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What Does Post-Conflict Look Like? Observations from Sri Lanka

March 7, 2014

**I wrote this blog post for distribution to the University of Maryland R. H. Smith School of Business community. This post will be cross-posted at rhsmith.umd.edu at a future date.**

What does post-conflict look like?

Our cohort of MBAs signed up for an international consulting course in Sri Lanka – a lesser-hyped emerging market economy. It’s not one of the big four of infamous BRIC stature; nor does its “S” take BRICS’ position 5, the World Cup host position held by South Africa. Like many emerging market economies, Sri Lanka, an island country with a population of 20 million, has experienced a sharp and steady increase in growth since the early 2000s. Its GDP, $16 billion in 2000, registered at just over $59 billion in 2012, comparable in size to its South Asian neighbors Bangladesh or Nepal.

Sri Lanka’s growth and size tell a story – but there’s more to the story than rapid post-2000 growth. Sri Lanka recently concluded a 26-year civil war between roughly the Northern and Eastern vs. the Southern and Western portions of the country. The war ended when the Sri Lankan military defeated the separatist group, the Liberation Tigers of Tamil Eelam (LTTE), in 2009. It was not a pretty end.*

But what does that mean? What does a 26-year civil war mean for economic growth? How does a war impact business opportunity, housing, human capital, and growth? What happens to politics, memory, and education? Fighting is over – it is possible to travel from North to South in a day. The Ambassador of Sri Lanka expressed the wish that he doesn’t want his country only to be seen as a post-conflict country by outsiders; but as a place of growth and opportunity, of culture, of business. However, history has a very real impact on business readiness, on the evolution of a political climate, and the nature of investment. In Northern Sri Lanka, the effects of war are still visible, as are the after-effects that an explosion in the availability of credit, transportation, and communication can have on a previously isolated community.

Driving North from the well-populated and fast-growing South, this is what I saw:

One of the factories we visited in Northern Sri Lanka was filled with boxes like these: gifts of the World Food Programme. International organizations have a prominent presence in Northern Sri Lanka.

One of the factories we visited in Northern Sri Lanka was filled with boxes like these: gifts of the World Food Programme. International organizations have a prominent presence in Northern Sri Lanka.

  • A brand-new highway running from South to North, with brand-new traffic careening like crazy up and down a 2-lane highway, passing each other at speed and delivering shipments of goods and people between North and South. We were told that the road project had been funded by the government of China.
  • Utility-sized pole markers marking areas with uncleared landmines.
  • Ruins of houses along the highway, roofless, blackened, crumbled. Damaged houses increased in number as we pushed further north.
  • Some ruined homes had new tin roves covering half of a damaged structure, some with populated laundry lines hung through the roofless parts of the building. Some people were returning and rebuilding.
  • A railway that ran straight North along the highway, but ended some way into the previously rebel-held areas. It had been destroyed during the war and was undergoing new construction, and we were told that the project was funded by the government of India. Deeper North, we saw the ghosts of old rail tracks. Some ghost tracks had coverings at old rail crossings, and people lived in houses all around them.
  • Lush greenery everywhere, and a very rural setting. There were plots of land with small homes in the center, which was in significant contrast to the densely populated cities of the South.
  • A giant toppled water tower with a sign that said “Never Again” in one previous rebel stronghold.
  • Signs indicating headquarters for different international NGOs such as Save the Children and CARE International.
  • Branded United Nations materials – old UN tarps repurposed into new structures, sometimes as roves. Food packages sitting in businesses bearing World Food Programme labels.
  • Signs everywhere indicating peace and rehabilitation. One sign, in the heart of Kilinochchi, a one-time LTTE stronghold, said: “Kilinochchi, the heart of peace and hope.”

Once settled in Jaffna, a town at the very northernmost tip of Sri Lanka, we saw occasional white United Nations vehicles drive by with their classic blue UN letters displayed across the backs of truck beds. We moved quickly to be home by 9 pm every night, and our taxi drivers were careful to avoid any contact with police or authorities. Soldiers made their presence known, standing guard at posts, at side roads, and rode through town on large military vehicles. They came out in force when a Western delegation, U.S. State Department included, made their way North during the week for a human rights investigation. They guarded restaurants, which we discovered when we accidentally joined what seemed like a top brass holiday dinner party.

During our work, businesses noted that their competitive environment had changed drastically since 2009. Raw materials were readily available for manufacturing and production. Businesses were able to reduce their inventories because they no longer needed to plan a year in advance in case transportation was blocked. Ease in transportation was facilitating rapid market entry for businesses located outside of the Northern Province, leading to price-based competition across industries. Business was booming and spending was going up on everything from beer to a new KFC housed in a brand-new mall. Credit was available, and very expensive, for customers and other businesses – so available and so expensive, in fact, that it was leading to payment problems.

Thinesh Bakehouse was open throughout the war and baked about 7,000 loaves of bread per day during the height of the war in the mid-2000s. Bread lines would form outside the bakery, for many, at times this was their only source of food.

Thinesh Bakehouse was open throughout the war and baked about 7,000 loaves of bread per day during the height of the war in the mid-2000s. Bread lines would form outside the bakery, for many, at times this was their only source of food.

Our clients described their experience of war briefly and simply: one bakery used all of its capacity for bread production to feed long lines of customers day in and day out when food was scarce. One client spent years trying to settle the lease and insurance on a vehicle that went out for deliveries and never came back – a vehicle of which the remnants were found in a neighboring province years later. One client described that their work processing business grants had been nearly impossible for years, but that they were happy to be able to support more entrepreneurs in a more peaceful environment.

As Smith students, we did not see the war. We did not see much of the day-to-day of how a country repairs itself and invests for growth in a post-war environment. We did, however, appreciate the short chance we had to partner with small businesses as they do their part to build a stronger and more peaceful country.

 

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