Sri Lanka's economy hit as insurers label country war risk
COLOMBO, Aug. 8 (Kyodo) - Insurers worldwide have slapped a war risk label on Sri Lanka after last month's rebel attack on the country's main air force base and adjacent international airport, inflicting a further blow to an economy reeling from the aftershock of the devastating pre-dawn attack.
''The situation is grim,'' Chandra Jayaratne, chairman of the Ceylon Chamber of Commerce, told Kyodo News on Wednesday.
''The stock market performance on Tuesday tells the whole story,'' he said, referring to the crash of the Colombo stock market to new lows after the attack.
The London-based War Risks Rating Committee has formally declared that Sri Lanka carries insurance risks for ships and aircraft by labeling voyages and flights to and from there as ''held covered.''
The label means underwriters are free to set rates at their discretion, premiums commensurate to the stability of the area are to be charged and special surcharges are levied for on-carriage cargoes.
The July 24 attack by Tamil Tiger separatists on Sri Lanka's only international airport and the adjoining military air base destroyed or damaged a large part of the country's national airline fleet.
The apparel manufacturing sector, which earns the most foreign exchange for the country, held a crisis meeting Tuesday with Treasury Secretary P.B. Jayasundera to work out a strategy to counter both the increased costs and lack of air freight capacity following the airport attack.
An estimated 30% of garment exports are flown to markets in Europe and North America, and manufacturers have had to contend with prohibitive insurance surcharges and flight cancellations following the airport attack.
''Airlines are either canceling flights or downgrading aircraft flying to Colombo as a result of the huge insurance mark-ups following the attack,'' one airline agent said on condition of anonymity. ''Something must be quickly done to control the damage.''
The vital tourism industry, which had expected a record 450,000 arrivals this year, has taken a heavy twin-blow, with prospective visitors scared off by the airport attack and the lack of seats to Colombo resulting from the pullout by airlines.
''We have nearly 700 rooms on this stretch of the coast,'' the manager of a beach resort in the south said. ''When the guests who are now with us leave, less than 40 rooms will be occupied.''
Local insurance companies have strongly protested about the ''war risk'' tag saying that imposing this label on the whole country was unjustifiable. The state-owned Sri Lanka Insurance Corporation has written a letter to London urging a review.