After four years of cease-fire, Sri Lanka's economy has been picking up fast, thanks to an inflow of investment and growing trade. One can easily spot several new buildings. However, the suicide bombing has threatened the fragile peace in the country. Within hours, the Sri Lankan air force struck at Tamil Tiger bases in the East to retaliate against the attack. The tension has yet to subside.

The past month has seen more than 100 people killed in bombings and other violence, making it the bloodiest since the truce between government forces and the Tigers took effect.

In the past few days, Sri Lankan leaders have called for peace talks with the LTTE to resume without any conditions. They want the Tigers to return to the negotiating table. But both sides have yet to agree on the mode of transportation- likely involving a seaplane - to transfer the rebels' eastern leaders to the North. In the next few days, the truth will be known: which side is the more reliable.

The Sri Lanka Monitoring Mission, which was set up to oversee the peace process, has been optimistic that the LTTE will accept the offer. But it remains to be seen how the next round of talks will proceed. Colombo-based diplomats say the chances for a lasting peace are not so good because both sides continue to think that time is on their side.

Colombo scored a victory of sorts when Canada joined the United States, Britain and other countries that have banned the Tamil Tigers and labelled them terrorists. Sri Lanka has already flagged this issue and asked for further cooperation from Australia and the European Union. The Sri Lankan diaspora on these two continents has played an important role in being a lifeline of the LTTE. Any ban would reduce the money transfers from those countries to families in LTTE-controlled areas in Sri Lanka.

The LTTE has been further weakened by the 2004 tsunami's sweep down the island's eastern coast, where its camps are located. There is a lot of disappointment among diplomats here that the tragedy of the tsunami did not brought the two protagonists closer to each other and to attaining peace. In Aceh, Indonesia, the tsunami has literally ended the conflict between the government and Acehnese freedom fighters.

Of late, Sri Lankan leaders have been saying that in the next round of talks, which has not yet been agreed, they will raise issues related to democracy and human rights with the LTTE leaders. They say that the LTTE has ignored these important issues all along and has avoided discussing them. Another topic to be taken up is the recruitment of child soldiers by the LTTE, some as young as seven years old. According to Human Rights Watch, there are around 5,000 child soldiers who are helping their parents fight the separatist war.

Over the past 20 years, the Tamil separatist conflict has eroded Sri Lanka's once dynamic economy. As Asia's oldest democracy, formed in 1931, Sri Lanka hopes to reinvent itself politically and economically. But this dream can only come true once there is a genuine peace in the country. Already, Sri Lanka wants to integrate further with the regional economy. Currently, Colombo is interested in becoming a "sectoral dialogue partner" of Asean, a move that should have been made two decades ago.