Sri Lankan Prime Minister Ranil Wickremesinghe today played down fears over Sri Lanka's stalled peace process as he sought deeper trade links with the rest of Asia.

Wrapping up a two-day visit here, Wickremesinghe assured businessmen at a luncheon dialogue that the withdrawal of Tamil Tiger rebels from peace talks in April was "temporary" and that a ceasefire observed since February last year under a Norwegian-brokered truce was still on.

"They are not resorting to armed conflict and they are committed to finding a peaceful solution. We have no reason to disbelieve that," he said.

The government was confident talks could be revived, but he reiterated that he expected negotiations to be tough because the outcome would "determine the pattern of the political system".

Starting the talks

He noted that Norwegian and Japanese envoys were due in Colombo this month to help jumpstart the peace process, aimed at ending three decades of ethnic bloodshed that has claimed more than 60,000 lives.

"The next round (of talks), when it begins, will go on for some time. It is going to be a crucial round and there will be hard bargaining on our side," he said.

As a trade-dependent nation, Wickremesinghe said Sri Lanka wanted closer ties with the region because a failure in World Trade Organisation (WTO) talks which began Wednesday in Cancun, Mexico, would have "tremendous repercussions" on its economy.

Sri Lanka is working on a comprehensive economic cooperation agreement with India and aims for a pact to be in place by the end of the year. It is also negotiating with the US for a free trade agreement, he said.

"By this way, we hope we could secure access to the larger market and the regional markets," he added.

Highway project

Earlier, the Sri Lankan government signed a memorandum of understanding to award a US$280 million toll expressway project to a Malaysian consortium led by the state-owned Construction Industry Development Board and three local firms.

The minister for rehabilitation of the war-ravaged northern Wanni region, Noordeen Mashoor, said foreign investment in Sri Lanka has increased since the ceasefire last year, with "marked improvement" particularly in tourism.

"We are looking at investment from countries closer to Sri Lanka, especially in this region," he said.

Sri Lanka is offering up to 15 years tax-free status incentives to woo foreign investors, he said, adding it hoped to lure Malaysian firms seeking to relocate to low-cost countries.

Works Minister S Samy Vellu said the expressway project linking Colombo to Kandy, a popular tourism and religious destination, was awarded on a government-to-government basis.

Work will begin in six months on a build, operate and transfer (BOT) basis and is expected to be completed in three years, with the Malaysian consortium to collect tolls but the concession period not yet fixed, he said.

Malaysia is also looking at another possible road project connecting the expressway to the capital's Katunayake airport and working on a development masterplan for Kandy, he added.

Wickremesinghe was to leave Malaysia later Wednesday. - AFP