SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE

UNCLAS SECTION 01 OF 03 COLOMBO 001071

SIPDIS

DEPT FOR EB A/S ANTHONY WAYNE; SA/INS FOR J. BRENNIG, N.
DEAN; PLEASE PASS TO TSUNAMI RECONSTRUCTION TASK FORCE;
TREASURY FOR C. CARNES; MCC FOR D.NASSIRY

SENSITIVE

E.O. 12958: N/A
TAGS: EAID ECON PGOV CE MALDIVES'>MV
SUBJECT: SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE
(JUNE 16, 2005)

Ref: State 109335


1. (U) This cable provides information for the June 16
post-Tsunami IAWG meeting. Please see action request in
para 10.

MALDIVES
--------------

2. (U) Econchief and USAID Environment Officer visited
MALDIVES on June 13 to discuss USD 8.7 million contribution
to the GORM Tsunami Relief and Reconstruction Fund (TRRF).
Emboffs met with Riluwan Shareef, Executive Director,
Ministry of Finance; Mohamed Ahmed, Assistant Executive
Director, Ministry of Finance; and, Aminath Didi, Assistant
Director General, Department of External Resources,
Ministry of Foreign Affairs.


3. (SBU) Shareef thanked the USG on behalf of the GORM for
its support in the aftermath of the tsunami. He also
expressed appreciation for the flexibility of the US
Government in its consideration of potential projects and
uses for the money. Shareef said that reconstruction has
leveled off somewhat in recent weeks, the result of:

--Fatigue and stress on the part of GORM officials, who
have been working 18-20 hour days since the tsunami hit;
the GoRM realizes it need to rationalize people's schedules
and workflow;

--Maldivian construction companies are overtaxed and not
always capable of meeting donor requirements for
international contracts. This then begs the question, do
you take a risk with less capable contractors, or spread
out the ones that are able to meet requirements?

--Dealing with increased capital investment expenditures.
In a normal year, MALDIVES would absorb approximately USD
30 million in investment. Even if one assumes a five-year
rebuilding period, the USD 450 million in assessed damage
means MALDIVES faces a burden several times its normal
absorptive capacity.


4. (SBU) Shareef indicated that they are treating the
reconstruction effort as a budgetary exercise, in order to
closely track the financial management of the projects and
programs. Regarding the USG request to disburse all monies
within 16 months, the GORM would make every effort to
comply, but this would be a tall order. Didi suggested
that imposing such a timeframe means we need to move as
quickly as possible to conclude a bilateral agreement, and
the GORM would appreciate a draft from the USG as quickly
as possible.


5. (SBU) One area that Shareef suggested would help the
GORM immensely was capacity building related to TRRF fund
management. In this regard, the Finance Ministry currently
keeps most national accounts on the Quicken "QuickBooks"
program. This limits their ability to meet the transparency,
auditing and reporting requirements of many donors. Further,
the Ministry has been working since before the tsunami to
better integrate GORM accounts. The TRRF was based on a
public finance project that had been under consideration by
the ADB, but the loan component for the project remains
uncertain. There is currently draft legislation before the
Majlis (parliament) and under consideration by cabinet to
strengthen the public accounting system. The GORM would be
interested in using approximately 10 percent of the proposed
USG funds to hire a consultant and purchase the necessary
hardware and software to pursue this project. According to
Ahmed, the project could be completed within three months and
would be a huge boon to the GORM's ability to meet donor
requirements for accountability, would help the GORM better
disburse and account for funds more quickly and would have
longstanding benefits for shaping how the GORM structures
its overall financial program.


6. (SBU) Regarding questions of accountability, Emboffs
were also briefed on the GORM version of the Donor
Assistance Database (DAD) provided by UNDP. This mechanism
should be implemented by mid-July and will be maintained
directly by the GORM. The GORM has already established
KPMG MALDIVES as their internal auditors for the TRRF and
provided Econchief with a copy of the Terms of Reference
(TOR) for the internal audit function (will be faxed to
SA/INS and Task Force). External audit TOR is under
development and will be provided when completed. Currently
the GORM is updating income and expenditures daily and
posts this information every two weeks on the Internet at
(http://www.finance.gov.mv/).


7. (SBU) The GORM remains concerned about financing gaps in
the sewerage, clean drinking water and jetty and harbor
development sectors, in addition to the administrative
capacity building issues described above. They have
promised to have the Department of National Planning
provide us with a list of ideas that they would pursue with
our donation. Regarding the US request to "brand" our
donations, GORM is in full agreement and encourages the
practice.


8. (U) On the question of how to transfer funds, the
MALDIVES Monetary Authority maintains an account with the
Fed in New York and the Bank of MALDIVES has a connection
with JP Morgan-Chase. Therefore, it will probably be
easiest to arrange a transfer from Treasury to the MMA Fed
account in New York.


9. (SBU) Emboffs met with representatives from UNDP and the
Maldivian National Chamber of Commerce and Industry (MNCCI)
to discuss the potential US contribution as well. Both
groups urged vigilance on the monitoring of the funds and
expressed a desire that the US help in building capacity,
as they agreed with the GORM assessment that the rebuilding
effort is beginning to wane as a result of a lack of
resources and capabilities. As did the GORM, both UNDP and
MNCCI identified water and sanitation, jetties and capacity
building as key areas for reconstruction.


10. (SBU) With regard to the TRRF, we obviously need to
have more discussions about specific projects.
Nonetheless, Post suggests that we proceed with negotiation
and conclusion of a bilateral agreement. In keeping with
reftel request to keep to general sectors, we suggest that
the agreement identify water and sanitation, harbor and
jetty projects and administrative and financial capacity
building as the scope. Please advise on how such an
agreement will be prepared on the USG side.

Sri Lanka - Six-Month Anniversary
--------------

11. (SBU) With regard to Washington discussions on how to
mark the six-month anniversary, Post believes it would be
best to tie our PD efforts to the signing and
implementation of the SOAG. In Sri Lankan culture, one
month, three month and one year anniversaries are
appropriate to mark events of this magnitude. Post placed
an op-ed on USG assistance at the three-month mark, and
will consider doing another one for the six-month
commemoration. However, we do not envision a major public
affairs effort aimed at marking the six-month point, but
would focus our efforts, when we sign the SOAG, on
highlighting the projects to be undertaken through the
supplemental funding initiative.

USTDA Visit
--------------

12. (U) USTDA Reps are in town today and tomorrow and will
be meeting with a cross-section of tsunami reconstruction
players to find the best fit of USTDA assistance. We will
work closely with USTDA to identify good opportunities with
follow-on commercial potential.

Paris Club Debt Relief
--------------

13. (U) We have heard from the Finance Ministry that the
GSL intended to sign an MOU with the Paris Club on June 15.
We further understand agencies are working on a draft
bilateral agreement for consideration by the GSL. Please
let us know if additional information is required to help
in this effort.

LUNSTEAD