Sri Lanka one year on: Has peace brought happiness to this island nation?

Last may, the bloody civil war ended in a dramatic shoot-out in a remote mangrove swamp

The ancient man with the walrus moustache, his white coat ablaze with medals, greets me like a long-lost friend. The huge lobby, dazzlingly bright and hot and open to the four winds, is unchanged. The morning after I arrived, a fancy wedding was going full pelt, with drummers in turbans, small children dressed up as princes and princesses, and dramatic local beauties sashaying up and down the winding stairs in the latest sari styles.

Here at the Galle Face, Colombo's famously eccentric colonial hotel, locals and foreign visitors are spending Sri Lanka's peace dividend like there is no tomorrow.

But although peace returned to Sri Lanka exactly one year ago this month – when the Sri Lankan army finally killed off the leaders of the Liberation Tigers of Tamil Eelam in a bloody and dramatic early-morning shoot-out in a remote mangrove swamp – it has not so far been the bright new dawn one might have imagined.

True, tourists numbers have soared – but the tourists never went away altogether. Sri Lanka was always too beautiful and too much of a bargain to be snubbed. A lively civil war is normally the kiss of death to tourism, but the island's loyal following worked out early on that all the fighting was going on far away, in the east and in the north, which is mostly scrubby and flat. That left the most gorgeous parts – the central and southern highlands, the tea country, the southern and south-eastern beaches – to enjoy.

So the Galle Face lobby being awash with pink-faced Brits in shorts is nothing new. But when I go out to find old friends and colleagues, equally familiar is the shadow of fear that hovers behind every conversation.

And that's peculiar.

The war is over, the enemy vanquished – exterminated, one might say – the island reunited for the first time in a generation. Declaring a new age of peace, President Mahinda Rajapaksa sounded almost Churchillian. "This is our country," he told parliament last May. "This is our motherland. We should live in this country as children of one mother. No differences of race, caste and religion should prevail here... All the people of this country should live in safety without fear and suspicion... Let us all get together and build up this nation."

But a year on, the shadow of fear still won't go away.

There's the prominent businessman who cancelled a film screening – the film's subject was not Sri Lanka, but he feared its rebellious story could be taken as a sign of dissent. Another businessman got a dinner invitation from one of the Rajapaksa clan: "The president has a family member in a controlling position in every important institution in the country," he told me. He didn't want to accept but didn't dare refuse.

There's the top journalist who has installed CCTV outside his home: that way if a white van comes to get him – the goons who abduct journalists always come in white vans – at least he will get a little warning. And there's the other journalist who contributed anonymously to The Independent last year, having fled Sri Lanka fearing for his life. He then returned to the island but, through poor luck or poor judgement, got into the bad books of the ruling family again. Where is he? Is he one of the disappeared? Or simply in hiding? He's certainly not responding to e-mails or answering any of his phone numbers.

There is the manager of a provincial hotel I met who spoke eloquently about how everyone around him told him to shut up and keep his controversial opinions to himself. He is a charming and gregarious man, but as soon as he found out what I do for a living he cut me dead.

We have the bright but slightly seedy spectacle of noses in the Galle Face trough, the island's prosperous fatties shoulder to shoulder with the pink visitors as they tuck into the hotel's super-size Sunday buffet brunch. And we have the stubborn prospect of fear, well-founded, mortal fear laying siege even to the braver and more thoughtful members of the community. Neither of these faces of the island is new; but the persistence of fear, as peace sinks its roots in Sri Lanka, is disquieting.

One year ago – or at almost any point in the previous 26 years, since the outbreak of the civil war – there was no getting away from fear. If you were a politician or an opinion-maker and you got on the wrong side of Velupillai Prabhakaran, the founder and unchallenged leader of the LTTE, the Liberation Tigers of Tamil Eelam, he could quite easily send a suicide bomber to have you blown to bits.

The ruthlessness of Prabhakaran is why the hopes of those who tried to bring the two sides together – in particular the Norwegian diplomats who used the peacemaking skills they'd honed in the Middle East, the former Yugoslavia and elsewhere – always looked a bit starry-eyed. I was present at the famous press conference in a remote corner of the island's northern jungle in April 2002, during the Norwegian-brokered ceasefire, when the reclusive and paranoid Prabhakaran faced the international media for the first and last time in his life. "If you want us to take you seriously as a democrat," one journalist asked, "why are you surrounded by guards?"

And it wasn't just the bodyguards – wearing mirror shades and fingering their sub-machine guns, straight out of a Bollywood gangster movie. Growing paunchy in middle age, Prabhakaran was still wearing his jungle fatigues. It was hard to imagine him any other way – in collar and tie or kurta pyjamas, say, on the stump, getting out the vote. He had too much blood on his hands to reinvent himself now. The habit of killing was too deeply ingrained in him – as the Norwegians and the rest of the world were to learn as the ceasefire fell apart. He didn't know any other way to live.

But however improbable Prabhakaran appeared as a man of peace, the Sinhalese political establishment in Colombo had got themselves strapped to him and his cause. Successive governments refused to grant his movement the independent homeland it demanded – but under huge pressure from the West to stop the war, they had conceded degrees of autonomy to the north and east: they had conceded the idea they would share governance of the island, and that the LTTE, the only remaining representatives of the Tamils in the areas where they were in the majority now that Prabhakaran had killed off all the others, would be their partner in power.

The Tamil communities in question certainly had legitimate grievances against the Colombo government – grievances which are re-surfacing now the war is over. The problem was, their partner-in-peace was a one-trick pony. For Prabhakaran, jaw-jaw was never more than a preliminary, or a mask, for war-war.

So as the 2002 ceasefire – greeted with joy across the island – gradually fell apart, Colombo had nowhere to go. There was no peace to keep any more – but another outbreak of war promised to be no more decisive than all the previous ones. Sri Lanka seemed locked into its own vicious stalemate – like Kashmir, or Gaza, or Pakistan's North-West Frontier.

The answer to the conundrum came from the Buddhists. Buddhists from Tibet to Vietnam to Burma are normally identified with the peace party. Even when they are locked into a bitter antagonism, as in Tibet, their adherence to non-violence is rigid. But Sri Lanka's Buddhists are rather different. They believe the Lord Buddha himself visited their island on three occasions and declared it to be the "Dhamma Dipa", the island of the Dharma, the Buddhist teachings. The island, they claimed, thus had a unique relationship to their faith – and that meant the whole island. The Tamils, most of whom are Hindus, not to mention the Muslims and the Christians, are there on sufferance: the island must be preserved as a unity to protect its holy status.

So the Buddhists set themselves against devolution very early on, and their righteous chauvinism has made them useful allies for populist Sinhalese politicians ever since. When the Norwegians tried to broker peace, monks burnt Norwegian flags outside the embassy in Colombo. And as the ceasefire disintegrated, they set up their own political party, the Jathika Hela Urumaya (JHU), to champion Sri Lanka as a unitary state – turning the clock back a generation and throwing away any hope of cutting a deal with the Tigers. Founded in 2004, the party sent nine monks to parliament the following year.

Entering the ruling coalition, these militant prelates gave Mahinda Rajapaksa a striking new idea. Abandon the attempt to cut a new deal with the Tigers. Instead, finish them off for good.

"I strongly believe in achieving peace without going to war," Rajapaksa said, launching his campaign to become president in October 2005. But then he added, "I totally refuse the concept of traditional homelands. Sri Lanka is a traditional homeland for every Sri Lankan."

This was the new note. And when he appointed war hero Major-General Sarath Fonseka as head of the army, and his own brother, Gotabaya Rajapaksa (a much-decorated retired lieutenant-colonel who had emigrated to the US after leaving the army), secretary for defence, it was clear he meant business.

Belatedly, Prabhakaran realised that the peace was over and the war was entering a new and more dangerous phase. True to his old instincts, in April 2006 he sent a female suicide bomber to kill General Fonseka. She nearly succeeded, but after surgery in Colombo and Singapore, the general pulled through. Now there was no going back. What they call "Eelam War IV" – the fourth and final phase of the civil war – was under way.

It ended three years later, or exactly one year ago, on a lagoon fringed by mangroves on the island's north-east coast. In happier times, Mullaitivu would be the sort of place to give a seaside hotelier big ideas. But by April 2009, it was all that Prabhakaran had left, a blood-drenched battlefield. In three years of fighting, the territory controlled by the Tigers had shrunk from 15,000 square kilometres to a mere 300 square kilometres – a wedge of coast, hemmed in by Fonseka's troops.

In their desperation, the Tigers had forced tens of thousands of Tamil civilians to come with them as human shields. Never had Prabhakaran's claims to be his people's saviour seemed more threadbare. The last, desperate calculation was that Fonseka and the Rajapaksas, faced with being blamed for massive civilian casualties, would even now, at the 11th hour, call a halt – allowing Prabhakaran to flee into his jungle.

Instead, the Sri Lankan army kept up its assault, and Rajapaksa's government closed their ears to the protests of the world. Thousands of human-shield refugees were rescued, many more were killed and maimed, and by mid-May it was nearly all over.

The hardcore of the Tiger leadership was now trapped between the sea and the Nanthikadal lagoon. This was not the end of a modern war, it was more like the denouement of Macbeth or Richard III. Boxed in on all sides, Prabhakaran's only hope was to plunge through the lagoon and somehow blast a path through the troops on the other side and flee into the jungle. With this in mind, at around 3am on the morning of 17 May, more than 150 Tigers came scudding across the lagoon in small boats and began shooting at the force massed on the far shore. But the army was ready for them and responded with barrage after barrage of fire, and by dawn the lagoon was silent. The first attempt to gain a beachhead had failed.

Prabhakaran had one more trick up his sleeve. At around 2.30am the following day a group of Tamil civilian stragglers crept towards the army front line and pleaded to be let through, claiming that there were injured non-combatants among them in need of first aid. The guards kept them at bay: no one would be admitted before dawn, they said. Half an hour passed: the "civilians" lost patience and tried to fight their way through – the officer in charge fired warning shots in the air – and according to Lieutenant-colonel Keerthi Kottachchi, "suddenly, nearly 200 terrorists opened fire and charged our positions".

These too were cut down by the massively superior government force, most of them dying before they could scramble out of the lagoon. After two more hopeless final skirmishes, the lagoon fell silent again.

When two army teams pushed cautiously through the mangroves, they found 18 more bodies littering the ground. One of them was Velupillai Prabhakaran. A war that had lasted nearly half of Sri Lanka's independent existence was finally over.

Whatever the criticisms of General Fonseka's conduct of the war and the army's treatment of civilians, Sri Lanka had won a great victory against a man whose claims to lead his people to liberation were fatally compromised by his brutality.

But once the adulation died down, the question was: where is President Rajapaksa planning to take a Sri Lanka that has finally found peace?

The new angle of attack given him by his extreme nationalist allies, the Buddhist monks – that there were no "traditional homelands" on the island – had enabled him to launch a war of extermination against the Tigers. And now the war was won, the same dogma provided him with rhetorical tools for peace. In their own tongue, he urged the Tamils to join with the majority Sinhalese. "This is our country," he told them. "Protecting the Tamil-speaking people of this country is my responsibility [and] my duty. All the people of this country should live in safety without fear and suspicion. All should live with equal rights."

But these fine words have been accompanied by very disturbing actions. Several anti-government journalists have been murdered and half a dozen have disappeared without trace. The most shocking case was that of Lasantha Wickrematunge, the pugnacious editor of the Sunday Leader, shot dead by unknown assailants on his way to work in January 2009. Denying all knowledge of the murder, President Rajapaksa said, "He was a good friend of mine. He had informed somebody to inform me that he was in danger, but unfortunately I didn't get that message."

Mahinda's brother, Gotabaya Rajapaksa, defence secretary in the government, described the editor's death as "just another murder". But it's not hard to find hostility towards the free press in the words of the president himself. In a recent interview, Mahinda said, "Let me tell you that every citizen in Sri Lanka must be patriotic. No one can destroy the image of our country here or abroad for petty political gains, as we have seen in the past. If someone engages in that kind of activity, he or she can only be a traitor."

This is the tone of voice not of a democracy that has finally rid itself of a monstrous enemy, but of a regime which dreads criticism and aims to suppress it by instilling even greater fear in its enemies. And it is with dismay that one sees the signs of a burgeoning new tyranny at large in Sri Lanka.

Take, for example, the fate of General Sarath Fonseka. It is arguable that the general was himself a questionable sort of democrat. But why exactly he fell out so badly with the Rajapaksas after his victory is not yet fully clear. What we do know is that a couple of months after the end of the war he resigned from the army and declared his intention to run for the presidency against his former boss. So great was his popularity as conquering hero that the entire opposition fell in behind his leadership.

In the event, Fonseka lost badly – and it is not hard to find Sinhalese Sri Lankans who believe the poll was rigged – but what happened next beggared belief: President Rajapaksa had him arrested on charges that included playing politics while still in uniform. Fonseka won a seat in parliament in last month's general election, but if the president's goal was to marginalise the one man capable of upstaging him, he has clearly succeeded.

And if that is the way the Rajapaksa clan treat their closest Sinhalese comrades, what sort of future in the island can the Tamils hope for?

Under the British, the island's educated Tamils had become a privileged élite. The origin of the civil war lay in the sustained attempt by the majority Sinhalese, with the Buddhists leading the charge, to wrest those privileges from them, turning them into second-class citizens. Like Muslims in India before independence, Tamils came to believe that their only hope lay in hacking out a homeland where they themselves would be the majority.

The Tamil-dominated town of Trincomalee is the place to go to see the wreck of Tamil hopes in independent Sri Lanka. It has the greatest natural harbour in Asia, but the little town around its rim has enjoyed only a fraction of the development you would expect of such a magnificent natural port. And if things are going to improve here, there are no immediate signs of it; instead, a modern harbour and a second international airport are to be built at Hambantota in the south – the Rajapaksas' home town.

Trinco was always the Tigers' golden prize, though one they never managed to seize. But as long as they were lurking near, and as long as some kind of a Tamil "homeland" was still on the cards, Sinhalese ambitions were held in check here. Now those brakes have gone.

"Till the 1980s the minorities had a problem," a leading Tamil businessman in the town told me. "The Sinhalese were colonising our areas, changing the demography. The Sinhalese population of Trinco used to be less than 5 per cent; now it's 23 per cent. Sinhalese people were given houses and land, to encourage them to settle, while Tamils were subjected to intimidation and extortion. These were the stepping stones that led to the violent struggle, because we could see no light at the end of the tunnel."

And today? "The same thing goes on," he insisted. "They don't talk about it but they are still trying to move Sinhalese people from the south to the north and east so in future we Tamils can never say: this is a Tamil area.

"I never supported the LTTE," he went on. "It was wrong to go down the path of violence. But it happened because people saw no light at the end of the tunnel. And that's still true today. None of these things would be a problem if there was justice in this land."