US embassy cable - 05COLOMBO310

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 000310 
 
SIPDIS 
 
DEPT FOR SA/INS: J.BRENNIG; DEPT PLEASE PASS TO 
MCC:DNASSIRY; TREASURY FOR C.CARNES; COMMERCE FOR A.BENAISSA 
 
E.O. 12958: DECL: 02/07/2015 
TAGS: ECON, EFIN, EAID, CE, Tsunami 
SUBJECT: DIFFERENCES IN REBUILDING COST ESTIMATES DISSIPATE 
AS REBUILDING TASK FORCE TAKES THE REINS 
 
Classified By: Ambassador Jeffrey J. Lunstead, reasons 1.4 D and E. 
 
1. (SBU) Summary: Recent estimates of rebuilding costs by the 
Government's Task Force for Rebuilding the Nation 
(TAFREN) and the Multi-Lateral Development Banks (MDBs) 
seemed divergent following initial public statements, but 
further analysis has revealed greater commonality.  Both 
the Government and the MDBs currently use USD 1.5 Billion 
as the estimate for total rebuilding costs.  Differences 
were largely due to the scope of the rebuilding plans 
considered by each group.  The rebuilding effort has been 
largely taken over by TAFREN and the relevant ministries, 
with TAFREN adopting the role of overseer and the 
individual Ministries taking responsibility for 
particular tasks.  It is unclear if Mano and TAFREN have the 
political clout 
that will be required to keep rebuilding 
on task.  One option would be for the President to appoint a 
political heavyweight to take charge.  End Summary. 
 
2. (SBU) As the post-Tsunami focus in Sri Lanka moves from 
relief 
to reconstruction, there is new emphasis on the damage 
assessments completed by the multilateral development 
banks (MDBs), the Government of Sri Lanka's (GSL) Task 
Force for Rebuilding the Nation (TAFREN) and, reportedly, 
the Liberation Tigers of Tamil Eelam (LTTE), the Tamil 
terrorist organization that controls a portion of 
northern and eastern Sri Lanka (Note: World Bank is 
attending meetings with the LTTE on their damage 
assessment on February 8. End Note). 
 
3. (U) At first blush, there appear to be significant 
discrepancies in the assessments (the GSL assessment 
indicates a rebuilding cost of USD 3.5 billion, versus 
the MDB quote of USD 1.5 billion).  However, once the 
assessments are broken down into component parts, there 
is a great degree of similarity. 
 
4. (U) The differences, particularly between the TAFREN and 
MDB 
assessments, can be largely attributed to the TAFREN 
policy of looking several steps beyond rebuilding, to the 
kinds of long-term improvements that would be needed to 
modernize and improve efficiency.  These include ideas 
such as a modern, electric rail line from Colombo to the 
southern part of the country, running parallel to the 
rebuilt rail-line damaged in the Tsunami, and major 
upgrades to the existing rail structure (USD 415 
million), major road expansion and development projects 
(USD 490 million), increased tourism development (USD 195 
million), and improved water supply and sanitation 
facilities (USD 229 million).  There are roughly USD 150 
million in other, smaller scale improvements and upgrades 
in other sectors. 
 
5. (U) Further, TAFREN included a few sectors that were not 
covered as part of the MDB assessment, primarily because 
they are covered under other assistance programs (e.g. 
Japanese assistance to the telecommunications sector). 
There is approximately USD 100 million in these areas. 
 
6. (C) Finally, there were some differences between 
assessments 
of particular sectors.  For example, the TAFREN 
assessment estimates USD 132 million would be required to 
restore 
educational institutions, while the MDB study suggests 
only about USD 45 million.  An initial analysis of the 
two assessments seems to indicate a difference in 
philosophy - the MDBs prefer an approach that retains 
structures and communities as much as possible, while the 
TAFREN report seems to suggest that there will be more 
migration and more need for entirely new school buildings 
(Note: this is not necessarily the GSL position, but 
could be a initial reaction due to the very early and 
cursory examination done by the TAFREN assessors. End 
Note).  World Bank Senior Economist Rocio Castro 
confirmed that the GSL had been discussing larger 
potential migration scenarios in early meetings. 
 
7. (SBU) As another example, TAFREN estimates rebuilding the 
fisheries industry will cost about USD 314 million, 
compared to an estimate of USD 145 million by the MDBs. 
According to Castro, the TAFREN estimates on the 
fisheries side were erroneous due to early and incomplete 
information, which led to over-estimating the loss of 
boats and their value. 
 
Reconciling the Numbers 
----------------------- 
 
8. (U) During a recent GSL review of rebuilding activities 
with 
the donor community, ADB Resident Representative 
Alessandro Pio, speaking on behalf of all the MDBs, 
outlined sectors the donor community, particularly the 
MDBs, would be willing to fund under tsunami relief and 
rebuilding programs and those, such as railway 
enhancements and new roads, that they would not.  The 
GSL, for its part, is aware of those areas donors may 
consider beyond the scope of tsunami relief, but sees an 
opportunity to tie rebuilding into their larger 
investment plan.  They also see the opportunity to 
leverage some monies that would have gone to upgrades of 
existing infrastructure, and move straight to the upgrade 
as part of the rebuilding process.  Significantly, 
though, during the course of the donor coordination 
meeting, Treasury Secretary PB Jayasundera referred to 
the USD 1.5 billion tally as the number the GSL would use 
in moving forward. 
 
Rebuilding Mechanisms 
--------------------- 
 
9. (U) Now that relief has largely morphed into rebuilding, 
Sri 
Lanka has phased out its Center for National Operations, 
the President's Office-based secretariat that oversaw the 
initial GSL response to the crisis, and handed over day- 
to-day rebuilding tasks to relevant line Ministries and 
TAFREN.  TAFREN is led by senior 
Presidential Advisor Mano Tittawella (a close Embassy 
contact) and includes several 
high-profile Sri Lankan CEOs as the coordinators of 
various  sectors. 
 
10. (C) During a recent briefing on GSL 
initiatives, the Ambassador queried Tittawella about the 
role TAFREN would play in rebuilding, particularly when 
compared with the role of the Finance Ministry. Tittawella 
briefly outlined a coordination and 
motivational role for TAFREN as a body that could cut 
through the political logjams and act as a buffer in 
order for the appropriate Government ministries to handle 
their assigned tasks.  Econchief spoke with TAFREN 
Housing Coordinator Mahesh Amalean, the head of MAS 
Holdings, one of Sri Lanka's largest garment 
manufacturers, who gave a similar explanation. 
Nonetheless, despite best intentions, TAFREN has not yet 
been tested in its ability to push through needed 
projects, so it remains unclear if it is capable as an 
institution of overseeing what is sure to be a 
politically-sensitive rebuilding effort. 
 
Comment 
------- 
 
11. (SBU) In sum, the differences between the TAFREN and MDB 
assessments are largely a product of difference in scope 
and scale of reconstruction plans.  As the process moves 
forward, however, it appears that consultations are 
helping to bridge the gaps. 
 
12. (C) The role of TAFREN vis-a-vis the other responsible 
GSL 
entities may not be so easy to reconcile, however.  Sri 
Lanka is a tremendously polarized society, and political 
gain at your opponent's expense remains the guiding 
principle of the ruling class.  While we have tremendous 
respect for Mano Tittawella, he is not an elected official and 
has little political clout except through his proximity to 
the 
President.  One option would be for the President to appoint 
a 
political heavyweight who could cut through the red tape and 
bureaucratic hurdles to take charge. 
So far, she has shown no inclination to do so, preferring to 
deal through bureaucratic players 
whom she controls.  End Comment. 
LUNSTEAD