C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 001917

SIPDIS

DEPARTMENT FOR D, SA, SA/INS, S/CT, DS/DSS/ITA, DS/IP/NEA/SA
DEPARTMENT ALSO PLEASE PASS TOPEC
NSC FOR E. MILLARD

E.O. 12958: DECL: 11-05-13
TAGS: PGOV PINS PTER ASEC MOPS ECON CASC CE NO LTTE
SUBJECT: In further move, President declares state of
emergency

Refs: (A) Colombo-Ops Center 11/05/2003 telecons

- (B) Colombo-SA/INS 11/04/2003 fax
- (C) Colombo 1902, and previous

(U) Classified by Charge' d'Affaires James F. Entwistle.
Reasons 1.5 (b, d).


1. (C) SUMMARY: Adding further to her sudden actions
on November 4, the President declared a state of
emergency on November 5. She told the Charge' (Septel)
that, despite reports to the contrary, she had not
sacked the finance minister. On the evening of November
4, President Kumaratunga read a brief statement on
national TV asserting that she had had to take over
several ministries and suspend Parliament earlier that
day in order to "ensure national security." In response
to her actions, a key government minister sharply
criticized the President at a briefing for diplomatic
missions. The LTTE has said it is concerned about the
President's actions. Amid a dive in the stock market,
the President's moves also have serious economic
implications. The situation in Colombo remains quiet.
Septel analyzes the sharp deepening of cohabitation
divisions and their possible impact on the peace
process. END SUMMARY.

========================
President's Latest Steps
========================


2. (SBU) Further to her dramatic actions on November 4
(see Ref C), President Kumaratunga declared a state of
emergency on November 5. One key effect of this
declaration will be the prohibition without permission
of public campaigning, public gatherings, and the use of
public address systems.


3. (C) Despite many reports that she had taken over the
Finance Ministry, the President told the Charge' point

blank late November 5 that she had not/not taken any
steps against the finance minister. Per her November 4
actions, however, she has fired the interior, defense,
and mass communications ministers and retained the
portfolios of each ministry for herself. Personnel
changes, especially within the media, also continue.
The President has replaced the officials in charge of
the government-run ITN television station, the Sri Lanka
Broadcasting Corporation radio station, and Lake House,
the government-owned newspaper house. On the evening of
November 4, she also ordered the government printer to
publish the gazette notifications making official her
ministerial changes and her suspension of Parliament.
The government printer was reportedly forced by the
police to take these steps, but he was later released.

=======================
November 4 TV Statement
=======================


4. (U) By way of publicly explaining her actions,
President Kumaratunga read a brief statement on national
television late November 4. (Note: A copy of the
statement was faxed to SA/INS -- see Ref B.) Speaking
both in Sinhala and later in English, the President said
her "urgent corrective action" was meant to remedy the
GSL's "ineffective steps...to ensure national security."
She went on to assert that she was "committed to the
preservation of a pluralist, democratic society."
Commenting on the peace process, the President expressed
her "willingness to discuss with the LTTE a just and
balanced solution of the national problem, within the
parameters of the unity, territorial integrity and
sovereignty of Sri Lanka." She closed by appealing to
all citizens to remain calm and maintain law and order.

============================================
Key Minister criticizes President's actions
===========================================


5. (C) With the Prime Minister and many of his key
aides in Washington, the reaction of the United National
Party (UNP) governing coalition to the President's moves
continues to be halting. Late November 4, a brief
statement in the PM's name was issued. The statement
strongly condemned the President's actions (see Ref C).
On November 5, G.L. Peiris, a key GSL minister in charge
of peace process issues, gave a briefing to members of
the diplomatic corps and heads of international
agencies. Karu Jayasuriya, Deputy UNP leader and
Minister of Power, was also present. While the briefing
started out as a pre-arranged review of the peace
process, it quickly turned to the GSL's views on
President Kumaratunga's recent moves. Peiris
characterized her actions as a "usurpation of power,"
and said they had been "fundamentally repugnant and
contrary to the norms of democratic government." Peiris
also criticized the timing of the President's actions,
claiming that they were designed to mar Prime Minister
Wickremesinghe's ongoing visit to the U.S. and
interrupted the budget process in Parliament (see
Para 9).


6. (C) Peiris also repeatedly asserted that the UNP
government continued to enjoy the support of a majority
of the Parliament and that a motion of confidence in the
PM was being drafted. Peiris went on to note that if
the President felt she had the political support to take
over control of Parliament then she should do so, but
that he believed the President did not have the
necessary backing.


7. (C) In other developments, a formal impeachment
motion on Supreme Court Chief Justice Sarath Silva was
handed over to Speaker of Parliament Joseph Perera by
UNP MPs hours before the President suspended Parliament
on November 4. Given the suspension of Parliament,
however, no action can be taken on the impeachment
motion until it reconvenes. The move to impeach the
Chief Justice has sparked a protest in the judiciary,
with a work stoppage by judges and court staff taking
place on November 5. In the meantime, Gayantha
Karunatilleke, a UNP Spokesman, told Pol FSN that UNP
party members were "sitting tight" until the Prime
Minister returned from Washington and issued
instructions on what they should do.

======================
Tigers express Concern
======================


8. (C) The Liberation Tigers of Tamil Eelam (LTTE) have
expressed concern about the situation. In a November 4
article on the pro-LTTE website "TamilNet," under the
headline "Future of Sri Lanka's peace hangs in balance,"
Tiger spokesman Daya Master stated that the group is
"carefully monitoring and studying developments" before
taking any decisions. The article goes on to
characterize the status of the GSL-LTTE ceasefire
agreement as "uncertain." In a November 5 press report,
Master was also quoted as stating that "these sudden
decisions of the President have jeopardized the peace
process." In the meantime, there are reliable reports
that the LTTE appears to be pulling its political cadre
from their offices in government-controlled areas of the
north and east, and bringing them back to LTTE-
controlled areas.

=====================
Economic implications
=====================


9. (C) President Kumaratunga's steps seem set to have a
serious economic impact. The budget was to be presented
to Parliament on November 12 for its first reading, with
a third and final reading scheduled for December 14.
According to Faiz Mohideen, Deputy Secretary of Finance,
the government cannot spend any money after January 1 if
the budget has not been passed. The only relief to that
situation is the ability to extend, only twice, the
previous year's budget for a quarter. That measure,
however, must be voted on by Parliament, which is
currently suspended by order of the President.


10. (SBU) Following the President's actions, Colombo's
stock market, which had been the second best performing
market in Asia in 2003 (and was perhaps slightly
overheated) also took a sharp blow. Already down from
uncertainties surrounding the LTTE's counterproposal to
the GSL, the market fell by 5 percent on November 4 (its
largest one-day drop to that point) and declined by an
additional 15 percent on November 5. It is down more
than 18 percent from its historic high in mid-October.
While some analysts had predicted a "slight" correction,
nothing of this magnitude was forecast.


11. (C) The continued swirl of rumors and confirmed
moves by the President (including the apparently
erroneous reports about a takeover of the Finance
Ministry) are likely to have a further negative effect
on the economy. The rupee, which had appreciated
slightly, and remained stable for several months, has
depreciated against the dollar. The Board of Investment
(BOI) issued a statement to try to calm investors,
noting that the "BOI of Sri Lanka will not detract from
our general commitment to improving our level of
service." Nonetheless, econoff heard from
representatives of MAS Holdings, a major apparel
manufacturer in Sri Lanka, that Lands End -- a major new
buyer -- was thinking about canceling an imminent visit.
Tilak de Zoysa, Chairman of the Ceylon Chamber of
Commerce, told poloff on November 5 that he and other
business leaders were "very disturbed" at what he
characterized as "serious" implications for the
recovering economy.

====================
Colombo remains Calm
====================


12. (SBU) The situation in Colombo has remained quiet
throughout the crisis. Although military troops have
been lightly deployed around some government press and
media installations, security has not increased
otherwise and people are moving freely about the city.
The Consular Section has received some queries from
Amcits about the situation. In response, Mission plans
to issue a brief consular message.


13. (U) Minimize considered.

ENTWISTLE