TRINCOMALEE, Sri Lanka (IHT) -- Just north of here the Sri Lankan military is closing in on separatist rebels in what it calls the climactic battles of the country's long-running civil war.

But in this heavily militarized port city, part of a province where the government declared victory 18 months ago, there are no signs of jubilation. Residents are scared to leave the city limits after dark and are reluctant to speak in public about the conflict, fearing retribution from rebels or pro-government factions.
Security has improved, says S. Thevarajah, an employee of the local government health service, but he does not plan on telling his son, who has lived in Britain for the past 17 years, to come back.
“There are too many problems here,” Thevarajah said. “And he's my only son.”
After a quarter-century of intermittent civil war, the government is advertising the hope to Sri Lanka's 21 million people that the national nightmare is almost over.
Map Trincomalee, Sri Lanka » View Today in Asia & Pacific In a military conflict that was once considered intractable, the government has won a string of victories against the Liberation Tigers of Tamil Eelam that has left the rebel group and its leader, Velupillai Prabhakaran, cornered and on the run.
And yet, even with a military victory apparently at hand, peace appears far from reach and the prospect of new bloodshed looms. The fighting inside the tiny wedge of territory still held by the rebels, where about 200,000 civilians are trapped, could intensify. And even if the Tamil Tigers lose all their territory, they are likely to retain capacity to unleash terror attacks, particularly with trained suicide bombers.
“What the victor does after the battle will determine whether you win or not,” said Rohan Samarajiva, a former government regulator who is now a business consultant. “It's appalling to see how little things have improved in the north and the east.”
The cultural and political grievances of the ethnic Tamil minority that underpinned the insurgency have yet to be addressed, analysts say, and any reconstruction efforts are likely to be slowed by the effects of the global economic crisis.
The country's economy has been remarkably resilient in recent years, despite the conflict; but money today is literally in short supply in Sri Lanka.
Tourist arrivals were down 32 percent in January; the garment industry is shedding jobs; and the prices of two major exports, tea and rubber, are plummeting. The central bank's foreign reserves are down to about $1.5 billion, enough to pay for six weeks of imports.
The capital, Colombo, is buzzing about whether President Mahinda Rajapaksa will seek a bailout from the International Monetary Fund or India.
Opinion about the country's future seems sharply divided between north and south.
In Colombo, many say they are relieved and hope that the country can finally exploit its potential as a tropical paradise for tourists and a strategic port between the Middle East and East Asia.
For Lohitha Kalhara Peiris, a 35-year-old lifeguard from the majority Sinhalese ethnic group who works in Dubai, the end of the conflict may mean he is able to start a family in Sri Lanka. “Seeing the war ending I feel we have a future,” he said. “We can do something.”
Farther north, however, ethnic Tamils are waiting for signs that the government will address what a Tamil politician named Douglas Devananda, who opposed the rebels, called their “genuine political grievances,” chiefly greater political autonomy.
Sirimal Abeyratne, a professor of economics at the University of Colombo, says the north and eastern regions are several decades behind the southern areas in terms of wealth and development. “They lost their investor class, they lost their physical assets, their infrastructure,” Abeyratne said. “People lost their skills.”
Here in Trincomalee there are clear efforts at reconstruction, much of it done with aid from Western governments. In the newly renovated municipal building there is talk about an ice factory and a new start for the region's fishing industry. During the years of insurgency much of the coastal waters were military restricted zones. Now fishermen will be able to export tuna to Japan, said Ariyawathi Galappaththi, a member of the Eastern Provincial Council, a government body that oversees development plans.
Trincomalee's main market, destroyed in an explosion attributed to insurgents in April 2006, has been rebuilt.
Galappaththi shrugs off a question about recent violence, including the assassination of the chief priest of a Hindu temple in September and an attack near the beach resort of Nilaveli several weeks ago.
“In the wartime how many people died and how many bombs were there?” she asked rhetorically. “We are not as concerned when one or two people die.”
That may not be convincing for foreign tourists who might be tempted by a trip to the nearly deserted beaches here. The small handful of foreigners in Trincomalee these days work for the Red Cross or other aid agencies. The municipal council cannot name any projects planned by foreign investors.
Analysts worry that Rajapaksa and his government are not committed to the type of political power-sharing that may be needed to ensure peace.
“I don't think the prospects of a follow-up political agreement for the Tamils is in the cards for some while, unfortunately,” said Alan Keenan, an analyst for the International Crisis Group, a nonprofit research organization based in Brussels.
Without greater recognition of Tamil minority rights, Keenan said, the “odds are that there will be significant political resistance and some degree of armed resistance.”
The victories on the battlefield have lifted the popularity of Rajapaksa, whose party won solid majorities in two provincial council elections Sunday. At the request of the government, national flags fly in villages across the country along with posters glorifying government troops.
“We have now been able, within a short span of two and a half years, to almost completely defeat the cowardly forces of terror that had wrapped our entire nation in fear through several decades,” Rajapaksa said in national day celebrations earlier this month.
The retreat of the Tamil Tigers appears due to a confluence of factors, from a global war on terror that hindered his group's ability to raise money to a split in the group's ranks, to what, in hindsight, seems to have been devastating strategic errors on the part of the rebels.
Prabhakaran, the rebel leader, urged Tamils to boycott the national polls three years ago, effectively giving Rajapaksa, who was backed by radical ethnic Sinhalese groups and whose campaign pledge was to end the war, the margin he needed to win.
By that time, a large and important faction of the Tamil Tigers had seceded. It promptly joined the government in pushing Prabhakaran's forces out of the east, including around Trincomalee.
The Rajapaksa administration has corralled political support to quash the Tigers, crush dissent and dismiss any international criticism of human rights as propaganda. Independent journalists have been hounded out of the country, jailed on anti-terror laws and killed.
Paikiasothy Saravanamuttu, who heads the nonpartisan Center for Policy Alternatives in Colombo, wondered whether the Rajapaksa government would simply impose “a victor's peace.”
He described the government's challenge this way: “Now that we have nearly ended the war, are we going to end the conflict?”
Thomas Fuller reported from Trincomalee and Colombo. Somini Sengupta reported from New Delhi