SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE (MAY

UNCLAS COLOMBO 000914 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 18, 2005) REF A) Colombo 890 B) State 91524 ¶1. This cable provides updated information from Sri Lanka for the May 18 post-Tsunami IAWG meeting. Value Added Tax -------------- ¶2. (U) The Value Added Tax issue may be resolved. Ambassador received a letter from Finance Secretary P.B. Jayasundera over the weekend that provides a streamlined solution for USAID and other USG contractors. Econchief and Acting USAID Director will meet with Treasury officials next week to try to finalize procedures and clarify a few points, but we are cautiously optimistic. Kandy Development Forum Tsunami Highlights -------------- ¶3. (SBU) We will report on the development forum septel, but thought the following points would be useful for IAWG consideration: --Discussion of the 100m/200m coastal exclusion zone highlighted both confusion within the government and possible areas of flexibility. TAFREN Chief Mano Tittawella indicated that flexibility could be shown in areas where insufficient land was available, but Science and Technology Minister Tissa Vitharana noted that the exclusion zone was a temporary measure, until a more comprehensive coastal survey can be completed. Ambassador asked how something could be considered temporary once 50,000 families had been moved into permanent shelter someplace else. No answer was given. On the margins of the meeting, the Ambassador and Econchief discussed the June 19 DVC with various participants and believe there is keen interest in having discussions with the USG on this issue. --There was universal support among the donor community for the President's efforts to conclude a joint mechanism for providing relief and rehabilitation services in the north and east. We will report on the President's opening speech septel, but she gave a determined, and somewhat emotional, commitment to move forward with the mechanism in the near future (points were similar to those made during her May 13 meeting with the Ambassador and DCM, reported Ref A). A member of the all Buddhist monk party, the Jathaka Hela Uramaya (JHU),interrupted proceedings for a brief moment following the President's speech, calling on the government to "destroy the LTTE airfield" and criticizing the Government's willingness to deal with terrorists. During donor representative interventions, all spoke about the need for conclusion of a joint mechanism, both in practical terms for facilitating the delivery of assistance, and for its value as a concrete step that could help revive peace negotiations. --We had an initial discussion with the Central Bank on debt relief during the forum, and they remain interested, but we will need to review with them the points in ref b. LUNSTEAD