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Business confidence is hard to maintain even at the best of times in the best of places. When it comes to Sri Lanka which has unfortunately gathered a reputation for political violence over the years, building confidence among investors is doubly difficult.

In the past year the peace talks between the government and the Liberation Tigers of Tamil Eelam have thankfully got wide publicity and as a result confidence has returned in some measure to the markets. The share market has recorded new highs and investors have begun to open their pocket books.

The recovery is not still at a level that would be sufficient for long term development, but growth rates are back in positive territory and there is hope of better times.

The biggest cloud on the horizon is the war in the Gulf. While we believe that it is imperative that Iraq obeys United Nations Security Council Resolutions as a good international citizen, it is also true that a conflict would hit our economy hard. Our markets in West Asia would suffer and shipping costs to other markets in Europe and North America would rise.

But such a war is an event we in Sri Lanka have no control over. In such a situation we must try our best to avoid creating fresh situations at home that would further undermine business confidence.

The current reports that President Chandrika Bandaranaike Kumaratunga is planning to dismiss the government and call for fresh elections barely a year into the Parliament's term has already hit the markets.

The Colombo bourse dropped sharply last week as the reports spread and analysts predict the bears will rule this week as well.

Predictably the business community has also reacted sharply to the reports according to our main report in yesterday's business pages. The respected Managing Director of Hatton National Bank Rienzie T Wijetilleke has warned of "economic chaos" if there is another election. The President of the National Chamber of Commerce Asoka de Z Gunesekera points out what a waste of money a general election would be.

The consensus of opinion among the business leaders was that the political leadership should think about raising the economic standards of the country and that of the people while pursuing the peace process aimed at finding a lasting solution to the national question.

As all Sri Lankans know elections in this country are like small wars. There is widespread violence, and during that period government does not function. Vital administrative decisions are postponed and business activity grinds to a halt. In 2001, Sri Lanka's economic Annus Horribilis, one of the main reasons for the recession was the long period of political instability.

Parliament was dissolved when it was not necessary that year. When defections occurred and it was likely that a new government would be formed in the same Parliament, the House was dismissed. The subsequent election produced almost the same permutations within parliament and it was clear that the new government headed by Prime Minister Ranil Wickremesinghe could have been appointed without holding an election.

The sad fact is that we are a nation that thrives on a diet of self-made crises and may be heading for another election. But if we are to think of the nation and its fragile economy which is struggling to come back to life, then political stability is the most important factor that has to be introduced.

The best way for business to succeed is to give the economy a definite set of rules to run by for a definite period of time. There is no other way.

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Copyright 2001 The Associated Newspapers of Ceylon Ltd.
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