Identifier
Created
Classification
Origin
08COLOMBO721
2008-07-25 08:04:00
CONFIDENTIAL
Embassy Colombo
Cable title:  

SCENESETTER FOR A/S BOUCHER'S VISIT FOR THE 15TH

Tags:  PGOV PREL PTER PHUM MOPS PINR ECON CE MV 
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C O N F I D E N T I A L SECTION 01 OF 05 COLOMBO 000721 

SIPDIS

DEPARTMENT FOR SCA A/S BOUCHER

E.O. 12958: DECL: 07/21/2018
TAGS: PGOV PREL PTER PHUM MOPS PINR ECON CE MV
SUBJECT: SCENESETTER FOR A/S BOUCHER'S VISIT FOR THE 15TH
SAARC SUMMIT

REF: A. COLOMBO 653

B. IIR 6816007808

Classified By: Ambassador Robert O. Blake, Jr., for reasons 1.4(b,d).

C O N F I D E N T I A L SECTION 01 OF 05 COLOMBO 000721

SIPDIS

DEPARTMENT FOR SCA A/S BOUCHER

E.O. 12958: DECL: 07/21/2018
TAGS: PGOV PREL PTER PHUM MOPS PINR ECON CE MV
SUBJECT: SCENESETTER FOR A/S BOUCHER'S VISIT FOR THE 15TH
SAARC SUMMIT

REF: A. COLOMBO 653

B. IIR 6816007808

Classified By: Ambassador Robert O. Blake, Jr., for reasons 1.4(b,d).


1. (C) Summary and Introduction: Your visit for the 15th
SAARC Summit finds most SAARC member countries preoccupied
with domestic issues. After surviving a no-confidence vote,
the Indian government is looking ahead to national elections
next year, and frustrated that last minute objections from
Sri Lanka's political opposition prevented the signing of the
Sri Lanka-India Comprehensive Economic Partnership Agreement.
Tension in the Pakistani-Indian relationship remains
significant following the Kabul Indian Embassy bombing. The
Bangladesh delegation is led by a caretaker government, while
it is still unclear who will lead the Nepalese delegation.
Prospects for SAARC to overcome its history as an institution
of limited effectiveness therefore remain modest. For your
bilateral meetings in Colombo, you will find the Sri Lankan
Government cheered by recent military progress north of
Mannar that makes progress on a peace process unlikely before
at least the end of the year. The Maldivians face a budget
crisis, continued delays in ratifying the new constitution
and establishing the key independent institutions that will
supervise the country's first ever Presidential elections
this fall. End Summary and Introduction.

SAARC AGENDA
--------------


2. (U) Amid much opposition sniping over lavish GSL
expenditures and a security dragnet over much of central
Colombo that has those residents that can heading for the
hills or southern beaches, SAARC Foreign Ministers are
expected to sign on August 3 three, perhaps four agreements.
The most significant will establish a $300 million SAARC
Development Fund focused on projects within SAARC countries.
India has pledged an additional $100 million to this effort.

Embassy Kathmandu reports that according to an official from
Nepal's Ministry of Foreign Affairs, SAARC intends to make
observation guidelines more comprehensive and hopes to have a
mechanism for high-level interaction between member and
observer nations for the summit in 2009, including possible
participation in summit sessions. (Burma has applied for
observer status; a decision to accept its application may be
made at the Summit.) Heads of State are also expected to
discuss a three-year plan of action for addressing climate
change that Ministers of Environment formulated in Dhaka on
July 3. Other agenda items include the shortage of food and
oil as well as problems of terrorism, according to public
statements by Nepalese Foreign Secretary Gyan Chandra Acharya
and GSL officials.

SRI LANKA: GOVERNMENT BETS ALL ON MILITARY VICTORY
-------------- --------------


3. (C) In Sri Lanka, your visit comes on the heels of a
significant military victory by government forces at
Vidattalthivu on July 16, the most important LTTE Sea Tiger
base along the western coast held by the Tigers for 19 years
(ref B). On July 18, Secretary of Defense Gothabaya
Rajapaksa predicted to Ambassador that the government would
continue this offensive along the Western coast and be able
to reach Pooneryn by the end of the year. If accomplished,
this would represent an important shift in the military
balance toward the GSL. It would place the whole of the
western coast in government hands, limit smuggling by Indian
fishermen to the LTTE along the west coast, and open a direct
road to the Jaffna peninsula, which has effectively been cut
off from the mainland since the August 2006 closing of the
main north-south A9 highway. While we and most others still
do not believe a purely military solution will be possible,
recent advances have breathed new enthusiasm into the

COLOMBO 00000721 002 OF 005


military effort. Foreign Miniser Bogollagama rejected the
LTTE's July 21 unilaeral ceasefire declaration for the
Summit and declared in Parliament the following day that the
Government would not enter into a truce agreement with the
Tigers.


4. (C) While the government remains vulnerable on the issues
of inflation and corruption, the President's Sinhalese base
appears willing to bear almost any burden as long as the
perception prevails that the GSL is winning the war against
the LTTE. President Rajapaksa's divide-and-rule tactics,
luring members of other parties to defect to his ruling
coalition, have so far succeeded in weakening the Sinhalese
nationalist JVP and the main opposition party UNP. His
strategy appears to be to build political momentum through
military victories and then test his (and his party's)
popularity through a series of Provincial Council elections.
Following on the elections in the Eastern Province, two more
provincial elections will take place on August 23, and the
campaigns are well underway (ref A). If the government and
its allies continue to do well in these elections, and
sustain their military progress, the President will likely
call Parliamentary elections in early 2008 to secure a more
workable Parliamentary majority. We recommend we use your
meeting with the President to probe his thinking on the
future military and election timetable.

PEACE PROCESS MORIBUND
--------------


5. (C) As a consequence of the GSL's overall strategy, the
peace process has been in hibernation as the GSL tries to
weaken the LTTE militarily as much as possible. Since the
beginning of this year the authorities have refused on
security grounds a request by the Norwegian Ambassador to
travel to the Vanni for a meeting with the LTTE. However,
the security concern is likely a smokescreen for the fact
that the government simply does not want a Norway-LTTE
meeting to take place. (The GSL permits UN officials to
travel to the Vanni on a regular basis.) Basil Rajapaksa
hinted to the Norwegian Ambassador that the GSL might permit
him to travel to Kilinochchi to meet with the LTTE, but there
has been no concrete progress and the Ambassador is now on
leave until the end of August. President Rajapaksa's
principal condition for resuming talks is for the LTTE to lay
down its arms. The Ambassador has told the GSL this is
clearly a non-starter, which the LTTE has already rejected.


6. (C) Meanwhile, prominent Sri Lankans and interested
members of the international community are pursuing a number
of Track 1.5 and 2 initiatives to resolve Sri Lanka's ethnic
conflict with very limited results. The most promising
effort is the One Text Initiative (OTI) which brings together
senior political leaders to tackle difficult issues, such as
access to humanitarian goods and services, and language
policy. In the long term, OTI aims to build confidence and
trust among stakeholders necessary for future peace talks.
However, the real power brokers in the Rajapaksa
Administration have so far not been involved. Our
interlocutors on these initiatives consistently emphasize
that their efforts should remain out of the media spotlight
to keep Sinhalese nationalists from pressuring the government
to disengage. We will continue quietly to support these
efforts and encourage political leaders to remain involved.
In particular, we see attempts to bring in Sinhalese
nationalists in the South as well as the Tamil Diaspora
community as important in laying the groundwork for future
negotiations. We recommend you urge the President and other
GSL interlocutors that they use the next six months to begin
serious thinking on their strategy both to forge a credible
power-sharing proposal, building on the important progress
the All Parties Representative Committee has made, and engage
the LTTE. The Ambassador has pointed out to senior officials

COLOMBO 00000721 003 OF 005


that even in the most optimistic scenario whereby the GSL
occupies all of the Vanni, a significant LTTE residual force
would go underground and continue terrorist attacks so the
LTTE leadership must be engaged at some stage to persuade
them to lay down their arms.

PROGRESS BUT NO FURTHER CHILD SOLDIER RELEASES
-------------- -


7. (C) We are pushing both GSL officials as well as new
Eastern Province Chief Minister "Pillaiyan" to cooperate with
UNICEF to secure the release of the 66 remaining children in
UNICEF's case files, as well as to establish effective
mechanisms to ensure further recruitment does not take place.
Since DAS Feigenbaum's visit, UNICEF and GSL have signed an
agreement on information sharing that lays the groundwork for
joint UNICEF-GSL verification teams to identify and secure
the release of the children in UNICEF's database. Both sides
are also exploring options for a public information campaign
to communicate the government's stated zero tolerance policy
on child soldiers. While no further releases have occurred,
the increased cooperation is welcome news. Implementation of
a robust joint monitoring mechanism, coupled with a
significant decline in UNICEF's numbers and a public
education campaign, would go a long way to convince us that
the GSL is taking "effective measures" to demobilize child
soldiers and prevent their recruitment in the future as
required by U.S. law.

HUMAN RIGHTS REMAINS A SIGNIFICANT CONCERN
--------------


8. (C) We have seen relatively little movement on our other
bottom-line requests to the GSL on human rights. We have
repeatedly and through various channels conveyed to senior
officials that we need, at a minimum, to see evidence of
resolve in pursuing justice in the headline "Trinco 5" and
ACF cases under consideration by the President's Commission
of Inquiry. The way the GSL handled the end of the mission
of the Eminent Persons and its aftermath - particularly
quashing the attempts of the Commission of Inquiry to obtain
further video testimony from victims and witnesses - leave
doubt about the government's intentions to let the truth come
out. We have also told them that improvement on
disappearances will help us return to a more normal security
relationship and get the Congressional restrictions on
military assistance and training lifted. Unfortunately, the
ICRC and other sources have documented that disappearances
are again on the rise. Finally, we have urged that if the
GSL is not willing to accept a full-fledged mission from the
Office of the High Commissioner for Human Rights, it should
appoint internationally credible persons to lead the national
Human Rights Commission to assure its independence and
effectiveness. This also has not happened. Likewise,
threats to the media continue and our efforts to urge the GSL
to release Tissainayagam, the media case most international
human rights groups are focused on, have proved fruitless.

ECONOMY RESILIENT DESPITE THE CONFLICT
--------------


9. (SBU) In 2007, Sri Lanka continued its healthy economic
growth, reporting a 6.8% increase in real GDP. (Note:
Actual growth may have been closer to 6%). Total GDP was $32
billion, yielding a per capita income of about $1,600. The
GSL is proud of this performance, even though it falls short
of the "Mahinda Chintana" goal of 8% annual growth as the
means to reduce poverty rapidly. The missing 2% demonstrates
the consequence of the GSL's pursuit of a military solution
to the conflict, as the World Bank and others estimate that
the conflict has cost Sri Lanka about 2% in forgone GDP
growth annually. Military spending contributes significantly
to the government deficit (7.7% of GDP in 2007) that is

COLOMBO 00000721 004 OF 005


driving high inflation -- over 28% in June. The government
downplays the impact of deficit spending by overstating the
role of high prices of imported commodities -- mainly oil and
food -- as drivers of inflation. The rising cost of living
is a political concern to the government, but has not yet
produced any serious protests. Microsoft, Citibank,
Coca-Cola, AIG, and power producer AES are among the few U.S.
companies operating in Sri Lanka; many other brands are
represented by local agents. The conflict, tender
transparency issues, and investment obstacles continue to
deter greater U.S. investment.

MALDIVES AT A TURNING POINT
--------------


10. (C) Maldives' first multiparty presidential elections are
due no later than October, but tensions are rising as
preparations lag. The draft of the new constitution is
complete, but so far, President Gayoom has not agreed to sign
it. The Minister of Information and Legal Reform stated (on
his personal blog site) that the President would ratify the
Constitution on July 30, but there is no official
confirmation of this. Gayoom has become increasingly
isolated through the resignations of key ministers and is
likely getting questionable advice from family members and
cronies who are reluctant to give up or share power.
Moreover, numerous pieces of reform legislation needed to
carry out free and fair elections have languished in the
Majlis (Parliament).


11. (C) Opposition parties are again resorting to street
agitation to try to increase the pressure on Gayoom to yield
on the constitution. Private polling shows that Gayoom
probably does not command majority support, but the
opposition has not yet been able to coalesce around a common
candidate. A re-election of Gayoom, one of the
longest-serving rulers in the world, would have profound
negative consequences for Maldives' stability if the general
public perceives it as rigged and could give new impetus to
Islamic extremists seeking a foothold in Maldives. Gayoom
has a healthy ego; we may be able to appeal to his vanity by
urging him to secure his legacy as the man who ushered in the
first true democracy in the Muslim world and brought his
country into the twenty-first century. If, by the time of
your meeting, he has not ratified the Constitution you should
urge him and other senior officials to do so, pass the
implementing legislation for the independent justiciary and
Election and other Commissions that will be needed to oversee
the elections.


12. (C) The Ambassador has twice raised with FM Shahid USG
concerns about increasing reports (including by ICRC and
other credible observers) that the conditions in Maldivian
prisons, which had been improving, have suffered a setback
recently, with more numerous reports of torture and abuse.
The U.S. provides significant training to the Maldivian
security forces and conducts a number of joint exercises with
them. Our counterterrorism cooperation is also important to
us. It will be important to emphasize in confidential
meetings with Maldivian security officials that such
practices are relics of the past and could jeopardize our
cooperation.

MACROECONOMIC RISKS AS DEFICIT SOARS
--------------


13. (SBU) Meanwhile, despite strong GDP growth of 7-8%
annually, the government recently stated that the economy is
in recession. In early July, the Auditor General revealed a
staggering 2008 deficit of $342 million when several large
infrastructure projects (and their related fees) failed to
materialize. This caused the resignations of three important
Ministers -- Finance, Trade and Tourism -- following heavy

COLOMBO 00000721 005 OF 005


criticism by the Majlis. (Many speculate that Finance
Minister Qasim Ibrahim's resignation is setting the stage for
his own presidential bid.) The IMF and World Bank have for
several years urged government restraint and fiscal
responsibility, noting in particular concerns about
exceptionally high overall expenditures of near 70% of GDP
(2008 budget). Inflation, which stood at 7.4% in 2007, is
expected to grow as imported commodities, primarily oil and
food, continue to rise in price.


14. (U) All of us in Mission Colombo appreciate your visit
and your continued engagement on the challenging issues we
face. We look forward to welcoming you in Colombo and Male.
BLAKE