IN VISIT, COMMERCE DAS WILLIAMSON EMPHASIZES

UNCLAS SECTION 01 OF 03 COLOMBO 002017

SIPDIS

SENSITIVE

FOR E, EB, SA/INS, SA/RA
DEPT PLEASE PASS TO USAID FOR BERNADETTE BUNDY - ANE/SA,
USTR FOR AUSTR WILLS; TREASURY FOR SRI LANKA DESK; NSC FOR
ELIZABETH MILLARD; COMMERCE FOR ARIADNE BENAISSA

E.O. 12958: N/A
TAGS: ECON ETRD BEXP PREL KIPR KTEX CE ECONOMICS
SUBJECT: IN VISIT, COMMERCE DAS WILLIAMSON EMPHASIZES
IMPORTANCE OF STABILITY FOR INVESTMENT AND GROWTH

REFS: A) Colombo 1983 B) Colombo 1957

Sensitive but unclassified. Please handle accordingly.


1. (U) Summary: During her visit, Commerce DAS Williamson
heard updates on the current political environment and
emphasized to public and private sector interlocutors the
importance of a stable, predictable environment for growth
and investment. Williamson applauded the government's work
to date on the peace process and economic reform, urged an
amicable resolution of the ongoing domestic uncertainty and
confirmed the USG's commitment to expanding the bilateral
trade relationship. End summary.


2. (U) Commerce DAS Molly Williamson, accompanied by DOC
Sri Lanka Desk Officer Ariadne Benaissa, met with key
business and government contacts in a two-day visit, coming
a week after the President took over three ministries and
suspended Parliament. She met with officials from the
Ministry of Commerce, including the Minister, the Board of
Investment (BoI),the private/public sector IPR Working
Group, the Ceylon and the American Chambers of Commerce,
individual business leaders, the Joint Apparel Association
Forum, and visited a leading edge US software development
firm.


3. (U) At all meetings, Williamson delivered the message
that the US is looking for trading partners with stability,
predictability, rule of law, a business-friendly
environment and a trainable workforce. She noted that Sri
Lanka had received attention from the USG because it
tackled its problems on its own, and attracted
international support for those efforts. She applauded the
GSL's commitment to the peace process, economic reform and
trade liberalization, and expressed appreciation for the
stance taken at Cancun. Williamson promoted more
commercial interaction, including visits to the US to
explore opportunities and attend trade shows, sending trade
delegations, and general public relations to promote a
positive image of Sri Lanka. She supported the robust TIFA
relationship, and cautioned the Sri Lankans about the
realities of potential FTA discussions, explaining the
constraints of US political dynamics.

Impact of Political Uncertainty
--------------

4. (SBU) DAS Williamson's schedule was unaffected by the
political maneuvering, except for its primacy as a
discussion topic. She heard from all parties that the
moves by President Kumaratunga were unexpected, and had a
negative effect on the country's international reputation,
foreign investment and on individual business relationships
(reftels). Both private and public sector groups expressed
the desire that that the President and PM come to a
resolution quickly, so they could get back on the track of
development and growth. Many interlocutors complained that
business deals were now on hold, pending resolution. None
saw a threat of violence or unrest in the current
circumstances.


5. (U) Major issues DAS Williamson discussed with these
representatives included IPR Protection, infrastructure
development, education, TIFA talks, and the prospect of FTA
discussions.

IPR
---

6. (SBU) On the day of DAS Williamson's arrival, November
13, the Parliament Speaker signed the new IPR legislation,
bringing it into effect. At the meeting with
representatives from the private sector and the GSL Offices
of Intellectual Property, Consumer Affairs, Police and
Attorney General, DAS Williamson was briefed on current
efforts to begin implementation of the law. These efforts
include: establishment of special IPR units in the police
and Attorney General's office, a series of public lectures
about the law, training programs for police and customs,
newspaper ads and WIPO assistance to conduct a study on
using IP to become more competitive. IP Office Director
Dr. Karunaratna relayed the GSL's desire to become an IPR
policing hub for the region. Opportunities for
implementation support were explored, including Dept. of
Commerce programs for lawyers and judges, industry
association programs, training by US Customs in New Delhi,
and help from the new Microsoft Office, due to open soon.
Infrastructure Development and Education
--------------

7. (U) DAS Williamson heard from the private sector, as
well as from the BoI, about the importance of developing
infrastructure to enable growth. Projects are planned or
are already underway for roads, ports, airports, power and
water. BoI Chairman Arjunna Mahendran relayed that five
infrastructure projects, worth $150 million, were put on
hold as a result of the current political dispute. In
addition to infrastructure, he said he saw growth potential
in the telecom sector including Back Office Processing and
call centers, and in textile manufacturing. The BoI target
for annual Foreign Direct investment is $1 billion by 2006.


8. (SBU) At the BoI and the Chambers of Commerce, DAS
Williamson explored the education situation, and heard
about insufficient capacity at the universities, and how
many graduates do not emerge with the skills employers
demand. English language skills, once very strong, have
declined, and new programs to bring English back into the
curriculum are underway. There is an effort to train a
core group of workers in English and IT to staff operations
such as call centers. Finding educated workers was not a
problem for Virtusa, an award-winning, growing US software
development company that DAS Williamson visited, as it
offers on-the-job training for new employees.

TIFA/FTA
--------------

9. (SBU) DAS Williamson emphasized at each meeting that
there are no bilateral FTA negotiations currently underway,
but the robust, effective TIFA process has successfully
addressed many issues that would need to be dealt with in a
strengthening trade relationship. Commerce Minister
Karunanayake confirmed what was said during the TIFA talks,
that the GSL is close to signing the WTO Information
Technology Agreement, and was waiting for a response from
the USG in Geneva. DAS Williamson also engaged garment
sector representatives, emphasizing the importance of
taking steps to reduce the impact of the MFA phase-out, and
saying they should not expect an FTA to cushion the impact.
Recommended steps include improving productivity and
competitiveness, as well as diversification out of
garments. She also offered to assist the group with their
visit (planned for mid-January) to the southeastern US to
explore options of importing inputs from US mills.


10. (SBU) Comment: This visit was important for two
reasons. First, DAS Williamson could see firsthand that the
political situation was not unstable, as depicted in the
international media, and that the GSL and business
representatives are ready to move forward on all fronts.
Second, she gave a dose of US political reality to those
anxious to start the FTA process. Her description of the
mandated procedure and likely timing was educational for
most, and appreciated by all. End comment.

DAS Williamson did not have an opportunity to clear this
cable.
LUNSTEAD