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

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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

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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

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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.



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