Peace and Prosperity: US Policy Goals in Sri Lanka 2006
Address Delivered by Ambassador Jeffrey Lunstead to
the American Chamber of Commerce in Sri Lanka
January 9, 2006
Happy New Year. The new year is a good time to both reflect and look ahead.
What a year 2005 was!
Tsunami set the tone – a rollercoaster of hope and despair, followed by ups and downs on the political and economic fronts.
We didn’t know until late in the year whether we would see a new President, or keep the old for another year, and here we are with a new President, some potentially good economic news recently from the Central Bank, an uncertain situation with regard to the peace process and a complex international situation with issues everywhere that cry out for attention and scarce resources from the “international community.”
With that framework in mind, I’d like to talk about US goals in Sri Lanka for 2006 and lay out some issues that I believe will be important during my last six months or so in your beautiful country and that will likely confront my successor soon after his or her arrival.
At the Embassy, we are currently doing our annual goal setting exercise. This gives us a chance as a mission to look at where we’re heading.
As has been the case since arriving here, our goals boil down to two simple, yet complementary themes: peace and prosperity.
I say they are complementary, because I don’t think one can exist without the other.
Peace allows for increased economic activity and investment, which prompts greater prosperity, which further solidifies the desires for and benefits of peace.
It is a virtuous cycle. Unfortunately, the opposite vicious cycle can also happen.
In many of my discussions with you, either at large events such as this, or at our more informal “Sector Teas,” I’ve focused on themes such as what business’s role should be in laying a foundation for sound economic policy or the need for the private sector to take an activist role in supporting sound economic and public policies.
These points remain important and valid.
Today, however, there is an overriding theme that trumps all the others:
Peace.
The peace process is paramount.
As we look at peace and prosperity, we are at a point in the cycle when the furtherance of peace is perhaps the single most important thing that can push Sri Lanka along the path to further prosperity.
A failure to capitalize on peace now will have significant negative repercussions in the months and years ahead. It will be especially bad for the economy and the underlying businesses that drive it.
Therefore, I think it critical that the business community take an abiding interest in the current status of the process.
You need to take an active role in both promoting the process and educating the country about the benefits of the processes’ success or the consequences of its failure.
I just recently returned from Brussels where I participated in the co-chairs meeting.
What I was pleased to find in Brussels, was a continued optimism on the part of my fellow co-chair participants that, despite recent damage to the ceasefire and the peace process, a strong hope for progress remains.
As we said in our statement:
“The Co-Chairs note that Sri Lanka is facing a crucial choice between increased violence and re-invigorating the peace process. The prospects for long-term peace lie in the hands of the Government of Sri Lanka and the LTTE. The Sri Lankan people want peace. A failure to respond to this desire would be a tragic step backward.”
We went on in our statement to outline those recent events and statements that we saw as useful and those that we saw as detrimental to the process.
In that vein, I have to take a moment here to congratulate the Government on its continued restraint, despite the recent provocative actions by the LTTE.
Similarly, the US calls on the LTTE to stop its violent activities and to return to the negotiating table with the Government of Sri Lanka in order to work towards a stable, permanent peace.
There can be a role for the LTTE in future development of Sri Lanka, but only if it returns to the peace table, renounces terrorism in word and deed and become a responsible participant in Sri Lanka’s future. And this will lead to a better life for the Tamils and all Sri Lankans in the North and East.
The LTTE’s current actions call into question its “leadership” of the Tamil people.
What kinds of leaders block their people from realizing their most fundamental democratic aspirations?
What kinds of leaders allow their people to continue to suffer from a lack of investment and industry?
What kinds of leaders continue to pursue violence when the clear benefits of peace are obvious?
These are not acts of leadership.
They directly undermine LTTE claims to legitimacy and they keep the aspirations of the Tamil people bottled up.
The United States remains committed to the peace process in Sri Lanka, and in helping the legitimate governing bodies of Sri Lanka to prepare for their roles in developing and protecting their citizens.
Through our USAID program, we are helping to increase the competitiveness of Sri Lankan industries, we are helping Sri Lanka rebuild after the tsunami, and we are supporting efforts to help people realize the benefits of peace.
Through our military training and assistance programs, including efforts to help with counterterrorism initiatives and block illegal financial transactions, we are helping to shape the ability of the Sri Lankan Government to protect its people and defend its interests.
Let me be clear, our military assistance is not given because we anticipate or hope for a return to hostilities.
We want peace. We support peace. And we will stand with the people of Sri Lanka who desire peace.
If the LTTE chooses to abandon peace, however, we want it to be clear, they will face a stronger, more capable and more determined Sri Lankan military. We want the cost of a return to war to be high.
Now you may be asking, why is the American Ambassador using such blunt language at a gathering of the business elite? What has this got to do with our businesses or our interests?
As I said in the beginning, it is imperative that the business community become seized with the peace process. For the peace and prosperity message to take hold, people need to understand better the prosperity element.
Just as the US has found that post-9/11 security measures have imposed costs and restraints on some businesses, the Sri Lankan business community must clearly outline the benefits that have accrued since the peace process began, and clearly outline the potential pitfalls of the absence of peace.
Now then, while Peace is critical and the top priority, I don’t want to leave other prosperity issues unattended.
On this front, Government has a clear choice and needs to establish an economic framework to help it foster peace and quickly realize the maximum gains from even the smallest peace initiatives.
Such a framework will require:
-- a strong entrepreneurial class,
-- a strong trade regime that doesn’t discriminate and
that attracts the best products in the world,
-- agricultural and industrial establishments that
export quality goods for needed hard currency,
and
-- an increasingly vibrant services sector that helps Sri
Lanka bridge the development divide.
What is needed to move things in this direction?
--Stable macroeconomic policies – particularly a sustainable debt level and responsible fiscal management,
--infrastructure that is built to support a growing
economy,
--an investment-friendly environment that sees four to five times as much investment as currently exists,
--a strong skill base that provides employees that can contribute immediately to an employer’s bottom line, and
--a legal system that promotes the timely resolution of commercial disputes and protects property rights, thereby ensuring a steady flow of creative ideas and innovation.
These kinds of policies will help Sri Lanka realize the kind of growth that allows an infant born today, in a country with a GDP per capita of US$ 1,000, to finish his A-levels in a country with a GDP per capita of close to US$ 5,000. And then finish University and raise his own family in a country that has a GDP per capita of US$ 8-9,000.
The US hopes to play a direct role in the promotion of Sri Lanka’s growth, particularly through our USAID programs, such as rebuilding the Arugam Bay Bridge and working with the local community to enhance tourism prospects and rebuilding vocational training schools that were damaged by the tsunami.
USAID is also working through its competitiveness program to increase Sri Lankan industry competitiveness in a global environment.
Finally, we hope to successfully conclude compact negotiations that will allow the Millennium Challenge Account program to begin operating in Sri Lanka.
The Government’s MCA proposal includes infrastructure in irrigation, rural electrification, rural roads and small and medium enterprise development.
Mahinda Chintana raises the issue of promoting rural-growth, something that is needed if the country as a whole is going to prosper in the years ahead. You can’t allow growth to leave huge segments of the population behind.
Nonetheless, a focus on “home grown” solutions, that ignores the lessons learned of the global community and that fails to take advantage of what we in the US call OPM – “other people’s money” – will only lead to further stagnation and continued growth far below its potential.
Let me read some recent newspaper headlines, some which actually appeared and some which might have been.
Here is one from last week's Wall Street Journal: "Intel explores Sri Lanka as site for chip plant." No that is not the real headline, the real one is "Intel explores Vietnam as site for chip plant." Here is another one from the Wall Street Journal: "Microsoft targets India and Sri Lanka in $1.7 billion expansion." Well, no, "Sri Lanka" was not in that headline. The article continues that in addition to Microsoft's investment, Intel would invest over $1 billion in India, and that SemIndia would invest $3 billion to use AMD technology to produce microprocessor chips. And there are many other similar stories. Now I am not suggesting that Sri Lanka could or should compete with India. What I am suggesting is that there is an enormous amount of foreign investment going on, and Sri Lanka is not getting its share.
What are some things that would get things moving faster for Sri Lanka?
I strongly believe that one of the main opportunities for Sri Lanka lies in the successful conclusion of the WTO’s Doha Round in 2006.
Sri Lanka is a trading nation that has an opportunity to play a leading role in promoting the resolution of outstanding issues and help the developing countries of the world understand the benefits to opening up what has been termed “south-south” trade.
The World Bank estimates that by far the greatest income opportunities from increased trade will come from the elimination of barriers between developing countries.
Sri Lanka appears to already realize this, given its efforts to conclude bilateral and regional trade agreements among its neighboring nations.
Instead of looking at market access for Sri Lankan products as a type of development assistance Sri Lanka should look at the major benefits that accrue by opening its markets, opening markets in other countries and spurring a broader, more diverse set of trading partnerships.
Sri Lanka is at a tricky point in its history. It’s not clear if it is at a crossroads, or a cliff’s edge.
The US will continue to support a strong, unified Sri Lanka that seeks peace and prosperity and that offers an atmosphere of respect and justice for all citizens regardless of religion and race.
We will urge others in the International Community to do the same.
We have stood with Sri Lanka through the peace process as one of the co-chairs.
We are standing with Sri Lanka through the rebuilding process from the tsunami.
And we want to stand with Sri Lanka as it crosses the threshold from a situation of “no war” to one of peace and moves from a platform of low economic growth to a launching pad of economic dynamism.
I see the role of the business community and other civil society players as critical in these endeavors.
But the business community has a key role, because your initiatives and your penchant for risk-taking, decision-making and negotiating are all areas that the Government will need to advance if the cause of peace and prosperity is to be served.
I look forward to working on these issues with you in my final months as Ambassador, and will remain hopeful that my successor will inherit a portfolio of issues poised for positive progress and dynamic growth.
Thank you