The Sunday Times Economic Analysis

The Sunday Times Economic Analysis By the Economist

Cracks in the peace process can affect economic revival
Betwixt the writing of last Sunday’s column and its publication, cracks appeared in the Geneva agreement. The fissures surfaced on both sides of the divide and within the government ranks itself. The LTTE thought fit to begin military exercises for unknown reasons and intentions. Were they giving signals of a preparation for war? Is it a means of strengthening their bargaining power at the April confab? Then they sought to meet the Norwegian facilitators again for undisclosed reasons. On the government side the constituent parties aired disagreements.

At first the JVP seemed to be appeased. They rationalised that the government had achieved what they wanted and that they would not squabble about words. Then they began to rumble about having agreed to the Ranil Wickremesinghe Ceasefire Agreement. The JHU opposed the agreement as a betrayal of the pre-election agreement with Mahinda Rajapaksa as Prime Minister. It may have been their rumblings that prompted the JVP to also change its stance. The forthcoming provincial elections are no doubt another factor in their strategy to oppose the Ceasefire Agreement.

Other columnists and commentators will no doubt cover these issues and the emerging political developments. They may offer various explanations for these reactions of the various players. For us the pertinent issue and concern is that these developments are of severe consequences for even short-term economic performance. The long-term growth of the economy requires a durable peace and a credible constitutional agreement. That indeed is far off.

The tourist industry is likely to face the consequences of this uncertainty. Once again it is badly timed for the industry as it is showing signs of a revival after the tsunami setback. The Secretary to the Ministry of Tourism Dr. P. Ramanujum indicated that most of the tourist facilities in the South and East that were damaged have been repaired. So accommodation will hardly be a constraint. Although January saw an increase in tourism by 4 per cent it was the month worst affected and the increase in comparison could be misleading. Yet the numbers are encouraging.

The earlier Tourist Board target of an increase of tourists this year by 27 per cent was revised consequent to the deteriorating security situation. Even the realisation of the new target of 600,000 set by the Board would require an effective containment of the violence immediately. Since tourists plan their holidays well in advance the credibility of the Ceasefire holding good is vital for tourism. The rumblings of the JVP and JHU would only help the LTTE’s strategy of keeping the economy weakened even without firing a single bullet at economic targets.

The positions taken by the several parties are hardly encouraging for the achievement of this prospect. Fortunately the interval is short and both parties would like to present a report of good conduct. The issue at present is whether the truce will last till then. April may prove either the cruelest month or be the harbinger of new hope. After that it is the strengthening of the agreement that would matter. The present rumblings of the constituent parties of the government hardly augurs well for the strengthening of the ceasefire.

The attainment of a durable peace and settlement is indeed very far on such a jagged road, that we can give up the dreams of emulating neighbouring India or China in achieving high rates of growth. Moderate growth is what we can realistically expect in this scenario.

Meanwhile the Japanese Ambassador Mr. Suda came out with some home truths. The bottom line of his hard-hitting speech was “be pragmatic” in the approach to the peace process. He put the finger on the right spot when he asked all parties to the conflict to be pragmatic. A lesson that the JVP and JHU must surely learn. Pragmatism begins with a realistic look at the options, the costs and the benefits, the immediate losses as against the ultimate gains. The peace dividend that is often talked of has proved a mirage and will continue to be so unless the government and the parties in the South adopt a pragmatic approach to the problem. The ground situation, the capacities of the military, the agreement on a just solution, the persuasion of the international community to accept it and help in its implementation are among the considerations.

This is a serious issue for the country and must be viewed as such if the economy is to grow to generate much higher employment opportunities and reduce poverty. Pragmatism is vital for achieving peace and prosperity. Are we going to adopt a pragmatic approach to the realisation of peace or are we having our eyes fixed on popularity and political success? The latter approach will not get the economy rising to the desired pace of growth.

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