Financial Times

Point of View
Commerce and politics in perspective
By Dinesh Ranasinghe
A hot-topic nowadays discussed and argued amongst the business community is the current political scenario of the country; the presidential election.
The reason for such enthusiasm and motivation from these communities is worthwhile investigating.

A political party (or combination as in Sri Lanka) elected, which is favoured because of its policies by the majority of the general public would administer/govern the nation. Such an empowered government would formulate policies and legislation for the entire nation, and industries would be subject to such policies and regulations.

The government may implement policies and regulations through its widespread network; ministries, provincial councils, various authorities, etc. Thus elections create a direct link and a natural interest in the business communities.

In other words, the concern of the business community is the vulnerability of national policies and regulations to the political party in power. It is necessary to ascertain the uncertainty, assess the impact of politics and to reduce risk association from politics on commercial activity. For this purpose one should understand ‘politics’.

How stable is the country’s political system? Sri Lanka’s political system has not been stable in the past with three general elections in the last five years.
Also there is a high possibility of another general election if the candidate of the opposition is elected as President with executive rights. How strong is the government’s commitment to ownership, contractual rights, etc? With a coalition government in power with strings being pulled in either direction there is a significant degree of uncertainty.

For instance Sathosa being privatized and again attempting reverse the privatization would send negative vibes due to lack of commitment and stand.
How long is the government likely to remain in power? Again this depends on the Presidential Election -- thereby the president’s executive powers and the bond between the coalition government.

If the government is succeeded, how would the policies, rules, regulations change? This is a matter of party’s policies and how fast they could be implemented if elected. With the answers to the above, it’s evident that Sri Lanka’s political climate is not stable and consists of uncertainty compared to any developed country. This immense uncertainty may be perceived as a threat by the commercial establishments.

However the business community has welcomed the year-end presidential election upon announcement and this is apparent from the improving equity indices. Empirically before general elections or its announcements the share market crashed and gained momentum upon the formation of a government irrespective of the party elected.

It is believed there is no rational explanation of such behaviour from the business community. Thus proving politics impact on commerce may be a matter of perception.

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