Good morning
Distinguished members of the head table, ladies and gentlemen

Let me first thank the organisers for the honour and privilege of inviting me to make the keynote address this morning. I am particularly pleased to be here because this is not yet another one of those Colombo-Centred discussions. It is a discussion which involves regional business leaders and since I believe, coming from Kandy as I do, that it is extremely important that development and peace should go hand in hand and should begin in the regions, I think this is a very welcome opportunity for me to share with you some of my thoughts with regard to the fundamental inter-relationship between peace and development.

There is more than the moral and ethical imperative for peace in our country. There is very sound economic good sense about it and it is for this reason that I wanted to use the theme “Peace is good business”. We all know about war profiteering and the way in which weapons manufacturers profit from conflict. It is our duty as responsible citizens, as part of the corporate responsibility that all of us as business leaders pledge to uphold, to ensure that peace can be more profitable than war. Not only will it benefit the common citizens of our country and will have a durable value added to our society, but it will also ensure that war is unlikely to return ever again to our beautiful land.

We have today, the examples of many groups in conflict situations in countries in the international community who have themselves renounced violence and taken to the path of peace. Yesterday the Irish Republican Army announced that after 36 years it was going to abandon armed struggle, in order to achieve its political objectives. This is a very significant moment in the history of that country and the Northern Ireland conflict will make a radical turn for the better as a consequence of what the IRA has done. Not so long ago following discussions going on in Helsinki between GAM, the rebel movement in Aceh, and the government of Indonesia, both sides announced that they had reached success and that very soon they would sign a peace agreement bringing to an end that separatist movement in an important part of Indonesia.

It is not unlikely that the same good news can take place in our country with the right political will and the right decisions made by the parties to the conflict that has plagued our country for so long. But the incentive for that must come from you. The peace process belongs to the public of Sri Lanka . It is not the exclusive property of the government of Sri Lanka or of the LTTE. The stakeholders are you, the people of Sri Lanka and the business leaders and the private sector have a very important role to play in this process and this is why I feel it is important that your Investors for Peace Dialogue and your Alliance for Peace must take more bold steps in your pursuit to link the economy of the country, the economic development of the country with the peace process in our country.

We are at a very important stage in the peace process. We did have, of course, a Ceasefire Agreement at the beginning of 2002 and it is now three and half years into a ceasefire which, despite the many violations, continues to hold substantially. We have not had open conflict, we have not had the scale of death and destruction that we had when the conflict was going on. This is the longest ceasefire that we have had todate and everyday of the ceasefire means an additional investment in peace. We should be grateful that the ceasefire continues, but we must not take the ceasefire for granted. We have to be able to use the ceasefire as an opportunity to make a durable peace and sometimes we unfortunately do not do that. We have attempted to use the opportunity of the natural disaster that befell us all on the 26 th of December, in order to devise a structure where we could engage the LTTE and the Muslim parties in a partnership endeavour to have an equitable allocation of the foreign aid that has generously come in from the international community for post-Tsunami reconstruction. That structure has substantially been endorsed by the Supreme Court of Sri Lanka. It has upheld in its interim order two fundamental principles : one is that the President of Sri Lanka was entirely constitutional and legal in concluding such an agreement and in delegating one of her Secretaries to sign such an agreement. Secondly, that it was entirely legal and constitutional for the President of Sri Lanka to conclude an agreement with the LTTE as the premier protagonist in the conflict and as a body that has effective physical control of certain parts of our country. There are of course certain elements with regard to the Regional Committee’s functions and the Regional Fund that have been stayed by the Supreme Court. Today the government lawyers are filing objections to that interim order and these objections together with the responses of the petitioners will be heard by the Supreme Court on the 12 th of September. I do not wish to speak more on the subject, but the Supreme Court, I am sure, will evaluate the objections of the government lawyers and the petitioners and come to the right decision at the right time.

But meanwhile there are substantial aspects of the Post-Tsunami Operational Management Structure that can be implemented and it is here that you have a very important role to play. P-TOMS is a vehicle for development, for Post-Tsunami reconstruction. It is reconstruction in which you have a role to play. The construction industry and many other parts of economy can be galvanized by this huge infusion of foreign assistance that is coming into the country and the six districts which are involved in the Post-Tsunami Operational Management Structure are districts that have already been affected by the conflict, by 20 years of conflict, and they have now been affected by the Tsunami. The people living in those districts of all ethnic groups, all religious groups desperately need assistance and it is the conviction of the government that all of us should unite in order to ensure that the Post-Tsunami assistance that we have received should go directly to these people and we need to, therefore, work in partnership with all organisations including private business leaders in order to ensure that this is done. There is therefore a great opportunity here for business leaders to participate in project proposals and their formulation at the district committees in which you can actively play a role with the GAs involved, with the other representatives of the government departments, with NGOs, including international NGOs and the representatives of the UN system who are represented on the district committees. You can also help in the Regional Committee and finally in the High Level Committee. But most important of all, you can help in the implementation of the project proposals when the implementing agencies are given the contracts by the Regional Fund whose custodians will be the World Bank to ensure that those projects are implemented successfully for the direct benefit of the people.

As I have said peace is not the exclusive task of the government. It is the public who are the stakeholders and it is here that you have a very important role to play. What I propose to say this morning is broadly divided into four sections, (1) I want to talk about regional development, that’s a very important component of the peace process and of the peace dividend that is so important. (2) I want to also mention something about the private sector and its role in the North and the East. (3) the global context and finally (4) I would make some concluding remarks.

We are all familiar with the refrain Colombata Kiri Apata Kekiri. This was something that was used as a theme in the Report on Youth Unrest some years ago. But it is unfortunately a refrain that we must continue to remind ourselves about because of the essentially Colombo-centric and Western province-centric skewed development that we have with us. The Finance Minister in his budget speech last year talked about the share of the poorest 40% in the national income having declined from 21% in 1980 to 14% in 2002, whereas the richest 20% increased to 54%. Now it is not only a lopsided development in terms of the lower income deciles of our country but it is also a skewed development in terms of regions. There is a heavy preponderance of the Western province in its share of the national GDP, 43 to 49 % in the 1996 to 2003 period. The Northern Province in contrast had the lowest per capita of GDP of the country. So it is important for our economic development planners not only to have pro-poor development strategies but also to have regional development strategies with their fundamental implications in the Sri Lankan context of meeting the aspirations of minority ethnic groups, especially in the North and the East. We are all familiar with the entitlement theory of the distinguished economist Amartya Sen. It is upto us to ensure that this entitlement of the minorities in the North and the East and in the other regions as well are, in fact, met and I think regional leaders can by talking freely and frankly, as Mr Tissa Jayaweera said, ensure that our policy makers are able to take these considerations into account when the plans of our country are formulated, particularly, at Budget time.

Now there are many who claim that the peace dividend has not, in fact, reached the people and here the research done by the Economic Division of the Peace Secretariat tends to disprove this and I am grateful to Seneka Abeyratna and Rajith Lakshman of my Peace Secretariat who have made an analysis of the post-Ceasefire situation and has shown that, in fact, it has triggered economic growth in the North and the East. Of course it is only the beginning and much more can be achieved, but if you look at the GDP of the Northern province it grew by an average of 12.6% during the post-Ceasefire period compared to 3.4% during the pre-Ceasefire period. In the Eastern province the gross domestic product increased by 10.1% per annum during the post-Ceasefire period compared to 4.6% during the pre-Ceasefire period. And in the North Central province which shares common borders with both the Northern province and the Eastern province, there was an increase of 8.2% in the post-Ceasefire period when you compare it with the -0.2% in the pre-Ceasefire period. The Northern province grew twice as fast as the Western province in respect of the annual post-Ceasefire GDP growth 12.6% vs. 6.2%. Of course it can be argued that they were starting from a lower base, but these are not the only 3 regions to have realised significantly higher GDP growth rates during the post-Ceasefire period compared to the pre-Ceasefire period. I think it is plausible to argue that the increase in the average GDP growth rate of Sri Lanka as a whole from 3.9% to 5% in the post-Ceasefire period was due largely to the exceptionally high growth rates realised collectively by the Northern, Eastern and North Central provinces . So these findings are compelling evidence that the transition from war to peace has realised a substantial economic dividend in the 3 main provinces affected by the civil conflict form which the entire country has also benefited to some extent as reflected in the National GDP growth rate.

But there is an important sector-wide illustration that I would like to come to. There has been a phenomenal growth in the agricultural sector in real terms in the Northern province , 32% per annum, and in the Eastern province 19% per annum, compared to 4.3% and 4.9% respectively in the pre-Ceasefire period. Now data published by the Department of Census and Statistics shows a marked increase in paddy production in the affected areas during the transition period. In the Northern province paddy production annually average 138,000 metric tonnes during the post-Ceasefire period compared to, something like half that, 65,000 metric tonnes during the pre-Ceasefire period and in the Eastern province the post-Ceasefire average was 752,000 metric tonnes compared to 619,000 metric tonnes before the Ceasefire. So the combined share of the North and the East in national paddy production is also significantly higher in the post-Ceasefire period amounting to 31% than in the pre-Ceasefire period. The contribution of the North and the East towards food security of the country has also been very considerable. Now I think its important that in the sectors of industry and services also, you have a positive growth and that means a creation of employment opportunities in these two sectors as well.

Let me now move onto the private sector’s role in the North and the East, because I believe that the Chambers can help, not only in providing an impetus for this growth, but in also getting us the data that we need on private investment, because comprehensive data on pre and post-Ceasefire private investments are not easily available. But in some sectors like banking, retail trade, information communication technologies, there is certainly an indication of private sector activity in the conflict affected areas. In the communications sector we looked into what Dialog Telecom has done as they were not operating in the North and the East before the Ceasefire. But have now invested more than one million US dollars in the North and the East. Of the 1.5 million Dialog mobile users in the country, 250,000 or 17% are located in the North and the East alone. This is a very interesting statistic because the population of the North and the East combined is only 13% of the entire country.

I think the role of the Chambers therefore is a very important one because you can establish links amongst yourselves and try to form mutually reinforcing links which will help integrate the national economy. I am very happy to hear that already many of your regional Chambers of Commerce have established these links, and that there are not only institutional links but also personal links that are being established. Post-Ceasefire growth rates in the North and the East can be sustained and improved with greater impact to the national economy if we can only consolidate the peace process, implement the post-conflict and the post-Tsunami rehabilitation and reconstruction program and move towards re-opening direct negotiations with the LTTE within the framework of the Oslo decisions that was signed between the Government of Sri Lanka and the LTTE on the 5 th of December 2002.

But we have to think creatively, as to how to improve the investment climate in general, and we have to also come up with investment promotions strategies specific to the conflict affected areas. We do of course have investment friendly policies and the Board of Investment Chairman is here. He is responsible for that in terms of foreign investment, but we must also think in terms of domestic investment within the country. And it is not an easy task to attract private sector investments into troubled areas. It requires innovative thinking, people are normally risk averse and especially so with a history of the conflict that we have had in our country and continuing political killings, child recruitment and other violations of the Ceasefire. So we must think of a mix of economic and non-economic incentives. Involvement of the private sector in the larger task of formulating a strategy for post-conflict recovery does require us to look at the situation in each of the provinces and try to devise income and employment generating activities in the areas. We need quick-win projects and it is only you who can identify what those projects can be because you know the resources in your respective areas. You know what investment you need and you have access to banking facilities and to the political sources where you need the support with regard to policies. So the business community can play and have played a role of course, in the search for these economic solutions which will help buttress the peace process. A number of groups such as Sri Lanka First and of course Business Alliance for Peace have demonstrated already a great commitment to peace and a genuine sense of corporate social responsibility by taking initiatives. But clearly we need to do more, much more. It is not enough for us to wait for the government to take action. We have ourselves to take the initiative and try to drive the peace process forward with the economic engine of growth that, you, in the private sector have, in your hands. The global context is also a very encouraging one. As many of you know, corporate social responsibility has today become a hallmark of corporate management. Best practices and lessons are available throughout the world. In the United Nations we have the Global Compact which was launched by the Secretary General some years ago and I think over 1500 companies in 70 countries today participate in the global compact and these include Sri Lankan companies as well. Now in trying to have a more sustainable and inclusive global economy the whole question of the role of business and peace has taken a very important place.

In South Africa the business community we know was instrumental in enabling a smooth transition from the apartheid regime to a non-racial democratic regime in that country and I know many representatives of the private sector in South Africa do visit Sri Lanka and representatives of the Sri Lankan business committee have also been to South Africa in order to learn the lessons that they can teach us from their experience. Just as an example, one company actually paid for secret meetings between the African National Congress and the top Afrikaaner leaders during the last few years of the collapsing apartheid regime. And this helped to lay the groundwork for the negotiations which ended apartheid.

In El Salvador we have another good example of a case where a critical mass within business became the crucial force behind ending the country’s conflict. The Salvadorian business community realised that they were missing out and lagging behind opportunities offered by the international economy in a context of growing competition. And so a new generation of business leaders began to link their continued economic prosperity to peace and this group was a crucial and critical force behind the negotiations that led to the signing of a peace agreement in that country in January 1992.

In Gaza and the West bank, (we have just heard references to the Arab-Israeli problem), the private sector spearheaded by the Palestinian diaspora and the support of the European Union, has created new banking systems, venture capital funds and mechanisms to the privatisation of the telecommunications and other industries.

I think what we must do in our country is for the government and private sector to identify modalities for working together as partners on these issues. And there is therefore a challenge that faces the private sector to assist the government in defining opportunities for local and foreign investors interested in doing business in the North and the East. And in identifying innovative policies and institutional mechanisms for promoting as well as encouraging early engagement. Agri business, fisheries, tourism, information technology and communications, banking, insurance and micro finance are some of the areas where there is a great deal of scope for early engagement and I would encourage the private sector to examine potential also for rehabilitating the social and economic infrastructure of the North and the East through joint ventures. Risk sharing investment modalities, I believe, are most appropriate for areas undergoing a transition from conflict to peace. The promotion of private enterprise can therefore have a major stabilising effect in the conflict affected areas. We must make every effort to substitute instruments of peace instead of having the weapons of war. And one of the most potent instruments of peace is, I believe, private sector led development in the troubled areas. And so the early engagement of the private sector in the North and the East is a very important avenue for us to secure peace and harmony and to convert this fragile Ceasefire that we have into a durable peace.

May I conclude with a few other specific remarks. I have said before, that the Multilateral Investment and Guarantee Agency (MIGA) an important arm of the World Bank group, which is the risk insurance agency of the World Bank has been invited, on my initiative, to come to Sri Lanka. We have already had two preliminary visits and a delegation from MIGA will come to this country in September in order to investigate a program for our conflict affected areas. MIGA has had experience in a number of conflict affected areas with great success in Bosnia Herzegovina, Gaza and other areas. They have devised programs for risk insurance where the government of the country obtains a soft loan from IDA and this helps to finance the insurance of various initiatives that the private sector undertakes in the conflict affected areas. I am very hopeful that a similar program can be implemented in our country which will help to give some confidence not only to foreign investors but also to domestic investors.

There is a great need also to be done in capacity building, as you know, with the reconstruction activities going on in the North and the East. There is great demand for carpenters, masons and for the other artisans involved in the construction process. For that we do need to have vocational training. Vocational training has the added advantage of weaning youth away from violence and providing them with productive employment, with gainful employment which will stand them in good stead as livelihoods in the future. Don’t wait for the government of Sri Lanka or the Ministry of Labour and Vocational Training to start vocational training. You can do it yourself. You can do it even with simple mechanisms like training on the job when you recruit people. And I think this is something in which the private sector therefore can play a very important role.

I also want to draw your attention to a Peace Village that the Army has begun in Jaffna, in the high security zone, which as you know is a subject of a great deal of controversy between the government and the LTTE. But now it is possible that the private sector companies also can sponsor peace villages in various parts of the North and the East in order to help to convince the villagers that the settled way of life and the return to their agricultural practices would be something that they could do and which you can support them to start doing.

There is also a great deal that needs to be done to find employment for the internally displaced persons, many of whom are still languishing in camps which are in very bad conditions. There are also a large number of refugees, many of them educated, in India waiting to come back to Sri Lanka . They are a human resource that you could use in the private sector.

Omanthai and Muhamalai have check points that involve great deal of delays in having the checking of not only the passengers but also cargo. I am hopeful that the Department of External Resources will obtain funding for streamlining procedures here.

Micro-credit is another area in which we have to do a great deal of work in the North and the East and we can use the excellent examples of the Gramee Bank in Bangladesh and in other countries, in order to ensure not only that the poor villagers have credit but also that the women are able to be drawn into the economic productivity of the North and the East.

There is also the great reservoir of diaspora investment that remains largely untapped. This is something that can be done with the cooperation of the Ministry of Foreign Affairs and our Diplomatic Missions abroad. The Ministry of Foreign Affairs has an Economic Affairs Division which is very active and I do believe that the Regional Chambers of Commerce should utilise their services as well as the services of the Department of Commerce in order to try to ensure that specific needs for investment could be addressed through them to the diaspora in different parts of the world today.

Let me say finally that I believe very strongly that not only must the initiatives come from regional chambers of commerce for development which will help strengthen the sinews of peace in our country, but it is also important that we have interlocking structures to ensure that we remain an integrated country. I think that this can be done with greater emphasis on the inter-dependence of the various parts of our national economy.

In conclusion I would like to quote what Winston Churchill said sometime ago, he said, “Some people regard private enterprises are a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse pulling a strong wagon”. I see the private sector in Sri Lanka as having the potential of a healthy horse that can pull the Peace Wagon from the mire that we are in right now.

Thank you.