politics and coalition economics
The next President of the Democratic Socialist Republic of Sri Lanka
could be one who has to implement coalition policies both with respect
to political questions as well as the economy. The two main coalition
partners have laid down similar conditions for their support to
one Presidential candidate. Most of the conditions relate to the
peace settlement with the LTTE, but there are some broad economic
policies also spelt out in those conditions. In the current context
the political conditions cannot be divorced from the peace effort.
The success on the peace front would have a most important bearing
on the success in the economy.
political conditions of support, however unrealistic and impractical,
may be sweet music in the ears of the majority of the majority community.
Therein lies the rub. Are we strangling the peace process and thereby
strangling the economy as well? The conditions in as far as the
approach to peace is concerned are described as ones seeking an
honourable peace. In that process it appears to rule out a number
of options such as a federal solution. Many political commentators
would now think that federalism is the most practical solution.
LTTE, though once agreeable to a federal solution, appears to be
non-committal about it. The essence of a federal solution lies in
the details of the federal constitution. What powers are at the
centre and what powers are devolved on the provinces? What are the
geographical de limitations of the federal entities? These are details
that are themselves difficult to agree on by the government, the
LTTE and other parties. However these details appear irrelevant
in relation to the coalition, as they are opposed to a federal solution.
No detailed solution is talked of in the agreement. It is mostly
a statement of what the coalition partners are opposed to such as
the P-TOMS and the current Cease Fire Agreement.
approach and the attitude of the coalition agreement and the basis
of settlement are not likely to lead to an acceptable solution.
Basically the coalition approach is a Sinhala-biased one without
much hope of being a basis for the settlement of this question.
The coalition Presidential candidate wanting to have direct talks
with Prabakaran, a most unlikely scenario, further strengthens the
scepticism that there is no solution in sight. It is not the intention
of this column to discuss the coalition's peace process but the
coalition approach is no doubt a backward march on the road map
to peace and settlement. Coalition politics is likely to lead to
a halt the process towards peace. In fact the fear is that it may
take us to the brink of war.
the UNF government and Chandrika Kumaratunga failed to arrive at
a settlement, they both kept the hopes of peace alive and achieved
an uneasy non-settlement that enabled the economy to thrive. The
President herself acknowledged this contribution of Ranil Wickremasinghe
at Tuesday's SLFP rally. Regrettably the coalition arrangement is
driving the economy from hopes for peace to fears of war. Therein
lies the threat to the economy.
economic policies of the coalition are another fear. These are not
spelt out in any detail, but have undertones of reversing the market-oriented
private sector orientation of the economy. The clear statement that
no important public enterprises would be privatised could be admired
for its categorical and clear statement. Yet it has serious implications
for public finances, aid and investment.
is an ideological position rather than one arrived at by an analysis
of public enterprises or their performance. However since most public
enterprises, such as the estates, NDB, Telecom, Air Lanka and insurance,
have been already privatised, the impact of this policy may be limited.
The problem is whether this policy may reverse some of the privatisations
by the two previous regimes. Will the government revert to a policy
of nationalisation? This may not be a realistic option but even
statements that they might do so could have grave effects on investment
of the significant milestones in the country's post independent
economic history was the continuity of economic policies in 1994.
For the first time since independence, despite a change of government,
the new SLFP led government assured a continuity of economic policies.
The change of government in 1994 did not result in a reversal of
policies, as it had been before that, when governments changed.
In 1994, the new government headed by the SLFP, announced its commitment
to continue market friendly open economic policies.
too gave private enterprise the lead role in economic activity and
pledged to support private enterprise and characterized its strategy
as Open Economic Policies With A Human Face. The first Economic
Policy Statement of the government made this stance quite clear
when it stated, the government stands committed to building a strong
national economy within a market framework. The principal engine
of growth is expected to be the private sector, both domestic and
foreign. It promised to pursue market-friendly policies and it kept
to that policy stance.
statements of the coalition parties are contributing to creating
considerable doubt as to whether there would be a continuity of
market-friendly polices. Ignorance of economics and the developments
of the international economy and obsolete socialist policies may
lead us once again into a period when the government controls the
this would happen is in the hands of the people who may in any case
be swayed to vote on the basis of other political considerations.
On the other hand, there is a strong body of opinion that were the
coalition to assume power, the ground realities would not permit
such a reversal of policies. It is this contention that generates
optimism among investors, despite the happenings on the political
scene. Yet coalition economics is likely to decelerate the tempo
of economic activities.