- Local hospitality and tourism operators sidelined by foreign-run biz exploiting loopholes
Sri Lanka’s burgeoning tourism industry, already under pressure to recover post-pandemic, is grappling with an influx of foreign nationals overstaying their visas and engaging in unauthorised business activities.
This trend, particularly among Chinese, Russian, Ukrainian, and Israeli visitors, has affected local hospitality and tourism operators, who argue they are being sidelined as foreign-run enterprises exploit local loopholes.
Despite the Government’s recent issuance of a gazette to increase fines for visa overstays, questions linger over enforcement and the broader impact on tourism.
Legal loopholes
According to Sri Lanka’s Immigrants and Emigrants Act, authorities have broad powers to detain and deport foreigners operating illegally. Yet, evidence suggests that enforcement has not kept pace with the rise in unauthorised businesses, especially in coastal towns popular among tourists.
This situation is exacerbated by limited resources and personnel for visa regulation, leaving a gap that some foreign nationals exploit.
Speaking to The Sunday Morning, senior immigration advisor and Attorney-at-Law Sampath Perera said Section 28 of the Immigrants and Emigrants Act granted the minister the authority to order the removal of non-citizens who violated visa terms or immigration rules.
However, several legal loopholes weaken the effectiveness of this provision, especially regarding overstaying and unauthorised business activities by foreign nationals.
He noted that the reliance on the minister’s discretion and the potential delays in issuing removal orders could result in prolonged cases, allowing violators to remain in the country without immediate repercussions.
Perera also said that additionally, Section 28(1) required a prior conviction for certain removal orders, which could slow down enforcement due to lengthy court proceedings. Limited resources and personnel for enforcement hinder the practical ability to carry out removal orders swiftly.
Furthermore, the finality of the minister’s orders, which cannot be contested in court, may lead to hesitancy in issuing removals, while dependence on shipmasters for deportation complicates immediate actions. The application of removal provisions to holders of residence permits lacks clarity, potentially complicating enforcement against those engaging in unauthorised activities.
Moreover, the act does not provide for continuous monitoring of foreign nationals, allowing violators to go unnoticed until specific law enforcement actions occur.
Lastly, he added that while fines for overstaying had increased, lax enforcement and reliance on monetary penalties rather than immediate deportation weakened the deterrent effect, enabling foreign nationals to exploit the system and engage in unauthorised economic activities, often undermining local businesses.
In 2023, the Ministry of Public Security attempted to crack down on visa overstays with revised fines under the Immigrants and Emigrants Act. Now, foreigners who overstay by 7-14 days are subject to a $ 250 penalty, while overstays beyond 14 days incur a $ 500 fine.
Despite these measures, business operators claim authorities are lenient in screening foreign nationals who enter on tourist visas but engage in profit-making ventures.
Police Spokesman DIG Nihal Thalduwa said the Police would monitor overstaying foreigners in the country and take appropriate action.
He stressed the importance of adhering to visa regulations and warned that violations would be addressed promptly to ensure compliance with immigration laws.
DIG Thalduwa urged the public to cooperate with law enforcement in reporting any suspicious activities related to overstaying foreigners.
Creating an uneven playing field
Currently, Sri Lanka stands at a crossroads in managing foreign tourism while ensuring that local business owners remain central to the industry’s growth.
As the Government attempts to strike a balance between encouraging tourism and preventing illegal operations, the question remains whether these measures will be enough to address the concerns of both the local community and the legitimate foreign visitors who abide by Sri Lankan laws.
For now, Sri Lanka’s local hospitality industry continues to bear the weight of an uneven playing field, hoping that stricter oversight will bring about fairer conditions.
In southern coastal towns, hotel owners have expressed frustration with what they see as a lack of regulation. Local hoteliers say Russians are notably active in running small-scale tourism operations exclusively for Russian clients.
“These visitors are effectively competing against us, operating businesses that cater solely to their own compatriots, which is unfair to us local operators,” said Sandamali Perera, who runs a guesthouse in Hikkaduwa. “They can operate in Russian without any local language barrier, and their clients often trust them more due to the shared language and culture. We’re at a disadvantage.”
Perera and other hoteliers point out that these foreign-run ventures bypass traditional tourism channels, conducting everything from accommodations to guided tours for Russian-speaking tourists. This disrupts the local tourism ecosystem as these tourists rarely spend on other local services.
“Tourists who stay with foreign nationals tend to keep themselves within that circle – they don’t explore local restaurants or stores as much,” she explained.
Many hotels have felt the impact, with profits taking a hit as travellers choose foreign-owned accommodations that cater specifically to them.
Shanika Dissanayake, who owns a beachside restaurant near Unawatuna, said: “The fines only impact those who get caught. Most foreign nationals overstaying here are left unbothered because enforcement is so lax. These foreign-run businesses are thriving in areas where locals are struggling to make ends meet.”
The tourism industry remains one of Sri Lanka’s primary economic pillars, with locals heavily reliant on tourist spending to sustain their businesses. Foreign nationals setting up exclusive, non-transparent operations undercuts local livelihoods.
“The situation creates an unbalanced competition,” said guesthouse owner Perera. “When foreigners run tourism businesses without oversight, it impacts our industry and leaves locals struggling.”
Cybercrime on the rise
Beyond the tourism sector, Sri Lanka has faced a surge in cybercrime, largely involving foreign nationals. Between September and October, the Sri Lanka Police detained nearly 200 individuals, mostly Chinese nationals, linked to various online fraud schemes and financial scams.
Authorities revealed that these individuals often conducted large-scale cybercrime operations from their hotel rooms, hidden under the guise of temporary accommodation.
Police reported recent raids on hotels where Chinese nationals were found involved in cybercrimes, confiscating hundreds of pieces of digital equipment. In one operation, officers seized mobile phones, laptops, USB wires, routers, and other computer parts, suggesting organised cybercrime activities spanning several months.
Hotel owners have also expressed concern over the risks posed to their properties and reputations. Darshana Samaratunga, who owns a hotel in Panadura, noted that foreign cybercriminals used local hotels as temporary bases, putting local businesses at risk of becoming associated with illegal activities.
“If the authorities can’t control this, they’re leaving us open to danger and reputational harm. We have no way of vetting every guest’s background,” he said.
In the northern city of Vavuniya, locals face a different challenge. Online financial scams have swept through the region, with many duped into sharing personal information or One-Time Passwords (OTPs) for online banking.
Foreigners have reportedly set up easy-payment schemes and online lotteries, misleading Sri Lankan customers into compromising their data. Despite public warnings from the Central Bank of Sri Lanka (CBSL), there is no centralised mechanism to monitor these scams, leaving many vulnerable.
Kamala Soosai, an activist in Vavuniya, highlighted the toll these scams had taken on local residents. “I’ve seen several people lose their entire savings to these schemes. They trusted these people, not knowing they would be targeted for exploitation,” she shared.
Soosai believes more robust systems should be in place to educate rural communities about the dangers of these scams and ensure better monitoring of foreign nationals engaging in business activities outside the regulatory purview.