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Cablegate: Mca Potential Threatens Esf and Da Funding/Us

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

UNCLAS COLOMBO 001958

SIPDIS

SENSITIVE

FOR DEPUTY SECRETARY ARMITAGE FROM AMBASSADOR LUNSTEAD

E.O. 12958: N/A
TAGS: PREL EAID ECON AMGT KMCA CE LTTE
SUBJECT: MCA POTENTIAL THREATENS ESF AND DA FUNDING/US
LEVERAGE ON PEACE PROCESS

1. (SBU) RICH, I FEEL COMPELLED TO CALL YOUR ATTENTION TO A
POTENTIALLY MAJOR PROBLEM WITH US ASSISTANCE TO SRI LANKA,
AND, I ASSUME, SOME OTHER MCA ELIGIBLE COUNTRIES. FOLLOWING
THE OMB PASSBACK EXERCISE, WE HAVE HEARD THAT ESF AND DA
FUNDS FOR SRI LANKA WERE SLASHED BY 50 PERCENT, USING THE
RATIONALE THAT MCA MONEY WOULD MAKE UP THE DIFFERENCE. IF
TRUE, THIS IS UNACCEPTABLE AND RISKS UNDERMINING MCA BEFORE
IT GETS UNDERWAY. IT WOULD DESTROY TWO YEARS OF HARD FOUGHT
IMPROVEMENTS IN OUR USAID PROGRAMS IN SRI LANKA. OUR USAID
PROGRAMS ARE FOCUSED ON SUPPORTING PEACE AND THEY GIVE US
IMMENSE LEVERAGE, RELATIVE TO THE AMOUNT OF MONEY SPENT, IN
THE PEACE PROCESS.

2. (SBU) WE UNDERSTAND OMB HAS PROPOSED ESF AND DA CUTS OF
50 PERCENT OF OUR USD 12 MILLION AND USD 6.6 MILLION REQUESTS
RESPECTIVELY. THESE PROPOSALS WERE ESSENTIALLY FLATLINE
REQUESTS, NEEDED TO SUSTAIN OUR ONGOING PROGRAMS. WHILE TRUE
THAT SRI LANKA IS AN MCA ELIGIBLE COUNTRY, ITS MCA COMPACT
PROPOSAL IS STILL IN ITS INFANCY. FURTHER, MCA IS UNDER NO
OBLIGATION TO FUND A COMPACT PROPOSAL. FINALLY, THE COMPACT
PROPOSAL IS COMPLETELY A GSL EXERCISE, WITH NO RELATIONSHIP
TO USAID FUNDING OR THE KINDS OF TECHNICAL ASSISTANCE AND
CAPACITY BUILDING USAID PROGRAMS ARE PROVIDING.

3. (SBU) WITHOUT SUFFICIENT ESF AND DA FUNDING, THE USG WILL
BE UNABLE TO CONTINUE PROGRAMS SUCH AS THE INFORMAL
COOPERATION AIMED AT BOLSTERING THE PEACE PROCESS AND SETTING
THE STAGE FOR EVENTUAL RECONCILIATION, PROMOTION OF
EMPLOYMENT AND TRAINING PROGRAMS FOR UNEMPLOYED YOUTH,
ENHANCED SRI LANKAN COMPETITIVENESS IN WORLD MARKETS THROUGH
TECHNICAL ASSISTANCE AND EFFORTS TO BOOST AGRICULTURAL
PRODUCTIVITY TO ENHANCE LIVELIHOODS. IN ADDITION, OUR
CURRENT OFFICE OF TRANSITION INITIATIVES (OTI) PROGRAM
PROVIDES IMPORTANT SUPPORT FOR THE PEACE PROCESS THROUGH ITS
SMALL-SCALE, BUT HIGH IMPACT, LOCAL PROGRAMS. OTI IS
SCHEDULED TO PHASE OUT IN EARLY 2006. IF ESF AND DA ARE CUT,
WE WILL BE UNABLE TO MOVE INTO AN OTI FOLLOW-ON PROGRAM. THE
MCA CONCEPT PAPER CURRENTLY SEEKS ASSISTANCE IN IRRIGATION,
THE APPAREL SECTOR, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT,
RURAL ROAD DEVELOPMENT, THE POWER SECTOR AND TRAINING FOR
GOVERNMENT OFFICIALS.

4. (SBU) ONE FINAL CONCERN. IN ALL OF OUR AND MCC'S
INTERACTIONS WITH THE GSL, WE HAVE ASSURED THE GSL THAT MCC
FUNDING IS NOT A REPLACEMENT FOR USAID FUNDS. THE
PRESIDENT'S INITIATIVE CLEARLY STATED THIS WOULD BE
ADDITIONAL DEVELOPMENT ASSISTANCE, TO SUPPLEMENT THE
ASSISTANCE RECEIVED BY COUNTRIES THAT ARE MAKING THE TOUGH
CHOICES TO INVEST IN THEIR PEOPLE, PROVIDE GOOD GOVERNANCE
AND ENHANCE ECONOMIC FREEDOM.

5. (SBU) I APPRECIATE YOUR ATTENTION TO THIS MATTER AND YOUR
ASSISTANCE IN HELPING TO SET THINGS RIGHT. GIVEN THE
UNCERTAINTIES SURROUNDING THE MCA SITUATION, AND THE
POTENTIAL DEVASTATING EFFECTS ON OUR USAID FUNDING, THE
PROPOSED CUTS IN ESF AND DA FUNDING COULD SEVERELY UNDERMINE
OUR CREDIBILITY, OUR STANDING IN THE DONOR COMMUNITY AND OUR
LEVERAGE WITH THE GSL.
LUNSTEAD

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