US embassy cable - 05COLOMBO1331

UNCLAS SECTION 01 OF 03 COLOMBO 001331 
 
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 
SUBJECT: SRI LANKAN POST-TSUNAMI RECONSTRUCTION UPDATE 
(JULY 27, 2005) 
 
1.  (U) This cable provides information for the August 
3, 2005 post-Tsunami IAWG meeting. 
 
Maldives Update 
--------------- 
2.  (SBU) The Government of Maldives (GORM) still has 
not submitted plans for using USG funds.  The Planning 
Ministry gave a July 17 deadline to the line 
ministries for submitting details on projects, but the 
embassy has not received any new information.  Poloff 
spoke with Riluwan Shareef, Executive Director of the 
Ministry of Finance and Treasury, and was told that 
due to the recent reshuffling of cabinet ministries, 
the GORM will not meet self-imposed deadlines. 
 
Sri Lanka Unfazed by Indian Earthquake 
-------------------------------------- 
3.  (SBU) Sri Lanka was unaffected by the June 24 
earthquake that struck India's Andaman and Nicobar 
Islands.  Slight tremors were, however, felt in 
several parts of Sri Lanka, including Colombo. 
 
Housing Update 
--------------- 
4.  (SBU) The Government of Sri Lanka (GSL) is now 
focused on constructing permanent housing, the final 
phase of its shelter reconstruction program.  There 
are still lingering problems with transitional housing 
(reftel A), but TAFREN's (Task Force for Rebuilding 
the Nation) permanent housing program is now the focus 
of media attention.  According to TAFREN, pre-Tsunami 
Sri Lanka built between 4,000 and 7,000 houses a year. 
The latest figures published by the Department of 
Census & Statistics put the number of fully damaged 
houses at 41,393 and partially damaged houses at 
36,168 (total of 77,561 housing units).  However, 
there are still thousands of unaccounted people living 
with host families who will eventually also want 
permanent housing.   Construction work has already 
commenced on 5,000 units and 22,794 households outside 
the buffer zone have received the first rebuilding 
installment of Rs. 50,000 ($500). 
 
Housing Ultimatum 
----------------- 
5.  (SBU) Government spokesman Nimal Siripala de Silva 
informed journalists on June 25 that the GSL is giving 
delinquent donors an ultimatum.  If donors who 
promised to build permanent houses do not begin 
construction before the undetermined deadline, the 
government will cancel the agreements it has signed 
with them.  Mr. De Silva did not name donors, but said 
he would do so if and when the agreements were 
cancelled.  (Note: By "donors" here, it appears de 
Silva means "NGOs."  End Note.)  In the event of 
cancellation, the minister stated that the government 
would reallocate the land and the treasury would give 
funds directly to victims.  In his July 19 address to 
the American Chamber of Commerce (AMCHAM), Mano 
Tittawella, chairman of the Task Force For Rebuilding 
the Nation (TAFREN), estimated that 70 to 80 percent 
of the tsunami pledges have been converted to 
commitments.  (Comment: The government has been 
complaining about the unreliability of some NGOs for 
the last couple weeks (Reftel A) and it appears ready 
to crack down on unreliable NGOs.  End Comment.) 
 
Hyperinflation Risk in Tsunami-hit Areas 
------------------------------------------- 
6.  (SBU) The GSL is having an increasingly difficult 
time acquiring an adequate supply of raw materials and 
labor for the construction of houses.  The increase in 
demand has caused inflation in many tsunami-affected 
areas, and TAFREN Chairman Mano Tittawella announced 
at the July 19 AMCHAM meeting that this inflation 
could become hyper-inflation if conditions do not 
change. 
 
Tsunami Orphans Find Homes 
 
SIPDIS 
-------------------------- 
7.  (SBU) According to recent local press reports, all 
but 20 of the 1072 tsunami-orphaned children have 
found legal guardians.  Mr. Abeygunawardene, the 
Commissioner of the Department of Probation and Child 
Care, informed journalists that the GSL has given 
these children scholarships to support their education 
and has sent 500 rupees ($5.00) a month to their 
guardians in financial support. 
 
The Recommended Buffer Zone 
---------------------- 
8.  (SBU) The committee appointed by the President 
presented its finalized report on the 100/200 meter 
buffer zone to the cabinet last week.  If the cabinet 
accepts the committee's recommendations, they will be 
sent to the local government agents for consultation 
with residents.  Overall, the committee made four 
recommendations regarding the buffer zone: 
 
--Instead of forcible evacuation of population 
resident in the 100m / 200m buffer zone, they should 
be offered the choice to rebuild and live in their 
original sites. 
 
--In case of people who wish to leave the buffer zone, 
the government should facilitate relocation on 
alternative safer sites outside the buffer zone. 
 
--However, no future development or expansion of 
existing structures should be permitted within the 
buffer zones, and the provisions of the Coast 
Conservation Act should be strictly implemented. 
 
--To ensure safety of the communities that wish to 
remain on their original lands within the buffer zone, 
the committee recommends adopting features like 
berming, green belts and mangroves as envisaged in the 
Tsunami devastated areas of Banda-Aceh in Indonesia. 
 
SIPDIS 
 
9.  (SBU) In a June 25 meeting with Charles Setchell 
of USAID/OFDA, Mr. Setchell discussed with econoff the 
necessary steps the USG should take to influence the 
GSL's buffer zone policy.  Mr Setchell suggested that 
the USG use the Galle district in the South of Sri 
Lanka as the template for the reconstruction effort in 
the rest of the country.  He proposed that the USG put 
together a disaster mitigation proposal that walked 
TAFREN and the Coastal Planning ministry through what 
Galle has done in the Southern coast.  In addition, he 
argued that more local disaster mitigation programs 
such as evacuation plans for all types of emergencies 
needs to be implemented rather than solely preparing 
for another tsunami and depending on international 
warning systems.  Mr. Setchell concluded that a strong 
USG proposal would allow the GSL to distance itself 
from the 100/200-meter buffer zone restrictions that 
are slowing the rebuilding effort. 
 
Value Added Tax Headaches 
------------------------- 
10. (SBU) Since the expiration of the 4-month post- 
tsunami VAT exemption, the government has been taxing 
 
SIPDIS 
tsunami humanitarian relief items.  The government's 
 
SIPDIS 
logic for applying the VAT was to prevent people from 
illegally selling VAT exempt goods in the open market. 
NGOs have already felt the impact of this policy; for 
example, Oxfam paid $1 million in import duty for 
vehicles used in tsunami reconstruction work.  In 
addition, NGOs such as International Medical Corp. and 
others have complained to econoff that the VAT is 
hindering relief efforts and tons of containers worth 
of relief goods are reportedly lying idle at the port 
of Colombo waiting to clear customs and for government 
officials to determine VAT exemption or not.  Items 
held up include clothes, wheelchairs, crutches, 
sleeping bags, blankets and vehicles.  Only a few 
items such as medicines, baby food and building 
materials for temporary housing have been exempted 
from VAT so far.  Despite diplomatic pressure, the GSL 
has refused to budge, much to the frustration of 
numerous NGOs. 
 
Debt Relief 
----------- 
11. (U) Econoff forwarded the newly updated bilateral 
agreement on debt deferral and talking points to Dr. 
Jayatissa, Assistant Governor of the Central Bank, Mr. 
Jayamaha, Deputy Director General, External Resources 
and Dr. Ranee Jayamaha, Deputy Governor of the Central 
Bank for their review.  Econoff has requested that the 
Sri Lanka delegation provide comments as soon as 
possible. 
 
12. (SBU) Comment: Instead of hitting the ground 
running, the permanent housing program has been 
hindered by the ambiguousness of the buffer zone and 
other land issues.  People who have lost houses are 
reluctant to move far from the sea as the buffer zone 
stipulates and most donors are unwilling to provide 
major funding until the GSL resolves the land title 
issues.  Furthermore, the GSL's monthly payment of 
5000 rupees ($50.00) per tsunami-affected family 
arguably has encouraged people to stay in transitional 
camps rather than proceed with reconstruction.  Until 
the GSL sets a coastal policy and communicates it to 
all the stakeholders, confusion will impede a more 
rapid reconstruction.  With regard to the Maldives, 
the Ambassador discussed Tsunami rebuilding issues 
with the GORM, but it appears that the reshuffling of 
the cabinet coupled with fatigue has severely limited 
the ability of the government to respond to USG 
project requests.  However, Riluwan Shareef, Executive 
Director of the Ministry of Finance and Treasury told 
Ambassador that his goal was to see an agreement 
signed by the end of August. 
 
LUNSTEAD