Financial Times

Heed signals from investors
More foreign and local investors have put their plans on hold for investment in the island because of the uncertainty generated by the snap election and fears that a new government might not be as friendly towards investors as the UNF regime was.

These firms have either planned to start a new business or expand and diversify into new fields. The new initiatives, many of which would have been planned when the UNF government was in power, would have generated hundreds of new jobs.

The fact that they have put on hold their investment plans and are awaiting the outcome of the election bodes ill for the country's investment and industrialisation goals. Obviously, these investors are worried that the PA-JVP combine, known as the Freedom Alliance, will win the poll and that a government they form might not be as favourably inclined towards the private sector as the UNP-led UNF regime was.

The underlying message here is that if a government propped up by the JVP comes in, they will not invest. Otherwise, there will be no need for them to worry and suspend investment plans.

The business community is worried that a future Freedom Alliance government might impose too many restrictions that would not only make it difficult to do business but increase costs. While the JVP's greater involvement in parliamantary politics is to be welcomed, their virulent opposition to free market economic policies and resistance to devolving significant power to the Tamils would surely be a cause for concern in the business community.

A commitment to a liberal economic policy and an early end to the war are essential to create the climate required for business to prosper. The Freedom Alliance, and especially the JVP, has been at pains to assure the private sector that they are not opposed to private enterprise. But they have only themselves to blame if there are lingering doubts about their commitment to a free market economy that has confused or scared off investors, given their irresponsible rhetoric and often hostile comments about the private sector.

However, as is usually the case, there are at least two sides to the story. This is clearly indicated by the fact that while some investors have adopted a wait-and-see attitude or postponed their plans, others with a different attitude are boldly going ahead with theirs, undeterred by the political uncertainty.

A good example is the investment in a call centre by the banking multinational, HSBC. It has said that it is going ahead with the project despite rumours that it might pull out. We quote a senior HSBC executive as saying that both the main political parties have assured the bank of their support for the project.

Furthermore, two private Indian airlines began flights to Colombo last week, a result of the agreement reached by Prime Minister Ranil Wickremesinghe during his visit to India to liberalise air traffic between the two countries. Politics has not deterred them and they obviously see a good business opportunity here.

Without new investment projects, particularly foreign investments, the country has no hope of accelerating economic growth to the levels required to make a notable dent in the unemployment and poverty levels. The signal given by those investors who have put on hold their plans is that political parties aspiring to govern the country need to give a clear message about their commitment to a liberal economy and to maintain consistency in policy and implementation.

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