Financial Times

Signals to the private sector
The corporate world would have much to ponder over given the decisive defeat of the UNP government and the neo-liberal economic policies it stood for and the better-than-expected support for the leftwing JVP at the April 2 general election.

The people's verdict would no doubt have set alarm bells ringing in many a corporate boardroom and lead to some soul-searching among the tycoons who backed the losing side.

It also shows how out of touch with reality, and the common people, the business community is. The absence of violence meant there was no disruption of economic activity.

It sends a positive message to foreign investors and tourists and augurs well for efforts to restore investor confidence. It is most likely the new government would have to renegotiate the deal struck by the previous regime with the IMF for aid given the fact that its policies are markedly different and go against the neo-liberal policies of liberalisation and deregulation promoted by the lending agencies and the Western aid donor community.

The IMF aim was tied to certain conditions and actions to be taken by the government according to an agreed upon timetable. The new government does need IMF loans, especially because such funds are seen as a badge of approval by other investors. It also needs to resume the disbursements of aid already pledged and foreign investments that were in the pipeline but put on hold because of the uncertainty generated by the power struggle between the president and prime minister and the left-wing orientation of a PA-JVP government.

The first priority is the speedy resumption of peace talks with the Tigers since donors have clearly said that disbursements of aid would depend on significant progress in the peace process. We quote corporate leaders as saying that the private sector should get on with business now that the perceived uncertainty associated with the election is over.

The corporate sector cannot wait indefinitely for 'ideal' conditions to arrive before they make their investments and should take a lesson from those companies who quietly get on with business whatever government is in power and however much 'uncertainty' may be in the air.

The private sector should take comfort from the fact that the new government, although having made hostile remarks about the business community during the polls campaign, is still supporting free market economic policies and has not opted for a totally closed or socialist policy.

It may be puzzling for the former regime, the corporate sector and its foreign backers that the people appear to have rejected a set of economic policies that they claimed would have led to a more prosperous Sri Lanka, creating an environment in which dynamic private enterprise could have thrived and accumulated wealth that eventually would have trickled down to all.

But the reality is that the majority of people have delivered a verdict that they did not support the UNP's headlong rush towards a fully deregulated free market economy and the indecent haste with which it went about privatising state enterprises. The election verdict means that the UNP, the corporate sector and the aid agencies had not done a good enough job in winning support for their policies.

The former regime and its foreign backers had not been able to convince the majority of the people that the free market, deregulated economy they promoted was good for them.

The people are saying that they had not been able to see and feel benefits of a free market economy despite claims to the contrary and the positive macro-economic indicators trotted out by the former regime and its corporate backers. This is a signal the private sector would do well to heed.

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