US embassy cable - 04COLOMBO897

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 000897 
 
SIPDIS 
 
DEPARTMENT FOR SA, SA/INS, INR/NESA; NSC FOR E. MILLARD 
 
PLEASE ALSO PASS TOPEC 
 
E.O. 12958:     DECL: 05-28-14 
TAGS: PGOV, PREL, PINR, ECON, CE, NO, Elections, Political Parties 
SUBJECT:  Political update:  Norwegian Envoy's visit; 
Provincial elections seem set for July; New ministers 
 
Refs:  Colombo 888, and previous 
 
(U) Classified by James F. Entwistle, Deputy Chief of 
Mission.  Reasons 1.5 (b,d). 
 
1.  (C) This update on Sri Lanka's political situation 
reviews the following recent developments: 
 
-- In latest visit, Norwegian Envoy characterizes 
meetings with GSL and Tigers as "fruitful." 
 
-- Several new ministerial appointments announced. 
 
-- Provincial Council elections look set to take place 
in July. 
 
-- During visit by Mission team, GSL under pressure to 
deliver the economic goods in the deep south. 
 
-- Proposed rate hikes in basic services may spell 
trouble for UPFA government. 
 
=============================== 
Norwegian Special Envoy's visit 
=============================== 
 
2.  (SBU) In the latest bid to move the peace track 
forward, Norwegian Special Envoy Erik Solheim arrived in 
Sri Lanka on May 24.  On May 26, he met with Liberation 
Tigers of Tamil Eelam (LTTE) political chief S.P. 
Thamilchelvam in the northern Tiger-controlled town of 
Kilinochchi.  In a press release issued by the Tigers 
late May 26, Thamilchelvam was quoted as informing 
Solheim that the LTTE's Interim Self Governing Authority 
(ISGA) proposal for administering the north/east should 
be the key initial focus of possible peace talks and not 
ways to get to a possible final settlement.  (The LTTE's 
ISGA proposal was made late last year.  The group 
withdrew from peace talks with the GSL in April 2003.) 
Solheim also reportedly met late May 27 with President 
Chandrika Kumaratunga and key advisers, including 
Foreign Minister Kadirgamar and Peace Secretariat Chief 
Jayantha Dhanapala. 
 
3.  (C) COMMENT:  The LTTE statement underscoring the 
importance of discussing its ISGA proposal first is the 
group's reaction to the GSL's idea that other "core 
issues" be discussed in parallel.  The LTTE has long 
made known that it wants the ISGA proposal to be a key 
topic of possible talks.  The proposal is very 
controversial in the south, however, and the LTTE's 
apparent aim that it be made the key basis for talks is 
potentially problematic.  In the meantime, the GSL's 
idea to discuss "core issues" in parallel was a 
negotiating tactic that could annoy the Tigers.  Despite 
all the jockeying, Solheim has publicly characterized 
his visit as "fruitful."  The Ambassador will be meeting 
with Solheim late May 28.  END COMMENT. 
 
============================ 
New Ministerial Appointments 
============================ 
 
4.  (SBU) On May 26, new ministers and deputy ministers 
were sworn in by President Kumaratunga.  Ratnasiri 
Wickremanayake, a senior Sri Lanka Freedom Party (SLFP) 
MP who served as prime minister from 2000-2001 in the 
then-People's Alliance (PA) government, was sworn in as 
Minister of Public Security and Law and Order, Minister 
for Buddha Sasana (Affairs), and also as Deputy Minister 
for Defense.  D.E.W Gunasekera, a senior MP and 
organizer of Sri Lanka's small Communist Party, was 
appointed as Minister of Constitutional Reforms. 
Professor V. Warnapala, a national list SLFP, was named 
Deputy Minister of Foreign Affairs. 
5.  (C) COMMENT:  While the appointment of additional 
ministers by Kumaratunga was not unexpected, most 
observers had expected her to retain the Public Security 
and Constitutional Reform portfolios.  Wickremanayake's 
appointment as deputy defense minister is important, as 
he will serve as day-to-day head of this key ministry. 
(Kumaratunga retains the defense ministry portfolio.) 
Warnapala is a former Sri Lankan foreign service officer 
with wide-ranging experience in international affairs. 
END COMMENT. 
============================================= = 
Provincial Council Elections seem set for July 
============================================= = 
 
6.  (SBU) Sri Lanka's six remaining provincial council 
elections look set to take place in July.  Deputy 
Elections Commissioner Ananda Senanayake told Pol FSN on 
May 27 that the elections would take place either July 3 
or 10, but that President Kumaratunga had not yet set a 
firm date.  The six councils in which elections will 
take place are those in Central, Uva, Western, 
Sabaragamuwa, North Central and Southern Provinces. 
These provincial council elections follow the United 
People's Freedom Alliance's (UPFA) decisive victory in 
the Wayamba ("Northwest") provincial council election 
held on April 24, in which it won 31 of the 52 seats on 
the ballot (see Reftels).  In a related development, 
Media Minister Reginald Cooray resigned his Cabinet post 
on May 27 to run for the position of Chief Minister of 
the Western Province.  Deputy Transport Minister M. 
Herath also resigned his position and will run for Chief 
Minister of the Sabaragamuwa Province.  As was done 
during the April parliamentary elections, the Elections 
Commissioner recently probibited campaign posters and 
cut-outs being put up during the election campaign, and 
allocated nearly Rs. 9 million (approx. USD 90,000) for 
their removal. 
 
7.  (C) COMMENT:  Although provincial councils do not 
have much authority nor access to finances, the results 
of the elections could spell which way the political 
winds are blowing.  It is early, but -- at this point -- 
the President's United People's Freedom Alliance (UPFA) 
is widely expected to win most of the provincial council 
seats up for grabs.  (The UPFA is the technical term for 
the grouping between the "SLFP" and the Marxist Janatha 
Vimukthi Peramuna, "JVP.")  The opposition United 
National Party (UNP) is expected to pick up a fair 
amount of seats.  If the UNP does very poorly, however, 
it could further undermine UNP leader Ranil 
Wickremesinghe's leadership of the party.  He has 
already faced unprecedented internal party criticism due 
to the UNP's defeat in the April parliamentary election 
(see Reftels).  END COMMENT. 
 
=========================================== 
GSL under pressure to deliver in Deep South 
=========================================== 
 
8.  (C) Polchief and Pol FSN visited the southern city 
of Galle, May 24-25.  During the visit, the team met 
with a wide variety of political, civil society, and 
Buddhist clergy interlocutors.  Among all interlocutors, 
there was widespread satisfaction that the government 
was moving forward with the peace process.  Jayantha 
Jayaweera, a former UNP MP, however, was critical of the 
GSL, stating that it had "lied" during the electoral 
campaign by claiming that the then-UNP government was 
"giving in" too much to the LTTE only to follow the same 
policies when in power.  A number of interlocutors were 
worried that the GSL would have a hard time meeting the 
commitments it had made on economic matters during the 
campaign.  Ven. Baddegama Samitha, a UPFA MP and a 
Buddhist monk, for example, admitted that the UPFA "had 
probably made too many promises regarding jobs and that 
there would be a drop in prices."  Samitha thought the 
UPFA would eventually exceed expectations, but he 
thought it would take time. 
9.  (C) COMMENT:  Southern Sri Lanka, including Galle, 
has long been a leftist bastion and the UPFA still 
appears quite strong there.  That said, there is some 
concern developing that the new government is not 
delivering on its promises quickly enough.  This could 
hurt the GSL's political standing down the line.  If the 
government gets into some trouble, it is not clear 
whether the UNP will necessarily benefit.  In fact, the 
JVP may be the main beneficiary.  Though the party is 
technically part of the UPFA, the JVP has maintained its 
own organization and is seemingly disassociating itself 
ever so slightly from the SLFP.  In doing this, the JVP 
seems to be playing a smart game and it appears poised 
to pick up more support in the future.  END COMMENT. 
 
============================================= ========= 
Rate hikes in basic services may mean trouble for UPFA 
============================================= ========= 
 
10.  (C) Several recent proposed rate hikes in basic 
services may spell trouble down the road for the UPFA 
government.  Due to low hydroelectric production, the 
Ceylon Electrical Board has indicated that it may raise 
rates soon.  Additionally, Prima Ceylon Limited, the 
sole producer of flour in Sri Lanka, announced on May 26 
that it could hike its prices for flour by twenty 
percent per kilogram if the GSL fails to pay subsidy 
dues that Prima believes are in arrears.  On May 27, the 
GSL issued a gazette notification that declared flour an 
essential commodity and established a set price for 
flour.  The GSL also announced that it would allow 
competition for flour in the market.  Given Prima's 
monopoly of flour production, this essentially invites 
flour imports in the short-term; however, given the 
GSL's duty structures and the regional price of flour, 
it is not clear if there would be any takers.  Rate 
increases have also been mooted in other basic services 
lately, namely bus fares and petroleum prices.  (We 
understand the GSL is exploring ways to keep petroleum 
prices down, including via a recent request to the GoI 
for a line of credit to subsidize the Indian Oil 
Company's subsidiary in Sri Lanka.) 
 
11.  (C) COMMENT:  It is widely believed on the ground 
that one of the main reasons leading to the UNP's defeat 
in the April elections was that the impact of promised 
economic reforms had not yet been felt by the average 
Sri Lankan.  During the campaign, the UPFA took full 
advantage of this perception that the UNP had failed to 
deliver the goods (although macroeconomic indices 
indicated that the country was doing relatively well). 
When coupled with conflicting GSL statements on 
privatization (see Reftels) and uncertainty regarding 
government proposals to hire thousands of unemployed 
graduates, however, the UPFA risks looking like it 
cannot deliver on its economic promises early in its 
tenure.  As noted above, contacts in Galle are already 
reporting that the GSL is under pressure to deliver the 
economic goods quickly.  END COMMENT. 
 
14.  (U) Minimize considered. 
 
LUNSTEAD