US embassy cable - 05COLOMBO1071

UNCLAS SECTION 01 OF 03 COLOMBO 001071 
 
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; MCC FOR D.NASSIRY 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: EAID, ECON, PGOV, CE, MV, Maldives, Tsunami 
SUBJECT: SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE 
(JUNE 16, 2005) 
 
Ref: State 109335 
 
1. (U) This cable provides information for the June 16 
post-Tsunami IAWG meeting.  Please see action request in 
para 10. 
 
Maldives 
-------- 
2. (U) Econchief and USAID Environment Officer visited 
Maldives on June 13 to discuss USD 8.7 million contribution 
to the GORM Tsunami Relief and Reconstruction Fund (TRRF). 
Emboffs met with Riluwan Shareef, Executive Director, 
Ministry of Finance; Mohamed Ahmed, Assistant Executive 
Director, Ministry of Finance; and, Aminath Didi, Assistant 
Director General, Department of External Resources, 
Ministry of Foreign Affairs. 
 
3. (SBU) Shareef thanked the USG on behalf of the GORM for 
its support in the aftermath of the tsunami.  He also 
expressed appreciation for the flexibility of the US 
Government in its consideration of potential projects and 
uses for the money. Shareef said that reconstruction has 
leveled off somewhat in recent weeks, the result of: 
 
--Fatigue and stress on the part of GORM officials, who 
have been working 18-20 hour days since the tsunami hit; 
the GoRM realizes it need to rationalize people's schedules 
and workflow; 
 
--Maldivian construction companies are overtaxed and not 
always capable of meeting donor requirements for 
international contracts.  This then begs the question, do 
you take a risk with less capable contractors, or spread 
out the ones that are able to meet requirements? 
 
--Dealing with increased capital investment expenditures. 
In a normal year, Maldives would absorb approximately USD 
30 million in investment.  Even if one assumes a five-year 
rebuilding period, the USD 450 million in assessed damage 
means Maldives faces a burden several times its normal 
absorptive capacity. 
 
4. (SBU) Shareef indicated that they are treating the 
reconstruction effort as a budgetary exercise, in order to 
closely track the financial management of the projects and 
programs.  Regarding the USG request to disburse all monies 
within 16 months, the GORM would make every effort to 
comply, but this would be a tall order.  Didi suggested 
that imposing such a timeframe means we need to move as 
quickly as possible to conclude a bilateral agreement, and 
the GORM would appreciate a draft from the USG as quickly 
as possible. 
 
5. (SBU) One area that Shareef suggested would help the 
GORM immensely was capacity building related to TRRF fund 
management.  In this regard, the Finance Ministry currently 
keeps most national accounts on the Quicken "QuickBooks" 
program.  This limits their ability to meet the transparency, 
auditing and reporting requirements of many donors.  Further, 
the Ministry has been working since before the tsunami to 
better integrate GORM accounts.  The TRRF was based on a 
public finance project that had been under consideration by 
the ADB, but the loan component for the project remains 
uncertain.  There is currently draft legislation before the 
Majlis (parliament) and under consideration by cabinet to 
strengthen the public accounting system.  The GORM would be 
interested in using approximately 10 percent of the proposed 
USG funds to hire a consultant and purchase the necessary 
hardware and software to pursue this project.  According to 
Ahmed, the project could be completed within three months and 
would be a huge boon to the GORM's ability to meet donor 
requirements for accountability, would help the GORM better 
disburse and account for funds more quickly and would have 
longstanding benefits for shaping how the GORM structures 
its overall financial program. 
 
6. (SBU) Regarding questions of accountability, Emboffs 
were also briefed on the GORM version of the Donor 
Assistance Database (DAD) provided by UNDP.  This mechanism 
should be implemented by mid-July and will be maintained 
directly by the GORM.  The GORM has already established 
KPMG Maldives as their internal auditors for the TRRF and 
provided Econchief with a copy of the Terms of Reference 
(TOR) for the internal audit function (will be faxed to 
SA/INS and Task Force).  External audit TOR is under 
development and will be provided when completed.  Currently 
the GORM is updating income and expenditures daily and 
posts this information every two weeks on the Internet at 
(http://www.finance.gov.mv/). 
 
7. (SBU) The GORM remains concerned about financing gaps in 
the sewerage, clean drinking water and jetty and harbor 
development sectors, in addition to the administrative 
capacity building issues described above.  They have 
promised to have the Department of National Planning 
provide us with a list of ideas that they would pursue with 
our donation.  Regarding the US request to "brand" our 
donations, GORM is in full agreement and encourages the 
practice. 
 
8. (U) On the question of how to transfer funds, the 
Maldives Monetary Authority maintains an account with the 
Fed in New York and the Bank of Maldives has a connection 
with JP Morgan-Chase.  Therefore, it will probably be 
easiest to arrange a transfer from Treasury to the MMA Fed 
account in New York. 
 
9. (SBU) Emboffs met with representatives from UNDP and the 
Maldivian National Chamber of Commerce and Industry (MNCCI) 
to discuss the potential US contribution as well.  Both 
groups urged vigilance on the monitoring of the funds and 
expressed a desire that the US help in building capacity, 
as they agreed with the GORM assessment that the rebuilding 
effort is beginning to wane as a result of a lack of 
resources and capabilities.  As did the GORM, both UNDP and 
MNCCI identified water and sanitation, jetties and capacity 
building as key areas for reconstruction. 
 
10. (SBU) With regard to the TRRF, we obviously need to 
have more discussions about specific projects. 
Nonetheless, Post suggests that we proceed with negotiation 
and conclusion of a bilateral agreement.  In keeping with 
reftel request to keep to general sectors, we suggest that 
the agreement identify water and sanitation, harbor and 
jetty projects and administrative and financial capacity 
building as the scope.  Please advise on how such an 
agreement will be prepared on the USG side. 
 
Sri Lanka - Six-Month Anniversary 
--------------------------------- 
11. (SBU) With regard to Washington discussions on how to 
mark the six-month anniversary, Post believes it would be 
best to tie our PD efforts to the signing and 
implementation of the SOAG.  In Sri Lankan culture, one 
month, three month and one year anniversaries are 
appropriate to mark events of this magnitude.  Post placed 
an op-ed on USG assistance at the three-month mark, and 
will consider doing another one for the six-month 
commemoration.  However, we do not envision a major public 
affairs effort aimed at marking the six-month point, but 
would focus our efforts, when we sign the SOAG, on 
highlighting the projects to be undertaken through the 
supplemental funding initiative. 
 
USTDA Visit 
----------- 
12. (U) USTDA Reps are in town today and tomorrow and will 
be meeting with a cross-section of tsunami reconstruction 
players to find the best fit of USTDA assistance.  We will 
work closely with USTDA to identify good opportunities with 
follow-on commercial potential. 
 
Paris Club Debt Relief 
---------------------- 
13. (U) We have heard from the Finance Ministry that the 
GSL intended to sign an MOU with the Paris Club on June 15. 
We further understand agencies are working on a draft 
bilateral agreement for consideration by the GSL.  Please 
let us know if additional information is required to help 
in this effort. 
 
LUNSTEAD