US embassy cable - 04COLOMBO515

C O N F I D E N T I A L SECTION 01 OF 04 COLOMBO 000515 
 
SIPDIS 
 
DEPARTMENT FOR SA, SA/INS, INR/NESA 
DEPARTMENT PLS ALSO PASS TO USTR J. ROSENBAUM 
NSC FOR E. MILLARD 
TREASURY FOR R. ADKINS 
COMMERCE FOR A. BENAISSA 
 
E.O. 12958:  DECL:  03/23/14 
TAGS: PGOV, PREL, ECON, PTER, CE, NO, Political Parties, Elections 
SUBJECT:  Sri Lanka:  Implications of a possible victory 
by the President's party and JVP in April 2 election 
 
Refs:  Colombo 503, and previous 
 
(U) Classified by Ambassador Jeffrey J. Lunstead. 
Reasons 1.5 (b, d). 
 
1.  (C) SUMMARY:  At this point in Sri Lanka's April 2 
parliamentary election campaign, the UPFA alliance 
between the President's party and the JVP appears ahead 
in the race, though not a lock to win.  If the UPFA does 
come out ahead and goes on to form the government, 
however, there are numerous implications.  On the 
positive side, the UPFA is committed to continuing the 
peace process, though it is unclear how effective it 
would be in dealing with the LTTE.  On the negative 
side, a win by the alliance poses serious questions 
about the direction of GSL economic policy and reform. 
 
2.  (C) SUMMARY (Continued):  With respect to bilateral 
ties, although we have maintained close links with the 
President and her key advisers, and she is basically 
friendly to the U.S., a UPFA government would be more 
difficult to deal with and less responsive to our 
positions on international matters compared to the 
current UNP government.  We would expect a UPFA 
government to continue the policy of trying to reach a 
Free Trade Agreement (FTA) with the U.S., however. 
Overall, if the UPFA forms the next government, 
President Kumaratunga would want good relations with the 
United States and we would likely be able to cooperate 
on a number of key issues.  It would be better for Sri 
Lanka and better for the bilateral relationship if a UNP 
government were returned to power, however.  END 
SUMMARY. 
 
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UPFA appears to be in lead (for now) 
------------------------------------ 
 
3.  (C) At this point in Sri Lanka's April 2 
parliamentary election campaign, the alliance between 
the President Kumaratunga's Sri Lanka Freedom Party 
(SLFP) and the Janatha Vimukthi Peramuna (JVP) appears 
ahead in the race.  (The alliance's technical name is 
the United People's Freedom Alliance, "UPFA.")  As 
reviewed in detail in Reftels, while they are an inexact 
science in Sri Lanka, polls are showing the UPFA to be 
significantly more trusted than Prime Minister 
Wickremesinghe's United National Party (UNP) with 
respect to dealing with what the public has described as 
the most important issue:  the economy.  Compared to the 
UNP, the UPFA also has a significantly better image on 
corruption, which has been a sleeper issue in the 
campaign.  In the meantime, the UNP is ahead among those 
polled in terms of handling the peace process with the 
Liberation Tigers of Tamil Eelam (LTTE).  While the 
polls do not clearly delineate head-to-head matchups 
among the parties, the UPFA appears to have a strong 
lead among Sri Lanka's majority Sinhalese community, 
with the UNP doing relatively well among minority groups 
such as Muslims. 
 
4.  (C) The poll results tend to confirm what Mission is 
hearing anecdotally.  The general view is that the UNP's 
campaign has had a difficult time gaining traction, 
though it may have picked up some momentum in the past 
week or so and could conceivably mount a comeback.  Most 
observers currently believe, however, that the UPFA 
campaign -- taking advantage of Kumaratunga's control of 
the press -- has been more effective at getting its 
message out.  Overall, it now seems quite possible -- 
though it is by no means a lock -- that the UPFA could 
win a majority in Parliament outright on election day, 
or at least come close enough to doing so to allow it to 
form the next government by gaining the support of 
smaller parties and/or UNP defectors. 
 
----------------------------------- 
Possible implications of a UPFA win 
----------------------------------- 
 
5.  (U) If the UPFA does win, there are numerous 
implications.  Sketched out below are notions of what a 
UPFA victory might mean for two of Sri Lanka's most 
pressing issues:  the peace process and the economy. 
 
6.  (C) PEACE PROCESS:  The UPFA has publicly committed 
itself to continuing the peace process.  President 
Kumaratunga has been a long-standing advocate of ethnic 
reconciliation and has underscored her support for 
continuing the informal peace process and the ceasefire. 
She and other UPFA leaders have also publicly come out 
in favor of the Norwegian government peace facilitation 
effort and a near-term resumption of the negotiation 
track with the LTTE that has been on hold since April 
2003.  Although the SLFP and JVP were initially bitingly 
critical of the LTTE's October 2003 proposal on forming 
an interim setup in the north/east, the UPFA has 
indicated that it is willing to discuss that proposal in 
the context of possibly "devolving powers" to the north 
and east. 
 
7.  (C) While the UPFA has basically said all the right 
things about the peace process, it remains unclear how 
effective it would be in dealing with the LTTE.  The 
LTTE, for example, is known to bitterly dislike both 
Kumaratunga and her chief assistant on peace process 
issues, former foreign minister (and a possible PM in a 
UPFA government) Lakshman Kadirgmar.  Kumaratunga and 
Kadirgamar reciprocate that view in large measure.  (The 
LTTE almost killed Kumaratunga in 1999 in an 
assassination attempt and Kadirgamar, a Tamil, is 
considered a traitor by the group and has had his life 
threatened on multiple occasions.)  Given all of this 
baggage, it is unclear to what extent the two sides can 
cooperate.  Previous efforts (those from 1994-2001) by 
President Kumaratunga to engage the LTTE in long-term 
peace processes ended in complete failures, for example. 
There is also the question of whether the JVP is really 
on board with the UPFA's proclamations regarding the 
peace process.  The JVP has been stridently skeptical of 
the process in the past, lambasting the UNP on many 
occasions for allegedly giving away too much to the 
LTTE, for example.  The JVP has also on many occasions 
lashed out at the Norwegian peace facilitation effort. 
Given that the UPFA is clearly a very loose electoral 
alliance, it is by no means clear whether the JVP will 
work closely with the SLFP on the peace process, or 
actively try to undercut those efforts.  The JVP, for 
example, has already stated that the GSL should try to 
work with Karuna, the rebel LTTE commander in the east, 
in an effort to destroy the main LTTE organization.  The 
Norwegian facilitators have stressed that taking such a 
course would probably spell the end of the peace process 
and President Kumaratunga has asserted that she has no 
plans to reach out to Karuna. 
 
8.  (SBU) THE ECONOMY:  On the economic front, a UPFA 
win poses serious questions about the direction of GSL 
economic policy and reform.  Certain issues seem clear: 
privatization efforts will slow, if not cease; the GSL 
will take positions in the WTO more typical of 
developing countries (i.e., aligning with the G-22) and 
fiscal discipline will likely become more relaxed (the 
President has promised to hire a minimum of 25,000 new 
government employees if the UPFA assumes power). 
Whether these positions will be exacerbated by the 
President's SLFP party's alliance with the Marxist JVP 
is still a point of debate.  The President's key 
economic advisors assure us that the SLFP can "control" 
the JVP.  Nonetheless, the recently released UPFA 
"manifesto" raises serious questions about the role of 
the private sector and the pace of economic reform (see 
Reftels).  Sri Lankan business groups have met on a few 
occasions with members of the UPFA alliance.  Most 
recently, the Ceylon Chamber of Commerce hosted a closed 
door meeting with the JVP.  While members of the 
business community are not enthused about a JVP- 
influenced Government, they claim the JVP is making the 
right noises (though it is not clear the JVP understands 
the "market" concepts it claims to now embrace -- see 
Reftels). 
 
--------------------------------- 
Possible impact on bilateral ties 
--------------------------------- 
 
9.  (C) With respect to bilateral ties, although we have 
maintained close links with the President and her key 
advisers, and she is basically friendly to the U.S., a 
UPFA government would be more difficult to deal with and 
less responsive to our positions on international 
matters compared to the previous UNP government.  With 
respect to the day-to-day act of dealing with a 
government controlled by the UPFA, we would expect that 
its various ministries would take longer to review U.S. 
proposals and to react to our concerns.  This was the 
case with President Kumaratunga's 1994-2001 People's 
Alliance (PA) government, which often proved to be 
extremely formal and highly protocol-conscious.  During 
that timeframe, meetings with high-level principals such 
as the president, PM, and FM, were often difficult to 
arrange, which was a problem because decision-making was 
often funneled up to the highest levels.  This pattern 
could well be replicated in a UPFA government.  On the 
substantive side, the UPFA has made clear during the 
campaign that it considers the UNP to have been too pro- 
U.S. on various matters and it has promised to support a 
foreign policy that is "not aligned or subservient to 
any other country or group of countries."  These code 
words indicate that the UPFA plans to anchor itself more 
firmly within the Non-Aligned Movement (NAM) and the 
G-77 than the UNP government, which was relatively pro- 
U.S. on matters such as Iraq.  As noted, in the economic 
area, this would almost certainly involve the GSL 
linking itself to the G-22 in the WTO context. 
 
10.  (C) As for U.S.-Sri Lankan bilateral economic 
relations, we anticipate the GSL continuing to want an 
FTA, though an incoming UPFA administration will have 
little technical understanding of the FTA process and 
would likely want additional concessions and longer 
phase-outs in certain sectors, demands that would be 
unhelpful and run counter to the context in which the 
USG has been considering an FTA.  We also anticipate 
being able to work cooperatively with a UPFA government 
on submitting a Millennium Challenge Account compact 
proposal.  We expect that the Treasury Advisor program 
on budget and debt management would be welcomed by a 
UPFA government, though we do not know to what degree it 
would appreciate the stringent discipline required to 
make fiscal reforms work.  A potential Tropical Forest 
Conservation Act (TFCA) initiative would probably face 
some initial skepticism, given sensitivities about the 
environment and doubts about U.S. environmental policy. 
Also, the UPFA has been critical of the current 
government's policies on economic development in the 
forest areas. 
 
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COMMENT 
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11.  (C) If the UPFA forms the next government, 
President Kumaratunga would want good relations with the 
United States and we would likely be able to cooperate 
on a number of key issues.  In short, we would work to 
make the best of things.  Given her history with the 
LTTE and the economic proclivities of many in her camp 
it is possible, however, that the peace process and/or 
the economy could deteriorate markedly.  Simply put, it 
would be better for Sri Lanka and better for the 
bilateral relationship if a UNP government were returned 
to power.  END COMMENT. 
 
12.  (U) Minimize considered. 
 
LUNSTEAD