Financial Times

Inevitable low intensity war
Fighting a war means a lot of sacrifices. Many years back when the government was mulling a proposal to introduce compulsory national military service, many – particularly those in the higher echelons of power – objected and the proposal was abandoned. Some parents, worried about conscription, quickly packed their rich kids to overseas schools and universities.

Sacrifice! That is only for the thousands of poor rural families who have no option other than send their sons to join the military for economic reasons and at the same time protecting the nation while the warmongers are the very people who don’t want their children to join the battle and die for their country.

Once again the war drums are beating as the LTTE makes it virtually impossible for any government to proceed with no rational explanation over the spate of killings in the northeast and the latest abortive attempt on the life of the army commander.

As the militants get more intransigent, offering a plethora of excuses to justify their actions, most Sri Lankans believe taking on the LTTE in a do-or-die battle is the only option left. “We have to give them back,” noted one senior advertising executive as government planes bombed LTTE-controlled areas in Trincomalee.

No one wants to revert to war but tensions are rising and even the most rational Sri Lankan is getting tired of the LTTE and its defiant attitude. However a word of caution – Sri Lanka simply doesn’t have the financial resources to resort to a full scale conflict.

The Treasury is desperately short of cash and two weeks back withdrew the urea fertilizer subsidy for the country’s key crops – tea, rubber, coconut and vegetables.

The private sector was told that the government cannot subsidize it any more and handed over to the state sector the issue of subsidized fertilizer for paddy only. But what about crucial crops like tea and the plight of its 300,000 smallholders owning small plots of land? Was there any deeper study done before this decision was taken?

Last week following appeals, President Mahinda Rajapaksa asked the Plantations Ministry to study the issue and recommend possible ways of mitigating the impact on the trade. Not two months ago, the trade was informed of a possible decision and asked for their views. “We were preparing our views and waiting to discuss this with the authorities, when the decision had already been made,” one fertilizer importer said.

No one needs to be reminded of how a few officials and businessman bled the nation of important VAT revenue. With more and more handouts being offered by the government, the need for cash is growing. The tea industry in addition to the fertilizer subsidy issue is also paying a higher Cess and finding it hard to make ends meet.

Coconut producers are also grumbling. At least rubber prices are doing well and the neat 100-rupee profit on a kg of rubber can cushion the latest blow.
All the positive signs in the economy have turned negative. The stockmarket was swinging like a pendulum last week while international rating agency Standard & Poor’s lowered Sri Lanka’s credit rating to negative from stable blaming rising violence for the change.

Standard also revised its outlook on Sri Lanka Telecom, a good stock, to negative from stable based on the lowering of the country rating.
It said the outlook revision reflects concerns that the recent sharp escalation in hostilities between the Sri Lankan government and the rebels could precipitate the collapse of the truce. “The outlook could revert to stable if substantial and tangible progress is achieved in maintaining the official ceasefire,'' Standard & Poor's credit analyst Agost Benard said.

A worried Ceylon Chamber of Commerce, while urging the government to win international support to put pressure on the LTTE, also called for restraint from all sides in the crisis. It is no doubt clear that a low intensity war has began as the government just couldn’t take it anymore as killings went on unabated and pressure was mounting in the south.

However remember if we have been struggling for cash without fighting a war, then think of the plight we’ll be in if there is a full-scale war.

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