Out of war's shadow, Sri Lankans vote for president

COLOMBO (Reuters) - Two former allies who led Sri Lanka to victory in a 25-year civil war dueled at the ballot box on Tuesday after a bitter campaign for the country’s first peacetime presidential vote in nearly three decades.

In a voting day surprise, challenger General Sarath Fonseka acknowledged that he was not registered to vote but the Elections Commission said that by itself did not affect his eligibility to stand for the election.

Fonseka has mounted a surprisingly strong challenge to President Mahinda Rajapaksa in a close contest in which the defeat of the Liberation Tigers of Tamil Eelam (LTTE) in May has figured heavily in campaigning, with both claiming credit.

Counting, starting with postal ballots, began on Tuesday, with the final result expected by midday on Wednesday. The earliest returns, just over 26,000 postal votes, showed Rajapaksa leading with 69 percent and Fonseka with about 30 percent, according to Election Commission results.

Late on Tuesday, the government said it had not yet decided whether to mount a legal challenge to Fonseka’s eligibility, Information Minister Anura Yapa said.

Fonseka called a media conference and admitted his name was not on voter rolls despite registering in 2008.

Rajapaksa as commander-in-chief and Fonseka as the army commander stood side-by-side after the historic victory in May, but within months split over what the general said was his sidelining by the president and false coup plot accusations.

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More than 14 million people registered to vote and election monitors said turnout was between 70 and 80 percent. Heavy security included more than 68,000 police officers and fears voting day would be bloody did not materialize.

The Colombo Stock Exchange, open for a half-day trading session, rose 1.1 percent. It was one of the world’s best performing markets last year, gaining 125 percent on post-war optimism, and is at record levels this year.

Whoever wins will take the reins of a $40 billion economy awaiting the full peace dividend, despite large Indian and Chinese investments into infrastructure and about $1.5 billion in foreign investment into government securities.

Major investors have mostly shied away, saying Sri Lanka must first rein in government spending, which would in turn boost confidence in the rupee currency.

The rupee has been mainly stable in the past year but fell as much as 6 percent in April and May as cash reserves plunged.

Both Rajapaksa and Fonseka have pledged to dole out costly subsidies and public sector pay rises, which economists say will make it hard for Sri Lanka to meet its cost-cutting obligations under a $2.6 billion International Monetary Fund loan.

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Campaigning had been bloody, with more than 800 violent incidents recorded, among which five people were killed.

However polling was smooth, election observers said, despite minor blasts before polls opened in the northern city of Jaffna, the cultural center of Sri Lanka’s Tamil ethnic minority, a petrol bomb attack and other minor incidents. There were no casualties.

The blasts may have triggered low turnout in the former war zone, with less than 20 percent voting in the Northern Province, where Jaffna is located. Around 50 percent voted in the Eastern Province. Analysts had given Fonseka the edge in both areas.

Both sides traded blame for the blasts, with Fonseka’s camp saying they were aimed at deterring his backers. Rajapaksa’s camp accused the opposition of trying to discredit the president.

A coalition of opposition parties with divergent ideologies have united to support Fonseka with the sole aim of defeating the incumbent, who called the vote two years early hoping to capitalize on what then seemed unbeatable post-war popularity.

A handful of international observers and 250,000 election officials have spread out across the Indian Ocean island, which for the first time in nearly three decades votes without the fear of suicide blasts or attacks by the Tamil Tiger separatists.

“Today’s victory will be remarkable. It’s been evident with voters across the nation participating toward our victory,” Rajapaksa said after voting in Medamulana, his rural district on the southern coast. “We expect a peaceful election and are getting ready to enjoy a better tomorrow.”

In the capital Colombo, 51-year-old security guard Jayantha Perera said he wanted whoever won to tackle the economy.

“What I expect in the future is that in the same way peace was established, the cost of living will be brought down and the unemployment problem will be solved, ” he told Reuters TV.

In Medamulana, O.K. Dingininya, 85, insisted on voting for the first time in 15 years, despite being barely able to walk.

“(Rajapaksa) has liberated this country and allowed us to move freely,” he told Reuters as he was helped into a booth.

Additional reporting by Ranga Sirilal in COLOMBO, Shihar Aneez in MEDAMULANA, and N. Parameswaran in JAFFNA; Editing by Paul Tait and Jerry Norton