Scenesetter for your upcoming visit to

C O N F I D E N T I A L SECTION 01 OF 04 COLOMBO 001750

SIPDIS

FOR AMBASSADOR TAYLOR IN S/CT FROM CHARGE AMSELEM; ALSO
PASS SA/INS DIRECTOR GOOD

E.O. 12958: DECL: 09/17/12
TAGS: PREL PGOV PTER ECON CE
SUBJECT: Scenesetter for your upcoming visit to
Sri Lanka

(U) Classified by W. Lewis Amselem, Charge d'Affaires.
Reasons 1.5 (b, d).

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Summary
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1. (C) I want to extend a warm welcome to you on your
September 28-30 visit to Sri Lanka. Your visit comes at
an exciting time. A ceasefire has been in place since
December 2001, and the government and the Tamil Tigers
just sat down for constructive face-to-face talks, which
are due to continue later this year. The situation
remains fluid, however, with the intentions of the
Tigers -- a FTO-listed organization -- still unclear.
The peace process could also be undermined by domestic
fissures, such as "cohabitation" stresses between the PM
and the President, and tensions between the Muslim
community and the LTTE. The government is also dealing
with a delicate economic situation.


2. (C) This period of tremendous opportunity and
volatility in Sri Lanka is also a time of significant
U.S. influence. Prime Minister Wickremesinghe wants to
work closely with the U.S. Your visit will help cement
the gains made in U.S.-Sri Lankan relations by
underscoring our strong support for the peace process,
and by providing a forum to brief the GSL on the global
campaign against terrorism. In addition, your visit
provides an opportunity to underscore our continuing
commitment to assisting the government in
counterterrorism training. End Summary.

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Status of the Peace Process
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3. (C) The election of a new government in
December 2001 heralded in an exciting -- and potentially
momentous -- period in Sri Lanka. The United National
Front (UNF) government headed by Prime Minister Ranil
Wickremasinghe has taken an activist posture,
particularly regarding the peace process. In short
order, the government and the Liberation Tigers of Tamil
Eelam (LTTE) re-initiated the stalled Norwegian
government facilitation effort and put unilateral
ceasefires into effect in December 2001. The government
also took rapid steps to ease tensions by lifting
roadblocks and checkpoints, and ending bans on medicine
and other items entering LTTE-controlled territories.
The government's performance on human rights issues has
also been a strong one, with many fewer Tamils
complaining of mistreatment at the hands of the security
forces. (Note: There is still an appearance of
impunity in some cases that the GSL needs to do more to
grapple with, however.)


4. (C) Continuing the positive trend, the GSL and the
LTTE went on to conclude a formal ceasefire accord in
February. The accord is being monitored by the
Norwegian-run Sri Lanka Monitoring Mission (SLMM),which
has performed capably, but is thin on the ground. In a
benchmark event, the two sides met face-to-face in
Thailand, September 16-18. Before the talks took place,
the GSL met the longtime demand of the LTTE and lifted
its ban on the organization, effectively legalizing the
LTTE as a political entity in Sri Lanka. The talks --
though preliminary -- were constructive, and set the
stage for further talks slated to take place later this
year. In a press conference held at the end of the
talks, the chief LTTE negotiator also made remarks that
seem to have edged away from an outright demand for a
separate state for Tamils.


5. (C) All of these steps have had a dramatic effect in
decreasing tensions in the country, bringing relief to a
war weary populace. Already, the ongoing ceasefire is
the longest break that Sri Lankans have had from the
ethnic conflict since it began in 1983. This new spirit
was symbolized by PM Wickremesinghe's visit to Jaffna in
March, the first such visit by a GSL leader in years.
SA Assistant Secretary Rocca joined Wickeremesinghe for
part of this visit, underscoring U.S. support for the
peace process. A/S Rocca's visit also led to the
arrival of a demining team sponsored by the U.S., which
has been clearing mines in Jaffna since April. The
Deputy Secretary also made a highly successful visit to
war-ravaged Jaffna during his August visit to Sri Lanka.

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LTTE Intentions not clear
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6. (C) Despite so much progress in so short a time, GSL
interlocutors will be the first to tell you that the
situation is potentially fluid. One key reason for this
is lack of confidence in the LTTE (which has been listed
on our Foreign Terrorist Organization list since 1997).
While it is clear that the LTTE is worried about further
international isolation in the aftermath of September 11
(there are indications that intensified international
pressure has decreased its funding, for example),it is
not clear whether the organization is simply looking for
a hiatus to wait out the storm. Some of the LTTE's
activities raise questions about its commitment to
peace, including forced recruitment for its military
(some of it of children),and the widespread extortion
of money from Tamils and Muslims. The LTTE also remains
authoritarian in structure and has not renounced
terrorism (although there have been no reported LTTE-
sponsored terrorist attacks this year). With full
knowledge of these risks, the GSL has made the decision
that it wants to test the LTTE to determine whether it
is for real and, so far, this policy is generating
favorable results.

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Cohabitation Stresses and Muslim issue
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7. (C) Another factor that could unravel the peace
process is domestic opposition in the south. The
radical, Sinhalese chauvinist Janantha Vimukthi Peramuna
(JVP) party has engaged in rallies and demonstrations
against the ceasefire accord. A potentially more
ominous threat is President Kumaratunga and her party,
who have sent mixed signals, at times constructive, at
times critical. Kumaratunga's attitude seems largely
bound up in the cohabitation tensions that flare between
her and Prime Minister Wickremasinghe's government.


8. (C) Another level of tension involves the Muslim
community and the LTTE. The two sides have long been at
loggerheads, particularly in the ethnically mixed
Eastern Province. Based on first-hand observation by
Mission personnel and other reports, some Muslims are so
angered at efforts by the LTTE to marginalize their
community that the possible growth of Islamic extremism
needs to be closely monitored. Taken together, all of
these tensions are not positive for the peace process,
especially during this sensitive period when the
negotiation track with the LTTE is just starting up.

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Economic Issues
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9. (SBU) Turning briefly to economic issues, Sri Lanka's
situation is delicate. While it has the most open
economy in South Asia and a relatively high per capita
income (USD 837),economic growth has been uneven and is
mostly confined to the greater Colombo region. A litany
of problems in 2001 conspired to produce the country's
first year of GDP contraction since independence (minus
1.4 percent). The new UNF government appears committed
to putting the right policies in place to re-ignite
economic growth. The main test of this commitment came
in its 2002 budget, presented in March. This budget
contained many substantive reform measures and was key
to restarting the suspended payments of the IMF's
Standby Arrangement. The government is now implementing
many of these reforms, while trying to minimize the
burden of increased prices on the population. We expect
2002 to be a rebuilding year, with growth of 2-3
percent.


10. (SBU) Our trade relationship with Sri Lanka entered
a new phase with the signing of a bilateral Trade and
Investment Framework Agreement (TIFA) in July. The TIFA
sets up a council, jointly chaired by USTR and the Sri
Lankan Ministry of Commerce, to discuss trade and
investment issues. The first council meeting is to take
place in November with the visit to Sri Lanka of Deputy
USTR Ambassador Huntsman. The U.S. intends to use the
TIFA process to improve the investment climate in Sri
Lanka and win greater business here for American firms.

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Counterterrorism training
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11. (C) One area of particular interest to the GSL will
be counterterrorism training. The U.S. has engaged Sri
Lanka quite actively in this key area. In addition to
military-to-military training, the ATA and INL programs
in Sri Lanka continue very successfully. In FY-02, the
ATA program conducted five courses and spent
approximately USD 1.2 million to equip 80 police and
government of Sri Lanka officials with various anti-
terrorist skills. In addition, INL, in conjunction with
the Department of Justice trained an additional 50
criminal justice sector officials in investigation and
prosecution.


12. (C) The government of Sri Lanka has responded
positively to the training. Unlike some countries, Sri
Lanka takes pride in incorporating the training material
and pedagogy into its budding police training
curriculum. But much work remains to be done -- and Sri
Lankans know it. On the heels of the most recent ATA
counterterrorism legislation seminar, Sri Lanka has
identified areas where it needs further assistance.
From material assistance with creation of a national
criminal database to assistance with financial crimes
investigation skills, Sri Lanka awaits much needed --
and appreciated -- ATA training. As Ambassador Wills
noted in a recent message to you, we believe that Sri
Lanka should remain a priority country for such
training.

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Conclusion
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13. (C) This exciting period in Sri Lanka provides many
opportunities for the U.S. Per the recent policy
review, USG agencies are in the process of visiting Sri
Lanka to assess possible enhanced defense
cooperation, review economic and commercial issues, and
study the possible return of the Peace Corps. As he
made clear to President Bush during their meeting in
Washington in July and to the Deputy Secretary in
Colombo in August, Prime Minister Wickremesinghe wants
to work closely with the U.S. Your visit will further
help cement U.S.-Sri Lankan relations by underscoring
our strong support for the peace process and by
providing a forum to brief the GSL on the global
campaign against terrorism. In addition, your visit
provides an opportunity to underscore our continuing
commitment to assisting the government in
counterterrorism training.


14. (SBU) We suggest that you make the following key
points in your meetings with Sri Lankan officials:

-- Express strong U.S. support for the peace process and
Norwegian facilitation. GSL needs to keep up momentum;
Sri Lanka is a vital symbol of movement toward peace and
stability in a troubled South Asian region.

-- All parties should work in national interest on peace
process and on economic reform. It is important that
peace process not falter because of political
infighting.

-- Express appreciation to Sri Lanka for its support of
the global campaign against terrorism. Review with GSL
interlocutors the status of the global campaign.

-- Review opportunities for additional U.S.-sponsored
counterterrorism training.
-- Human rights issues important; GSL has shown
significant improvement; need to work to end appearance
of impunity.
AMSELEM