Until recently Sri Lanka's tiny bourse had been emerging as one of the world's best gainers, but foreign investors are either pulling out or putting plans on hold as fears grow that the country could slip back into civil war.
The Colombo Stock Exchange was last year set to repeat its world-beating 1994 bull run, but a feud between the president and prime minister in November saw the market tumble and sent investors running for cover.
The Board of Investment (BoI) said the country lost 15,000 jobs after President Chandrika Kumaratunga called elections for April 2, nearly four years ahead of schedule, after her power-sharing arrangement with Prime Minister Ranil Wickremesinghe broke down.
The stock exchange had gained 70 percent in the first 11 months of last year, but with the political crisis the market shed 20 percent in just two days and settled at a level 40 percent higher by the end of the year.
Brokers are unanimous that the bourse would have seen a near 100 percent gain if not for the political turmoil.
BoI Chairman Arjunna Mahendran said top firms, including the Four Seasons and Hilton hotel chains, were holding back their investments because of the political power struggle.
Monthly investment approvals have also dropped to about 100 million dollars from 250 million dollars since Kumaratunga dismissed three ministers and took away Wickremesinghe's control over the security forces late last year, Mahendran said.
"If not for the action taken in November, we would by now be approving about 300 to 350 million dollars worth of investments monthly," Mahendran told reporters.
The World Bank agrees that some of the investments lost as a result of the political uncertainty here may never come back, but capital into the tourism sector and call centres could return with stability.
"If we do not pursue peace and sound economic polices, that will chase away foreign investments," the Bank's country director Peter Harrold told AFP.
He said big ticket investment could await a clear policy signal from a future government before making a commitment while most of the investments could be on hold with the potential to return.
Wickremesinghe said the election was called at a time when the economy was set to surge after recovering from its first-ever recession in 2001 and Sri Lanka was set to receive 4.5 billion dollars in foreign aid.
"The economy was about to take off if not for this (election)," the prime minister said in an interview with AFP. "We would have had eight percent growth. All that has been stopped because of this."
The World Bank and other international lenders agree, but are more concerned that there should be no post-election violence that would hurt tourism, a key sector generating jobs.
The BOI's Mahendran said foreign investors were more worried about the fallout of the power struggle on the peace process with Tamil Tiger guerrillas than the political bickering.
"Investors are not really too interested in the problems between the president and the prime minister," he said. "All they want is a clear signal that the country is committed carry out peace talks with the Tigers."
Adding to the uncertainty is the unprecedented split in the Tamil Tiger movement, sparking fears of a bloody internecine war. Both factions have pledged to uphold a truce in place since February 2002, but worries remain.
Wickremesinghe expects Norwegian-brokered talks to resume by April and a government led by him, but the president has also expressed confidence of winning.
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