were 500,642 tourist arrivals. Over 53% of the visitors came from Europe. Tourism receipts were estimated at $692 million that year. The country had 16,973 hotel rooms with 31,331 beds and a 53% occupancy rate.

According to 2004 estimates of the US Department of State, the daily cost of staying in Colombo was $156.

FAMOUS SRI LANKANS

One of the great rulers of the Anuradhapura period was Dutugemunu (fl.100 bc), who is famous for having saved Ceylon and its religion from conquest by Indian invaders. Mahasen, a king in the 3d century ad, built many fine dagobas and other monuments that delight and amaze visiting art lovers. The classical period of Ceylonese art flourished under Kassapa, a king of the 5th century. The great figure of the Polonnaruwa period was Parakramabahu I (the Great, r.115386), who unified the government of Ceylon, built many magnificent structures, and organized the economy. The most famous political figure in modern Ceylon was Don Stephen Senanayake (18841952), leader of the independence movement and first prime minister of independent Ceylon. Solomon West Ridgway Dias Bandaranaike (18991959), prime minister from 1956 to 1959, is regarded as the founder of Ceylon as a socialist state. His widow, Sirimavo Bandaranaike (19162000), was prime minister during 196065, 197077, and 19942000. She was the world's first female prime minister. Her daughter, Chandrika Bandaranaike Kumaratunga (b.1945) was president from 1994 to 2005. Junius Richard Jayewardene (190696), who helped usher in economic reforms and a free enterprise system, became Sri Lanka's first president in 1978 and served until 1982. Science fiction writer Sir Arthur C. Clarke (b.England, 1917) is one of Sri Lanka's most famous expatriate residents. Born in Sri Lanka, Canadian author and poet Michael Ondaatje (b.1943) received the 1992 Booker McConnell Prize for his novel The English Patient.

DEPENDENCIES

Sri Lanka has no territories or colonies.

BIBLIOGRAPHY

Bruton, Henry J. Sri Lanka and Malaysia. New York: Oxford University Press, 1992.

Dissanayaka, T. D. S. A. The Politics of Sri Lanka. Colombo, Sri Lanka: Swastikha (Private) Ltd., 1994.

Hasbullah S. H. and Barrie M. Morrison (eds.). Sri Lankan Society in an Era of Globalization: Struggling to Create a New Social Order. Thousand Oaks, Calif.: Sage, 2004.

Kanesalingam, V. Economic Liberalisation in Sri Lanka. Colombo, Sri Lanka: Friederich Ebert Stiftung, 1995.

Orizio, Riccardo. Lost White Tribes: The End of Privilege and the Last Colonials in Sri Lanka, Jamaica, Brazil, Haiti, Namibia, and Guadeloupe. New York: Free Press, 2001.

Sri Lanka: State of Human Rights, 1994. Colombo, Sri Lanka: Law and Society Trust, 1995.

Wood, Alan Thomas. Asian Democracy in World History. New York: Routledge, 2004.

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