Financial Times

Developing the north


The end of nearly three decades of conflict this week also brought other good news to Sri Lanka and the business community. On Thursday, an IMF spokesperson told reporters in Washington that the proposed $1.9 billion loan talks with the Sri Lanka government are on track and "at an advanced stage in the discussions with the authorities.” “We do not have a definitive scheduled executive board but we look forward to having a programme brought to the board for approval in the coming weeks," Caroline Atkinson was quoted as saying.

"We have been discussing with the Sri Lankan authorities a normal stand-by arrangement, which we believe is appropriate given the nature of the problems and the need for an adjustment and for sufficient financing," she has said.

That to some extent puts to rest the view that political considerations rather than economic fundamentals will decide the fate of an extremely important facility for Sri Lanka at a time when a lot of cash is needed to rebuild the northeast and the economy in the rest of the country.

Amidst all this ‘ha ho’ and whether or not we’ll get this facility after the US and the UK implied that the loan should be suspended in a retaliatory strike against the government’s refusal to halt fighting and minimise civilian casualties, we have consistently said, ourselves and by quoting economists who know the workings of the IMF, that the facility will come through.

The US which has a big stake in the IMF may however be able to influence the IMF to enforce ‘more’ conditions for the loan. That cannot be ruled out. In the meantime, the end to the war doesn’t mean everything is hunky dory. As long as long-standing problems faced by the Tamil community remain as issues and if mistrust and alienation continue, Sri Lanka could still be sitting on a powder-keg.

It is imperative that President Mahinda Rajapaksa and all organs of the government ensure that the new hand of friendship that the President extended in his speech in parliament (‘the fight was against the Tigers and not the Tamils’) is reflected on the ground. Some Tamils were believed to have intimidated and harassed during victory celebrations across the country.

The celebrations were reminscient of the fervour seen across Sri Lanka when Arjuna Ranatunga’s warriors won cricket’s World Cup in 1996.
Probably responding to concerns expressed, the President on Thursday stepped in and urged the people to ensure no harm befalls the Tamils, accidentally or intentionally, during victory celebrations. Hopefully these few incidents won’t dampen the spirit and outpouring of relief and support to over 250,000 internally displaced people by thousands of Sri Lankans.

Now as the dust settles, attention will be focused on the economy and investment in the north and the east. The euphoria and mood seen now by the private sector as it mulls plans to invest in these war-ravaged regions is different to the buzz that happened after the UNP-led peace accord in February 2002.
At that time the flow of investment was essentially to Jaffna since the Tigers still controlled a large part of the north. Today, the government has absolute control of the entire north and east and that means the entire north is open for business and investment.

Thus the prospects for local and foreign investors is mind-boggling, if ‘real’ peace has come.
Infrastructure development is the key to attracting investments and a government Task Force headed by Presidential Advisor Basil Rajapaksa has already got cracking on this front. It is critical that the government resettles all the IDPs as early as possile while providing other signals that would clearly ensure ‘trust’ and ‘confidence’ towards the population there.

A Jaffna resident told this column that, “there were requests from the authorities to put up the black flag (in Jaffna). These flags are up but out of fear and not choice. We should be allowed to make choices – that is when we would be free.”

This is a strong view in Jaffna and across the north and while President Rajapaksa made a good start in his parliament speech, those pronouncements and declarations should be seen on the ground. Winning the hearts and minds of the people is key to economic growth and trade from the south flowing into those areas, and vice versa.

It is vitally important that Colombo’s big business also considers the private sector in the north as equal partners and not a minority factor in new business ventures. Only if the north is given an equal or bigger stake in deciding their future in areas like infrastructure, investment and development in addition to politics, can the region proper and the ‘real’ peace come.

The Tigers may be defeated but the issues that fostered Tamil militancy in the 1980s remain unresolved. The government needs to speedily offer a political solution that would have the support of all parties concerned. Economic development of the war-ravaged north hinges on the speed by which the authorities address the root cause and furthermore, create an environment of trust and confidence amongst residents there.

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