Identifier
Created
Classification
Origin
05COLOMBO678
2005-04-06 11:04:00
CONFIDENTIAL//NOFORN
Embassy Colombo
Cable title:  

VISIT OF MCC CEO APPLEGARTH TO SRI LANKA INCREASES

Tags:  KMCA EAID ECON PREL CE 
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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 03 COLOMBO 000678 

SIPDIS

SENSITIVE

DEPARTMENT PLEASE PASS TO MCC D.NASSIRY; DEPARTMENT FOR
SA/INS; COMMERCE FOR A. BENAISSA; TREASURY FOR C.CARNES

E.O. 12958: DECL: 04/06/2015
TAGS: KMCA EAID ECON PREL CE
SUBJECT: VISIT OF MCC CEO APPLEGARTH TO SRI LANKA INCREASES
GSL UNDERSTANDING OF COMPACT PROCESS

Classified By: Classified by DCM James F. Entwistle, reasons 1.4 b and
d

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 000678

SIPDIS

SENSITIVE

DEPARTMENT PLEASE PASS TO MCC D.NASSIRY; DEPARTMENT FOR
SA/INS; COMMERCE FOR A. BENAISSA; TREASURY FOR C.CARNES

E.O. 12958: DECL: 04/06/2015
TAGS: KMCA EAID ECON PREL CE
SUBJECT: VISIT OF MCC CEO APPLEGARTH TO SRI LANKA INCREASES
GSL UNDERSTANDING OF COMPACT PROCESS

Classified By: Classified by DCM James F. Entwistle, reasons 1.4 b and
d


1. (SBU) Summary: During a March 29-31 visit to Sri Lanka,
Millennium
Challenge Corporation (MCC) CEO Paul Applegarth discussed Sri
Lanka's
potential compact proposal with President Kumaratunga, Prime
Minister
Rajapakse, Finance Minister Amunagama, Central Bank Governor
Mendis,
Opposition Leader Wickremesinghe, Foreign Secretray
Palihakara, Finance
Secretary Jayasundera, Presidental Advisor and Strategic

SIPDIS
Enterprise Management
Agency Chairman Tittawella, as well as representatives from
the Government of
Sri Lanka's (GSL) Millennium Challenge Account (MCA) steering
committee and
members of the business community, NGOs and civil society.
MCC left the GSL
with "lessons learned" from the Madagascar compact
negotiation process and
helped clarify the requirement that compact proposals
directly address poverty
reduction through economic growth. Applegarth's visit was
productive and well
received by the GSL, which now needs to act on the momentum
created by the
visit. End Summary.


2. (U) MCC CEO Paul Applegarth visited Sri Lanka March 29-31
to discuss Sri
Lanka's concept paper for MCA funding. During a series of
meetings with high-
ranking GSL officials and the leader of the opposition, as
well as members of the
business community, NGOs and civil society, Applegarth
highlighted a number of
themes designed to help Sri Lanka better organize its
consultative process and
enhance its eventual compact proposal.


3. (U) In each of his meetings, which included President
Kumaratunga, Prime
Minister Rajapakse, Finance Minister Amunagama and the MCA
working group,
Applegarth highlighted the need for Sri Lanka to think
broadly about the potential
for MCA funding, spell out clearly what the proposal was
trying to accomplish,
focus on proposals that would lead directly to poverty
reduction through economic

growth and embrace the fact that MCC has no preconceived
notions about what
projects or proposals would best suit Sri Lanka. Applegarth
made clear that the
compact proposal is entirely in the hands of the GSL and its
partners in the
consultative process.


4. (C) President Kumaratunga expressed satisfaction with the
way the MCA
process has been running in Sri Lanka and urged Applegarth to
visit rural areas to
see first hand the challenges to development. The President,
who clearly had been
briefed on MCC, but not the GSL's initial proposals,
discussed several areas where
she saw potential needs, including the education and health
sectors. With some
gentle prodding by the Finance Secretary, she then turned to
several issues that are
included in Sri Lanka's concept paper, including the
development of small and
medium enterprises and the redevelopment of irrigation
reservoirs in rural areas.


5. (SBU) Prime Minister Rajapakse was particularly
thoughtful on the MCA
process, and was especially articulate in describing his own
experience consulting
with people in his constituency. He cited one example in
which he visited with
local leaders, presuming that electrical power was their
primary need, only to learn
that it was actually far down the list. A new road to the
local fisheries harbor was
what the community perceived as its most pressing need.
Ambassador and
Applegarth urged Rajapakse to share his views and experience
widely in order to
help push the Government's consultative process along.


6. (C) Finance Minister Amunagama discussed the need for
small and medium
enterprise (SME) development and described the GSL concept
paper's consistency
with the Government's overall economic development plan and
budget priorities
for 2005. Amunagama praised the GSL's MCA steering
committee's efforts, and
said the Ministry had explicitly chosen for their MCC project
staff, "young,
dynamic people" who were not afraid to challenge conventional
wisdom and think
outside the box (Note: while members of the MCA-related staff
are young and
well-educated, we hope the other characteristics will be made
evident soon. End
note).


7. (C) Former Prime Minister Ranil Wickremesinghe, leader of
the opposition,
welcomed Applegarth's visit and noted that it had been his
Government's
initiatives that made Sri Lanka MCA eligible. He belittled
the current
Government's ideas for MCA programs, noting especially that
the proposed rural
irrigation projects were aimed at increasing rice harvests,
without changing
policies on land use and crop diversification. According to
Wickremesinghe,
increased rice yields will simply dampen rice prices and make
farmers worse off in
the long run. When asked specifically if he thought the GSL
would be able to
conclude a suitable compact negotiation with MCC,
Wickremesinghe chose to
abandon any pretext of a willingness to cooperate with the
Government and simply
answered "no." (Note: thus far the opposition has been left
out of the MCA
consultative process in Sri Lanka. While Asia Foundation and
Amcham will likely
push for wider inclusion, it is not clear if they will be
successful in garnering
support for opposition participation. End note).
Wickremesinghe gave a detailed
assessment of why the political composition of the current
coalition government
makes progress on the economic front unlikely (owing to
Marxist-Nationalist
coalition partner Janatha Vimukthi Peramuna (JVP) sniping
about economic
reform efforts). Note: Wickremesinghe seemed in a mood to
show his toughness.
In addition to his scathing criticisms of the MCA proposal,
he discussed several
local political issues, including moves by the GSL to
restructure the Ceylon
Electricity Board and the Ceylon Petroleum Corporation, in
the face of opposition
by unions. Wickremesinghe's solution to these challenges is
to allow the entities
to collapse, then pick up the pieces when people have no
choice but to follow.
End note.


8. (SBU) During a dinner with senior Presidential economic
advisor Tittawella,
Central Bank Governor Mendis and Foreign Secretary
Palihakara, Tittawella
commented that, so far, he thought the GSL had,
understandably, gotten distracted
from the MCA process and had not fully embraced the unique
nature of the
opportunity. Now that the immediate needs of tsunami relief
were behind it, the
GSL should focus on MCA and its opportunities. He promised
to brief the
President and to work with the Finance Ministry to help push
the consultative and
compact proposal process forward. Governor Mendis led a
fairly wide ranging
discussion of needs for diversification and better policies
in the agricultural sector,
pulling from his experience as head of one of Sri Lanka's
largest conglomerate
companies (where he served until retirement last year),which
has a significant
agricultural component.


9. (U) During a visit to Hambantota, an extremely poor
province in southern Sri
Lanka, Applegarth saw first hand the effects of the December
26 tsunami, and
relief and reconstruction efforts that are underway. He
visited a medium sized
garment factory and heard about challenges to small and
medium enterprises
during a meeting with representatives from the Hambantota
Chamber of
Commerce. During a visit to a rehabilitated irrigation
reservoir (Note: which did
not look very "rehabilitated." End note),Applegarth had the
opportunity to discuss
challenges in the paddy sector with farmers and
representatives from various GSL
and local government agricultural departments. In one
exchange, which provided
useful fodder for discussions in Colombo, farmers indicated
they would be willing
to consider crop diversification, should they get information
and training on how
to grow and market new products. This statement was in
direct contrast to
previous assurances by local and central government
representatives that paddy
cultivation was a "cultural" issue and that farmers would not
consider growing
other crops. Following the visit to Hambantota, Applegarth
visited Bodyline, a
state-of-the-art garment manufacturer and an example of Sri
Lanka's top-of-the-
line manufacturing capabilities.


10. (SBU) Comment: CEO Applegarth's visit was positive and
seemed to have
provided some needed clarity for the GSL on issues ranging
from the consultative
process to the kinds of analysis MCC will seek when
evaluating proposals. Asia
Foundation and Amcham have already scheduled follow-up
meetings and begun
working with the GSL to advise them in their efforts to draft
and implement a new
consultative plan for the process of preparing a compact
proposal. End Comment.
LUNSTEAD