Financial Times

Misgivings on economic policy
The forthcoming presidential election has once again raised questions about the economic policy of the new government. The business community has begun to voice misgivings about the commitment to an open economy by the SLFP/UPFA candidate, prime minister Mahinda Rajapakse, mainly because of his alliance with the leftist JVP. This is reminiscent of the noises that emanated from the private sector when the UPFA forged an alliance with the JVP before the last general election.

At that time too there were fears about that alliance’s stance on free market policies and its perceived hostility towards the private sector. However, hindsight proved such fears were unwarranted. Except for the policy of not privatising state enterprises which the alliance referred to as strategic enterprises, the UPFA policy was not much different from the UNP’s.

The fact is even a party like the JVP is realistic enough to know that they cannot go back to the era of a totally closed, state-dominated economic policy.

It is also clear that both main presidential candidates have to win the support of minority and special interest groups as demonstrated by their recent meetings with minority and smaller political parties and special interest groups like trade union leaders and Moslem organisations. Both candidates, therefore, would have to make some compromises and give concessions that would be opposed by different interest groups.

UNP leader and presidential candidate Ranil Wickremesinghe is known to be the private sector’s preferred candidate and his party’s version of an open economic policy is seen as more investor-friendly than his rival’s. During the UNP’s previous administration it did start some far-reaching reforms of the state sector and removed some of the red tape with the aim of making the private sector more dynamic. But now even Wickremesinghe is wooing trade unions as shown by his meeting with labour leaders where he said privatisation would continue under his administration but that it would ensure no loss of jobs, worker benefits or trade union rights.

Rajapakse's speech to the business community on September 12 cleared some of the misgivings expressed about his commitment to an open economy. He made the telling point that during the last one year when he had been prime minister and the JVP a constituent party of the government, the All Share Price Index of the Colombo Stock Exchange increased by 56 percent, the average daily turnover increased by 87 percent, and market capitalization had almost doubled.

He stressed that he would be a "business and entrepreneur friendly" president and stressed the need to constantly give a boost and an edge to “national entrepreneurs”.

This is something many business leaders have been calling for. They bemoan the neglect of local enterprise and the preference governments appear to give foreign investors through tax breaks and other concessions.

Rajapakse also stressed that the private sector not only consists of the more vocal and well-connected organised business sector but is a combination of the large, medium, small and micro businesses. While supporting the large scale businesses to expand their businesses he said his government will give the SME sector special attention. This is something the previous UPFA government emphasised and no doubt is a key objective of the JVP, which is known to draw significant support from the SME sector.

Appealing to the business community not to be misled by misrepresentations of his economic policy, Rajapakse pledged to follow a practical, pragmatic and fair path, saying: “I will not take this country to war nor to a closed economy.”

The business community should take heart from the fact that the forthcoming poll shows that both main candidates are committed to an open economic policy albeit to different degrees.

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