"This year we will see about 30,000 new machines, next year it may go up to 35,000-40,000," Jit Warnakulasuriya, chairman of Just in Time (Pvt) Ltd, told Reuters in an interview.

Just in Time last week opened the first retail outlet for Compaq Computer Corp products in Sri Lanka.

"In my opinion computer sales to commercial business will grow by 75-80 per cent. All computer vendors are predicting a big growth for the next 15 months," Warnakulasuriya said.

"It will, however, saturate (the market) after year 2000."

Sri Lanka has appointed a task force to look into the millennium bug in various sectors, most of which expect to be compliant by late next year.

"Computer sales in the five year period 1991-1996 were around five billion rupees ($75.6 million). Most of these computers will haveto be replaced in the next 15 months," Warnakulasuriya said.

"Compaq feels the explosive growth of Internet users will also provide demand for computers in Sri Lanka.

"The seven Internet service providers are doubling their business every year and everyone who wants an Internet connection is a customer for us," he said.

Industry officials said Sri Lanka had less than 10,000 individual Internet users but business was expected to grow at least 70 per cent next year, following aggressive marketing and availability of ISDN services.

There are no figures available for the number of computers in the country, but Warnakulasuriya estimated there were between 80,000 and 100,000 working units, including personal computer and upper-end machines.

Most international computer vendors are represented in Sri Lanka, where sales rocketed last year after the government removed import duty on computers and software.

But industry officials said the introduction of a 12.5 per cent goods and services tax (GST) fromApril had a negative impact on sales, which were showing signs of slowing down.

"The Computer Vendors Association, which includes 36 of the biggest companies in Sri Lanka, have made representations to the government for the removal of the GST on computers," Warnakulasuriya said.

"GST is bad for the growth of the computer industry right now. Individuals cannot reclaim GST unlike companies," he said.