9th November 1997

Peace and the quid pro quo

By Rajpal Abeynayake

The latest: "one bomb is enough to stop the investors from comming here
Fallout is a dirty word. Says a foreign investor that " the fallout of the Eelam War is on you people, not us." The investor, whose projections for 1997 entailed bringing in major foreign investment, says that "one bomb is enough to stop the investors from coming to this country."

Amongst the reactions to war, there is one particular response that has been particularly muted among the locals, but has been emphatic among the foreign investors. Says our intrepid foreign investor that "we do not lose any business here. Make no mistake. I do not lose any business in Sri Lanka. Sri Lanka, is out of the mainstream of South Asian business. With the opening up of India and with other South Asian economies doing the honours, Sri Lanka is in the periphery of foreign business concerns. "

For foreign business, what's apparent is that there is no visible end to the conflict. Theories don't count.

Having not discounted Sri Lanka as an Asian business location, the investors who came here now find that business in this country hinges on a peculiar brand of politics.

This makes it imperative that the tycoons of business need to keep their ears to the ground. For example, the recent declaration of the LTTE as a terrorist organisation by the US has made it clear to the business community that there is international opinion that is clearly in favor of a solution to the ethnic crisis. But, the query of the business community is whether the US ban amounts to anything that's tangible.

Foreign business asks one question. It may sound simplistic, but the one question is "why the Sri Lanka government cannot end the conflict?" That `simplistic'' query has a severe logical basis. For instance, if the US government has banned the LTTE, doesn't it follow that the US government would follow up the ban by taking tangible steps to help combat the enemy? What stops the US in helping in a crisp and short intervention that would militarily annihilate the Tigers?

The thinking among at least some sections of the foreign investment community is that the US does not want to make a committed intervention for the simple reason that "the Sri Lankan government does not show that it wants the US to make that kind of commitment".

For instance, the repeated refusal of the Sri Lankan government to ban the LTTE, is seen as a signal that the government is not committed enough to the war, to request for a committed US intervention with a conscience.

Several countries which have for long evinced an interest in Sri Lanka as an investment location, such as Japan, for instance, expect a US intervention that would legitimise an overt international onslaught against the LTTE. But, the Japanese reason that a US intervention has not been forthcoming for the simple reason that "the Sri Lankan government has not displayed a moral accountability to ask for US intervention". This they see as a lack of political will on the part of the Sri Lankan government to end the conflict, either militarily or politically.

Though this may sound a rather abstracted stand to take, from the point of foreign business, it is not all that unreasonable. Foreign business reason that investment in the country is eventually a two way street. There is no moral right to ask for investment, if there is no peace. In this context, any government would be expected to solve the conflict "one way or the other,'' however absurd or simplistic that may sound.

But, the Sri Lankan government has not displayed that commitment, because it has not shown an absolute interest in solving the conflict if not politically, then, at least militarily.

If the leadership shows an unwavering interest in militarily solving the conflict, foreign investment sees that there are many ways of getting the international community involved in pursuing a military solution, without getting into a situation of "total commitment".

For instance, there is a fairly pervasive feeling that the international community (basically the US) can interdict the waters of the surrounding Northeast so that arms supplies to the LTTE could be totally stanched.

From an economic point of view, such approaches to a solution seem to be novel, but not totally abstract. The Sri Lankan economy, which has already been marginalised to an extent due to the burgeoning economic status of India as a gloriously free market, cannot further ignore the fact that the war is tied to economics, and that a prolongation of the war may place Sri Lanka in a position that is altogether non- competitive and out of the pale.

The only economic salvation for Sri Lanka, at least as an entepot for the Indian market (by way of service industries such as shipping) depends on the political situation, which in turn depends on the war. If Sri Lanka does not display the political will to solve the crisis either politically or militarily, there is no reasonable basis to request help from other quarters_least of all the US.

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