Ladies and Gentlemen,

Thank you for having me here on this important occasion. Although I don’t presume nor pretend that today’s gathering will influence the course of history, I do cherish the few occasions I have to meet with representatives of the business community in Sri Lanka.

Allow me to start with a quote of this month’s LMD/AC Nielsen Business Confidence Index: “Biz confidence comes out of a tailspin”.

According the Central Bank, Sri Lanka counts with a healthy growing economy of 8%/year.

However:
• Trade deficit continues to widen..............currently 3,6% of GDP;
• Stock market did not gain significantly over the last year;
• Inflation above 10%;
• Government debt up 10% and government spending will rise next year with almost 40%;
• Interest rate up with 2 points; almost to 14%;

These figures are meaningless if not benchmarked to the neighboring countries.

You are perfectly capable to judge by yourself up to what extent the optimistic feeling of the business community on the economic development has an empiric basis.

Benchmarking the country to, let’s say Malaysia or Thailand might help one to see what Sri Lanka did not use of her economic potential over the last decade.

I now quote freely the LMD/AC Nielsen Business Confidence Index Sensitivity Analyses: The fate of the BCI (your own confidence) is based on three important issues:
1. The budget and, of course fiscal policies.
2. A lasting agreement between the main political parties regarding core issues as peace, constitutional and electoral reforms.
3. Peace talks between the Government and the LTTE.

None of the above represents a “stand alone” issue, so much is clear. Though all issues are related, I gather that the peace issue has been the dominant one over the last 20 years. Economic development, the only way towards poverty eradication, will only be pursued to the fullest, once the conflict has come to its end.

The costs of conflict are tremendous in economical terms. Based on research of the WB, one year of conflicts equals seven years of development co-operation. The damage caused by the brain drain as a result of the conflict can not be assessed in absolute terms, but is indisputable very substantive. As an outsider I cannot judge the impact of the conflict on the “Psyche of the Nation”, so I leave that one for your own judgment.

Of course the conflict has also her economic benefits for some. A number of books have been published on the dynamics of conflicts and why many stakeholders have a keen interest in maintaining the status quo. The logic of war and the profits of war often proof to be an underestimated subject when it comes to a settlement of a conflict. The powers of those who profit from conflict increase accordingly to the duration of the same. I do assume that we don’t find these powers in tonight’s audience…………………

The role of the international community in conflict areas is most often overestimated. The international community as a concept is expressed by the United Nations only. However, the UN has proved not always to be effective when it comes to addressing conflicts and very often is perceived as “too late, too little”. This can hardly be blamed on the UN itself as they are just as effective as their member states allow them to be. The internal workings of politics within the UN also often hamper the effectiveness of their operations. Within the context of the conflict of Sri Lanka, it is not very likely that the UN will play a bigger role, unless asked to do so by the parties involved in the conflict.

Naturally neighboring states can have an interest in helping to solve the problem. India has an interest in a stable and prosperous neighbor, but it is not very likely that they will more actively intervene in the conflict due to sensitivities in Tamil Nadu and past experiences in Sri Lanka. That leaves Sri Lanka with Norway and the three other Co-Chairs; be it as it is.

In the perception of the Co-Chairs it is clear of what should be done to bring the conflict to an end. The statements of the Co-Chairs are public documents and do repeat, time and again, the same core-messages. The LTTE has been urged to give up violence as an instrument to achieve political goals, to respect the democratic rights of all in Sri Lanka and to engage in a political process with the Government. The Government of Sri Lanka has been urged to acknowledge and accommodate the legitimate grievances of the Tamil population and propose a political solution based on a different constitutional framework acceptable for the Tamil population. The Co-Chairs made a clear reference to the outcome of previous negotiations and thus, any solution should be based on power sharing.

The “F” word has become to politicized, but is evident where the thinking of the Co-Chairs is going.

It is obvious that the means that the Co-Chairs can apply to help parties to come to a solution are limited. In 2003 there was a huge, US $ 4.2 bln, carrot and almost no stick. History made clear already that the international community cannot help the peace process in Sri Lanka by providing financial incentives. The stick option also has serious limitations. Calling a spade a spade often provokes a reflex of utter denial of the parties involved in the conflict; critics are allowed as long as it concerns the other party. As business persons, you better then most, do know that this mentality hampers the capacity of deal making. If you are not able to look through your customer’s eye, you won’t survive long in business.

How comes that in politics it so often seems to work the other way around? Though both parties in conflict care for a certain international credibility; both seem reluctant to incorporate the international view in their agenda for peace. The EU called a spade a spade when including the LTTE in the list of terrorist organizations.

The reaction of the LTTE was furious, but hopes are alive that the potential incentive of being de-listed helps them to come to the table and settle for a realistic negotiated solution. However, giving a name to LTTE practices doesn’t exclude the Government of Sri Lanka for its own responsibility in solving the conflict.

The Co-Chairs stated clearly that if the Government shows to be unwilling to come to a realistic political solution, a diminishing international support will be their part. In diplomatic language it calls upon the Government to take the moral high ground or accept a “stand alone” position. Depriving credibility seems thus to be the most powerful mean that the international community has.

Being consequent where human rights are involved, making sure that means for development assistance cannot be used for war and a “name and shame policy”, are the only weapons of the Co-Chairs to help parties finding a lasting solution for this tragic conflict. In other words; the efforts of the Co-Chairs only can be effective if parties are willing to come to reason and terms. There is, unfortunately, no magic stick and there are no quick fixes……. The solution has to come from the same root that caused it and is now responsible for letting this conflict dragging on; the people of Sri Lanka themselves.

In this conflict everybody claims to be another’s victim, but hardly anybody seems to claim the path to reconciliation. Everybody seems to know why something cannot work out, but few are daring enough to take a stance that invites the other party to become part of a solution. War has its costs, but peace has its price. The question is; are the people of Sri Lanka willing to pay that price?

The business community, and thus the respective Chambers of Commerce, can play a most important role in bringing the conflict to an end. As no other the business community realizes that any transaction demands considerable efforts and there is always a price to pay. Employers associations often proudly state that they are not involved in politics. I learned that, even if you don’t want to be involved in politics, politics will involve you. As the most important source for the income of the Government it seems also wise to play a role that articulates your specific interests in the society.

Of course taking a political role is not the same as supporting party politics or politicians, but any employers’ organization should be focus on their interests. Research shows that investors share the same priorities when it comes to decision taking. For many outsiders it comes as a surprise that the main considerations are not in the field of cost of labor or fiscal regime.

Yet for many years stability, predictability and transparency are valued as the most go-no go reasons in the decision making tree.

I cannot, as an outsider, make the judgment on how vocal the business community should be on this matter. I don’t know exactly the risks one can take and the stakes involved. I have no idea whom to convince and where to challenge the “competition”.

However I know that if the price for peace is not paid in due time, the cost of recovery only will tend to increase, not only in terms of economic damage, but also in terms of governance and administration, reputation and trust.