Prime Minister Ranil Wickremesinghe reportedly told ministers last week that the UNP government may move to overcome its bitter dispute with President Chandrika Kumaratunga by dissolving parliament and increasing its majority through new elections.

"It would be a major setback to the peace process," said Kethish Loganathan, analyst at the Centre for Policy Alternatives.

"It would confirm the LTTE's assessment of the political situation, that the parties in the south are not ready for bilateral consensus on the main issues."

Jagath Fernando, the deputy chairman of John Keells Holdings and chairman of the business community's pro-peace lobby group, SriLankaFirst, said: "For the peace process an election is not desirable at this stage. It will put talks on hold and delay any positive outcomes from the talks."

It is understood the government could achieve a two-thirds majority if it won about 20 new seats, paving the way for constitutional reforms to strip the president of some of her executive powers, particularly the power to dissolve parliament.

The government's resounding victory in the December 2001 poll, its subsequent success in local government elections and its progress with the peace process has lead most observers to predict that it would increase its majority if new elections were called.

But it is not clear what effect the continuing economic crisis - and in particular the rising cost of living - might have on voters.

"One cannot take for granted that the UNP would hold onto its seats," Loganathan said.

The peace process has been an important driver of improving business confidence this year, underpinning a strong sharemarket.

There is also hope that the extensive reform agenda proposed by the pro-business UNP government should help spark an economic recovery.

Dushyanth Wijayasingha, an economist at Asia Securities, said elections could temporarily slow down the reform agenda, under which about 30 bills are set to be introduced to parliament.

"An election would have probably some impact [on business confidence] in the short term but the positive impact may be felt in the longer term if the ruling party was returned to power with a much stronger majority," he said.

One leading businessman said elections would create uncertainty, harming business confidence.

"But if there was more stability after the elections, then that would be a good thing," he said.

Nawaz Rajabdeen, vice president of the Federation of Chambers of Commerce and Industry, said the government had to start delivering on its promises. Fresh elections were not the answer, he said, particularly as they would come so soon after presidential elections in 2000 and parliamentary elections in 2000 and 2001.

"Things will go from bad to worse [if an election is called]," he said.

"Confidence will go down. It is not good for investor confidence having elections every year."

Under pressure from donors like the International Monetary Fund, the UNP government has committed itself to reigning in spending.

Although election campaigns often threaten this sort of fiscal restraint - as politicians offer incentives to the electorate to win votes - it is hoped the government's strong position should make new spending promises unnecessary.

Unique hotel: Foreigners pay less than locals
The domestic tourism boom on the east coast has forced a Trincomalee hotel owner to do the unthinkable: charging locals more than foreigners. Rajan Pragash, who runs the French Garden hostel (see pic) just north of Trincomalee, has raised his room rate for local tourists to Rs. 750 a night, while foreigners pay just Rs. 500 to Rs. 600. "My name is in the guidebook," Pragash said, acknowledging the importance of preserving his reputation with the tourist guides that dictate the movements of so many foreign independent travellers.

He is also only allowing locals to stay on the weekends.

Trincomalee has been inundated with local tourists from the south of the country ever since travel restrictions to the area were lifted in accordance with the government's ceasefire agreement with the LTTE. Officials said about 10,000 people were believed to have travelled to the city for the July Poya weekend, with many Buddhist pilgrims visiting the temples at Thiriyaya and Seruwila.

Large numbers of younger people were also making the trip on normal weekends with most going to the Kinniya hot springs and Nilaveli beach.

Despite its natural beauty, Trincomalee has never reached its potential as a tourism destination because of the conflict in the north and east. The sudden influx of visitors is too much for the city's limited accommodation, and operators like Pragash - who have tended to cater to foreigner travellers and international aid workers - are now in demand from domestic tourists. By charging locals more than foreigners, Pragash has turned an established Sri Lankan tourism practice on its head. Most hotels and resorts in the country offer locals considerably lower rates than international tourists, while foreigners visiting tourism attractions also face much higher levies. Picture by Trincomalee correspondent Sinniah Gurunathan.

Who is the CEO?
When Sri Lanka Telecom (SLT) employees walk into work on Monday they may still not know the identity of their chief executive.

Monday marks the expiration of SLT's five-year management agreement with Japan's NTT Communications but up to Friday most employees didn't know who would occupy the CEO's chair.

NTT, which owns a 35 percent stake in SLT, has run the telecommunications company since the commencement of the management agreement on August 5, 1997. Under a separate agreement with the company's only other shareholder, the Sri Lankan government, NTT also appoints SLT's chief executive.

Shuhei Anan, the current CEO, was believed to be in Japan over the weekend but is expected to be back by Monday, when chairman Thilanga Sumathipala will reveal whether Anan will remain in the position or will be replaced by another NTT appointee.

The government plans to sell a further 15 percent stake in SLT in October.

On a recent visit to Malaysia, Board of Investment chairman Arjuna Mahendran said a Malaysian telecommunications company was among several foreign companies interested in buying the latest tranche.

NTT paid $225 million in 1997 for the stake, but any further initial public offerings (IPOs) have since been repeatedly delayed, thanks to the country's economic crisis and the falling values of telecommunications companies around the world.

Project to expand rubber forest
The rubber industry has proposed an ambitious project to expand the area under cultivation with new plantings in the southern region to ensure enough latex is available to local industries.

Under the proposal by the Rubber Cluster, an informal grouping of all stakeholders in the industry, at least 30,000 hectares in the Moneragala district will be planted with high yielding clones.

"It is a huge project to expand the rubber tree forest," a Rubber Cluster official said. The new plantings will be in the semi-dry zone so that tapping is not interrupted by rain.

The new project, estimated to cost about $ 18 million, is required to revive rubber production in the island, which has fallen drastically because most trees are old and estate owners have stopped tapping latex owing to poor prices.

Rubber production fell to 86,000 tonnes last year while yields have been falling and the cost of production rising in recent years. The area under rubber cultivation now is around 157,000 hectares.

Under the new initiative, the industry expects to produce 60,000 tonnes at a targeted yield of 2,000 kg a hectare a year with new high yielding clones.

This should yield about 150,000 tonnes of latex, which is considered the base load volume required to sustain the local rubber industry as a competitive industry, officials said. The project is part of a Cluster initiative to "reposition latex crepe" and concentrate on making more value-added products under a strategy to develop the rubber industry as a "thrust industry", they said.

New consumer protection outfit
The proposed Consumer Affairs and Fair Trading Authority (CAFTA) will have wide powers to investigate anti-competitive practices and abuse of dominant market position by Sri Lankan companies, according to Trade Ministry sources.

The authority, which will replace the Fair Trading Commission and the Internal Trade Department whose employees would be absorbed into the new outfit, combines consumer protection and market regulation of internal trade.

It will also protect traders and manufacturers against unfair trade practices and promote effective competition.

The CAFTA would be able to control and eliminate restrictive arrangements among enterprises with regard to prices, acquisition and abuse of dominant position in the market and any restrictions on competition adversely affecting the trade.

It would have powers to investigate the existence of monopolies, mergers between companies and anti-competitive practices.

The CAFTA bill provides for the setting up of a council consisting of professionals to investigate cases where goods or services are sold at excessive prices. Members of the public can complain to the council.

The bill gives powers to the minister to declare any article or service that is considered essential to the life of the community as a "specified article".

No trader or manufacturer will be allowed to increase the prices of such goods or services without the authority's approval.

The CAFTA would also be able to issue directions to manufacturers or traders in respect of labelling, price marking, packing and sale as well as determine standards and specifications relating to manufacture, storage, transport and sale of goods.

Kerala, SL to jointly woo the West
From the backwaters of Kerala to the sunny beaches of Sri Lanka, the two regions are hoping to piggyback on each others' attractions to jointly draw hordes of Western tourists.

In an ambitious effort, government officials, and tourism and travel trade executives from Kerala and Sri Lanka meet in Colombo on August 28-29 with hopes of formulating a joint marketing plan to sell the benefits of visiting these two regions to the Western world. The Maldives is also to be brought into the picture in a tripartite tourism promotion.

"The two regions have many similarities and ideally we should exploit this for a joint marketing exercise," said Hotel Taj Samudra General Manager Praveen Nair, the prime mover of this project.

Nair, who took up the Colombo posting some three months ago and before that was based for two years in the Taj group in Kerala, sees a huge potential in joint marketing the two regions plus the Maldives. While Western travellers spend about seven days in Kerala, one option is to offer a 12-14 day-trip starting in Colombo and proceed to Kerala.

While the Taj Samudra is holding a Kerala food festival from August 24 to September 1, official delegations from Kerala and Sri Lanka will meet in between at the Taj Samudra. The 35-strong Kerala delegation is led by State Transport Minister K.V. Thomas and includes Tourism Secretary N. Balakrishnan, Tourism director Alkesh Sharma and travel trade representatives.

Sri Lanka's delegation is expected to be led by Tourism Minister Gamini Lokuge. On day one of the meeting, Kerala will make a presentation on what is has to offer to the Western world followed by day two with the Sri Lanka presentation. Both sides will then try to work out a joint marketing plan.

'The Sri Lanka Tourism Board is also positive about this meeting," Nair said adding that the food festival will contain all the Kerala cuisine that is famous across the world.

Kerala dancers inclusive of exponents of the Klari Pyte, a traditional form of martial arts from which emerged the more popular Karate, will complete the entertainment sector of the major promotion campaign.

The southern Indian state and Sri Lanka have together made great strides in the social sphere. Kerala has the lowest birth rate in India, one of the best healthcare systems in the country and 99 percent of its people are literate. It is the only state in India that has more women and men. Some 80 percent of Indians in the Middle East are Keralites while amongst Indians in the West the largest number of professionals come from Kerala.

Nair, an accountant cum lawyer who has worked in hotels in India and Europe in a career spanning 20 years, says he is buoyant and optimistic about the tourism industry in Sri Lanka particularly after hopes of peace. In the past three months, hotel room rates have risen by $3 to $4 while occupancies are also up.

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