As a senior Norwegian envoy arrived in Sri Lanka to explore ways of stabilizing the fraying 40-month-old ceasefire, the Liberation Tigers assured international truce monitors of their cooperation in curbing the violence but demanded they take action against Army-backed paramilitaries.

“Our organization and the Tamil people in general are seriously perturbed over the increasing acts of violence and killings in military occupied areas,” head of the LTTE’s Political Wing, Mr. S. P. Tamilselvan said in a letter to the head of the Sri Lanka Monitoring Mission (SLMM).

The violence was being carried out with the intention of smearing the LTTE, Mr. Tamilselvan said, pointing out the violence has been escalating since the Tigers pulled their unarmed political cadres out of Army-controlled areas for their own safety.

“Innocent people are targeted for assassination and given a political connection with this group or that with a reputation for being opposed to LTTE,” Mr. Tamilselvan said.

“Without recourse to proper investigations … the government and the military spokespersons are engaged in a mud-slinging campaign against the LTTE,” he said.

“The patterns of increase points to a systematically planned and timed orchestration to discredit the LTTE … We have no doubt that there is a political agenda behind these acts, meticulously planned to apportion the blame on our organization.”

“While assuring you of our co-operation to curb violence, we regret that our capability in this respect is very much limited since the areas in which these killings and violence take place are fully under the control of the occupying Sri Lankan military,” Mr. Tamilselvan told the SLMM.

The reaffirmation of the LTTE’s support for the CFA comes amid renewed international efforts in Sri Lanka’s peace process.

The former head of the SLMM, retired Major General Trond Furuhovde, is visiting this week as special representative of the Norwegian government to consult the LTTE and the Sri Lankan government and to discuss the security situation and the truce.

The Norwegian embassy played down expectations, however, saying “a meeting between the GOSL and the LTTE to discuss the implementation of the Ceasefire Agreement is not likely to occur in the near future, the visit is an opportunity for both parties to propose measures for strengthening the implementation of the agreement.”

Separately, International Human Rights Advisor to the Peace Process, Mr. Ian Martin is also visiting Sri Lanka.

Mr. Martin, former Secretary General to Amnesty International, is to meet with LTTE and government officials before present proposals regarding the protection of human rights.

These developments occur within the backdrop of escalating violence in the Northern and Eastern provinces. While the restive east has seen repeated skirmishes between Army-backed paramilitaries and the LTTE, violence has also spread to the Northern province.

Meeting with SLMM officials, the head of the LTTE’s Political Wing in Jaffna, Mr. C Ilamparithi said the SriLanka Army (SLA) was complicit in several of the recent killings.

Mr. Ilamparithi said their office had received evidence implicating the head of SLA Intellligence Wing in Jaffna, Mr Mahes Banda, in some of the murders that have alarmed residents of the northern peninsula.

Jaffna has seen an increase in politically-motivated murders, including the killing of Kopay Christian College Principal Nadarajah Sivakadadcham, organizer of Kopay’s Tamil Eelam Women’s Day events, since the withdrawals of LTTE officers from SLA-controlled areas.

Mr. Ilamparithi further told the members of the SLMM that killings, harassment of Jaffna residents, thefts, drug abuse, and incidents of rape have increased following the withdrawal of LTTE political cadres from Jaffna district.

Violence continued in the eastern province also, with SLA-backed paramilitaries ambushing a convoy of Tiger cadres in LTTE-controlled parts of Vavunathivu, 5 kilometers west of Batticaloa.

The LTTE said three of their cadres were wounded by attackers who withdrew to the Vavunathivu SLA camp after a firefight. The SLA claimed four LTTE cadres were killed in the ambush, including a senior intelligence official, and that seven others were seriously injured. The LTTE denies the claim.

Sri Lankan newspapers reported that the government provided a helicopter for an injured LTTE member to be evacuated to Colombo for treatment.

The SLA claimed gunmen from the Karuna Group, a paramilitary outfit led by a renegade Tiger commander, were targeting LTTE Colonel Banu, who assumed command of Batticaloa-Amparai after Karuna defected to the SLA in April 2004following the collapse of his six-week rebellion against the LTTE.

The LTTE says there are five Tamil paramilitary groups, including Karuna’s, which are paid and provided with logistic support by the Sri Lanka security forces and that a covert military campaign is being waged to destabilise the Eastern province and paralyse the LTTE’s political engagement in the region.

Donors must address the imbalance in international assistance to the north and east of the country compared to the south, and increase investment in long-term development programs in Sri Lanka’s conflict-affected regions to preclude under age youth from seeking to join the Liberation Tigers, Refugees International said last week.

“It is undeniable that the war has in effect created two countries: the south, with its relative wealth and economic opportunity, and the north, where the landscape is harsh and there is little economic investment, RI said.

Anyone under the age of 18 is considered a child when volunteering for non-state militaries. For state militaries the age bar is 16, according to UN regulations.

“Many former combatants maintain that they volunteered [for the LTTE],” RI said.

But arguing that “in much of the LTTE controlled areas there is an all-pervasive environment of Tamil nationalism and political control,” the organisation said this “coupled with the lack of economic opportunity, suggests that physical intimidation and force are not always necessary to convince young adolescents to join the LTTE.”

An LTTE spokesperson interviewed by RI said adolescents continued to volunteer due to lack of economic opportunity in northern and eastern Sri Lanka.

The LTTE official was critical of the international aid agencies for failing to provide adequate livelihood and psycho-social activities for the 5,000 children that he claims have been demobilized, RI said.

The LTTE maintains that it is complying with its international commitments, first made in April 2003 in the Action Plan for Children Affected by War, to eliminate recruitment of child soldiers.

RI also said that “while prevention of child recruitment is an essential element to working with children affected by the conflict, it is also important to address simultaneously the reintegration of former combatants back into society.”

Many programs focus on vocational training and education. These are crucial elements to a successful reintegration but there are psycho-social and cultural issues that may also arise, RI said.

But RI warned that the assistance programmes themselves can fuel volunteers for the LTTE.

“We don’t want to see them rewarded for joining the LTTE. It might give them an incentive to join so they can benefit from leaving,” RI says it was told by one child group.

“Specialized attention can provide an incentive for families to allow recruitment and it can encourage the propaganda that serving with the LTTE will benefit you and your family,” RI said.

Nevertheless, RI is urging donors and agencies that provide programming for children impacted by the tsunami in Sri Lanka’s north and east expand programs to include children impacted by the war.

Sri Lanka’s economy will expand at the fastest pace in eight years in 2005 and maintain that growth rate next year as it rebuilds after the December tsunami disaster, Treasury Secretary P.B. Jayasundera says.

“I strongly believe that this year’s growth will be 6 percent plus,” Jayasundera, the civil servant in charge of planning next month’s budget, said in an interview on Monday.

“Given exports growth, the expansion in agriculture and a revival in tourism, we are on a solid growth path,” he said.

Increased tax revenue has helped, as has a continued decline in defense spending since a February 2002 cease-fire with the Tamil Tigers. “Defense is no longer exerting pressure on expenditure,” Jayasundera said.

The recovery of Sri Lanka’s $20 billion economy from a two-decade civil war between the government and the Tamil Tigers has been hampered by the tsunami disaster, which killed 39,000 people and left half a million homeless.

President Chandrika Kumaratunga’s government is expanding spending even as it tries to cut domestic borrowing and pare interest costs.

The government, which received aid and debt-relief pledges of $3 billion, will announce additional spending on damaged infrastructure in a Nov. 8 budget, Jayasundera said.

The economy expanded 5.4 percent in 2004 and is expected to grow between 5 percent and 5.5 percent this year, the central bank said last month. It last grew more than 6 percent in 1997, when it expanded 6.3 percent.

Sri Lanka’s recovery could be further strengthened by $4.5 billion in aid pledged by international donors on condition that peace talks between the government and LTTE, which broke down in April 2003, resume.

Jayasundera said the deficit this year would be between 8 percent and 8.2 percent of gross domestic product, rising to 8.5 percent in 2006. The central bank said in May that a deficit of around 9 percent of GDP was likely this year, up from 8 percent in 2004.

Sri Lanka recorded a budget deficit of 5.6 percent of GDP in the first nine months of this year, compared with a deficit of 6 percent in the same period in 2004, the state-run Daily News reported Wednesday in an advertisement.

Tax revenue rose to 10.4 percent of GDP, from 9.9 percent in the January-September 2004 period, the newspaper said. Foreign loan financing of the deficit accounted for 1.2 percent of GDP in the nine months to Sept. 2005, up from 0.6 percent of GDP the year before.

Sri Lanka’s economy grew 6 percent in the three months to June 30 from a year earlier, the fastest pace in more than a year, as tea and rubber output rose and roads and hotels were rebuilt.

“Commodity prices have been a blessing to us and will help keep the balance of payments at a surplus of $200 million this year and around $150 million next year,” even as the island spends $800 million more this year on fuel imports, Jayasundera said. Sri Lanka imports all of its oil.

“Agriculture and industry are both looking strong, and with foreign aid and the debt moratorium,” that is an achievable economic growth target, said Saman Kelegama, executive director at the Institute of Policy Studies in Colombo.

“But it will only be possible if the election doesn’t disturb the peak winter tourist arrivals or derail exports.” Sri Lanka is scheduled to hold its presidential election on November 17.

While high fuel costs are putting pressure on prices, Sri Lanka’s inflation rate will probably fall to between 9 percent and 10 percent this year, and drop to about 7 percent at the end of 2006, Jayasundera said.

The inflation rate slowed in September for the first time in 16 months, to 12.7 percent, from 12.8 percent in August, as the cost of foodstuffs declined.

The International Monetary Fund has said it expects Sri Lanka’s annual inflation rate to reach 14 percent this year, up from 7.9 percent last year, because of inflows of aid to help rebuilding. Sri Lanka should reduce fuel subsidies to manage its budget and debt obligations, the fund said last month.

“We will not reduce fuel subsidies quickly and sharply, as that would be destructive on industries currently in expansion mode,” said Jayasundera. “It will be done in a systematic manner and to balance during periods when agriculture supplies are strong.”
Sri Lanka will spend $400 million to build its first coal-fired power plant, as the government tries to cut fuel costs and meet electricity demand spurred by the cease-fire. The plant will produce 300 megawatts by 2010 and reduce generation costs by half that of oil-fired plants, which supply around 65 percent of the island’s electricity.

The government’s budget also will include plans to build a harbor in the southern town of Hambantota and to resurrect the construction of an expressway linking Colombo with the country’s international airport, Jayasundera said. Projects to rebuild roads destroyed by the tsunami will commence later this year, he said.

“We need to get three or four big projects off the ground to trigger private sector investment and transform the economy,” said Jayasundera.

Among the muddled themes on election platforms and press briefings is the confusion regarding what the Mahinda Rajapakse coalition’s position is about open economic policies. Although these meetings and press conferences are expected to clarify each candidate’s economic and other policy stances, they end up confusing the electorate. This confusion is an inevitable result of the incompatible policies of the SLFP-JVP-JHU coalition.

They proclaim that they are not opposed to open economic policies, but not the open economic policies of the past UNP and UNF governments. The question is not one of whether the policies are open economic policies or not, as there is no possibility of returning to a closed economy. The issue is the extent of liberalisation of trade and investment that they espouse and the internal consistencies of these problems.

What are these open or not so open economic policies? Open economic policies appear to mean different things to different people. In fact open economic policies appear to be a euphemism for any kind of economic policies with undefined restrictions. In fact open economic policies mean a liberal trade regime. It incorporates a minimum use of trade restrictions.

It also implies a low tariff regime and the jettisoning of non-tariff barriers to trade. This system of liberalised trade has been subscribed to by both SLFP and UNP led governments. The SLFP led government between 1994 and 2000 and the 2002-2004 government followed these policies with a few changes of no serious consequences to the broad framework of Open Economic Policies. Besides this, throughout this period the President subscribed to these policies and pursued them with vigour. The free trade agreements with India and Pakistan are instances of such a commitment.

Does the new coalition supporting Rajapakse have a different trade regime in view? If the answer is in the affirmative, he should make it clear what the changes are. Alternately he should make it clear that there are no substantial changes and that the coalition partners are agreeable to the continuation of liberalised trade policies.

It is mandatory to specify what controls the coalition intends to place beyond what are there already. It is also important to keep to the specified policies if returned to power. Both these are unlikely propositions.

The rationale for open economic policies is very clear. A small country with very little raw materials, inadequate capital and technology and a very small domestic market, cannot produce quality industrial products at competitive prices.

The rhetoric that Sri Lanka is blessed with natural resources is plain falsehood. We do not have petroleum, iron, coal or chemicals. In fact we do not even have adequate land and water resources with a population density of about 315 persons per square kilometre.

If our economic policies are based on fanciful ideas of non-existent bountiful natural resources, we are heading for an economic disaster. We have a very limited domestic market, as the purchasing power of the 19.7 million for many goods is extremely limited.

The attempt at widespread import substitution in the 1970s failed owing to the non-recognition of these facts. Today even big countries like China and India with a good endowment of some of the basic resources and a large domestic market have also adopted open economic policies as they realise the benefits of trade.

In Sri Lanka’s case, there is no option but to pursue a liberalised trade regime and be competitive in international markets. It is this need for greater efficiency and enhanced productivity that requires to be stressed, not the extent of openness.

The danger lies in the attractiveness of the political rhetoric that we must produce everything; that we must not waste money to import unnecessary things; that we must be self-sufficient in food; if translated into policies can only lead to slow economic growth and serious balance of payments problems. A liberalised trade regime is an essential regime for a small country in the present global context.

Some of the coalition partners are ideological in their economic policies and chose to largely ignore the changes within the Sri Lankan economy and in the global economic context.

If however the rhetoric we are hearing is only the stuff of electoral politics to gain votes and the policies they would implement, if returned to power, would be vastly different, then there is still hope irrespective of whoever may be elected President.

If however due to their beliefs or ignorance they think that a regime of trade controls in which the country can produce all it needs is the panacea, then we are in for a retrogressive period.

The UNP has reason to celebrate the clinching of a deal with the CWC and the SLMC in the run up to the presidential election, where numbers do matter most. In the on-going war for percentages, both candidates are desperate for alliances, big or small. The smaller parties, whose support they manage to secure are flaunted as kingmakers while others are rejected as jetsam and flotsam. It is a case of political sour grapes.

In the past, it was the SLFP which was considered incapable of capturing power without coalescing with smaller parties. But today even the UNP which boasts of the biggest vote bank has had to settle for a lot of humble coalition pie. This has been the natural outcome of the Proportional Representation System (PR), which precludes stable governments.

Smaller parties are in fact nonentities, unless they manage to ride the two main parties piggyback. But, strangely, they are in a position to dictate terms to their hosts. The SLFP and the UNP like the proverbial Arab, have let the camel of smaller parties into their political tents.

The presidential race appears to have become a battle not so much between Mahinda and Ranil but between CWC-SLMC and JVP-JHU, if their rhetoric is anything to go by. The JVP, which has become the self-appointed tooth battalion of the SLFP vows to defeat Ranil. SLMC Leader Rauff Hakeem has said he has never bet on the wrong horse. (We thought his horses were nowhere when he was shown the door by the PA in 2001 and when he was taken for a ride by the UNP, which refused to accommodate a separate Muslim delegation in the peace talks.) Thondaman has said the CWC will go all out to ensure Ranil's victory. The JHU says it will leave no stone unturned to ensure Mahinda's win.

Now, in the on-going battle for supremacy, the self-styled kingmakers will have to deliver as promised. We hear them talking of their votes in terms of millions. Their real strength is, in the jargon of ad guys promoting lingerie, 'seldom seen but much admired.' Or, it is like a ghost in an abandoned house–seen by none but feared by all. If one adds the number of votes each party claims to have–supposing one has nothing else to do–one will get a total far in excess of the number of registered voters countrywide!

There is no way of quantifying and verifying their claims as they have not contested a presidential election on their own, except the JVP (which in 1999 polled a little over four per cent). So, it could be argued that their claims of numerical strength are myths wrapped in rhetoric.

In some quarters, the percentages of past parliamentary elections are being used to predict the results of the November 17 presidential election. It is nothing but naivete. Calculating as they are, they are so weak in psychology. Voting patterns vary from presidential elections to parliamentary polls. A comparison should be made between two elections of the same kind, mutatis mutandis.

To gauge how much small allies could deliver to their captive hosts, a somewhat reliable basis will be results of the last presidential election. In 1999, the UNP polled 42.7 per cent and the PA 51 per cent. (A sympathy vote accrued to the PA because of the abortive attempt on its candidate's life). So, the task before the 'kingmakers' supporting the UNP will be to push the 42.7 per cent beyond the magic 50 per cent mark. Those backing the SLFP will have to help either retain its 51 per cent or prevent if from sliding below 50 per cent. Now that they have vowed to make their 'horses' win, come what may, let them trot out no lame excuses in the event of failure, if they are the kingmakers that they claim to be.

However, it doesn't usually happen so, after elections. The defeat will be debited to the candidate concerned and his party and the matter forgotten. The kingmakers will wash their hands of the matter. And they will return subsequently at parliamentary elections with a longer list of demands. They will be on a winning streak so long as the PR system, which allows them to go places on minuscule percentages, remains.