Identifier
Created
Classification
Origin
04COLOMBO809
2004-05-18 10:22:00
CONFIDENTIAL
Embassy Colombo
Cable title:  

Peace process, economic issues highlighted

Tags:  PGOV PREL ECON CE NO LTTE ECONOMICS 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 06 COLOMBO 000809 

SIPDIS

DEPARTMENT FOR SA, SA/INS, INR/NESA, S/CT

NSC FOR E. MILLARD

E.O. 12958: DECL: 05-18-14
TAGS: PGOV PREL ECON CE NO LTTE ECONOMICS
SUBJECT: Peace process, economic issues highlighted
during SA A/S Rocca's visit to Sri Lanka

Refs: Colombo 795, and previous

(U) Classified by Ambassador Jeffrey J. Lunstead.
Reasons 1.5 (b,d).

C O N F I D E N T I A L SECTION 01 OF 06 COLOMBO 000809

SIPDIS

DEPARTMENT FOR SA, SA/INS, INR/NESA, S/CT

NSC FOR E. MILLARD

E.O. 12958: DECL: 05-18-14
TAGS: PGOV PREL ECON CE NO LTTE ECONOMICS
SUBJECT: Peace process, economic issues highlighted
during SA A/S Rocca's visit to Sri Lanka

Refs: Colombo 795, and previous

(U) Classified by Ambassador Jeffrey J. Lunstead.
Reasons 1.5 (b,d).


1. (C) SUMMARY: Assistant Secretary for South Asian
Affairs Christina B. Rocca visited Sri Lanka, May 13-16.
Highlights of the visit included meetings with President
Kumaratunga, Prime Minister Rajapakse, Opposition Leader
(and former PM) Wickremesinghe, business leaders, and
Tamil politicians. A/S Rocca also visited the eastern
port city of Trincomalee. During her meetings, A/S
Rocca discussed the status of the peace process, as well
as economic and development issues. Most interlocutors,
including President Kumaratunga, were upbeat about the
peace process, and predicted a near-term return to
Norwegian-facilitated talks between the GSL and the
LTTE. A/S Rocca's visit generated highly favorable
press coverage, while serving to reiterate the USG's
deep interest in Sri Lanka and our continued strong
support for the peace process. END SUMMARY.

===========================
Meetings with GSL Officials
===========================


2. (C) PRESIDENT CHANDRIKA KUMARATUNGA: After a very
large photo spray, including TV cameras, the President
and A/S Rocca sat down on May 14 to an hour-long
discussion on Sri Lanka, its peace process, domestic
politics, and the economic situation. They began by
discussing the results of India's recent election. The
President said she knew Sonia Gandhi well and noted that
there had always been a "close personal link" between
her Sri Lanka Freedom Party (SLFP) and the Congress
Party. In response to a question by A/S Rocca as to
whether the new Indian government would support Sri
Lanka's peace process, the President said that she did
not think the Congress Party's antipathy toward the LTTE
would undermine the GoI's support for the peace process.


3. (C) Regarding the peace track, Kumaratunga said she
was committed to a three-month timeline to begin talks

with the Liberation Tigers of Tamil Eelam (LTTE).
(Talks have been on hold since April 2003.) She said
the GSL had a "clear stance that whatever the LTTE wants
to discuss, we will." She explained her earlier
position that talks would focus both on an interim
solution and a final solution in parallel, "to hold the
LTTE to a commitment to a final solution." The issue of
a final negotiated settlement was always a non-starter
in the past and the LTTE was still adamant about not
discussing it up front, she explained. Therefore she
had agreed to the LTTE request that the talks focus only
on the LTTE's Interim Self Governing (ISGA) proposal.
The President said she was comfortable not discussing
the matter of a final negotiated settlement immediately,
but, in the meantime, said the GSL would press the LTTE
to observe the ceasefire and fully respect human rights.


4. (C) A/S Rocca asked whether the LTTE still hoped an
interim agreement would codify a separate state. The
President replied that she thought the ISGA proposal was
the first step to a separate state, but that the GSL
would not agree to that. Later in the discussion, the
President said that the ISGA proposal was maximalist in
nature. She also felt that the LTTE did not want to go
back to war after two years of the ceasefire, as they
had "achieved more gains in the past two years than in
18 years of war." Her biggest fear, however, was that
the LTTE thought it could intimidate the GSL into
agreeing to a separate state. Both A/S Rocca and the
President agreed that they hoped for the LTTE to change
over time, through more exposure to democratic
processes. The President admitted her surprise over
eastern rebel leader Karuna's split from the main Tiger
organization in March, thinking that it might have
stemmed from his exposure to the outside world in the
previous six rounds of peace talks and Karuna's feeling
that "there might be something better than the bunkers
out there." (The LTTE largely crushed Karuna's
rebellion in April. Karuna's whereabouts remain
unknown.)


5. (C) A/S Rocca mentioned the upcoming June 1 meeting
in Brussels of the Co-chairs of the Tokyo Process. She
noted that participants in the meeting would be looking
for way to assist Sri Lanka's peace process. The
President responded that she hoped to have a meeting
with the local co-chair representatives to identify
issues and review the GSL's views on pertinent issues.
She remarked that there seemed a very good possibility
that talks between the GSL and the Tigers could begin in
the mid-July/mid-August timeframe. A/S Rocca asked
about Foreign Minister Lakshman Kadirgamar's recent
comments that the GSL preferred a domestic venue for
talks. The President responded that she did not want
the talks to turn into a "traveling circus," going from
country to country. She said the Tigers had given
"acceptable reasons" for not wanting the talks in Sri
Lanka, namely the possibility of demonstrations
hampering the discussions. Kumaratunga said Europe
could be a possible venue, given the poor health of
chief Tiger negotiator Anton Balasingham who is based in
London. "One European city would be okay, and one
without a big Tamil diaspora," Kumaratunga commented.
A/S Rocca reiterated that the U.S. wants to do what we
can to support peace.


6. (C) Asked about the role of the Marxist Janatha
Vimukthi Peramuna (JVP) in her coalition government, the
President responded that the group had publicly
committed itself to the peace process in the United
People's Freedom Alliance (UPFA) alliance document it
had signed in January. (Note: The UPFA is the
technical term for the grouping of the SLFP and the
JVP). Despite its rhetoric before the April 2 election,
the group had not made statements against the peace
process "at my request," the President said. The JVP
would not be part of the GSL delegation to the peace
talks. She did say, however, that talks this time
around would be "transparent and consultative," not
"secretive" like previous rounds.


7. (C) President Kumaratunga felt that all the focus on
"others" led the majority Sinhalese community to reject
the United National Party (UNP) government and vote the
UPFA into power. She was concerned, however, with the
"radicalization" of the Parliament, which now had many
minority parties, such as the pro-LTTE Tamil group, the
JVP, and the Buddhist monk party. This could become
very serious if the trend continued as it could lead to
the marginalization of the moderate parties. Queried by
A/S Rocca on a possible linkup between the SLFP and UNP,
the President replied that she had been suggesting it
for 10 years, but that former PM and Opposition leader
Ranil Wickremesinghe had wanted it only if he was in
power. Kumaratunga noted "with the SLFP and UNP, we
have 75 percent of the vote in Parliament." While she
said she was still in favor of a deal with the UNP, the
President admitted it would be "personally difficult for
me to work with half of the old Cabinet."


8. (C) A/S Rocca also said she was looking forward to
the Millennium Challenge Account (MCA) team coming to
begin looking at possible opportunities in Sri Lanka.
The President thought it was "wonderful" that Sri Lanka
was selected, but that she was apprehensive about Sri
Lanka's inclusion on the list, since some of the other
listed countries had "poor political practices." At the
conclusion of the meeting, Kumaratunga thanked A/S Rocca
for continued USG support for the peace process, and
said she was waiting to speak to Foreign Minister
Kadirgamar about his recent visit to Washington.


9. (C) PRIME MINISTER MAHINDA RAJAPAKSE:
Newly-installed Prime Minister Mahinda Rajapakse was
pleasant and relaxed during the May 14 meeting. The PM
and A/S Rocca briefly discussed the Indian election,
with the PM stating that he did not think that India's
foreign policy would change too much, especially
regarding Sri Lanka. A/S Rocca asked how his government
intended to move the peace process forward. The PM was
very upbeat in his reply, stating that he felt talks
would take place in the near-term. He also placed an
emphasis on a renewed focus on relief and rehabilitation
efforts in the north and east. To better handle
redevelopment work, the PM said that the four separate
ministries that currently dealt with rehabilitation
matters would be rolled into one ministry that from now
on would report directly to the President.


10. (C) A/S Rocca and the PM spoke about Sri Lanka's
selection as an MCA country and A/S Rocca confirmed that
a U.S. team would travel to Sri Lanka at the beginning
of June to begin efforts toward negotiation of a
compact. Rajapakse was very interested in the MCA
program, as he thought it would help offset possible
unemployment uncertainties that would arise with the end
of the Multi-Fiber Agreement and loss of garment quotas.
The Ambassador noted that Sri Lanka had the capacity to
take business from other countries, not just lose
business.


11. (C) Replying to A/S Rocca's question about the new
government's fiscal policies, PM Rajapakse replied that
the UPFA intended to continue operating under the
existing budget. No new budget would be presented until
the traditional budget debate later in the year. "Why
force a vote in Parliament now?" he stated. In a long
monologue on the budget, the peace process, and the
unions, the PM said that the working class supported the
peace process one hundred percent. Therefore, the UPFA
would keep its current economic policies in order to
retain working-class support while pushing ahead with
peace negotiations with the Tigers. When a final
settlement had been reached, then the government would
pursue any needed economic reforms. Ambassador Lunstead
responded that it was important that economic reforms
continue, even if the pace were to slow.


12. (C) Asked about the JVP and its commitment to the
peace process, the PM replied that the GSL would keep
the group involved in the process. Contrary to the
President's approach outlined above, he said he thought
the JVP should be included on the GSL's peace talks
delegation. This way, the JVP would "discuss peace
process issues and not sit out and argue," the PM said.
A/S Rocca asked Rajapakse if he thought the JVP would
play a constructive role in the discussions. Deflecting
the question, the PM said he wanted the JVP involved in
negotiations as an educational exercise: "they will
learn how difficult negotiations are." Rajapakse felt
strongly about the JVP's involvement, stating that
others' advice to leave them out of the discussions
would be "a disaster."


13. (C) OPPOSITION LEADER RANIL WICKREMESINGHE: In
their May 14 meeting, former prime minister
Wickremesinghe appeared relaxed and relatively upbeat.
He almost seemed relieved that the burden of national
problems had been passed to someone else -- i.e., the
new government, and he said as much. On the subject of
the April 2 parliamentary election, Wickremesinghe
asserted that much of the urban middle class had voted
for the Buddhist monks of the Jathika Hela Urumaya (JHU)
party. "Residents of the shanty town" had remained
loyal to the United National Party (UNP),however. He
admitted that it was possible that many voters thought
the UNP government had ceded too much to the Tigers over
the course of the peace process. The lack of a solid
"peace dividend" had also hurt the UNP, he thought.


14. (C) Wickremesinghe spoke at length about the new
UPFA government and the problems he expected it to have.
On the economic front, he did not see how the new
government could remain faithful to the former
government's budget, since so much of the UNP budget
related to privatization -- an economic policy not
publicly supported by the UPFA government.
Wickremesinghe also felt that the UPFA would have a
difficult time trying to obtain a majority in
Parliament. "They created their own problem by
attacking the JHU monks in Parliament," and had thus
jeopardized any possible JHU support of the government,
he said. He also felt that the UPFA's current strategy
of courting minority party members would not be
effective in helping the UPFA gain a majority in
Parliament.


15. (C) Asked whether the UNP would support the
President on the peace process, the former prime
minister had very clear thoughts, noting that the UNP
had two concerns: first, the UNP would insist that the
JVP publicly state its support for the peace process.
There was no point in the government criticizing the UNP
and TNA on the peace process if there was dissent within
the UPFA alliance. Second, he was distressed about what
he termed the GSL's use of the "Karuna faction to hit at
the LTTE." Wickremesinghe was quite certain that the
Sri Lanka Army had Karuna in custody and that recent
attacks in the east had been carried out by Karuna's
men, with the army's backing. He alluded to one killing
that occurred two days after the President told the
Norwegians she had the situation under control.
Wickremesinghe felt that the LTTE would not come to the
peace talks table if it did not feel that the government
was committed to peace. He added that he had been
largely cut out of the loop on peace process
information, which -- he remarked with some irony -- was
a common complaint that President Kumaratunga had when
he (Wickremesinghe) was PM.


16. (C) Wickremesinghe said the UPFA had internal
coordination problems on peace process issues, noting
the discrepancies between recent public statements on
peace talks by President Kumaratunga and Foreign
Minister Kadirgamar. Wickremesinghe also confirmed that
he had heard rumors that Finance Minister Sarath
Amunugama might lead the GSL team to any negotiations.
He also thought that newly named head of the Peace
Secretariat, Jayantha Dhanapala, would also be part of

SIPDIS
the team, but added that Dhanapala and Kadirgamar were
famous for not getting along, which raised questions
about Kadirgamar's possible inclusion on the negotiation
team.

==============================
Meeting with Tamil Politicians
==============================


17. (C) A/S Rocca also met on May 14 with members of
the generally pro-LTTE Tamil National Alliance (TNA).
Joseph Pararajasingham, MP from the eastern district of
Batticaloa, R. Sampathan, MP from Trincomalee in the
east, and Suresh Premachandran, a MP who is from Jaffna
in the north, comprised the group. Sampathan said he
was cautiously optimistic about the President's
statements promising a swift return to peace
negotiations. He said, however, that President
Kumaratunga and other GSL officials had sent some mixed
messages, which had caused some confusion. All the MPs
present emphasized their strong support for the
formation of some kind of interim mechanism that would
allow rehabilitation and resettlement work to proceed in
the north and east.


18. (C) Ambassador Lunstead made the point that
President Kumaratunga had stated that her first priority
was accelerating the pace of relief and rehabilitation
in Tamil areas. Sampathan accepted this, but noted that
decision-making for such efforts could not be "Colombo-
centric." At the end of the meeting, Pararajasingham
asked that the U.S. lift its Foreign Terrorist
Organization (FTO) ban on the LTTE. A/S Rocca replied
that the USG had sent clear signals to the Tigers that
if the group wanted the listing to be changed, then they
needed to renounce terrorism in both word and deed.

===================
Business Roundtable
===================


19. (SBU) During an hour-long business roundtable on
May 14, which included representatives from the American
Chamber of Commerce, the IT sector, and the tea,
banking, garment manufacturing, retail and gem
industries, Assistant Secretary Rocca heard the
following points:

-- The business community feels "in the dark" regarding
the new Government's economic plans and policies,
particularly whether or not economic reforms will
continue.

-- The garment sector is concerned about the potential
loss of jobs following the expiration of the Multi-Fiber
Agreement (MFA),and sees improved market access
(possibly based on Sri Lanka's notable social compliance
record) as a key to stemming job-loss to lower cost
producers.

-- An FTA with the U.S. remains desirable; if not
possible, however, would there be a possibility of duty-
free entry of garments made from U.S. textiles or yarn,
via an amendment to customs regulations?

-- The IT sector remains a strong driver for future
growth, and Sri Lanka is well placed to serve as a
center for business process outsourcing (BPO)
operations, or as a back-up center for such operations
in India.

-- Improved IPR enforcement will be key to attracting
the kind of value-added, "knowledge-work" that can help
drive additional growth in the IT sector.

-- USAID support of export-oriented business clusters
has been highly successful and should be continued.

====================
Visit to Trincomalee
====================


20. (C) A/S Rocca visited the eastern city of
Trincomalee on May 15. Highlights of the visit included
a military briefing by Major General Susil Tennakoon,
the commander of security forces in Trincomalee
District. Tennakoon noted the specific military and
security concerns present in the ethnically-mixed
Trincomalee District, but overall was upbeat about the
current security situation. A/S Rocca also met with
Government Agent (GA) for Trincomalee Gamini Rodrigo.
Rodrigo noted challenges in administering rehabilitation
programs in the district, but was on the whole positive
about the pace of reconstruction and aid programs
locally. Over a lunch meeting with civil society and
NGO contacts, Dagfinn Adnanes of the Norwegian-led Sri
Lanka Monitoring Mission (SLMM) noted that at present
the situation in Trincomalee was calm, but that reports
of intimidation and child recruitment by the Tigers
continued to flow in.


21. (U) While in Trincomalee, A/S Rocca also visited
several USAID/OTI project sites. She presided over a
handover of several fishing boats to a local fishermens'
society, for example, and also participated in a
discussion at a local university where students from a
broad cross-section of the country were learning
strategies of non-violent communication.

=======
COMMENT
=======


22. (C) A/S Rocca's visit generated highly favorable
press coverage. Coming right after the recent
parliamentary election, it was also well-timed, as it
served to punctuate the USG's continued deep interest in
Sri Lanka and our strong support for the peace process.
The good news is that interlocutors across the board
appear to support both the informal process and a timely
return to the negotiation track which has been on hold
since April 2003. Interlocutors, in fact, predict that
talks will probably take place within the next several
months. All is not roses, however. Based on comments
by TNA MPs, for example, there is a lot of skepticism
toward the GSL about its ability to follow through with
quick relief and rehabilitation assistance in the
volatile north/east. At the same time, as exemplified
by Wickremesinghe's remarks, the UNP clearly harbors
resentment toward the President about its recent
electoral defeat. In light of this, the UNP's degree of
support for the UPFA government's peace process plans
down the line appears questionable. All that said,
interlocutors heard our message that the U.S. believes
that all concerned parties need to work together in the
national interest toward a negotiated settlement.


23. (C) It also became crystal clear during the meeting
with the President that public and private comments by
Foreign Minister Kadirgamar during his Washington visit
on issues such as the ISGA are not in accord with the
President's stated policies. This reveals a troubling
lack of coordination within the government. Ambassador
will see Kadirgamar on the afternoon of May 18 and probe
further on this issue. END COMMENT.


24. (U) Assistant Secretary Rocca did not have an
opportunity to review this message before departing
Post.


25. (U) Minimize considered.

LUNSTEAD