SRI LANKA'S AMBITIOUS PLAN FOR NORTHERN

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 001126 SIPDIS DEPARTMENT PASS TO AGENCY FOR INTERNATIONAL DEVELOPMENT E.O. 12958: DECL: 12/09/2019 TAGS: CE ECON PGOV SUBJECT: SRI LANKA'S AMBITIOUS PLAN FOR NORTHERN RECONSTRUCTION COLOMBO 00001126 001.4 OF 003 Classified By: Acting Deputy Chief of Mission Michael Perkins for Reaso ns 1.4(b,d) ¶1. (C) Summary. An official of Sri Lanka,s Ministry of Nation Building provided Econoff with the Government of Sri Lanka,s (GSL) plans to rebuild the Northern region of Sri Lanka. The document outlines how the economy and infrastructure were destroyed by the war, the GSL,s 180 day plan to return people to their homes, and an action plan from 2010 to 2012to develop a viable economy. The GSL also has plans to lend money and encourage private banks to open branches in the North. The projected cost for Northern Reconstruction is $2.6 billion USD, and the government expects a large portion of these funds to be supplied by donors. The GSL plan appears to be a serious attempt to rebuild the North, and it will be useful to determine if the GSL is meeting its own targets. End Summary. Econoff Receives GSL Northern Reconstruction Document ¶2. (C) Econoff met with B.H. Passaperuma, Director General of the Northern Region Development Division of the Ministry of Nation Building and Estate Infrastructure Development to discuss Sri Lanka,s plans to rebuild the North following the end of the war. Passaperuma described himself as a friend of the United States, where he had been a student, and he gave Econoff a computer disc of the GSL plans to rebuild the North following the conflict with the LTTE. According to Passaperuma, there are only four copies of the GSL plans. Passaperaruma is a mid level official, and is seems doubtful that he would have one of four copies in existence. Passaperuma said that the plan is constantly updated. The document appears to be genuine, although sections on the internally displaced persons and demining appear dated. The plan portrays the GSL as serious in its efforts to rebuild Northern Sri Lanka. ¶3. (C) The GSL Reconstruction Plan is divided into eight chapters: chapters one through three on the historical, demographic and administrative structure of the Northern Province; chapter four on the Presidential Task Force (chaired by Senior Presidential Advisor Basil Rajapaksa); chapter five on demining operations; chapter six on priorities of the resettlement program; chapter seven on the 180 day accelerated program and chapter eight on the three year investment program from 2010 to 2012. This report will focus on the economic plans. The Northern Economy Has Been Reduced to Subsistence Farming ¶4. (C) The GSL plan paints a bleak picture of the Northern Economy. The North contains 1,174,000 people, or 5.8% of Sri Lanka,s total population, and the population is 97% Tamil, 2% Muslim, and 1% Sinhalese. The Northern Province,s share of the economy has declined to 2.9% of total GDP and employment creation has stagnated. In 1981, before the conflict began, there were 269,400 jobs, and this figure only grew to 281,000 by 2004, an increase of 12,000 over 23 years, or 522 new jobs per annum. The employed workforce in 1981 was 90% male, which has declined slightly to 80% male in 2004. ¶5. (C) The GSL report states that the North has little industry and the people primarily rely on subsistence agriculture. Prior to the conflict there were a number of large scale industries in the North, such as cement, chemicals, tile, salt and paper, a railway system, shipped goods to Colombo for domestic trade. Now industry is very limited. 'Due to the lack of (electrical) power and damage and destruction caused by the conflict and the tsunami, these (Northern) industries were crippled and only 333 industrial establishments with 5 or more employees were in operation in ¶2007. Out of large scale industries only Manthai salt is in operation albeit at a suboptimal level.' Similarly, the roads are in very poor condition, with little or no maintenance during the conflict period, the port apparently is not shipping goods, and 160 kilometers of railway were COLOMBO 00001126 002 OF 003 destroyed. According to the report, the availability of electricity is the lowest in the country, reaching only 33% of the population, although this ranges between 60% of the homes in Jaffna and Vavuniya, 37% in Mannar, and a paltry 4% in Kilinochchi and 1% in Mullaitivu . As for agriculture, the North contains 25% of Sri Lanka,s arable land, rice paddy is the main crop, and in 2008 the North produced 100 metric tons of paddy rice. However, 'due to extensive land mining, short supply of fertilizer, pesticide, etc, the commercial agriculture which prevailed in the area has been transformed into subsistence agriculture. In most of the areas in the (Northern) province, agricultural lands have been abandoned for these reasons.' Similarly, the fish catch fell from 56,000 metric tons in 2004 to 9,800 metric tons in 2008, due to restrictions on fishing, destruction of boats, and the tsunami and other factors. The GSL has reopened fishing areas in the North, so the fish catch may be recovering. 180 Day Resettlement Plan ¶6. (C) The GSL has developed a 180 day resettlement plan that reportedly runs from July 1 to December 31, although these dates have sometimes slipped. The 180 day plan for the Northern region focusing on 1) resettlement of the displaced families, 2) strengthening the public delivery system through infrastructure development and 3) ensuring the safety and security of the people. The GSL claims to have made broad consultations with Ministries, local government officials and politicians, U.N. agencies, Tamil Diasporae projects. ¶7. (C) The GSL has emphasized developing financial services and lending in the North. Two state banks were established in the Internally Displaced Persons (IDP) camps, and according to Rani Jayamaha, a member of the Presidential Task Force, the IDPs had hidden a great deal of money on their persons, they sold jewelry worth approximately $17 million, and the IDPs received substantial remittances from abroad. The Presidential Task Force has approved many new bank branches, extension offices and mobile units. In April 2009 there were 61 bank branches in the North (40 in Jaffna), and 18 extension offices (14 in Jaffna). The Central Bank has approved an additional 41 bank branches (21 more in Jaffna),and 58 extension offices and mobile units (18 in Jaffna),although not all of these approved offices have opened. The Central Bank has allocated $26 million USD for a special loan program through commercial banks to small and medium sized enterprises, of which one third was to be disbursed before the end of 2009. The Central Bank has agreed to forgive bank defaulters and waive standard loan requirements such as collateral and even identification documents. GSL 2010-2012 Northern Development Program ¶8. (C) The GSL has a detailed Northern Reconstruction program to put the North back on its feet, albeit at a substantial costs of $2.68 Billion USD from 2010 to 2012. The reconstruction program includes plans and budgets to rebuild houses, roads, electricity, water, agriculture, fisheries, schools, and industry. The plans call for $1.449 billion to be spent on improving economic infrastructure, $629 million on human settlements development, $266 million to strengthen social infrastructure and fostering social service, $259 million to revitalize productive services and $77 million for social protection and livelihood development. There are plans, for example, to rehabilitate 100,00 homes and build 132,000 more, to construct a 30 megawatt plant to provide electricity to all residents, to repair over 6,000 km of national, provincial and rural roads, to assist agriculture and fisheries, to rehabilitate the port, to assist a cement factory and develop special economic zones in Kilinochchi. The GSL expects that these investments will create 100,000 new jobs, bring 13% GDP growth rates per year, and reduce the poverty rates from the current 37% to 15% by COLOMBO 00001126 003 OF 003 ¶2012. Obstacles to Reconstruction ¶9. (C) The most serious impediment to reconstruction is that the GSL does not have sufficient resources for its reconstruction plan, so it will need to rely on donors. In addition, there are political issues, because governmental authority is divided between the locally elected Provincial Councils and the government agents appointed by the Central Government. Another problem is land title, because the GSL plans to use the old land records (from before the 30 year conflict). The possible return of Tamils, Muslims and Sinhalese, who left decades ago, along with possible carpetbaggers there to make a profit, can also create ethnic tension. Finally, an AID colleague said that most of the IDPs were released after their planting season, so they will need long term food assistance. ¶10. (C) Comment. The circumstances how the GSL official offered the GSL plan to Econoff 'out of friendship', when they had never met before, seems odd. Indeed, the plan puts the GSL in a favorable light by showing a serious effort to plan Northern reconstruction. It is strange that the GSL, which requires massive funding from donors, apparently has not released its planning document to them. The GSL Reconstruction plan does provide valuable background information and benchmarks by which to measure the progress of reconstruction. End Comment. FOWLER