(2011) Politics of market reforms and UNF-led negotiations.

In: Jonathan Goodhand, Jonathna Spencer and Benedikt Koft, eds. Conflict and Peacebuilding in Sri Lanka, Caught in a peace trap? London: Routledge.

The main purpose of this paper is to establish the importance of focusing on the politics of market reforms if Sri Lanka is to achieve sustainable peace. The late Newton Gunasinghe tried to draw our attention to this aspect in his seminal article analysing possible reasons for the July .83 anti-Tamil violence.2 In this essay he focused on the changing relationship between the state and different social classes among the Sinhalese because of policies of liberal capitalism and its impact on the ethnic conflict. Since the focus of essay was July .83 anti-Tamil violence where Colombo was the centre of violence, his foci were small businesses and the urban poor. He argued that the inauguration of liberal economic policies led to loss of state patronage in the case of small businesses and undermined welfare benefits received by the urban poor. He saw these factors playing a role in the July .83 violence.

This article explores the political economy of the UNF-led negotiations in 2002/2003, making use of the lines of inquiry in Newton Gunasinghe.s article. The fundamental message in this article is that UNF-led negotiations, which, along with a ceasefire agreement with the LTTE tried a massive dose of market oriented reforms, alienated a large section of the Sinhala population which had brought the UNF into power. This contributed to its defeat in the 2004 general elections which was the beginning of the end of the UNF regime.

Theoretically this article is a contribution to the body of literature that has begun to focus on the politics of market oriented reforms. Even mainstream literature now recognises that economic reforms are not a mere technical issue. Much of the earlier discussion on economic policy reforms, especially in agencies such as the World Bank, was technocratic. It assumed that what needs to be done in order to develop an efficient market economy is by and large known. The problem is in implementation. Shortcomings in implementation are explained by “(a) weakness in policy design (b) poor implementation capacity (c) disruptive power of short term transition problems (social costs of adjustment) and (d) the lack of “political will”. Failure was frequently seen to be the result of weak institutions, for which the typical remedy (of donors in particular) was to strengthen the institutional capacity of the implementing agency and to encourage “good governance” (in the technical sense of co-ordination, accountability and managerial propriety). Stronger institutions, it was argued, would lead to more robust policy analysis, technically sound policy and more effective implementation”

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