2003 REPORT ON INVESTMENT DISPUTES: SRI LANKA

UNCLAS COLOMBO 000751 SIPDIS SENSITIVE FOR L/CID/GLEHNER AND EB/IFD/OIA/NEFIRD E.O. 12958: N/A TAGS: KIDE EINV CE ECONOMICS SUBJECT: 2003 REPORT ON INVESTMENT DISPUTES: SRI LANKA REF: STATE 83098 Sensitive but unclassified, please handle accordingly. (SBU) Format for this report follows requirements in reftel. a) Claimant A b) 1999 c) Claimant A has a 23 percent stake in a private Sri Lankan telecommunications company. In 1994 the Government of Sri Lanka (GSL) granted this company a license to provide certain internet services. Claimant A and its Sri Lankan partners began offering the service in early 1999, competing with Sri Lanka Telecom (SLT),the national telecom company (GSL's holding in SLT was recently reduced from 62 to 45.4 percent). Claimant A's service resulted in a significant loss of income for SLT, which began taking actions to block Claimant A's service. These actions included bringing a local court case against Claimant A. Both parties have agreed to drop this case. A new Telecom Regulator was appointed in 2002, and he has provided much support to Claimant A. Despite this support, including a directive to provide the appropriate circuits to Claimant A, SLT continues to obstruct Claimant A's ability to provide its licensed services. The government's policies, reflected in the Telecom Regulator's decisions, recognize Claimant A's rights. Internet equipment held in customs since 2000 has been released. Payments made by SLT to companies to block connections for Claimant A have ceased. The situation for Claimant A with regard to government relations has greatly improved. Current problems of Claimant A result primarily from the government's non-enforcement of its own directives. Claimant A estimated revenue losses at $12 million and equipment losses at $900,000 last year. Due to ongoing problems, Claimant A states that 60-70% of its business is non- operational. Claimant A: Lanka Internet WILLS