Sri Lanka May Become ‘Hong Kong of India’ After War, HSBC Says

By Cherian Thomas

June 18 (Bloomberg) -- Sri Lanka’s economy can bounce back from its weakest growth in six years and become the “Hong Kong of India” as the end of almost three decades of civil war boosts business opportunities, HSBC Private Bank said.

Decades of fighting on the Indian Ocean island shackled its $32 billion economy, which according to figures released yesterday expanded 1.5 percent last quarter from a year earlier as the global recession intensified the slowdown. Ports, retailers, apparel and tea exporters could lead a recovery after the Tamil Tiger rebels were defeated last month.

“The rebound will be spectacular,” said Arjuna Mahendran, the Singapore-based chief investment strategist for Asia at HSBC Private Bank, which oversees $494 billion in assets. “To start with, Sri Lanka’s location gives its port a natural advantage.”

Sri Lanka could benefit from its proximity to India, just as Hong Kong profits from being a trade hub to China. Sri Lanka lies just 31 kilometers (19 miles) south east of India, the world’s second-fastest-growing major economy.

Seventy percent of the volume handled by the Colombo port is trans-shipment of goods imported by India and this could be increased because Indian ports don’t have adequate depth, Mahendran said. Sri Lanka has embarked upon a plan to quadruple capacity at the Colombo port in three years.

The Liberation Tigers of Tamil Eelam were defeated on May 16, ending their 26-year struggle for a separate homeland in Sri Lanka. The Tigers, who controlled a third of the country at one point, fell swiftly since January as the Sri Lankan military launched an unprecedented offensive to wipe them out.

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