Sri Lankan Prime Minister and presidential candidate Mahinda Rajapaksa speaks with Reuters during an interview at his official resident in Colombo September 14, 2005. REUTERS / Anuruddha Lokuhapuarachchi

By Simon Gardner

COLOMBO (Reuters) - Sri Lanka's peace bid with the Tamil Tigers needs a fresh approach, Prime Minister Mahinda Rajapakse said on Wednesday, vowing if elected president to invite his opponents to join forces to negotiate with the rebels.

Left-of-centre Rajapakse, who will face off against right-of-centre predecessor Ranil Wickremesinghe in presidential elections in November, says converting a 2002 truce into lasting peace after two decades of civil war and pursuing economic development are his top priorities.

While detractors balk at election pacts he has forged with hardline nationalist Marxists and Buddhist monks, who want him to take a tough line with the Tigers, Rajapakse says consensus is crucial to peace hopes and a return to war is not an option.

"Without consensus in the South, you can't settle this problem," Rajapakse told Reuters in an interview at his official Temple Trees residence in the heart of Colombo. "We have to restart the peace talks."

"(The Tigers) must realise that we have to satisfy the Sinhalese people in the majority. Without them we can't move forward," he added. "It is the responsibility of all parties. So we will get together ... and we will have a new approach."

Rajapakse, a lawyer with close links to labour unions and wide grass roots support among the Sinhalese Buddhist majority, said he would consider forming a cross-party coalition with Wickremesinghe's United National Party (UNP), the main opposition group.

But the 59-year-old premier, who wears traditional Sinhalese nationalist dress and a red scarf and even starred in a Sri Lankan film in the 1990s, must also contend with a rift within his own party, the Sri Lanka Freedom Party (SLFP).

Outgoing President Chandrika Kumaratunga and her brother, Foreign Minister Anura Bandaranaike -- whose family has long dominated the party -- have openly criticised his alliances with the Marxist People's Liberation Front (JVP) and the all-Buddhist monk National Heritage Party (JHU).

The Marxists and the monks want Rajapakse to ditch a government plan to share $3 billion in tsunami aid with the rebels and to redraft and amend the terms of the ceasefire --, proposals which have angered the Tigers.

But Rajapakse is unfazed, saying that loopholes in the truce need closing and that aid should be distributed in the north and east via existing mechanisms.

UNITY GOVERNMENT THE KEY?

"I have managed to get the JVP, JHU, SLFP and all the other left parties. Only the UNP is left behind," he said. "So what we must do is we must get the UNP also."

"We will have to discuss how we are going to work, whether we are going to join in government or whether we are going to be (separate) like this and support the peace process," he added, saying he would let parliament decide whether a general election should follow the presidential vote.

Rajapakse also wants neighbouring India, which has kept to the sidelines since becoming embroiled in open war with the Tigers in the late 1980s and being forced into a humiliating pullout in 1990, to be more closely involved in the peace bid.

"Without India we can't have a final solution, that is certain," he said. "Their blessings must also be there."

If elected Rajapakse will seek direct talks with elusive rebel leader Velupillai Prabhakaran to sound out where the state and the Liberation Tigers of Tamil Eelam (LTTE) can compromise and put a permanent end to a war that has killed more than 64,000 people.

"The first thing I will do is discuss this with Prabhakaran himself and have a ... practical approach," Rajapakse said. "Both parties must come forward to a compromise position... We'll go for a final solution. Why can't we?"

Business leaders and investors in Sri Lanka are betting on a win by Wickremesinghe, whom they perceive as more market friendly and more likely to cement a peace deal with the Tigers.

The Colombo all share index surged on Tuesday and Wednesday as the ruling party rift fuelled expectations of a Wickremesinghe victory. Analysts say the race is too close to call.

While Rajapakse has ruled out privatising state entities such as the loss-making Ceylon Electricity Board, he promises an open economy and wants foreign investors to embrace Sri Lanka.

"We want foreign investment, yes, but still we must see that the local businessman, local industrialist, is being given a proper place," he said. "I want to build up our ... small and medium scale entrepreneurs."

"So I will encourage them, give them more and more facilities to build themselves up to where they can compete with foreign investors," he added, Then he headed off to resume his morning exercises and weight-lifting -- his main hobbies aside from watching his three sons play rugby.

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