US embassy cable - 03COLOMBO787

C O N F I D E N T I A L SECTION 01 OF 03 COLOMBO 000787 
 
SIPDIS 
 
DEPARTMENT FOR SA, SA/INS, SA/PD; NSC FOR 
E. MILLARD 
 
LONDON FOR POL/RIEDEL 
 
E.O. 12958:   DECL:  05-12-13 
TAGS: PGOV, PREL, PINS, PHUM, KPAO, CE, Political Parties 
SUBJECT:  Cohabitation crisis erupts as president takes 
steps to take over lucrative national lottery board 
 
Refs:  (A) SA/INS-Colombo 05/10/03 class e-mail 
-      (B) Colombo 780, and previous 
 
(U) Classified by Ambassador E. Ashley Wills: 
REASONS:  1.5 (B,D). 
 
1.  (C) SUMMARY:  Another in Sri Lanka's long series of 
cohabitation crises has erupted as President Kumaratunga 
has taken steps to take over the lucrative national 
lottery board.  The GSL has resisted the move fiercely 
and the dispute seems bound for the courts.  In the 
meantime, the GSL is mulling over trying to impeach the 
president or calling new elections.  It is not clear how 
far both sides want to press this matter, but 
cohabitation ties, which were bad, continue their 
downhill slide.  Suggested "if asked" press guidance is 
contained in Para 10.  END SUMMARY. 
 
-------------------------------------- 
President Acts to Take Over Key Agency 
-------------------------------------- 
 
2.  (SBU) In the latest crisis involving Sri Lanka's 
always tense cohabitation ties, President Kumaratunga 
took steps May 9 to take over control of the Development 
Lotteries Board from the government.  (Note:  The funds 
this agency makes, and it is believed to run a large 
profit, are supposed to be used for national development 
projects.  Some of the money is also provided to the 
"President's Fund," which is controlled by Kumaratunga 
and was set up to make similar development-related 
allotments.  Many observers consider the agency to be a 
source of slush funds for those in government.  End 
Note.)  The details are a bit sketchy, but the president 
apparently signed an executive order late 
May 9 taking over the board.  Copies of this order and a 
letter signed by the president were duly sent to Prime 
Minister Wickremesinghe and Minister of Economic Reform 
Milinda Moragoda, who is chairman of the lotteries 
board.  In her letter, the president explained her move, 
asserting that she had to act because of reports she had 
received of managerial malfeasance at the board (She did 
not accuse Moragoda of any personal wrongdoing, 
however).  She also argued that the agency should have 
been transferred to presidential control at the time the 
government switched hands in December 2001, and not been 
put under the Prime Minister to begin with.  (Note:  We 
also understand that the President was worried about 
tentative plans to privatize the lotteries board, which 
would deprive her of money for her "Presidents Fund.") 
 
----------------- 
GSL Disputes Move 
----------------- 
 
3.  (C) Bitterly opposed to the president's action, the 
GSL acted immediately to prevent the order from being 
published in the government gazette.  (Note:  In Sri 
Lanka, executive orders seem to need to be published in 
the gazette in order to take effect, although the 
president's office and her supporters are disputing this 
-- see below.)  To do this, the government ordered 
police and party supporters to go to the government's 
main printing office in downtown Colombo late May 9 to 
prevent publication of the order.  Amid what turned out 
to be almost a mini-riot, the GSL made sure the order 
was not printed.  Instead, the chief printer conveyed 
the issue to the Attorney General, who is now looking 
into the matter.  (Note:  As of May 12, the police are 
still closing off roads in the vicinity of the 
government's printing office in an effort to prevent 
trouble.) 
 
4.  (SBU) In arguing against her action, the prime 
minister and Moragoda both immediately sent letters 
(which were made public) to the president asserting that 
the action she had taken was improper.  The PM's letter, 
more legal in nature than Moragoda's, asserted that Sri 
Lanka's constitution requires that the president 
"consult" with the PM prior to taking moves involving 
the government.  Moragoda's letter, meanwhile, asserted 
that what the president had done cut completely against 
the grain of the need for the president and the 
government to work together to smooth out cohabitation 
problems. 
 
----------------- 
GSL Contacts U.S. 
----------------- 
 
5.  (C) Per Ref A, the president's action also 
precipitated a flood of requests by GSL personages for 
U.S. help.  On May 9-10, the Ambassador received several 
calls from Moragoda and one from the PM, for example, 
requesting that the U.S. do what it could to stop what 
they characterized as the president's "meddling" in the 
government's business.  In response, the Ambassador 
noted that the U.S. generally does not get involved in 
specific issues involving Sri Lanka's internal political 
and legal system.  He went on to underscore, however, 
our long-standing position that the government and the 
president need to work together in the national interest 
in order to move the peace process and economic reform 
forward. 
 
6.  (C) In the course of discussions on this issue, 
Moragoda told the Ambassador that he would quit all his 
jobs in the government, including his position as a key 
member of the GSL's peace negotiation team, if the 
president's decision was put into effect.  The 
Ambassador, noting Moragoda's importance to the 
government and to the peace process, urged him not to 
take such a drastic action. 
 
-------------------- 
Next Steps in Crisis 
-------------------- 
 
7.  (C) At this point, the government appears to remain 
in charge of the lotteries board with Moragoda still 
acting as chairman.  In the meantime, Attorney General 
K.C. Kamalasabayson, who is considered a relatively 
neutral figure, is reviewing the matter.  It seems that 
he will either issue an advisory opinion on the issue or 
directly refer it to the court system.  As noted above, 
the GSL is arguing hard that the president had no right 
to act without consulting the PM first.  The president 
and her supporters, on the other hand, are arguing that 
printing in the gazette is a mere technicality and the 
order should be ruled as being in effect. 
 
8.  (C) As the legal angles play out, the situation has 
charged up those in the governing United National Party 
(UNP) who believe that the party should move against the 
president in a political sense.  Moragoda has told the 
Ambassador, for example, that there are some in UNP 
circles who are talking of moving forward with long- 
standing abuse of power charges against Kumaratunga with 
the aim of impeaching her.  Others in the party are 
thinking of calling new elections, which many in the UNP 
believe will result in gains vis-a-vis the president's 
People's Alliance (PA) party.  There is also talk of 
seriously constraining her "power of the purse" by 
starving her office of funding.  As of mid-day May 12, 
it is not clear whether the prime minister has decided 
to take any of these courses or under what conditions he 
may do so.  In the meantime, others in the party are 
counseling patience and a return to the status quo ante, 
urging that the government work to convince the 
president to rescind her order re the lottery. 
 
------- 
COMMENT 
------- 
 
9.  (C) It is not clear how far both sides want to press 
this matter.  Our sense, at this point, is that the 
president and the GSL might back off and not choose to 
make this matter a cause belli.  That said, after 
periodic crises over the course of past months, it is 
clear that cohabitation ties, which were bad, are 
continuing their downhill slide.  This is very bad news 
for the peace process, which is also in a trough because 
of the Tamil Tigers' recent decision to suspend their 
participation in the peace talks.  Clearly, if the GSL 
is engaged in fighting with the president, it will not 
be able to give the process the full attention it 
requires, especially during this sensitive timeframe. 
(Note:  SA A/S Rocca is currently visiting Sri Lanka. 
Her meetings, including comments in reference to co- 
habitation, will be reported Septel.)  END COMMENT. 
 
------------------------ 
Suggested Press Guidance 
------------------------ 
 
10.  (U) Suggested "if asked" press guidance follows: 
 
Begin text: 
 
Question: 
 
What is the U.S. position regarding the public fight 
which has broken out between the president and the prime 
minister in Sri Lanka over the control of a key agency? 
 
Answer: 
 
We are aware of the situation in Sri Lanka.  We continue 
to urge all sides to work together in a cooperative and 
conciliatory manner.  The focus must remain on the 
national interest in moving the peace process and 
economic reform forward. 
 
End text. 
 
11. (U) Minimize considered. 
 
WILLS