“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.”

It also said 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.

Potential

“It’s something you never expected to happen when you have lived most of your life under the specter of war,” said Otara Gunewardene, who runs Odel, Sri Lanka’s biggest department store. “It’s unbelievable. I see things differently now and see a lot of potential for growth;” she said.

John Keells Holdings Ltd., the island’s biggest diversified company, said it sees opportunities to grow in all its businesses from property development to banking and insurance.

Tea exporters could also benefit from a 30 percent surge in prices this year while the worldwide recession hasn’t sapped demand for the high-end lingerie and apparels the nation sells overseas, HSBC’s Mahendran said.

Tourism

Sri Lanka, which receives about 500,000 tourists each year, aims to increase that number by at least 20 percent annually through a global campaign said Dileep Mudadeniya, Managing director of the Sri Lanka Tourism Promotion Bureau.

The war discouraged travelers from the U.S. and Europe for years from visiting the teardrop-shaped tropical island. Occupancy rates have been 40 percent in the past two years in Colombo’s five-star hotels, which have a combined capacity of 2,000 rooms, said Jerome Auvity, general manager at Hilton Colombo. As a result, the average room tariff is about $62 a night, he said.

Still, the Board of Investment of Sri Lanka expects foreign direct investments to quadruple to $4 billion by 2012, led by investments in ports, tourism, telecommunication and textiles.

“We have been getting encouraging responses from foreign investors,” said Dhammika Perera, chairman of the Board. “We expect three leading hotel chains to sign an investment agreement with us in about three months.”

Sri Lanka’s benchmark stock index, the Colombo All-Share Index, has climbed 20 percent since the Tamil Tigers were defeated, taking its gains this year to 50 percent as local investors snapped up shares.

The Securities and Exchange Commission is now keen for the likes of George Soros, Mark Mobius and other top fund managers to invest in the country and help the Colombo Stock Exchange double its capitalization to $14 billion in a year.

“It will take a while for people to realize that a 30-year war has ended and the dividends it can bring,” said Channa de Silva, director general of the Commission. “Sri Lanka is a country waiting to unfold and we are confident there will be a lot of interest internationally.”