Now that violence between the Tamil minority and the Sinhalese majority has been reduced, it is possible that Sri Lanka's once-booming economy will return to its earlier relative prosperity. Such a comeback would be important for all of South Asia and would have strong implications for the rest of the Third World. Many problems found in war-devastated Sri Lanka - including bitter regional turmoil and ethnic strife - are common to nations in Latin America, Africa, and Asia. Bold new economic initiatives are being offered by the Sri Lankan government, and if successful, they may point many other Third World countries toward the path of mixed capitalisms. “My idea,” proclaims President Ranasinghe Premadasa from his office in Colombo, “is that national problems can be resolved through consultation, compromise, and consensus.” Calling himself “the voice of the voiceless millions,” Premadasa faces the overwhelming task of simultaneously healing war wounds and repairing the hemorrhaged economy.
The return of a stable, prosperous, and dynamic economy strategically positioned halfway between the Middle East and the Far East would bode well for many. Yet, the recovery process will not be easy: The country seasoned Asia-watchers often refer to as “the next Taiwan” was devastated by years of civil turmoil. The damage to relations between leading ethnic groups has yet to be repaired, although noticeable strides have been made by Premadasa's recently elected government. For example, one “mobile ministries” project sends officials into the countryside in an outreach effort. “Now we have the opportunity to implement programs, because the terror has been dispelled,” declares Premadasa.
Much-celebrated Ceylon tea alone won't propel the economic recovery of this island of 16 million. In this decade of global competitiveness, countries that lag behind will be relegated to permanent Third World - or Fourth World - status, forever bound to producing the low-cost, labor-intensive products that today's success stories leapfrogged over in the 1970s. In short, there is no way for Sri Lankan industry to move but upscale.
The Economic Base
Premadasa and others count on some positive factors. As in Germany during the waning months of World War II, much of Sri Lanka's equipment and machinery still functions. “It was a myth that we were completely destroyed,” according to Nissanka Wijewardene, chairman of the Greater Colombo Economic Commission. “The battles were mostly up north, and at that on a small tip of the island.” “Everything is quiet and calm, and business goes on as usual,” insists G. Matzdorf, president of West Germany's Diamenten Matzdorf, a precious minerals company. Some of the world's best gemstones, especially rubies and sapphires, are found on the island.
During the past several years production continued in the assembly lines, textile plants, and light-manufacturing factories based in a pair of tax-free zones near Colombo. The capital city's port is a top-rated deepwater harbor. Its location, at the intersection of Middle Eastern and Asian trade routes, is a plus.
Productivity per worker, says the United Nations Development Program, hovers at 80 percent of that in industrialized nations. According to one expert at the World Bank, that growth occurred at all during the violence is surprising. Gatum Kaji, a regional
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