By MICHAEL PREISS

AMID the ruins of Sri Lanka's civil war lie gems of stockmarket opportunity.

Legendary billionaire investor George Soros put it best when he said: 'The most money is made when things go from terrible awful to just awful.'

Sri Lanka is this year's fourth-best performing equity market, with a 75 per cent return. When the country was plagued by war, it was the most emerging of markets. But the end of the war and the recent peace process has several independent-minded, far-sighted investors taking notice.

Jim Rogers, co-founder of Quantum Fund with George Soros and author of classics such as Investment Biker and Adventure Capitalist, is one of those who has Sri Lanka on his mind.

Mr Rogers is fond of saying that one of the most profitable lessons he has learned is that if you get to a country after a long and bitter war, you usually find that things are very cheap, there's a lack of capital - and usually great opportunities. According to him, you tend to make a lot of money, especially if you are patient, have a longer-term view and are willing to invest through cycles.

Sri Lanka is at the top of list as far as these things go.

Many investors including myself, increasingly believe the island nation's time has finally arrived.

Sri Lanka is going to be one of the best investment opportunities on the planet for the next two to three years.

The Sri Lankan government intensified its battle against the Tamil Tigers at the beginning of the year to end the civil war - one of the longest-running armed conflicts in Asia - that cost 70,000 lives since 1983. The death of Tamil Tiger leader Prabhakaran was crucial to ending the fighting. Once the mysterious guerilla leader was dead, the Tiger movement collapsed, paving the way for lasting peace. Sri Lanka has traditionally excelled in tea, tourism, garments and rubber. And business potential in these areas remains, though in niche segments.

Tea plantations, dominated by trade unions, may not be as attractive any more. But downstream segments like blending, packaging and branding will be. In the capital-intensive tourism sector, where payback can take just four years or so, the risk is another terrorist attack will drive away visitors. Apparel export is crowded and dependent on single large orders.

So the new opportunities will not be in the sectors Sri Lanka is known for. They will be in real estate, business process outsourcing, banking, timber, pepper, fisheries, education, healthcare and, of course, infrastructure.

It is expected that the government will soon rebuild infrastructure, social facilities and offices across the northern regions that were long controlled by the Tigers. The redevelopment blueprint may be modelled on one in Eastern Sri Lanka, where the government began constructing a series of projects after the military expelled the Tigers from their former eastern stronghold.

Sri Lanka's long coastline is one of the island's most precious resources. Sandy beaches attract holiday makers and surfers from around the world.

But decades of civil war scared away most mainstream tourists, even though the fighting was mostly confined to the north and northeast. Going forward Sri Lanka could become the Thailand of South Asia for tourists.

As an investment theme, this might attract funds into Sri Lankan Hotel stocks that trade at multi-year lows. During the first peace talks in 2004, Sri Lankan Hotel stocks surged 200 per cent. We could see a replay of this going forward. The Sri Lankan Hotel industry expects 500,000 tourists this year. The end of the war has also accelerated the Sri Lankan government's negotiations with the International Monetary Fund (IMF) for a standby facility of US$2.6 billion. The IMF agreement would provide support to reserves and have other positive effects, such as of improving investor confidence and supporting the exchange rate.

Sri Lanka this week announced plans to issue a US$500 million sovereign bond in October. This comes on the back of a Standard & Poor's rating upgrade for Sri Lanka's debt to 'stable', from negative previously.

Bolstered mainly by agriculture, Sri Lanka's economy reported 6 per cent GDP growth in 2008, down from 6.8 per cent in 2007, as high global food and oil prices fuelled inflation and widened the trade deficit.

Just how much money Sri Lanka needs to rebuild is still unknown. But the initial investment needed to fix the stalled economy in the north and east is a US$5 billion business, according to government estimates. Roads, bridges, schools, hospitals, power plants and homes have to be built afresh. But the sweet spot for the foreign investor is not the war zone. The relatively peaceful Western Province, where Colombo is located, is a ready market waiting to be tapped.

The infrastructure and a consumer economy are already there, but the war kept away many providers of goods and services. They will come now. The capital Colombo, which accounts for half of Sri Lanka's $40 billion economy, will be the first to gain from peace.

Next to just making money, investors in Sri Lanka know their capital is helping a war-torn nation re-build and giving people and their families a brighter future. This is the true meaning of equity investing.

Michael Preiss is an Investment Advisor and can be reached at: Michael@michaelpreiss.net

This article was first published in The Business Times.