AFTER the end of Sri Lanka’s long and often barbaric civil war, there’s no avoiding President Mahinda Rajapaksa. Banners espousing his election manifesto Mahinda Thought line the nation’s roads and railways. Pick up a newspaper or turn on the TV and his mustachioed visage appears a dozen times, illustrating the most innocuous of stories. Most every street corner and public building seems plastered with his picture. And he’s often flanked by his three younger brothers–Defense Secretary Gotabaya; palace advisor Basil; and water, ports and aviation minister Chamal–the four of them striding purposefully toward the economic paradise they’ve promised.
It feels a little Mao-esque to the visitor, suggesting a personality cult at odds with South Asia’s only unbroken postcolonial democracy. But after defeating the separatist Tamil Tigers in a conflict that killed 100,000 people, this triumphalism could end in tears if Rajapaksa can’t win a very different battle–to secure the peace on his newly unified island and catch up on years of economic development lost to war and bad leadership.
A former lawyer from the island’s Sinhalese heartland, Rajapaksa will be quick to claim the spoils of victory–he seems likely to walk off with a second term in next year’s election. But Sri Lankans wonder whether their hugely popular leader, the first not to hail from Colombo’s Anglophilic elite, can fight the economic war with the same smarts and zeal he showed in vanquishing the Tigers. And they wonder whether the powerful Rajapaksas will line their pockets in office, as is the tradition of Sri Lankan leaders, or instead honor vows to wipe out graft, rein in a smothering bureaucracy and deliver a South Asian version of Singapore that was once seen as their strategic island’s destiny. “The war is over,” Rajapaksa told FORBES ASIA. “Now we have no excuses. We have to start working and develop this country.”
Heavily dependent on tea, tourism and foreign aid, Sri Lanka exports its population as cheap labor, and its factory production as Victoria’s Secret bras and Banana Republic shirts. Though of a similar size, history and cultural division, peaceful Malaysia has an industrialized high-tech economy almost eight times as large as agrarian Sri Lanka’s. “This is what I said in my speech [to parliament in May, when declaring the war over],” he says. “I am the man who is closer to the people and who would risk my life for the country. That’s why I won the war, and that’s why I’ll win the economic war, too.”
War-weary Sri Lankans seem willing to bet on Rajapaksa. And three months later there’s a buzz around Colombo that locals haven’t heard in a generation. The capital’s two main hotels, the Hilton and the Galle Face Hotel, a 150-year-old British colonial relic, are claiming 60% to 70% occupancy levels, double last year’s numbers. Tourist arrivals are up by a quarter since May, though off a very low base, and the stock market is up 60% this year. Long-suffering businesspeople report fatter order books, and in July the International Monetary Fund granted a $2.6 billion loan, but only after overruling critics of the country’s human-rights record.
The 63-year-old president is well pleased with his year’s work. Surrounded by economic advisors finishing his sentences for him, Rajapaksa held forth for 70 minutes at his official, heavily fortified Temple Trees office in the capital. It took some six security checks to be seated next to him.
Defiant, he doesn’t care “two hoots” that the West, the UN, international media, myriad nongovernment organizations and the Tamil diaspora deeply disapproved of his methods in defeating the Tigers. His only concern, he says, are Sri Lankans. “After 30 years, we were able to finally bring them peace.”
But how to win the peace? “Without development, there won’t be peace; we must develop the economy,” he says. “I don’t want to just be the liberator, I want to be the leader who brings permanent peace and development to this country.” Reconciliation with Tamil communities in the island’s north and east, he adds, means providing basic needs long denied them: electricity, water, shelter, education. “They want to start their padi fields, go back to their farms.”
Rajapaksa describes his own Sinhalese family: a niece who is married to a Muslim, another to a Tamil. “I am a president for the whole nation. I divide people not as Sinhalese or Tamils or Muslims or Burghers [Lankan-Europeans]. I divide them into people who love the country and people who do not.” Unlike most ethnic Sinhalese, he says he speaks Tamil “when I want to.” (He famously addressed parliament in Tamil the day after the army killed the Tiger leadership in May.) “I can approach them more closely by speaking to them in their own language.”
Rajapaksa boasts that even as he was waging the war, the economy grew by at least 6% each year (though the global recession is cutting that to 3.5% to 4.5% this year). Inflation is now down to 1.1%, from 11% four years ago, according to Central Bank figures. And he notes that per capita income has risen on his watch from $1,200 to $2,000.
But outside groups rate Sri Lanka poorly. Transparency International places it between India and Pakistan as one of Asia’s most corrupt economies. The World Bank measures the ease of doing business around the globe and ranks Sri Lanka 102nd out of 181 countries, knocking it for its tax regime, legal system and permit processing. On the Heritage Foundation’s Index of Economic Freedom, Sri Lanka ranks 111th of 179, slammed for roadblocks to foreign investment, its financial system and opaque property laws. With scores of ministers and 10% to 15% of the workforce employed by the government, it’s one of the world’s most administered countries. This correspondent had to get three approvals over four days to release a simple pair of foreign-made spectacles from customs.
Rajapaksa sympathizes with investors tied up by red tape. He says he’s instituting a Singapore-style “one-stop shop” to limit paperwork and smooth official contacts. “Every ministry and department wants to be the king,” he laments. He says he has “zero tolerance of corruption. If you give me the evidence, certainly I will take action against anyone.”
For now, bottom-fishing investors are looking at the country with new enthusiasm. Singapore’s Calamander Capital is raising $75 million for what it claims is Sri Lanka’s first private equity fund, targeting the plantation and ceramics sectors. Rajendra Theagarajah, chief executive of Colombo’s Hatton National Bank, wants Rajapaksa to encourage “Lankans overseas to invest as part of their contribution towards nation-building.” He’s referring to the wealthy Tamils in the West who fled the island generations ago when now rescinded “Sinhala Only” policies froze them out of opportunities. One Rajapaksa reform requires government workers to speak Tamil and Sinhala.
The lightly traveled Rajapaksa eschews any foreign models for his island’s renaissance. “We must have a Sri Lankan model,” which, he insists, “I prefer to be agriculturally based. If you can be self-sufficient in food, then the industries will come.” (This suits him politically; he draws his support from the Sinhalese rural communities of the south, where the army was raised.)
Some diplomats speculate that Sri Lanka is shifting its economic balance and morphing into a South Asian Venezuela, with Rajapaksa cast as Hugo Chávez. As foreign condemnation gathered over his conduct of the war, he ignored Western critics and cozied up to China, which provided cover in the UN, while Iran and Libya gave him cheap oil and materiel in return for tea and labor.
Though Sri Lanka does 70% of its business with the West, does Colombo now have new best friends? No, says Rajapaksa. “It’s a nonaligned economy. Whoever wants to help me, I will welcome them without strings.” Past criticism from the West won’t mean postwar score-settling and exclusion, he insists. “Noooo! I have invited [Americans]. New bridges and dams are [being] done by the British and Canada.” His investment door, he says, is open to all comers “with cash,” as he rubs his fingers together in a universally understood gesture. It’s this gesture that has some observers concerned, noting that Gotabaya Rajapaksa has been appointed to various corporate boards. Another concern is abuse of power: In December 2007, the British head of United Arab Emirates-managed Sri Lankan Airlines refused to clear 35 seats already paid for so Rajapaksa’s entourage could use them to fly home from London. The executive’s work permit was quickly revoked. Emirates Airlines dropped its management partnership soon after.
As for China, it’s made a huge investment in Rajapaksa’s home Hambantota district, developing the island’s most modern port and building a new airport. He denies that this is part of any effort to make Sri Lanka one of Beijing’s “string of pearls,” its scheme to guarantee its economic security–with strategies such as securing the oil lanes from the Middle East–by investing in its neighborhood. One of his advisors half-jokes that “soon we’ll all be eating noodles with chopsticks,” but Rajapaksa says, “I want to be the pearl of the Indian Ocean, of the whole world.”
Most Sri Lankans have known only ethnic conflict, but Rajapaksa says the country has no need for a South African-style truth and reconciliation commission, which many investors think is necessary. “We must not follow what happened in Africa or in Europe,” he says. Rather, he prefers a kind of national amnesia, a “Sri Lankan approach,” as he puts it. “I don’t think it is healthy to start digging into the history, these problems. We must forget about the past and start a new life, new thinking.”
In November Rajapaksa will have been president for four years, the minimum that the constitution allows before calling a poll. He won in 2005 on a leftist economic nationalist ticket, but this time he’ll take advantage of his war win and a dysfunctional opposition United National Party, traditionally linked to Colombo’s business elite. An election is expected by February. “Who is the politician who is not going to take that advantage?” he laughs. “I think all people underestimate me, and that is a mistake.”