Political risk: How global strategic issues would impinge on Sri Lanka

Friday, 16 December 2011 01:02 -     - {{hitsCtrl.values.hits}}

With the advent of communication technologies, decision makers have direct access to information that would be required to make an informed decision either in politics, economics or on matters that affect the economic stability or the business environment.

Flow of information ranges from eruption of volcanic ash (in Iceland), debt crisis (Argentina) to any global strategic issue involving countries that have been sabre rattling for years and are now on the verge of a full blown military clash (e.g. conflict between Israel and Iran).

How could such a situation affect Sri Lanka? It would be difficult to predict or quantify the level of political risk as no one is privy to the real issues that confront nations. Intelligence apparatus of superpowers keep an ear to the ground on the undercurrents of discontent among other countries.

Sri Lanka does not have an intelligence apparatus or a research wing within the government to provide such strategic advice. Lakshman Kadirgamar Centre for Strategic Studies is one such institution but it is dysfunctional. The Bandaranaike Centre (BCIS) is purely an academic institution.  

Iran’s possession of nuclear weapons would threaten the State of Israel and there is a real and imminent threat as political leadership in Iran have made unambiguous statements to the effect that Israel would be wiped out from the world map.

These are not isolated statements and common sense predicts that Israel would not sit idle by when such incendiary remarks are uttered by the leaders of another country hostile to its security.

Media reports indicate that Iran is on the verge of possessing a nuclear weapon and has not been forthright in their nuclear programme. History shows that Israel has been decisive in taking military action whenever there was a threat to her national security.

This is an alarming situation and would lead to unexpected manoeuvres among world powers. Political risk is unpredictable and can take in different form. This crisis would bring about a new world order and might tilt the balance of power.

What is important for Sri Lanka is whether there are contingent plans in place to face such a situation. Has the Cabinet of Ministers taken into account the global risk factors and whether there are plans in place to keep a buffer stock of materials needed to run the country? Is there a special cabinet sub-committee looking into the political risks? Could the Cabinet of Ministers form a Special Committee on Political Risks?

Sri Lanka, being a small country, can do nothing to stop a crisis of this proportion. Most of our energy requirements are channelled through Persian Gulf and any conflict with Iran would amount to a total disruption of aviation and shipping operations and will have drastic economic consequences for Sri Lanka.

There would be a surge in oil prices and other commodities. There would be a temporary scarcity of certain commodities which are crucial for our economy. World commodities and currency markets are highly volatile and will certainly have a negative impact. This will have a direct impact on our foreign reserves.

If sufficient quantities of oil are not stored the consequences are even more catastrophic. Neither India nor China would be able to assist Sri Lanka as this a crisis of a global proportion and each country would have to consider their own strategic assessments.

Sri Lanka would be hard hit as we depend on oil imports. Shortage and the escalation of oil prices would cause domestic transport disruption and cost of living would reach heaven above. There will also be an exodus of expatriates wanting to return to Sri Lanka. Outbreak of war in the region would certainly see an escalation in war risk premiums.

Sri Lanka would be in a precarious situation as our foreign relations with Western powers are all time low. A reappraisal of our foreign relations is urgently required but unfortunately this has a direct bearing on the domestic political situation.

There should be a marked improvement in domestic political realities as Western powers have demanded certain milestones to be achieved domestically before relations with them could be elevated to pre-war status. This is an exercise for the Government and ordinary citizens can play no role in that.

Political decisions must depend on sense and logic and must not be born out of emotions. It is the responsibility of the Government to adopt strategies that would be of benefit to the country.

The Government must demonstrate pragmatism in finding solutions to burning issues. It would be prudent to forge good relations with all countries rather than relying on few friendly countries.

The image and investment climate of the country faced a battering owing to the implementation of the Expropriation Bill, which could very well have been averted had there been a dialogue with the business chambers or stakeholders.

What is required now is action and not rhetoric. The primary responsibility of the Cabinet of Ministers is to demonstrate their political acumen and they must discuss the matters that threaten the nation’s survival under potential circumstances and political risk stands at the top of the agenda.  

(The writer is a freelance journalist and a political lobbying and government relations consultant.)

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