Comment: MoU boosts business confidence

The Memorandum of Understanding (MoU) signed between the SLFP and the UNP would boost business confidence in the country and many indicators are already showing a positive trend. The Colombo Stock Exchange is one of them, and soon after the MoU both indices, ASPI and Milanka showed an upward trend. However, the movement of CSE indices into negative territory during politically critical times in the past was highly volatile.

On many occasions in the past, especially when the PA or the UPFA government came to power or SLFP led government entered into an MoU with the left parties (recently with the JVP) CSE indices movements were used by certain elements to give an impression that the country's economy was at risk and business confidence was on the wane.

Some argued that the CSE was manipulated by the UNP with political motives. Similarly after the UNP's victory in 2001, it was interpreted in another way and some held the view that the UNP victory had boosted business confidence. However, now nobody can dispute the CSE boost, because the MoU was signed between the SLFP and the two arch rivals.

The MoU was signed on Monday. On Tuesday, the ASPI rose 31 points and passed the 2,500 point while the Milanka rose by 41 points. The highest ASPI figure reported so far is 2551.4 points on November 16, 2005.

All business chambers, and others in the business sector welcomed the move wholeheartedly. This itself is evident that the CSE trend is not manipulated because it is these trade bodies who invest in the CSE too.

The SLFP-UNP marriage was not the only cause to boost business confidence. The next round of peace talks between the government and the LTTE has begun in Geneva. This meeting takes place against a backdrop where hostilities escalated.

However, the business community will not be complacent with these two initiatives alone. They will expect more from all parties SLFP, UNP and the LTTE especially since we have seen many MoUs being signed earlier.We have seen several rounds of peace talks start and stalled with no conclusion.

On all such occasions the people all over the country were over enthusiastic and within a short period of time the people were disappointed that the MoUs ended with political wars despite the peace talks.

In order to witness a sustainable growth in the CSE to boost business confidence all parties have to make commitments and sacrifice. They should be sincere in what they have agreed upon and what they promised.

As far as the Sri Lankan economy is concerned, in broader terms since 1977 we have been practising the same economic policy, the open economic policy. We are proud to say this to the world and foreign investors. However we see different versions of this open economic policy and a fluctuation between two ends. If this new political agreement can sort out what is the best combination of the economic policy for a sustainable growth it would help boost economic growth and business confidence as well.

The statements issued by business leaders and organisations on the new political harmony, show that the business community is smarter than merely commenting on politics and peace. They have their own studies and suggestions and FCCISL has presented such a report. They have the widest experience of over five decades political war and over two decades civil war and their impact on the economy and business in the country.

Though we are made to believe that the country is politically stable, war risk is common to all countries. Tourism here will not be affected because Thailand, Egypt and other cities have faced the same issues and hence, risk to investments are similar all over the world but in reality it is not so. The business community is well aware of this.

The problems of the business community is not the only burning issue in this country. If the combined efforts of the two main parties ignore the suffering masses, the political stability or peace will never dawn.

Having ignored the sufferings of the masses, sovereignty of the country and blindly following extreme neo liberal policies to achieve peace at any cost is certainly not the solution.