US embassy cable - 04COLOMBO809

C O N F I D E N T I A L SECTION 01 OF 06 COLOMBO 000809 
 
SIPDIS 
 
DEPARTMENT FOR SA, SA/INS, INR/NESA, S/CT 
 
NSC FOR E. MILLARD 
 
E.O. 12958:      DECL: 05-18-14 
TAGS: PGOV, PREL, ECON, CE, NO, LTTE - Peace Process, ECONOMICS 
SUBJECT:  Peace process, economic issues highlighted 
during SA A/S Rocca's visit to Sri Lanka 
 
Refs:   Colombo 795, and previous 
 
(U) Classified by Ambassador Jeffrey J. Lunstead. 
Reasons 1.5 (b,d). 
 
1.  (C) SUMMARY:  Assistant Secretary for South Asian 
Affairs Christina B. Rocca visited Sri Lanka, May 13-16. 
Highlights of the visit included meetings with President 
Kumaratunga, Prime Minister Rajapakse, Opposition Leader 
(and former PM) Wickremesinghe, business leaders, and 
Tamil politicians.  A/S Rocca also visited the eastern 
port city of Trincomalee.  During her meetings, A/S 
Rocca discussed the status of the peace process, as well 
as economic and development issues.  Most interlocutors, 
including President Kumaratunga, were upbeat about the 
peace process, and predicted a near-term return to 
Norwegian-facilitated talks between the GSL and the 
LTTE.  A/S Rocca's visit generated highly favorable 
press coverage, while serving to reiterate the USG's 
deep interest in Sri Lanka and our continued strong 
support for the peace process.  END SUMMARY. 
 
=========================== 
Meetings with GSL Officials 
=========================== 
 
2.  (C) PRESIDENT CHANDRIKA KUMARATUNGA:  After a very 
large photo spray, including TV cameras, the President 
and A/S Rocca sat down on May 14 to an hour-long 
discussion on Sri Lanka, its peace process, domestic 
politics, and the economic situation.  They began by 
discussing the results of India's recent election.  The 
President said she knew Sonia Gandhi well and noted that 
there had always been a "close personal link" between 
her Sri Lanka Freedom Party (SLFP) and the Congress 
Party.  In response to a question by A/S Rocca as to 
whether the new Indian government would support Sri 
Lanka's peace process, the President said that she did 
not think the Congress Party's antipathy toward the LTTE 
would undermine the GoI's support for the peace process. 
 
3.  (C) Regarding the peace track, Kumaratunga said she 
was committed to a three-month timeline to begin talks 
with the Liberation Tigers of Tamil Eelam (LTTE). 
(Talks have been on hold since April 2003.)  She said 
the GSL had a "clear stance that whatever the LTTE wants 
to discuss, we will."  She explained her earlier 
position that talks would focus both on an interim 
solution and a final solution in parallel, "to hold the 
LTTE to a commitment to a final solution."  The issue of 
a final negotiated settlement was always a non-starter 
in the past and the LTTE was still adamant about not 
discussing it up front, she explained.  Therefore she 
had agreed to the LTTE request that the talks focus only 
on the LTTE's Interim Self Governing (ISGA) proposal. 
The President said she was comfortable not discussing 
the matter of a final negotiated settlement immediately, 
but, in the meantime, said the GSL would press the LTTE 
to observe the ceasefire and fully respect human rights. 
 
4.  (C) A/S Rocca asked whether the LTTE still hoped an 
interim agreement would codify a separate state.  The 
President replied that she thought the ISGA proposal was 
the first step to a separate state, but that the GSL 
would not agree to that.  Later in the discussion, the 
President said that the ISGA proposal was maximalist in 
nature.  She also felt that the LTTE did not want to go 
back to war after two years of the ceasefire, as they 
had "achieved more gains in the past two years than in 
18 years of war."  Her biggest fear, however, was that 
the LTTE thought it could intimidate the GSL into 
agreeing to a separate state.  Both A/S Rocca and the 
President agreed that they hoped for the LTTE to change 
over time, through more exposure to democratic 
processes.  The President admitted her surprise over 
eastern rebel leader Karuna's split from the main Tiger 
organization in March, thinking that it might have 
stemmed from his exposure to the outside world in the 
previous six rounds of peace talks and Karuna's feeling 
that "there might be something better than the bunkers 
out there."  (The LTTE largely crushed Karuna's 
rebellion in April.  Karuna's whereabouts remain 
unknown.) 
 
5.  (C) A/S Rocca mentioned the upcoming June 1 meeting 
in Brussels of the Co-chairs of the Tokyo Process.  She 
noted that participants in the meeting would be looking 
for way to assist Sri Lanka's peace process.  The 
President responded that she hoped to have a meeting 
with the local co-chair representatives to identify 
issues and review the GSL's views on pertinent issues. 
She remarked that there seemed a very good possibility 
that talks between the GSL and the Tigers could begin in 
the mid-July/mid-August timeframe.  A/S Rocca asked 
about Foreign Minister Lakshman Kadirgamar's recent 
comments that the GSL preferred a domestic venue for 
talks.  The President responded that she did not want 
the talks to turn into a "traveling circus," going from 
country to country.  She said the Tigers had given 
"acceptable reasons" for not wanting the talks in Sri 
Lanka, namely the possibility of demonstrations 
hampering the discussions.  Kumaratunga said Europe 
could be a possible venue, given the poor health of 
chief Tiger negotiator Anton Balasingham who is based in 
London.  "One European city would be okay, and one 
without a big Tamil diaspora," Kumaratunga commented. 
A/S Rocca reiterated that the U.S. wants to do what we 
can to support peace. 
 
6.  (C) Asked about the role of the Marxist Janatha 
Vimukthi Peramuna (JVP) in her coalition government, the 
President responded that the group had publicly 
committed itself to the peace process in the United 
People's Freedom Alliance (UPFA) alliance document it 
had signed in January.  (Note:  The UPFA is the 
technical term for the grouping of the SLFP and the 
JVP).  Despite its rhetoric before the April 2 election, 
the group had not made statements against the peace 
process "at my request," the President said.  The JVP 
would not be part of the GSL delegation to the peace 
talks.  She did say, however, that talks this time 
around would be "transparent and consultative," not 
"secretive" like previous rounds. 
 
7.  (C) President Kumaratunga felt that all the focus on 
"others" led the majority Sinhalese community to reject 
the United National Party (UNP) government and vote the 
UPFA into power.  She was concerned, however, with the 
"radicalization" of the Parliament, which now had many 
minority parties, such as the pro-LTTE Tamil group, the 
JVP, and the Buddhist monk party.  This could become 
very serious if the trend continued as it could lead to 
the marginalization of the moderate parties.  Queried by 
A/S Rocca on a possible linkup between the SLFP and UNP, 
the President replied that she had been suggesting it 
for 10 years, but that former PM and Opposition leader 
Ranil Wickremesinghe had wanted it only if he was in 
power.  Kumaratunga noted "with the SLFP and UNP, we 
have 75 percent of the vote in Parliament."  While she 
said she was still in favor of a deal with the UNP, the 
President admitted it would be "personally difficult for 
me to work with half of the old Cabinet." 
 
8.  (C) A/S Rocca also said she was looking forward to 
the Millennium Challenge Account (MCA) team coming to 
begin looking at possible opportunities in Sri Lanka. 
The President thought it was "wonderful" that Sri Lanka 
was selected, but that she was apprehensive about Sri 
Lanka's inclusion on the list, since some of the other 
listed countries had "poor political practices."  At the 
conclusion of the meeting, Kumaratunga thanked A/S Rocca 
for continued USG support for the peace process, and 
said she was waiting to speak to Foreign Minister 
Kadirgamar about his recent visit to Washington. 
 
9.  (C) PRIME MINISTER MAHINDA RAJAPAKSE: 
Newly-installed Prime Minister Mahinda Rajapakse was 
pleasant and relaxed during the May 14 meeting.  The PM 
and A/S Rocca briefly discussed the Indian election, 
with the PM stating that he did not think that India's 
foreign policy would change too much, especially 
regarding Sri Lanka.  A/S Rocca asked how his government 
intended to move the peace process forward.  The PM was 
very upbeat in his reply, stating that he felt talks 
would take place in the near-term.  He also placed an 
emphasis on a renewed focus on relief and rehabilitation 
efforts in the north and east.  To better handle 
redevelopment work, the PM said that the four separate 
ministries that currently dealt with rehabilitation 
matters would be rolled into one ministry that from now 
on would report directly to the President. 
 
10.  (C) A/S Rocca and the PM spoke about Sri Lanka's 
selection as an MCA country and A/S Rocca confirmed that 
a U.S. team would travel to Sri Lanka at the beginning 
of June to begin efforts toward negotiation of a 
compact.  Rajapakse was very interested in the MCA 
program, as he thought it would help offset possible 
unemployment uncertainties that would arise with the end 
of the Multi-Fiber Agreement and loss of garment quotas. 
The Ambassador noted that Sri Lanka had the capacity to 
take business from other countries, not just lose 
business. 
 
11.  (C) Replying to A/S Rocca's question about the new 
government's fiscal policies, PM Rajapakse replied that 
the UPFA intended to continue operating under the 
existing budget.  No new budget would be presented until 
the traditional budget debate later in the year.  "Why 
force a vote in Parliament now?" he stated.  In a long 
monologue on the budget, the peace process, and the 
unions, the PM said that the working class supported the 
peace process one hundred percent.  Therefore, the UPFA 
would keep its current economic policies in order to 
retain working-class support while pushing ahead with 
peace negotiations with the Tigers.  When a final 
settlement had been reached, then the government would 
pursue any needed economic reforms.  Ambassador Lunstead 
responded that it was important that economic reforms 
continue, even if the pace were to slow. 
 
12.  (C) Asked about the JVP and its commitment to the 
peace process, the PM replied that the GSL would keep 
the group involved in the process.  Contrary to the 
President's approach outlined above, he said he thought 
the JVP should be included on the GSL's peace talks 
delegation.  This way, the JVP would "discuss peace 
process issues and not sit out and argue," the PM said. 
A/S Rocca asked Rajapakse if he thought the JVP would 
play a constructive role in the discussions.  Deflecting 
the question, the PM said he wanted the JVP involved in 
negotiations as an educational exercise:  "they will 
learn how difficult negotiations are."  Rajapakse felt 
strongly about the JVP's involvement, stating that 
others' advice to leave them out of the discussions 
would be "a disaster." 
 
13.  (C) OPPOSITION LEADER RANIL WICKREMESINGHE:  In 
their May 14 meeting, former prime minister 
Wickremesinghe appeared relaxed and relatively upbeat. 
He almost seemed relieved that the burden of national 
problems had been passed to someone else -- i.e., the 
new government, and he said as much.  On the subject of 
the April 2 parliamentary election, Wickremesinghe 
asserted that much of the urban middle class had voted 
for the Buddhist monks of the Jathika Hela Urumaya (JHU) 
party.  "Residents of the shanty town" had remained 
loyal to the United National Party (UNP), however.  He 
admitted that it was possible that many voters thought 
the UNP government had ceded too much to the Tigers over 
the course of the peace process.  The lack of a solid 
"peace dividend" had also hurt the UNP, he thought. 
 
14.  (C) Wickremesinghe spoke at length about the new 
UPFA government and the problems he expected it to have. 
On the economic front, he did not see how the new 
government could remain faithful to the former 
government's budget, since so much of the UNP budget 
related to privatization -- an economic policy not 
publicly supported by the UPFA government. 
Wickremesinghe also felt that the UPFA would have a 
difficult time trying to obtain a majority in 
Parliament.  "They created their own problem by 
attacking the JHU monks in Parliament," and had thus 
jeopardized any possible JHU support of the government, 
he said.  He also felt that the UPFA's current strategy 
of courting minority party members would not be 
effective in helping the UPFA gain a majority in 
Parliament. 
 
15.  (C) Asked whether the UNP would support the 
President on the peace process, the former prime 
minister had very clear thoughts, noting that the UNP 
had two concerns:  first, the UNP would insist that the 
JVP publicly state its support for the peace process. 
There was no point in the government criticizing the UNP 
and TNA on the peace process if there was dissent within 
the UPFA alliance.  Second, he was distressed about what 
he termed the GSL's use of the "Karuna faction to hit at 
the LTTE."  Wickremesinghe was quite certain that the 
Sri Lanka Army had Karuna in custody and that recent 
attacks in the east had been carried out by Karuna's 
men, with the army's backing.  He alluded to one killing 
that occurred two days after the President told the 
Norwegians she had the situation under control. 
Wickremesinghe felt that the LTTE would not come to the 
peace talks table if it did not feel that the government 
was committed to peace.  He added that he had been 
largely cut out of the loop on peace process 
information, which -- he remarked with some irony -- was 
a common complaint that President Kumaratunga had when 
he (Wickremesinghe) was PM. 
 
16.  (C) Wickremesinghe said the UPFA had internal 
coordination problems on peace process issues, noting 
the discrepancies between recent public statements on 
peace talks by President Kumaratunga and Foreign 
Minister Kadirgamar.  Wickremesinghe also confirmed that 
he had heard rumors that Finance Minister Sarath 
Amunugama might lead the GSL team to any negotiations. 
He also thought that newly named head of the Peace 
Secretariat, Jayantha Dhanapala, would also be part of 
 
SIPDIS 
the team, but added that Dhanapala and Kadirgamar were 
famous for not getting along, which raised questions 
about Kadirgamar's possible inclusion on the negotiation 
team. 
 
============================== 
Meeting with Tamil Politicians 
============================== 
 
17.  (C) A/S Rocca also met on May 14 with members of 
the generally pro-LTTE Tamil National Alliance (TNA). 
Joseph Pararajasingham, MP from the eastern district of 
Batticaloa, R. Sampathan, MP from Trincomalee in the 
east, and Suresh Premachandran, a MP who is from Jaffna 
in the north, comprised the group.  Sampathan said he 
was cautiously optimistic about the President's 
statements promising a swift return to peace 
negotiations.  He said, however, that President 
Kumaratunga and other GSL officials had sent some mixed 
messages, which had caused some confusion.  All the MPs 
present emphasized their strong support for the 
formation of some kind of interim mechanism that would 
allow rehabilitation and resettlement work to proceed in 
the north and east. 
 
18. (C) Ambassador Lunstead made the point that 
President Kumaratunga had stated that her first priority 
was accelerating the pace of relief and rehabilitation 
in Tamil areas.  Sampathan accepted this, but noted that 
decision-making for such efforts could not be "Colombo- 
centric."  At the end of the meeting, Pararajasingham 
asked that the U.S. lift its Foreign Terrorist 
Organization (FTO) ban on the LTTE.  A/S Rocca replied 
that the USG had sent clear signals to the Tigers that 
if the group wanted the listing to be changed, then they 
needed to renounce terrorism in both word and deed. 
 
=================== 
Business Roundtable 
=================== 
 
19.  (SBU) During an hour-long business roundtable on 
May 14, which included representatives from the American 
Chamber of Commerce, the IT sector, and the tea, 
banking, garment manufacturing, retail and gem 
industries, Assistant Secretary Rocca heard the 
following points: 
 
-- The business community feels "in the dark" regarding 
the new Government's economic plans and policies, 
particularly whether or not economic reforms will 
continue. 
 
-- The garment sector is concerned about the potential 
loss of jobs following the expiration of the Multi-Fiber 
Agreement (MFA), and sees improved market access 
(possibly based on Sri Lanka's notable social compliance 
record) as a key to stemming job-loss to lower cost 
producers. 
 
-- An FTA with the U.S. remains desirable; if not 
possible, however, would there be a possibility of duty- 
free entry of garments made from U.S. textiles or yarn, 
via an amendment to customs regulations? 
 
-- The IT sector remains a strong driver for future 
growth, and Sri Lanka is well placed to serve as a 
center for business process outsourcing (BPO) 
operations, or as a back-up center for such operations 
in India. 
 
-- Improved IPR enforcement will be key to attracting 
the kind of value-added, "knowledge-work" that can help 
drive additional growth in the IT sector. 
 
-- USAID support of export-oriented business clusters 
has been highly successful and should be continued. 
 
==================== 
Visit to Trincomalee 
==================== 
 
20.  (C) A/S Rocca visited the eastern city of 
Trincomalee on May 15.  Highlights of the visit included 
a military briefing by Major General Susil Tennakoon, 
the commander of security forces in Trincomalee 
District.  Tennakoon noted the specific military and 
security concerns present in the ethnically-mixed 
Trincomalee District, but overall was upbeat about the 
current security situation.  A/S Rocca also met with 
Government Agent (GA) for Trincomalee Gamini Rodrigo. 
Rodrigo noted challenges in administering rehabilitation 
programs in the district, but was on the whole positive 
about the pace of reconstruction and aid programs 
locally.  Over a lunch meeting with civil society and 
NGO contacts, Dagfinn Adnanes of the Norwegian-led Sri 
Lanka Monitoring Mission (SLMM) noted that at present 
the situation in Trincomalee was calm, but that reports 
of intimidation and child recruitment by the Tigers 
continued to flow in. 
 
21.  (U) While in Trincomalee, A/S Rocca also visited 
several USAID/OTI project sites.  She presided over a 
handover of several fishing boats to a local fishermens' 
society, for example, and also participated in a 
discussion at a local university where students from a 
broad cross-section of the country were learning 
strategies of non-violent communication. 
 
======= 
COMMENT 
======= 
 
22.  (C) A/S Rocca's visit generated highly favorable 
press coverage.  Coming right after the recent 
parliamentary election, it was also well-timed, as it 
served to punctuate the USG's continued deep interest in 
Sri Lanka and our strong support for the peace process. 
The good news is that interlocutors across the board 
appear to support both the informal process and a timely 
return to the negotiation track which has been on hold 
since April 2003.  Interlocutors, in fact, predict that 
talks will probably take place within the next several 
months.  All is not roses, however.  Based on comments 
by TNA MPs, for example, there is a lot of skepticism 
toward the GSL about its ability to follow through with 
quick relief and rehabilitation assistance in the 
volatile north/east.  At the same time, as exemplified 
by Wickremesinghe's remarks, the UNP clearly harbors 
resentment toward the President about its recent 
electoral defeat.  In light of this, the UNP's degree of 
support for the UPFA government's peace process plans 
down the line appears questionable.  All that said, 
interlocutors heard our message that the U.S. believes 
that all concerned parties need to work together in the 
national interest toward a negotiated settlement. 
 
23.  (C) It also became crystal clear during the meeting 
with the President that public and private comments by 
Foreign Minister Kadirgamar during his Washington visit 
on issues such as the ISGA are not in accord with the 
President's stated policies.  This reveals a troubling 
lack of coordination within the government.  Ambassador 
will see Kadirgamar on the afternoon of May 18 and probe 
further on this issue.  END COMMENT. 
 
24.  (U) Assistant Secretary Rocca did not have an 
opportunity to review this message before departing 
Post. 
 
25.  (U) Minimize considered. 
 
LUNSTEAD