COLOMBO, SRI LANKA — THE news from Sri Lanka is almost always bad: leaders assassinated, soldiers ambushed, bombs exploding in buses. Except news on the economy, which is remarkably positive after 10 debilitating years of ethnic conflict.
"They're doing the right things here," says a Western diplomat. "If they continue, they might move into really rapid growth."
Much of the credit goes to the late president, Ranasinghe Premadasa, who liberalized an economy that had been among the most closed in the third world. Tariffs were slashed and controls on foreign exchange were lifted. The government is privatizing the state sector. Tourism is booming: 394,000 visitors in 1992, nearly as many as before the ethnic violence began in 1983. Foreign investment is also picking up: 23.24 billion rupees ($505 million) in 1992, up 75 percent from 1991.
Sri Lanka remains one of the world's main tea exporters, despite a drought last year. And Sri Lankans working abroad - as domestics, construction workers, and sailors - sent home $110 million in 1992. GDP grew more than 4 percent last year.
Partly, Sri Lanka has followed the prescriptions of the World Bank and the International Monetary Fund by making its markets more open and disciplined. But politics also govern the economy.
Sri Lankan politics has been dominated since the 1950s by two parties, the ruling United National Party and the Sri Lankan Freedom Party of Sirimavo Bandaranaike. When Ms. Bandaranaike last led the country, as prime minister from 1970 to 1977, she ran a planned economy well remembered for shortages, rationing, and plummeting living standards. In the 1988 presidential campaign, Premadasa constantly harped on Bandaranaike's economic record. He continued to thump this theme, in anticipation of a race for re election, until the day he was killed.
In the short run, the direction of the economy will probably not change as a result of Premadasa's death. But the pace of reforms will undoubtedly slow. Premadasa was an economic dynamo, which led to anomalous situations for a leader who praised the virtues of laissez faire. To boost rural employment, in 1992 he announced that 200 new garment factories should be built in remote areas. Manufacturers were reluctant because they prefer to build factories close to Colombo. So Premadasa declared that export q uotas for the US and European markets - which the government controls - would go to companies participating in the scheme. Sixty factories have opened.
Analysts are unsure if the scheme is an example of lively economic promotion by the government or government control that should be avoided.
How Premadasa's successor will run the economy is uncertain. "This government is still in the early throes of reforming its economy," says the diplomat. "And there is an opposition party that has done awful things economically in the past. You can't rule out their coming to power."