Cohabitation crisis erupts as president takes

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 000787

SIPDIS

DEPARTMENT FOR SA, SA/INS, SA/PD; NSC FOR

E. MILLARD

LONDON FOR POL/RIEDEL

E.O. 12958: DECL: 05-12-13
TAGS: PGOV PREL PINS PHUM KPAO CE
SUBJECT: Cohabitation crisis erupts as president takes
steps to take over lucrative national lottery board

Refs: (A) SA/INS-Colombo 05/10/03 class e-mail
- (B) Colombo 780, and previous

(U) Classified by Ambassador E. Ashley Wills:
REASONS: 1.5 (B,D).


1. (C) SUMMARY: Another in Sri Lanka's long series of
cohabitation crises has erupted as President Kumaratunga
has taken steps to take over the lucrative national
lottery board. The GSL has resisted the move fiercely
and the dispute seems bound for the courts. In the
meantime, the GSL is mulling over trying to impeach the
president or calling new elections. It is not clear how
far both sides want to press this matter, but
cohabitation ties, which were bad, continue their
downhill slide. Suggested "if asked" press guidance is
contained in Para 10. END SUMMARY.

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President Acts to Take Over Key Agency
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2. (SBU) In the latest crisis involving Sri Lanka's
always tense cohabitation ties, President Kumaratunga
took steps May 9 to take over control of the Development
Lotteries Board from the government. (Note: The funds
this agency makes, and it is believed to run a large
profit, are supposed to be used for national development
projects. Some of the money is also provided to the
"President's Fund," which is controlled by Kumaratunga
and was set up to make similar development-related
allotments. Many observers consider the agency to be a
source of slush funds for those in government. End
Note.) The details are a bit sketchy, but the president
apparently signed an executive order late
May 9 taking over the board. Copies of this order and a
letter signed by the president were duly sent to Prime
Minister Wickremesinghe and Minister of Economic Reform
Milinda Moragoda, who is chairman of the lotteries
board. In her letter, the president explained her move,
asserting that she had to act because of reports she had
received of managerial malfeasance at the board (She did
not accuse Moragoda of any personal wrongdoing,
however). She also argued that the agency should have
been transferred to presidential control at the time the
government switched hands in December 2001, and not been
put under the Prime Minister to begin with. (Note: We
also understand that the President was worried about
tentative plans to privatize the lotteries board, which
would deprive her of money for her "Presidents Fund.")

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GSL Disputes Move
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3. (C) Bitterly opposed to the president's action, the
GSL acted immediately to prevent the order from being
published in the government gazette. (Note: In Sri
Lanka, executive orders seem to need to be published in
the gazette in order to take effect, although the
president's office and her supporters are disputing this
-- see below.) To do this, the government ordered
police and party supporters to go to the government's
main printing office in downtown Colombo late May 9 to
prevent publication of the order. Amid what turned out
to be almost a mini-riot, the GSL made sure the order
was not printed. Instead, the chief printer conveyed
the issue to the Attorney General, who is now looking
into the matter. (Note: As of May 12, the police are
still closing off roads in the vicinity of the
government's printing office in an effort to prevent
trouble.)


4. (SBU) In arguing against her action, the prime
minister and Moragoda both immediately sent letters
(which were made public) to the president asserting that
the action she had taken was improper. The PM's letter,
more legal in nature than Moragoda's, asserted that Sri
Lanka's constitution requires that the president
"consult" with the PM prior to taking moves involving
the government. Moragoda's letter, meanwhile, asserted
that what the president had done cut completely against
the grain of the need for the president and the
government to work together to smooth out cohabitation
problems.

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GSL Contacts U.S.
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5. (C) Per Ref A, the president's action also
precipitated a flood of requests by GSL personages for
U.S. help. On May 9-10, the Ambassador received several
calls from Moragoda and one from the PM, for example,
requesting that the U.S. do what it could to stop what
they characterized as the president's "meddling" in the
government's business. In response, the Ambassador
noted that the U.S. generally does not get involved in
specific issues involving Sri Lanka's internal political
and legal system. He went on to underscore, however,
our long-standing position that the government and the
president need to work together in the national interest
in order to move the peace process and economic reform
forward.


6. (C) In the course of discussions on this issue,
Moragoda told the Ambassador that he would quit all his
jobs in the government, including his position as a key
member of the GSL's peace negotiation team, if the
president's decision was put into effect. The
Ambassador, noting Moragoda's importance to the
government and to the peace process, urged him not to
take such a drastic action.

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Next Steps in Crisis
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7. (C) At this point, the government appears to remain
in charge of the lotteries board with Moragoda still
acting as chairman. In the meantime, Attorney General
K.C. Kamalasabayson, who is considered a relatively
neutral figure, is reviewing the matter. It seems that
he will either issue an advisory opinion on the issue or
directly refer it to the court system. As noted above,
the GSL is arguing hard that the president had no right
to act without consulting the PM first. The president
and her supporters, on the other hand, are arguing that
printing in the gazette is a mere technicality and the
order should be ruled as being in effect.


8. (C) As the legal angles play out, the situation has
charged up those in the governing United National Party
(UNP) who believe that the party should move against the
president in a political sense. Moragoda has told the
Ambassador, for example, that there are some in UNP
circles who are talking of moving forward with long-
standing abuse of power charges against Kumaratunga with
the aim of impeaching her. Others in the party are
thinking of calling new elections, which many in the UNP
believe will result in gains vis-a-vis the president's
People's Alliance (PA) party. There is also talk of
seriously constraining her "power of the purse" by
starving her office of funding. As of mid-day May 12,
it is not clear whether the prime minister has decided
to take any of these courses or under what conditions he
may do so. In the meantime, others in the party are
counseling patience and a return to the status quo ante,
urging that the government work to convince the
president to rescind her order re the lottery.

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COMMENT
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9. (C) It is not clear how far both sides want to press
this matter. Our sense, at this point, is that the
president and the GSL might back off and not choose to
make this matter a cause belli. That said, after
periodic crises over the course of past months, it is
clear that cohabitation ties, which were bad, are
continuing their downhill slide. This is very bad news
for the peace process, which is also in a trough because
of the Tamil Tigers' recent decision to suspend their
participation in the peace talks. Clearly, if the GSL
is engaged in fighting with the president, it will not
be able to give the process the full attention it
requires, especially during this sensitive timeframe.
(Note: SA A/S Rocca is currently visiting Sri Lanka.
Her meetings, including comments in reference to co-
habitation, will be reported Septel.) END COMMENT.

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Suggested Press Guidance
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10. (U) Suggested "if asked" press guidance follows:

Begin text:

Question:

What is the U.S. position regarding the public fight
which has broken out between the president and the prime
minister in Sri Lanka over the control of a key agency?

Answer:

We are aware of the situation in Sri Lanka. We continue
to urge all sides to work together in a cooperative and
conciliatory manner. The focus must remain on the
national interest in moving the peace process and
economic reform forward.

End text.


11. (U) Minimize considered.

WILLS