Financial Times

Polls decision reduces uncertainty
Friday’s Supreme Court ruling has ended much of the uncertainty associated with the next presidential poll although it has generated new uncertainty in the form of an election campaign that, going by previous practice, would be very disruptive of normal economic and social life.

The decision was welcomed by the stock market with investors going on a buying spree and sending the indices shooting up. Brokers are forecasting choppy conditions on the Colombo bourse in the days ahead with good opportunities for trading.

Now there is renewed speculation – as to whether President Kumaratunga, who has been severely embarrassed by the Supreme Court’s decision as she had argued she was entitled to cling on to power till next year, would dissolve parliament and go for a snap general election to coincide with the presidential poll.

This is all the more possible given the fact that the government has lost its working majority in parliament with the withdrawal of the JVP.
This country has had a surfeit of elections in recent years. Most people are sick of elections and the violence and vitriol they invariably generate. Elections in this country and this part of the world seem particularly prone to violence. We seem unable to conduct an election without getting killed and houses being burnt.

If indeed we have to suffer another general election, the prevailing electoral arithmetic appears to indicate that we would end up with another hung parliament. Initially, there would be some uncertainty as the presidential election campaign gets under way as during this period inevitably there would be a slow down in business activity.

Investors, both local and foreign, would be inclined to put off investment decisions until they are sure what the new government would be like and what its economic policy would be.

The business community and foreign investors are seen as favouring a victory by the UNP as that party is perceived as the more market-friendly one. However, as we saw at the last general election, even a government formed with the Marxist JVP continued with the open market economic policy of the UNP, albeit with certain modifications. In that sense, there is hardly any difference between the economic policies of the two main parties.

The financial markets and business community are clearly unhappy with the slow pace of economic reforms by the present ruling coalition, and would no doubt welcome a change. Many stock brokers and investors are hoping for a win by United National Party Leader Ranil Wickremesinghe, citing his track record in macroeconomic management and foreign investment promotion.

The ruling coalition candidate Mahinda Rajapakse would probably have to strike an alliance with the JVP to win, which would mean his economic policy would not be as market-friendly as the markets would wish for.

What is important from a business point of view is predictability and stability. So the market favours a presidential election this year as that is the way it should be, but it does not want a premature general election. The need for stability was put across quite succinctly by Vivendra Lintotawela, chairman of the John Keells Holdings conglomerate.

He told a news agency: “What we need is a stable government, whichever one it is. At the moment it's not stable, so that is delaying most of the reforms that we think needs to be done.”

Looming large over the election is the talks on the ceasefire signed in 2002 and the prospect of a resumption of peace talks, without which this country is not going to get the investment it requires. A permanent peace is necessary for business to flourish.

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