SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE (JULY

UNCLAS SECTION 01 OF 03 COLOMBO 001180

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 MV
SUBJECT: SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE (JULY
7, 2005)


1. (U) This cable provides information for the July 7, 2005
post-Tsunami IAWG meeting.

Maldives Update
--------------

2. (SBU) Fathmath Nuzuha, Assistant Undersecretary of
External Resources Management at the Ministry of Finance and
Treasury has informed the embassy that the GORM wants to use
30% of US assistance for improving sanitation and the water
supply, 30% for building harbors, 15% for strengthening the
public accounting system of the Tsunami Relief and
Rehabilitation fund, and 25% for rebuilding the power
sector. However, we are still waiting for the Government of
Maldives (GORM) Planning Department to provide more detailed
feedback for potential projects. The embassy has requested
that the Maldives now provide specific details on the type
of projects it plans on implementing instead of general
concepts as previously proposed to the GORM.


3. (SBU) This change is due to concerns that the General
Accounting Office will want more details explaining how the
embassy is monitoring US government funds. Econoff has
requested that the GORM provides a list of programs, purpose
of programs, a justification for the need of the programs,
program budgets and benchmarks for what GORM hopes to
accomplish with USG assistance. Nuzuha notified Econoff
today that they could not provide detailed information on
proposed projects until Monday. Econoff will forward all
details to Washington as soon as possible.


4. (U) Embassy proposes that some of the US assistance be
reserved to pay for administration and travel costs for
monitoring the implementation of projects. The embassy is
assessing what amount will be required.

Sri Lanka: Follow-up on PAFFREL "malnutrition" assessment
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5. (SBU) The People's Action for Free and Fair Elections
(PAFFREL),an organization founded to monitor elections,
cited the malnourishment of children in tsunami relief camps
as a serious problem in its May 2005 report. However, in a
June 30 meeting with Poloff, PAFFREL Representatives Rohan
Hettiarachchi and Thusitha Aluthpataberdig, stated that
children in the tsunami relief camps are receiving adequate
nutrition. Aluthpataberdig says that PAFFREL based its
report on representatives' personal observations without
reference to any scientific guidelines to measure the
nutritional level of a child. The United Nations Children's
Fund (UNICEF) Health Unit Doctor, Aberra Bekele, told Poloff
on July 1 that malnourishment was already a problem in many
tsunami-affected areas prior to the natural disaster, and

SIPDIS
that UNICEF has not received any reports of severe
malnutrition in tsunami relief camps. UNICEF will release
another report in early August concerning the diet of
tsunami-affected youth, in which Dr. Bekele said she expects

SIPDIS
to find improvements in children's access to essential
nutrients.

Housing Update
--------------

6. (SBU) According to TAFREN (Task Force for Rebuilding the
Nation),as of July 03, 2005, 41,009 transitional
accommodation units have been completed. In addition, by
July 15, TAFOR expects all families living in emergency
shelters to move to transitional houses. The Government of
Sri Lanka (GSL) confirms that the transitional homes are
only for temporary living and therefore may not conform to
the best practices in building construction. TAFOR and TAP
(Transitional Accommodation Project) have tried to ensure
that construction of units meets a given criteria, e.g., a
minimum area of 400 square feet, and one toilet and shower
per 20 persons. However, some of the transitional units are
smaller than the agreed area, built with inferior material
and not suited to climatic conditions. NGOs are upgrading
some of these shelters to higher standards. In a June 23
TAFREN and limited Donor meeting, Mano Tittawella, Chairman
of TAFREN, told participants that he has heard the most
complaints about inadequate transitional shelters from
people with housing provided by World Vision, an American
NGO. These houses were not/not built with USG funds and
USAID Mission Director Carol Becker confirms that the houses
she inspected were made entirely of metal sheeting, making
the houses hot and uninhabitable.

Tsunami Consultation

SIPDIS
--------------

7. (SBU) In a July 05, 2005 meeting, Ambassador Lionel
Fernando, Chairman of the Disaster Management Relief unit of
the Human Rights Commission informed Poloff that his
organization just started conducting a comprehensive survey
of Tsunami victims from 1,142 villages in 5 provinces and 13
districts. The goal of this research is to determine the
people's perception of reconstruction progress, to study the
ethnic dimension of tsunami reconstruction, and to measure
the equity of the distribution of funds. Fernando said that
this is the first time since the tsunami that the government
has formally consulted victims. Ambassador Fernando
promised Poloff a copy of the results when the Human Rights
Commission completes its research in mid-August.

100m/200m Buffer Zone Follow-up
--------------

8. (SBU) The GSL currently is working to resolve the
continued controversy over building restrictions that
prohibit people from living and rebuilding within a pre-
determined 100 to 200 meters of the coast. Pressure to
increase flexibility or remove the buffer zone has increased
over the last couple weeks and the government has appointed
a 13-person committee to investigate whether this
requirement is necessary. The opposition United National
Party (UNP) has pledged to immediately remove the buffer
zone within its first day in office if elected. The embassy
is still seeking experts in the US to help analyze the
buffer zone issue. However, the time to offer any useful
input on the process is running out. Immediate action is
required if there is serious interest in shaping GSL's
buffer zone policy.

VAT Update
--------------

9. (SBU) A recent meeting between Econoff, USAID staff and
GSL Ministry of Finance officials led to a more streamlined
process for getting VAT exemptions for contractors and
grantees. USAID is in the process of assembling the details
requested for each contractor/sub-contractor and
grantee/subgrantee for submission to the Ministry of Finance
so tax-exempt letters can be issued. USG will only have to
document individual purchases greater than 100,000 Sri
Lankan Rupees (approximately $1,000) rather than every item
purchased.

The Joint Mechanism and the Regional Fund
-------------- -

10. (SBU) The recent signing of a Post-Tsunami Operational
Management Structure (P-TOMS) also known as the Joint
Mechanism (JM) has increased political tension within the
country as well as created new institutions for the
rebuilding process. Besides creating a new High-Level
Committee and a Regional Reconstruction Committee (Regional
Committee) staffed by the LTTE, the GSL and representatives
from the Muslim community, the P-TOMS calls for the creation
of the Post-Tsunami Coastal Fund (the Regional Fund) for the
six districts funded by donors. The "Fund's" purpose is to
facilitate and accelerate relief, rehabilitation,
reconstruction in the tsunami-affected areas of the North
and East. It will not fund large infrastructure projects.
Although the Regional Committee is responsible for review
and recommendations of projects and implementing mechanisms,
the World Bank as custodian of the Fund will ensure that the
projects fall within the parameters of the "Fund" before
approving the release of monies. On behalf of the donors
who invest in the Fund, the World Bank will hire a
Management Agent to monitor projects and ensure adherence to
procurement and financial standards and practices.


11. (SBU) USAID Mission Director Carol Becker, Poloff, and
other major donors and multilateral reps attended a June 29
World Bank meeting to discuss how the Sri Lanka Tsunami
Reconstruction Fund would operate. (n.b., the US will not
contribute to the Fund) The discussion revealed that many
practical details of the Fund remain unresolved. Among such
details is what mechanism the World Bank will use to
transfer funds to implementing agencies and whether the High
Level Committee has the authority to veto proposals endorsed
by the Regional Committee. World Bank Country Director
Peter Harrold told the group that he would be having back-to-
back meetings with the Treasury and the LTTE in Kilinochcci
in coming days in an effort to resolve these issues.
Harrold also reported that that the Regional Committee,
which will be chaired by the LTTE, would have to be informed
of all reconstruction activities occurring in the north and
east, regardless of the source of funding. Also, results of
an impromptu poll conducted among participants at the
meeting revealed that most donors supported the EU as the
bilateral observer. [Note: In separate discussions, it was
agreed that Japan, whose representative did not attend the
meeting, will likely share the bilateral observer chair with
the EU. End note.] USAID Mission Director Carol Becker -
reiterated U.S. inability to contribute to the fund due to
the LTTE's participation.


12. (SBU) Harrold described the proposed Multi-Donor Trust
fund as the same type of trust fund as had been previously
set up by the World Bank and as previously envisioned under
the unimplemented North-East Reconstruction Fund (NERF).
The Trust Fund will feed the Regional Fund described in P-
TOMS, but the World Bank must still work out the process by
which money gets from the World Bank account in Washington
to the GSL Treasury to implementing agencies in the field.

--Harrold suggested one possible scenario: Money will go to
an account either in name of the GSL Treasury or the Relief,
Reconstruction and Rehabilitation Ministry (3R Ministry)
into the regional fund. Once the Regional Committee
receives and approves project proposals, the World Bank will
verify that the proposals appear to be effective uses of the
money for the agreed upon purposes. The World Bank will
still have to satisfy the donors that the funds are being
used for the intended purposes. If so verified, there will
be an agreement between the World Bank and the implementing
agency, and funds will go to the implementing agency. How
exactly funds get to the implementing agency, as noted
above, must still be worked out. Harrold underscored LTTE
insistence that, whatever the routing or format used, the
World Bank must "sign the checks."


13. (SBU) Comment: There are still many unresolved issues
surrounding the implementation of the P-TOMS such as Muslim
representation, locations of committee meetings and the role
of the international observers. The Regional and High Level
committees will likely try to shape the rebuilding effort,
which raises concerns since the USG will have a very limited
ability to steer or influence these new institutions due to
our inability to work with the LTTE. However, it is
unlikely that these committees can influence the large-scale
infrastructure projects since most donors already have MOU's
with the GSL. The most likely scenario is that they will
influence where the small-scale projects go and to whom.

LUNSTEAD