FOURTH TOKYO CORE GROUP MEETING ROUNDUP

UNCLAS SECTION 01 OF 02 COLOMBO 000497

SIPDIS

FOR SA, SA/INS/D
PASS TO USAID AMBASSADOR, WENDY CHAMBERLAIN, AA/ANE;
GODRON WEST, DAA/ANE; BERNADETTE BUNDY, ANE

E.O. 12958: N/A
TAGS: EAID CE LTTE
SUBJECT: FOURTH TOKYO CORE GROUP MEETING ROUNDUP

Summary: The meeting focused on an update of the issues
raised by the Needs Assessment validation process,
progress in the most recent Peace Talks, a status report
on the Washington Seminar and the issue of conditionality
and a review of the Tokyo conference Agenda. Ambassador
Wills will host a meeting next week among donors to
discuss conditionality. END Summary.


1. The UN and ADB reported on the Needs Assessment
Validation Workshop held in Kilinochchi last week. It was
attended by 150 people, 50 of whom were LTTE, including
three LTTE consultants from AUSTRALIA, senior central and
provincial level Government staff, NGOs and civil society.
There were numerous comments and strong disagreements and
at the end of the workshop there were a few difficult
issues that remained unresolved. These included the
concept of blended or connected infrastructure development
favored by the GSL and self-sufficiency for infrastructure
development favored by the LTTE. Views differed also on
approaches to rebuilding (rehabilitation of existing
infrastructure where possible or replacement with state of
the art buildings). A small review group of GSL and LTTE
consultants is redrafting the document but differences may
still remain.


2. Minister Moragoda said that the debate is one of Marx
versus Adam Smith and that the LTTE has a steep learning
curve. The LTTE appears to be responding on the basis of
its past experience where the majority of donor funds went
to Colombo. The Tigers don't want funds to go through the
central Government now because they believe that a
percentage will be skimmed off the top. Rather, they want
to retain wealth in the region and would prefer to
contribute as little as possible to the Center. In
practical terms they want ADB money to remain in the
province with the design and implementation managed in the
North and East. The Minister said that the LTTE wants land
ownership patterns to change. On the private sector
development side, he believes that investment in small
business activities at the grass roots level may help the
LTTE move in the right direction. He asked for Japanese
assistance in this area.


3. The Norwegian Ambassador said that over the past few
months he had seen some movement in LTTE thinking, which
was initially focused on doing everything themselves, but
now the Tigers acknowledge that some outside technical
assistance might be helpful. According to Westborg, the
LTTE does not appear monolithic. While the LTTE still
believes that cooperatives are the way forward, it appears
open to joint ventures. Westborg said that while the LTTE
doesn't have as much time to go through the learning
experience as it would like, there is no easy way around
it and the GSL and donors need to be a little patient with
the Tigers.


4. Ambassador Westborg reported that at the most recent
peace talks, both sides had accepted the draft agenda for
the Tokyo meeting. He repeatedly pointed out at the talks
that the GSL and LTTE need to move forward to create a
positive attitude among the donors leading up to Tokyo.
The message was received and understood. He said that
significant political results will take more time than was
available given the Tokyo meeting date. Progress was made
at the talks in that the LTTE welcomed local elections in
its areas, even multi-party elections. Minister Moragoda
indicated that the LTTE wanted an expanded SIRHN, which
means a semi-permanent organizational structure. In
response, the GSL indicated that a clear road map with
milestones was required to consider such an expansion.
The road map needed to include units of devolution and a
plan for dealing with police and armed forces issues.
Minister Moragoda suggested that allowing democracy to
flourish at the grass roots level would create an
opportunity to pump money into local authorities. There
will be further discussion of the elements needed to
expand SIRHN at the next set of peace talks. Minister
Moragoda said that they had discussed having additional
meetings between the formal talks as a great deal of
ground still needed to be covered. To this end, G.L.
Peiris will meet with Balasingham in the Wanni or London
and he (Moragoda) will also see Balasingham in London.


5. The GSL will hold a Colombo Seminar in preparation
for Tokyo on May 6. A local think tank, the Center for
Policy Alternatives, has tentatively scheduled a pre-Tokyo
workshop for April 25 -27 for civil society. There was
considerable discussion as to whether the Colombo Seminar
would be an informational meeting or a consultative one.
One of the key factors is the timetable for getting the
documents for Tokyo ready. The ADB rep has heard concerns
from colleagues that the process has not been
collaborative enough and that there should be an
opportunity to discuss the documents prior to
finalization.


6. The Washington Seminar Agenda was discussed and the
Ambassador reported that the invitations had already gone
out. It was still unclear if Secretary Powell would make
an appearance and this may not be decided until the last
minute given world events. Ambassador Wills noted that
while the topic of Conditionality for disbursement of
donor funds did not yet appear on the draft Washington
Seminar Agenda, this discussion might be added since most
donors thought it should be discussed. The Japanese
Ambassador reiterated his previous position that the issue
is very sensitive and that it may not be appropriate as a
topic for discussion in an open meeting. Ambassador Wills
suggested that he would host a private donor meeting on
conditionality next week, at which a consensus would be
sought on the way forward on this issue. The USAID
Director reported that the development staff from a
significant number of bilateral missions had met and are
developing a paper on conditionality. Once the paper has
been approved by heads of mission, the intent of the group
was to have the document shared with the GSL and the LTTE
to create a transparent and collaborative process. The
ADB rep stressed that the paper needed to be simple and
practical. The IMF rep indicated that there was little
chance of keeping the discussion on conditionality private
since it was pretty clear that bilateral donors would
raise the issue at the upcoming World Bank and IMF
meetings.


7. The Private Sector meetings which will be held
immediately following the Tokyo Donor Meeting will
primarily be an opportunity for Sri Lankan businesses to
meet Japanese private sector counterparts to further
stimulate foreign investment. It does not appear open to
the private sector from other donor countries.


8. Minister Moragoda will be traveling extensively in
the next two weeks. He plans to travel to Brussels to
have discussions with the EU and hopes to have separate
meetings with representatives of Member States. This
appears to be an alternative to the originally proposed EU
Seminar. The EU members will be voting on the issue of co-
hosting the Tokyo Meeting and the EU Representative
indicated that signs are all positive that they will agree
to co-host. The next Core Group meeting will be held in
approximately 10 days time to fit into the Minister's
travel schedule.


9. Comment: Progress is slowly being made. It is our hope
that donors can agree on conditionality so that it can
form part of the agenda both at the Washington Seminar and
at Tokyo. We are troubled, as are other donors, with the
statist, autarkic and separatist thoughts expressed by
some LTTE'ers at the needs assessment meeting in
Kilnochichi, but this probably constituted posturing to
some extent. As the Norwegian Ambassador noted, the LTTE
probably doesn't have policies on many economic matters
yet. This is both good and bad, good in that the Tigers
may be open to influence and reality, bad in that it shows
how far they have to come to meet the normally-accepted
criteria set by donors.

WILLS