US embassy cable - 05COLOMBO712

UNCLAS SECTION 01 OF 02 COLOMBO 000712 
 
SIPDIS 
 
DEPT FOR EB A/S ANTHONY WAYNE; SA/INS FOR J. BRENNIG, N. 
DEAN; PLEASE PASS TO TSUNAMI RECONSTRUCTION TASK FORCE; 
TREASURY FOR C. CARNES 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAID, ECON, PGOV, CE, MV, Tsunami 
SUBJECT: SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE 
(APRIL 12, 2005) 
 
REF: A. COLOMBO 557       D. COLOMBO 696 
 
     B. COLOMBO 558       E. COLOMBO 697 
     C. COLOMBO 583       F. COLOMBO 704 
 
1.  This contains an action request (Par 6). 
 
2.  We are sending this update early since Post will be 
closed on Wednesday and Thursday for Sri Lankan holidays. 
 
3. The Ambassador and poloff visited the Maldives last week 
to discuss possible mechanisms for providing assistance, and 
visited several islands severely damaged by the tsunami. 
(Refs E and F).  After conversations with Maldivian 
government officials, the Embassy is convinced that USG 
supplemental tsunami assistance can be effectively channeled 
through the GORM's National Fund.  The government is willing 
to work with donors on particular needs or conditionalities 
they may have. 
 
4.  VAT:  While the GSL agrees that our bilateral agreement 
allows assistance provided by USAID through local partners 
to be exempt from VAT, the GSL now interprets our long 
standing system, the VAT-exempt notification letters, to be 
"illegal".  GSL suggests that contractors pay VAT, and that 
an arrangement be worked out for GSL review and reimburse 
funds paid for VAT.  This approach most likely would require 
substantial USG and NGO efforts to follow up with GSL for 
reimbursement, and is far from ideal.  Further, we went 
through this entire issue a year ago, which led to creation 
of the exemption letters.  This has tremendous implications 
for our tsunami programs.  The Ambassador and AID Director 
will raise this issue with the Finance Secretary on Friday. 
 
5.  At a recent donor meeting, it was agreed that bi-weekly 
meetings will be held between donors and the GSL tsunami 
"big three:"  Mano Tittawella of TAFREN, Tilak Ranaviraja of 
TAFOR, and Finance Ministry Secretary P.B. Jayasundera. 
Many pressing tsunami issues require coordination among the 
three.  Having regular sessions with all three present 
should be an effective way to break logjams and move things 
along quickly. 
 
6.  Post requests that organizers for the Private Sector 
Summit be contacted to assure that representatives from the 
Maldives are invited.  We assume that this will be a 
networking event in large part, but look forward to 
receiving more concrete details regarding the purposes of 
the meeting. 
 
7.  USAID has sent teams out to Galle and Matara in the 
south and Ampara and Batticaloa in the east to assess 
progress on the relief and rehabilitation front.  Take home 
message is that on-the-ground aid is progressing mostly as 
expected.  (Ref D). 
 
8.  The Ambassador and AID Director will meet with the 
Finance Secretary on Friday to present a copy of the draft 
Strategic Objective Grant Agreement, so that we may move 
ahead quickly after Congress passes and the President signs 
the Supplemental Aid package. 
 
9.  Two upcoming AID teams will visit soon to assist in 
preparing proposals for coastal zone management, and for 
vocational technical education. 
 
10.  GSL's Ministry of Finance and Planning has sent us the 
official announcement of the Development Forum to be held in 
Kandy on May 16 and 17, "to focus on the post-tsunami 
recovery and reconstruction process and the overall medium 
term development strategies of Sri Lanka."  The Ambassador 
plans to attend.  We will ask septel to be advised which USG 
officials will attend this conference. 
 
11.  Army Corps:  USAID is developing a new agreement with 
Army Corps to more clearly define the scope of its work. 
 
12.  A/S Cristina Rocca visit:  Preparations are underway 
for A/S Rocca's visit on April 19 and 20.  We want to make 
use of this visit to demonstrate the efforts underway, 
progress accomplished, and to articulate the importance of 
GSL helping the USG and its other aid providers help Sri 
Lanka. 
 
LUNSTEAD