March 27, 2007	Tuesday	Rabi-ul-Awwal 7, 1428

COLOMBO: The first ever air attack by Tamil Tiger rebels is a psychological setback to Sri Lanka’s military but could cause an even bigger blow to the island’s economy, analysts said on Monday.

In the daring strike, the Liberation Tigers of Tamil Eelam (LTTE) used two light fixed-wing aircraft against the Katunayake airbase, the home of Sri Lanka’s supersonic jet fleet — and managed to get away without a scratch.

Alastair Corera, the director of Orion Fund Management, said the operation had revived fears of more rebel strikes outside the embattled northern and eastern regions.

“When there are no events (outside the northeast) people seem to underestimate the risks that prevail, and incidents like this remind us of the risks,” Corera said.

The attack, which killed at least three Sri Lankan air force men and wounded another 16, was a sequel to a suicide bombing of the same air base and the adjoining Bandaranaike international airport in July 2001.

After the 2001 attack insurance firms slapped war-risk surcharges on airlines flying in to the international airport and shipping lines calling at Colombo — traffic declined and the economy went into recession.

Earlier this month, Fitch Rating warned that Sri Lanka’s international credit assessment may take a further beating if the South Asian island failed to make tangible progress in settling its decades-long separatist conflict.

The latest attack may also scare away would-be holidaymakers and further compound problems for the hospitality industry, which suffered an 18 percent drop in trade last month.

“It is bad, (but) it could have been worse if the airport was attacked,” Sri Lanka’s top tourism official Renton de Alwis said. “We hope our partners (tour operators) will be with us.” Sri Lankans are already feeling the pinch of stepped-up military action, with inflation exceeding 20 per cent in January. The government also raised defence spending by a whopping 45 per cent, to 1.3 billion dollars this year.

Private analysts fear the government may have to spend more on defence this year to replace the air assets taken out in Monday’s attack — at least two military helicopters were reportedly destroyed.

Retired army brigadier general Vipul Boteju said the attack would boost morale in the LTTE, but do little to bring about a halt in hostilities.

“We will not see a shift in military operations, but this is a huge psychological boost for Tiger cadres who have suffered several reversals in recent times,” Boteju said.

Defence columnist Namal Perera said the attack was loaded with symbolism.

“For the first time we have a guerrilla group operating an air force. This could be a first in the world,” Perera said. “This certainly adds a new dimension to the fighting. It also shows how difficult it is to fight them.” The LTTE released undated pictures of their air wing of seven men in light blue camouflage uniforms posing together with Tamil Tiger chieftain Velupillai Prabhakaran.

Diplomats said the Tigers may have been able to turn the tables on government troops with the attack, which could also help the rebels raise more money abroad from the expatriate Tamil community.

“There was a sense of euphoria in Colombo that the Tigers were only a few weeks away from being wiped out,” a Western diplomat said, summing up the mood in the capital before Monday’s air assault.

Government forces had been taking large parts of territory previously held by the Tigers in the island’s east and the government has already vowed to flush them out of the coastal region.

Official figures show the military has lost at least 1,050 personnel killed since the latest round of fighting erupted in December 2005.

The two sides had agreed to a Norwegian-arranged truce in February 2002, but successive talks have broken down.—AFP