View from Colombo: It's business as usual for many sectors despite media hysteria, panic and gloomy predictions

The overall market situation recorded dramatic improvement after President Chandrika Bandaranaike and Prime Minister Ranil Wickremasinghe ended two weeks of uncertainty by agreeing to work together and appointing a committee of officials to work out a national consensus on key issues and take the peace process forward.

The firing of three key ministers and suspending of parliament on November 4 by President Chandrika plunged the entire country into political crisis and an uncertain future with the booming stock market collapsing over-night – declining by around Rs60 billion. As a result, the business community was thrown into unexpected chaos.

Following the cease-fire agreement between the government and the Tamil Tiger rebels in February last year, ending two decades of deadly ethnic war which killed more than 60,000 people and devastated the island's economy, the business community in general which had suffered for long was very enthusiastic about the future.

Encouraged by the government incentives, including tax amnesty, large sums of black money were invested in many sectors.

As a result, almost every sector recorded growth until the unexpected political developments of the past two weeks. But with all involved – the President, Prime Minister and the Tamil Tiger rebels – openly and clearly stating their desire to pursue peace talks, the political and economic climate started to return to normalcy. Even companies trying to establish business in Jaffna said that the Tamil Tigers are no barrier to business.

Stock market

Of course the stock market continued to fluctuate during the past two weeks. But the truth is that the performance of the stock market and the corporate sector tends to hide the ugly reality that a large majority of people do not enjoy the fruits of the market economy.

There was panic even in the Board of Investment which is involved in attracting foreign and local investment, as it feared that the political uncertainty may force big time investors to hold on to their investments, leaving projects worth Rs 15 billion. But the developments during the past few days proved these fears to be unfounded.

Despite the media hysteria and panic and the gloomy predictions by many businessmen with their own vested interests it was business as usual for many sectors whose collapse they anticipated.

For example, contrary to forecasts that the growing tourist industry would be the first casualty, tourist arrivals, including a luxurycruise bringing 1,000 tourists, continued unabated, while a team from the Swiss-based travel giant, Kuoni, was in Colombo to promote the island as a major tourist destination.

Besides, Maldives-based Universal Enterprise announced a $ 500 million boutique type hotel project to be built in southern Sri Lanka.

The real estate sector, which has been thriving since the government announced a tax amnesty as well as due to the need-based prices, never showed any signs of decline contrary to all expectations.

Trade missions

The political uncertainty also didn't prevent foreign trade missions from visiting the country as two main trade teams, one from the United States and the other an 18-member team of potential investors from the London Chamber of Commerce, are now in the country meeting government officials and business leaders.

Ending all speculation was Wednesday's budget – described as "good and balanced" by Jeremy Carter, the IMF representative in Colombo – which was criticised by many quarters in the private sector who described it as "an election budget playing to the gallery".

Several private sector establishments complained that there is hardly any fiscal support for them although they remain the engine of growth and that there were no fresh incentives to lure foreign investors.

The writer is a Sri Lanka-based journalist.