Financial Times

LTTE boycott threatens investment

The mouth-watering prospect of a billion dollars a year in foreign aid over the next three or four years appears to be in jeopardy given the impasse over the LTTE boycott of the peace talks and their refusal to take part in the June aid meeting in Tokyo at which these aid pledges were to be formally announced.

The government had been hoping for a grand show in Tokyo with representatives from 35 countries and 20 multilateral organisations expected at the conference that would be jointly opened by Japanese Prime Minister Junichiro Koizumi and Premier Ranil Wickremesinghe. That meeting is to be followed by an investment seminar at which the government hopes to attract Japanese investments.

It will be highly embarrassing for the government and the international players in this peace process who are behind the conference if the Tigers do not turn up for the show. Perceptions are all important in such matters and the LTTE's boycott of the aid conference would definitely send negative signals to foreign investors.

This is the LTTE's way of rocking the peace boat. The timing of the LTTE's brinkmanship has been, as it usually is, impeccable. It knows very well that more than the money that will be pledged in Tokyo it is the confidence factor that is important - to attract the foreign investment so badly needed to accelerate economic growth. And without that acceleration of economic growth no government can hope to improve living conditions and stave off the social unrest that is bound to come with any deterioration in the quality of life of the people. If living conditions get tougher opposition parties are bound to turn on the rhetoric and the pressure.

The LTTE has decided it is not going to allow the government to use the peace card to get large dollops of aid and investment without getting its own share of the cake.

The government's chief negotiator and Cabinet spokesman Professor G.L. Peiris is believed to have said that the current impasse in the peace process will not pose difficulties in encouraging investments. Coming from the Minister of Industrial Development who would be in routine contact with foreign investors this is indeed laughable.

Representatives of aid agencies and even Norway's special envoy Erik Solheim have spoken very bluntly about the adverse implications of the current deadlock. Solheim has warned that Sri Lanka cannot expect significant amounts of foreign aid and investment if the LTTE stays away from the peace process. The former Harvard don, Professor Jeffrey Sachs, one of this government's international advisors, said during a flying visit earlier this month that foreign investors were waiting for a permanent peace deal before investing their money. "The more the peace process continues the more international help would be forthcoming," Sachs said. Peiris must surely not be unaware that any investor unwise enough to put money into a war zone that has temporarily cooled stands the risk of seeing his money going up in smoke.

Then there was Peter Woicke, executive vice president of the International Finance Corporation, the private sector arm of the World Bank, who said that Sri Lanka would not be able to attract big foreign investments if the peace process collapses. "If you have stability, you'll have more money," he said. Foreign investors do not like volatility. Sri Lanka will attract more long-term investments by private investors when the peace process makes progress, he said.

We can only hope that the LTTE is indeed merely posturing and that the "international safety net" that this government has boasted of would be able to get them back to the negotiating table.

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