SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE (MAY

UNCLAS SECTION 01 OF 03 COLOMBO 000868

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

SENSITIVE

E.O. 12958: N/A
TAGS: EAID ECON PGOV CE MV
SUBJECT: SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE (MAY
11, 2005)

Ref: Colombo 833

This cable is for participants in the May 11 Tsunami IAWG
Meeting.

Reconstruction Progress
--------------

1. (U) In Sri Lanka, reconstruction progress continues at a
measured pace. The Government seems to be feeling less
pressure on the transitional housing front and has announced
that they have surpassed 22,000 transitional shelters and
will achieve their goal of 30,000 shelters in place by June

30. NGOs and private sector entities continue to experience
constraints in land allocation in the East and poor
logistical coordination in other areas. The 100 meter
setback continues to be an issue and post intends to proceed
with the digital video conference as outlined in reftel.


May 12 Private Sector Conference
--------------

2. (U) Post recommends representatives from IAWG agencies
use the May 12 private sector conference as an opportunity
to engage with senior Government and private sector
representatives from Sri Lanka and Maldives. Both countries
are sending top-flight representatives who are prepared to
engage on potential projects and partnerships. Each
country's participants were listed in reftel.

May 16-17 Kandy Development Forum
--------------

3. (SBU) The May 16 and 17 development forum remains an
uncertain exercise, with no poverty reduction strategy draft
yet available and increasingly pessimistic assessments about
whether a joint mechanism will be in place (see below).
Ambassador, USAID and ECON will represent US. Ambassador is
planning to meet with World Bank ResRep before Friday to
discuss potential outcomes.


4. (SBU) Post is looking carefully at a potential rollout of
the supplemental, as we want to avoid either 1) the story
being buried by the development forum coverage, or 2) the
story being linked with the development forum, making it
appear as though the forum was our preferred mechanism for
pledging our assistance.

Joint Mechanism
--------------

5. (SBU) Finalization of a joint mechanism for the delivery
assistance in the north and east continues to elude the
Government and the rebels. The President met with some
donors on May 10 (the Ambassador is scheduled to meet the
President today) and told them she needs a few more weeks to
bring her coalition partner, the Marxist-Nationalist Janatha
Vimukthi Peramuna (JVP) on board. The JVP had announced
that it would reveal its alternative to the joint mechanism
during a rally on May 10. However reports from the rally
indicate that no alternatives were presented, only anti-LTTE
and anti-joint mechanism slogans. It is possible that the
JVP alternative would be to substitute Tamil National
Alliance representatives for the LTTE, something they have
proposed in meetings with donor representatives. The JVP
views the joint mechanism as a potential tool for the LTTE
to gain additional sovereignty and concessions in the
ongoing peace process.

USAID Pre-Bid Conference
--------------

6. (U) USAID Colombo hosted a "pre-bid" conference on May 10
for potential contractors to hear more about USG signature
infrastructure projects and learn about USAID contracting
procedures. The conference was well attended and should
allow for a more rapid start to USAID tsunami infrastructure
projects once the supplemental is passed.

Value Added Tax Conundrum
--------------

7. (SBU) We continue to be stymied in our effort to find a
simple solution to VAT exemption for USG contractors
performing US assistance projects in Sri Lanka. The Finance
Ministry has developed a rather convoluted system that would
require all purchases to be registered roughly a month in
advance (while the Government has not laid out this
timeframe, the process they envision would be 2-3 weeks at a
minimum). We hope that part of the problem is simply a lack
of institutional memory in the Finance Ministry, as many of
the Fiscal Policy officers are fairly new in the last couple
months. Nonetheless, if we are unable to secure a quick
resolution to this issue, it could impede progress on USG
assistance projects in Sri Lanka.

All-Hazards Warning
--------------

8. (U) Post notes with interest the various plans for all-
hazards warning systems, the USTDA/NOAA conference in
Hawaii, the IOC meetings in Paris and Mauritius and the
supplemental funding. We would appreciate some more
perspective, however, on how the global and regional systems
are to be linked with national systems. In particular, we
would like to have a sense as to whether funding will be
available for country-specific all hazards warning systems.

Tourism "Bounce Back" Initiative
--------------

9. (SBU) The USAID-sponsored Competitiveness Program will
launch a joint project on May 11 with representatives from
its tourism cluster, to collaborate with the Sri Lanka
Tourism Board and Sri Lanka airlines to promote vacation
travel to Sri Lanka. The strategy is to reassure and
attract European and Indian visitors. The campaign will
combine television advertisements and press events with
trade shows and will also include targeted invitations to
noted travel professionals and personalities. While overall
arrivals of foreigner visitors remain fairly high, much of
this is the result of foreign disaster assistance workers
and volunteers. Numbers of vacationers remains low, and
vacation-dependent businesses continue to struggle.

Post-Tsunami Analysis by Leading Sri Lankan Think Tank
-------------- --------------

10. (U) One of Sri Lanka's leading policy think tanks, the
Institute for Policy Studies, released a study of the post-
tsunami rebuilding situation, which made the following

SIPDIS
points (many of which are longstanding issues):

--The disaster had uneven impacts. 13 of the country's 25
districts were affected, but the North and East were
particularly hard hit accounting for over two thirds of the
deaths and almost 60 per cent of the displacement (as of
January, 2005).

--There is a need to place the tsunami within the broader
debate over policy choices facing Sri Lanka. For example,
public sector problems and shortcomings in the context of
the tsunami highlight many well known and long running
challenges to the public service, including lack of a
service culture or consultation, weak procurement and hiring
and firing policies, politicization, limited Ministerial
coordination, unclear relationship between the center and
local levels and weak oversight of public funds.

--The primary reconstruction priority is not raising
additional funds, but the process of using existing funds to
rapidly and equitably restores tsunami-affected areas.

--The reconstruction process must build on the existing
capacities and strengths of the poor, affected people e.g.,
building roads and houses with local skills, constructing
fishing craft with local boat builders, and rehabilitation
of the destitute through community-level centers.

--The reconstruction must avoid the impression of a two-tier
situation developing between tsunami survivors and other
poor groups such as those displaced by the conflict and
other low-income households.

--Regarding the most pressing issue of permanent housing,
there is an urgent need to start a dialogue with
beneficiaries about house design, land selection and
priorities to allocate land to beneficiaries

INGO Meeting
--------------

11. (U) Foreign Minister Kadirgamar and TAFREN Chairman Mano
Tittawella (who is leading Sri Lanka's delegation to the May
12 private sector forum) attended a Red Cross sponsored
meeting with INGO representatives in Geneva on May 7.
During this meeting, Kadirgamar reportedly discussed the
following themes:
--Need for INGOs to work as development partners of the
Government to ensure that assistance reaches those in need.
--Need for NGOs to register with the Center for the Non-
Governmental Sector (CNGS) in the Finance Ministry for post
tsunami reconstruction work, which would enable the

SIPDIS
Government to easily integrate their activities and programs
in the overall reconstruction plan.
--Need to build local capacities particularly of the
district level administrative units, and local NGOs.
--INGOs to develop their own 'guiding principles' for their
operations parallel to those developed by TAFREN for the
Government of Sri Lanka.
--Need for clearer understanding among the partners involved
i.e. Donor countries, Multilateral funding agencies, INGOs,
NGOs and the Private Sector and the Government, on the
reconstruction activities undertaken in order to fill the
gaps on funds available and project needs as well as to
avoid duplication.
--In view of the availability of substantial funds, need to
consider reaching out to the wider community along with the
tsunami victims. This will also help to avoid creating new

SIPDIS
inequities.
--Need to maintain quality standards in all reconstruction
work; rebuild better and environmentally sustainable.
--Need for transparent reporting mechanisms and to keep the
public informed of the outcome of contributions made.
LUNSTEAD