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Rasheeda Bhagat

Dr Saman Kelegama

Recently in Colombo

TO nurture the peace process in Sri Lanka, it is very important to keep taking economic benefits to Jaffna and other areas of the north-east, because such initiatives can develop a constituency against war and in favour of peace, Dr Saman Kelegama, Executive Director, Institute of Policy Studies in Colombo told Business Line in an interview.

Excerpts:

As an economist how do you see the Prabhakaran press conference in view of the ongoing peace process?

First of all, let me make it clear that the comments I make, even on the peace process, should be interpreted as the comments of an economist relating to the economy.

Okay, so what is the peace process going to do the economy in terms of improving investor confidence and bettering the lot of the Sri Lankan people?

When Mr Wickremesinghe signed the MoU in February there was a great degree of optimism. But some of that optimism has negated a little bit or tapered away consequent to the interview that Mr Prabhakaran gave. First it was said that these are unconditional talks; there will be no conditions; the LTTE will not have to destroy its weapons or pull out from the territory they control, etc. But what happened? The LTTE put forth two conditions; one was de-proscription and two, the Thimpu principles — Tamil homeland, Tamil nationalism and the right for self-determination of the Tamil people.

The moment you put these conditions... what we have at the moment is only a ceasefire, we have still not embarked on peace negotiations. Peace negotiations will take place in Thailand and the ceasefire is being used for soft issues like geographical entry, having the roads cleared of mines, and the like.

So when you put forward such conditions you put the government in an embarrassing position. Even earlier, the whole peace process got derailed when they put forth the Thimpu principles, which mean a separate state. How could the LTTE do a thing like that? People like us can interpret such statements in a certain way, but ordinary people get upset. Like the statement that he has not given up the idea of a separate Eelam, and when Mr Balasingham stated that Mr Prabhakaran is the Prime Minister and President of the North-East. People like us, who can look deeply into such issues, can conclude that he must have said it for the consumption of the hardcore rank and file of the LTTE. But the ordinary people are incensed by such statements.

I certainly sense anger here in Colombo, compared to the feel good factor in December 2001, soon after the UNF government had come to power. People seem to feel that the government is giving away too much.

The highhanded action that took place recently of Mr Balasingham diverting his aircraft through Trincomalee without informing the armed forces and the aviation authorities... I see this as a very high-handed act.

He could have been shot down.

Yes, and what would have happened? The whole thing would have gone back to zero.

Let's go to the economic implications of peace when it comes and what the peace process at the moment is doing to your economy.

Many people thought that now there is a ceasefire in place, the defence expenditure would drastically come down immediately. But that's not the case. We as economists know that it cannot come down drastically just because there is a ceasefire because the defence payments are on a deferred basis. Debt settlements for what equipment we have already purchased will have to go on for four to five years. So you can't see a drastic reduction of the defence expenditure. So the so-called peace dividend is not a costless dividend. It is a costly dividend. It means new investment, the Government has to spend more on relief and rehabilitation; the three Rs — relief, rehabilitation and reconstruction — are going to mean the Government will have to spend heavily.

But nations and international donors have already made promises.

True, the donors are coming but there is something called counterpart funds from the Government too. Peace is not going to be costless.

If you open the roadway from Vavuniya to Jaffna, some of the road will have to be rebuilt and made motorable... all those things will mean a huge cost. Also, new security arrangements will have to be put in place. The explosion of the LTTE ship which happened recently, that means the security cordon has to be in place even when the ceasefire is on.

So peace has its own cost. But meanwhile what is the government doing on various aspects of the economy?

Mr Wickremesinghe is genuinely trying to revive the economy. He has a plan and a vision and he wants to do a lot. Even the Budget that was presented, the underlying assumption behind it was that the peace package is going to work. That is why the ball has been put into the private sector's court and the private sector will have to deliver. So we are assuming that in the investment regime a degree of certainty will prevail. The moment the investment regime is contaminated with a degree of uncertainty, then there will be grave implications. The Budget is tailored in a way that assumes that the peace process will work.

What about growth estimates made by the Government?

The 3.7 to 4 per cent growth we are expecting is based on the assumption that peace will work. If we can prolong the ceasefire and take economic benefits to Jaffna with more business going there and develop a huge constituency against war and the Government can lock in the ceasefire, and keep talking, that will be the way to go about this exercise.

International donors are supporting the peace initiative and the third party is there (Norwegians) and everybody is watching.

A lot of people here are talking about peace being a big business. Your comments.

They mean a lot of NGOs and movements getting support from international funding agencies.

Would you say the Prime Minister is in an unenviable position right now?

Not really, because he is trying his best and India is behind him, the international donors and the Norwegians are behind him, and at least until this moment, the country is still behind him.

But the LTTE will have to behave, right?

Yes, and that is the big issue. But on the economic front the feel good factor is still there and the private sector is very enthusiastic about investing in the eastern province and opening hotels. The insurance and banking sectors are already making plans to open branches in the Jaffna peninsula; supermarket chains are going there and many hotels have plans for the region. They are willing to do everything but at the back of your mind the fear of the war breaking out is always there.

How do you see India's role in the whole process?

India's present position is good. It is lying low and watching the situation and I think that is the best strategy at the moment. India has had a bad experience with the LTTE.

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