US embassy cable - 03COLOMBO497

UNCLAS SECTION 01 OF 02 COLOMBO 000497 
 
SIPDIS 
 
FOR SA, SA/INS/D 
PASS TO USAID AMBASSADOR, WENDY CHAMBERLAIN, AA/ANE; 
GODRON WEST, DAA/ANE; BERNADETTE BUNDY, ANE 
 
E.O. 12958:  N/A 
TAGS: EAID, CE, LTTE - Peace Process 
SUBJECT: FOURTH TOKYO CORE GROUP MEETING ROUNDUP 
 
Summary:  The meeting focused on an update of the issues 
raised by the Needs Assessment validation process, 
progress in the most recent Peace Talks, a status report 
on the Washington Seminar and the issue of conditionality 
and a review of the Tokyo conference Agenda. Ambassador 
Wills will host a meeting next week among donors to 
discuss conditionality. END Summary. 
 
1.   The UN and ADB reported on the Needs Assessment 
Validation Workshop held in Kilinochchi last week.  It was 
attended by 150 people, 50 of whom were LTTE, including 
three LTTE consultants from Australia, senior central and 
provincial level Government staff, NGOs and civil society. 
There were numerous comments and strong disagreements and 
at the end of the workshop there were a few difficult 
issues that remained unresolved.  These included the 
concept of blended or connected infrastructure development 
favored by the GSL and self-sufficiency for infrastructure 
development favored by the LTTE. Views differed also on 
approaches to rebuilding (rehabilitation of existing 
infrastructure where possible or replacement with state of 
the art buildings).  A small review group of GSL and LTTE 
consultants is redrafting the document but differences may 
still remain. 
 
2.   Minister Moragoda said that the debate is one of Marx 
versus Adam Smith and that the LTTE has a steep learning 
curve. The LTTE appears to be responding on the basis of 
its past experience where the majority of donor funds went 
to Colombo. The Tigers don't want funds to go through the 
central Government now because they believe that a 
percentage will be skimmed off the top. Rather, they want 
to retain wealth in the region and would prefer to 
contribute as little as possible to the Center.  In 
practical terms they want ADB money to remain in the 
province with the design and implementation managed in the 
North and East. The Minister said that the LTTE wants land 
ownership patterns to change.  On the private sector 
development side, he believes that investment in small 
business activities at the grass roots level may help the 
LTTE move in the right direction.  He asked for Japanese 
assistance in this area. 
 
3.   The Norwegian Ambassador said that over the past few 
months he had seen some movement in LTTE thinking, which 
was initially focused on doing everything themselves, but 
now the Tigers acknowledge that some outside technical 
assistance might be helpful. According to Westborg, the 
LTTE does not appear monolithic. While the LTTE still 
believes that cooperatives are the way forward, it appears 
open to joint ventures. Westborg said that while the LTTE 
doesn't have as much time to go through the learning 
experience as it would like, there is no easy way around 
it and the GSL and donors need to be a little patient with 
the Tigers. 
 
4.   Ambassador Westborg reported that at the most recent 
peace talks, both sides had accepted the draft agenda for 
the Tokyo meeting.  He repeatedly pointed out at the talks 
that the GSL and LTTE need to move forward to create a 
positive attitude among the donors leading up to Tokyo. 
The message was received and understood.  He said that 
significant political results will take more time than was 
available given the Tokyo meeting date.  Progress was made 
at the talks in that the LTTE welcomed local elections in 
its areas, even multi-party elections.  Minister Moragoda 
indicated that the LTTE wanted an expanded SIRHN, which 
means a semi-permanent organizational structure. In 
response, the GSL indicated that a clear road map with 
milestones was required to consider such an expansion. 
The road map needed to include units of devolution and a 
plan for dealing with police and armed forces issues. 
Minister Moragoda suggested that allowing democracy to 
flourish at the grass roots level would create an 
opportunity to pump money into local authorities. There 
will be further discussion of the elements needed to 
expand SIRHN at the next set of peace talks.   Minister 
Moragoda said that they had discussed having additional 
meetings between the formal talks as a great deal of 
ground still needed to be covered. To this end, G.L. 
Peiris will meet with Balasingham in the Wanni or London 
and he (Moragoda) will also see Balasingham in London. 
 
5.   The GSL will hold a Colombo Seminar in preparation 
for Tokyo on May 6.  A local think tank, the Center for 
Policy Alternatives, has tentatively scheduled a pre-Tokyo 
workshop for April 25 -27 for civil society. There was 
considerable discussion as to whether the Colombo Seminar 
would be an informational meeting or a consultative one. 
One of the key factors is the timetable for getting the 
documents for Tokyo ready.  The ADB rep has heard concerns 
from colleagues that the process has not been 
collaborative enough and that there should be an 
opportunity to discuss the documents prior to 
finalization. 
 
6.   The Washington Seminar Agenda was discussed and the 
Ambassador reported that the invitations had already gone 
out.  It was still unclear if Secretary Powell would make 
an appearance and this may not be decided until the last 
minute given world events.  Ambassador Wills noted that 
while the topic of Conditionality for disbursement of 
donor funds did not yet appear on the draft Washington 
Seminar Agenda, this discussion might be added since most 
donors thought it should be discussed.  The Japanese 
Ambassador reiterated his previous position that the issue 
is very sensitive and that it may not be appropriate as a 
topic for discussion in an open meeting.  Ambassador Wills 
suggested that he would host a private donor meeting on 
conditionality next week, at which a consensus would be 
sought on the way forward on this issue.  The USAID 
Director reported that the development staff from a 
significant number of bilateral missions had met and are 
developing a paper on conditionality.  Once the paper has 
been approved by heads of mission, the intent of the group 
was to have the document shared with the GSL and the LTTE 
to create a transparent and collaborative process.  The 
ADB rep stressed that the paper needed to be simple and 
practical.  The IMF rep indicated that there was little 
chance of keeping the discussion on conditionality private 
since it was pretty clear that bilateral donors would 
raise the issue at the upcoming World Bank and IMF 
meetings. 
 
7.   The Private Sector meetings which will be held 
immediately following the Tokyo Donor Meeting will 
primarily be an opportunity for Sri Lankan businesses to 
meet Japanese private sector counterparts to further 
stimulate foreign investment.  It does not appear open to 
the private sector from other donor countries. 
 
8.   Minister Moragoda will be traveling extensively in 
the next two weeks.  He plans to travel to Brussels to 
have discussions with the EU and hopes to have separate 
meetings with representatives of Member States. This 
appears to be an alternative to the originally proposed EU 
Seminar. The EU members will be voting on the issue of co- 
hosting the Tokyo Meeting and the EU Representative 
indicated that signs are all positive that they will agree 
to co-host.   The next Core Group meeting will be held in 
approximately 10 days time to fit into the Minister's 
travel schedule. 
 
9. Comment: Progress is slowly being made. It is our hope 
that donors can agree on conditionality so that it can 
form part of the agenda both at the Washington Seminar and 
at Tokyo.  We are troubled, as are other donors, with the 
statist, autarkic and separatist thoughts expressed by 
some LTTE'ers at the needs assessment meeting in 
Kilnochichi, but this probably constituted posturing to 
some extent.  As the Norwegian Ambassador noted, the LTTE 
probably doesn't have policies on many economic matters 
yet.  This is both good and bad, good in that the Tigers 
may be open to influence and reality, bad in that it shows 
how far they have to come to meet the normally-accepted 
criteria set by donors. 
 
WILLS