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Cablegate: Fifth Core Tokyo Group and Wider Group Meeting

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 03 COLOMBO 000600

SIPDIS

FOR SA, SA/INS,D, LONDON FOR POL/RIEDEL; NSC FOR E.
MILLARD
PASS TO USAID, AMBASSADOR, WENDY CHAMBERLAIN, AA/ANE;
GORDON WEST, DAA/ANE; JAMES BEVER AND BERNADETTE BUNDY,
ANE/SA

E.O. 12958: N/A
TAGS: EAID CE LTTE
SUBJECT: FIFTH CORE TOKYO GROUP AND WIDER GROUP MEETING

1. SUMMARY: The Core Group meeting provided an update on
the status of the upcoming Seminars, workshops and
planning sessions in Washington, Colombo and Japan in
preparation for the June 9-10 Tokyo Donor Conference. The
agenda for Tokyo is evolving and the latest version
referenced below has been faxed to the State Desk
Officer. Topics discussed at the meeting included the
recently concluded World Bank meetings on Sri Lanka, an
update on the Washington seminar, the bilateral donor
draft Principles for Development and Peace paper,
ADB/WB/UN needs assessment document and the Sri
Lanka/Japan private sector meeting following the Tokyo
Donor Conference. END SUMMARY

2. Minister Moragoda chaired. He reported on his
positive meetings with the EU and some member country
representatives and thanked the EU for agreeing to co-
chair the Tokyo Donor Conference. He indicated that one
of the topics discussed with the EU was the need for an
expanded Sri Lanka Monitoring Mission.

3. Minister Moragoda will hold bilateral meetings with
Canada and Holland on the margins of the Washington
seminar and will also meet with the UN Secretary General
Anan and World Bank President Wolfensohn. Other meetings
may be scheduled. The Minister said that the Indian
Ambassador to Washington was likely to attend since the
Indian Finance Minister will not attend the World Bank
meetings.

4. The Japanese Ambassador reported on the changes in
the draft Tokyo Conference agenda based on meetings held
with the Multilaterals on April 4 in Tokyo as follows:

-- In Plenary Session 2 following Norway's general
remarks, summary reports will be given on the outcome of
the Colombo Civil Society and Private Sector meetings.
Three new organizations have been invited to participate
in the Tokyo meeting: IFAD, IOM and OPEC. The Japanese
Ambassador indicated that the World Bank remarks might be
moved from the concluding session to one of the plenary
sessions.

-- In the First Operative Session the ADB and UNDP will
talk on the Needs Assessment and in the Second Operative
Session the World Bank and IMF will report on Sri Lanka's
economic performance and reconstruction and development
agenda.

5. The World Bank's representative, Peter Harrold,
reported on the PRSP/Regaining Sri Lanka and CAS review.
Support was strong among Board members for overall
lending with approval of $850 million over four years
with the provision for up to one billion based on
performance. Harrold said that if the World Bank meeting
was the curtain raiser for Tokyo, it would appear that
now is the time for support to Sri Lanka. He also
indicated that a two hour meeting was held with US
officials prior to the Board review. Minister Moragoda
told the group that the GSL needed to look at the
concerns raised at the meeting and address them. These
concerns mainly revolved around the issue of sufficient
consultations prior to drafting the Regaining Sri Lanka
document. Harold suggested that there should be a
renewed emphasis on an ongoing consultation process and
there was a particular need to establish a mechanism for
consultations with civil society.

6. Ambassador Wills informed the group of efforts to
devise a statement of principles by bilateral donors to
be put before the negotiating sides prior to Tokyo,
preferably at the next round of talks. If widely
accepted, the document will be issued at the Tokyo
Conference. Minister Moragoda emphasized that while he
and the GSL supported the idea of such a paper, he didn't
want the GSL's economic program stalled as a result.
Ambassador Westborg, who had participated in discussions
on the Principles paper, said the sooner the paper came
out the better to allow time for the two sides to review
and discuss it. Ambassador Wills commented that he did
not want representatives from either side to think that
the donors were ganging up on them. The Japanese
Ambassador, who has been reluctant to discuss openly the
"Principles" paper, has greatly softened his position
after meeting with Ambassador Wills and the small group
of other bilateral donor principals. The Japanese
Ambassador agreed with Ambassador Wills that the document
should be provided to the two sides as expeditiously as
possible and that the message should be succinct and
pragmatic. The objective was not to scare off the LTTE
and jeopardize their participation in Tokyo. Ambassador
Wills quipped that if the "Principles" scared them off,
we don't want to give them money anyway!"

7. Peter Harrold reported that the Needs Assessment
document had been completed and had just been sent to the
GSL and the LTTE simultaneously. The GSL and the LTTE
have just been given a copy of the Multilateral Needs
Assessment. The GSL will forward it to donors, civil
society and the private sector in the next two days but
the timeframe with comments due by April 22 in
preparation for the next round of peace talks on April
29.

8. According to Harrold, the cost estimates arising from
the needs assesment have gone down from 1.6 to 1.3 billion
since the donor briefing last week and greater attention
has been paid to phasing to take into account capacity to
absorb the funds. Minister Moragoda expressed concern
about the possible macro economic implication of the
package and about the raised expectations on the part of
the LTTE as to how quickly funding would be implemented.
It was agreed that the IMF would run a macroeconomic
filter through. Ambassador Wills sought clarification of a
comment made at the last meeting that the LTTE would only
agree to
projects that provided state-of-art reconstruction and
equipment. Harrold indicated that the LTTE had become
more pragmatic in saying that what it wanted was for
the North and the East to get to the level of the rest of
the country and then march forward together. The World
Bank representative told the group that in terms of
volume, time and phasing, the Assessment was considered
practical.

9. The Japanese Ambassador reviewed Tokyo's comments
on the planning process for the Colombo seminar and the
Tokyo civil society and private sector meetings. Tokyo
is currently planning a meeting for civil society,
Japanese NGOs, the GSL and LTTE on June 8 and a private
sector meeting covering trade, investment and tourism on
June 9.

10. The Japanese are looking to the GSL to provide a
comprehensive incentive package to attract Japanese
investors, a package with data on investment
opportunities and a package of measures on deregulation,
tax schemes, access to resources and infrastructure. On
May 6 Japanese officials and representatives of the two
largest Sri Lankan Chambers of Commerce have been invited
to a meeting to provide the private sector view about
what is needed to attract foreign investment. The
Japanese Chamber of Commerce will organize the private
sector meeting. Ambassador Wills suggested that the US
would be interested in hearing about the package of
incentives the GSL was putting together in preparation
for the private sector meeting in Japan.

11. The Wider Tokyo Group meeting followed immediately
after that of the Core Group. Minister Moragoda thanked
the EU for agreeing to co-host the Tokyo meeting and for
the positive meetings he had in Brussels. He also took
the opportunity to thank the donors who supported the GSL
at the recent World Bank Board meeting. Since the IMF
conditions have all been met, the Minister was hopeful
that the review would also go smoothly. The Minister
then provided a summary of the status of preparations for
the Colombo meetings and asked for short briefings from
the Japanese Ambassador, the World Bank, UN
representatives and Ambassador Wills. Peter Harrold
provided a status report on the Needs Assessment and the
timing for comments as discussed in number 7 & 8.

12. COMMENT: The Japanese Ambassador and GOJ appear to
be more favorably disposed to the idea of a Principles
paper but are concerned about the reaction of the LTTE.
Although there continues to be wordsmithing on the
Principles paper, feedback from the other donors has been
Positive. (The draft statement of principles will be
cabled to Washington by septel.) After initial feedback
on the findings of the Needs Assessment, we are told that
the document has been revised to reflect greater
prioritization, sequencing and attention to absorptive
capacity. The GSL is particularly concerned that the
assessment fit in the economic framework but others are
concerned about raising unrealistic expectations on the
speed with which this level of assistance can be
implemented. END COMMENT

WILLS

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