Arugam Bay is a bay situated on the Indian Ocean in the dry zone of Sri Lanka's southeast coast. The bay is located 320 kilometres (200 mi) due east of Colombo, and approximately 4 kilometres (2.5 mi) south of the market town of Pottuvil. The main settlement in the area, known locally as Ullae, is predominantly Muslim, however there is a significant Tamil and Sinhala population to the south of the village, as well as a number of international migrants, largely from Europe and Australia. While traditionally fishing has dominated the local economy, tourism has grown rapidly in the area in recent years. Tourism in Arugam Bay is dominated by surf tourism, thanks to several quality breaks in the area, however tourists are also attracted by the local beaches, lagoons, historic temples and the nearby Kumana National Park.
Many of the buildings were destroyed in the 2004 tsunami. The Government's Ministry of Defense CCD (Coastal Conservation Department) created what is now described as Arugam's second "Tsunami" at the end September 2011 when all beach side structures were demolished by bulldozers. Due to its popularity among tourists, the area has managed a slow recovery by private initiatives only. As late as 2011 no help has been received from any official source or international organizations. An exception is uncoordinated support for fishing folk as well as many school rebuilding programs, resulting in a continuation to provide only separatist schools for each community. Although there is a huge demand for an international school, one huge new building donated by the people of Japan remains largely unoccupied since the grand 'opening' ceremony in 2007.
The bay hosts a large fleet of fishing boats which operates off the beach. Many organizations donated boats after the tsunami and as a result there are far more fishing boats than ever before. The main beach is a bit dirty, compared to nearby beaches which are rather more aesthetically pleasing and also have excellent waves.