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Cablegate: Sri Lanka Scenesetter

DE RUEHLM #0999/01 3030802
P 300802Z OCT 09




E.O. 12958: N/A
SUBJECT: Sri Lanka Scenesetter

1. (SBU) Sri Lanka stands at a pivotal point in its modern history.
The end of the long secessionist war with the LTTE opens up
opportunities for national reconciliation, political reform,
economic renewal, and international re-engagement. The question is
whether the Sri Lankan leadership has the vision, determination, and
courage to seize the opportunity. The Sri Lankans value their
realtions with the United States. Our challenge is strongly to
encourage the Sri Lankan government to embrace reconciliation,
accountability, and respect for human rights, while trying not to
push the country towards Burma-like isolation from the West.

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Aftermath of the Conflict

2. (SBU) The final months of the war were brutal, inflicting heavy
damage on all sides, both military and civilian. Estimates of the
number of dead and wounded vary widely, but outside observers agree
that the civilian toll was high. Many believed the Government of
Sri Lanka (GSL) could have minimized those casualties had it allowed
for some sort of negotiated surrender by the LTTE once the GSL had
surrounded remaining LTTE fighters. It is not clear, however,
whether greater effort in that direction by the GSL would have been
successful. The LTTE seemed intent on holding out to the very end,
forcibly recruiting civilians as young as 12 to continue the fight,
and using their own civilians as human shields even when it appeared
defeat was inevitable. In the last days and weeks of the conflict,
it became increasingly difficult to differentiate between civilians
and LTTE combatants. Most outside, neutral observers privately
agree that the GSL could have finished off the LTTE more quickly if
they had been willing to risk a higher level of civilian casualties.
The State Department's recent report to Congress on incidents
during the final stage of the war makes clear that significant
numbers of civilian dead and wounded were caused by both sides in
the final months of the war.

3. (SBU) President Mahinda Rajapaksa enjoyed immense popularity
among the Sinhalese electorate at the end of the war. He was seen
as the political architect of victory in what many thought was an
unwinnable war. He appeared invincible at the ballot box in
provincial elections during the first half of the year, and indeed
this success carried through to October. The government's budget
suffered from the high cost of winning the war. Expensive purchases
of war-related equipment and ammunition, often on longer-term
contracts and using up valuable foreign reserves, coupled with a
drop in exports due to the global economic downturn, pushed Sri
Lanka to request a stand-by arrangement from the IMF in early 2009.
Approval of this instrument was delayed until July, but while
foreign reserves dipped to only a month of imports in May, Sri
Lanka's reserves have recovered since then, and the IMF review team
issued a bullish report on their progress. Sri Lankans are
optimistic that the economy will improve, but it has been harder to
lure foreign investment into the private sector. Although there has
been a great deal of interest, particularly in areas such as
tourism, foreign direct investment is down so far in 2009, following
the worldwide trend. The overall defense budget has yet to see any
sort of peace dividend. Longer-term contracts with foreign
suppliers of military equipment continue to weigh heavily on the
budget, and the military has pushed for an expansion of bases and
personnel in the north. Many in the military believe that a
continued high level of troops is required in the formerly LTTE-held
areas to hunt down any remaining LTTE forces, seize hidden caches of
weapons, and prevent any resurgence of violence. At the same time,
military and civilian officials have stressed to us that the bulk of
the requested increase of about 15 percent in the defense budget is
due primarily to the GSL's need to pay down military debts incurred
during the final stages of the war.


4. (SBU) The most pressing issue the GSL must address, and indeed
the issue that most concerns many in the international community, is
the status of the 250,000-plus internally displaced persons (IDPs)
currently held in largely closed refugee camps in northern Sri

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Lanka. Mostly ethnic Tamils escaped the conflict zone during the
final months of the war, only to be placed in what the GSL calls
"welfare camps." The GSL's stated reasons for keeping the IDPs
confined to the camps have been the need to screen for ex-LTTE
combatants and the need to complete demining and other
reconstruction-type projects in the IDPs' former villages and towns.
Conditions in the camps, while far from ideal, mostly meet basic
humanitarian standards in terms of provision of food, water, and
shelter. There is great concern, however, that conditions in the
camps will rapidly deteriorate with the onset of the monsoon season,
which usually arrives in October but has not yet begun.
International pressure on the GSL to release large numbers of the
IDPs either to their homes or to host families increased in August
and September. The GSL recently announced its intention to
accelerate releases from the camps and said it plans to release more
than 40,000 in the next few weeks. While confirmation of these
figures is difficult, thus far, we have seen evidence that
significant numbers of IDPs have begun to depart the camps and
return to their homes or to host-family relatives. There are also
reports, however, that some "released" IDPs are being subsequently
confined to transit camps, as local security officials are reluctant
to release them. Nevertheless, there has been an uptick recently in
returns and we will watch carefully to see whether the GSL will meet
the president's declared target of releasing 70 percent of the IDPs
by the end of January.

Other Human Rights Concerns

5. (SBU) Human rights violations continue to be a problem in Sri
Lanka. Aside from possible violations during the final months of
the war, and the continued confinement of so many IDPs, other human
rights problems abound. Disappearances, while significantly down
over the past six months according to some indicators, remain a
problem. There also continue to be reports of extra-judicial
killings, albeit at a reduced rate since the end of the war.
Torture of LTTE-related detainees is suspected to continue, and the
line between the judiciary and the military continues to be blurred,
largely under the guise of the Prevention of Terrorism Act.

6. (SBU) Media freedom is emerging of late as the low spot of human
rights problems in the island. Few truly independent sources of
news exist in the island. Those that remain are under constant
pressure from anonymous threats, attacks and killings, as well as
official harassment from the GSL, leading to widespread
self-censorship. Well-known cases include the killing in January of
Lasantha Wickremetunga, editor of the Morning and Sunday Leaders,
and the trial and conviction of J.S. Tissainayagam under the
Prevention of Terrorism Act. All these contributed to Sri Lanka's
drop in the Press Freedom listing issued in October by Reporters
Without Borders, which placed Sri Lanka near the bottom across the
globe. The international community continues to push for the
release of Tissainayagam, and in a positive development, his two
publishers were acquitted of terrorism-related charges on October


7. (SBU) Left unresolved are the many questions revolving around the
ethnic tensions between Tamils and Sinhalese that were at the core
of the 25-year conflict. The structure of the LTTE in Sri Lanka
appears to have been destroyed, with no functional ability to carry
out attacks in the island. Few Tamils in Sri Lanka express any
desire to resume violent conflict. Strong feelings remain, however,
in particular among many Tamils in the north that their economy,
culture, and lifestyle now will be overrun by the Sinhalese
majority. Rumors abound of plans for Sinhalese colonization of
major Tamil towns in the north, and of plans to keep IDPs housed in
camps indefinitely. It should be noted, however, that disagreements
over land claims in the north and east are more complicated than
simple Singhalese confiscation of Tamil property. While this
sometimes may be the case, we are also aware of disputes on land
claims that go back for years with no clear resolution.

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8. (SBU) The big challenge for the Rajapaksa leadership is how to
address these underlying causes of Tamil unrest, while at the same
time appealing to the broader Sinhalese electorate and keeping
hard-line Sinhalese nationalists in check. There are several
approaches available, including two approved but unimplemented
constitutional amendments. These amendments, the 13th and the 17th,
provide various measures to decentralize power and address perceived
ethnic-based inequities. Additionally, a report was recently
completed by the All Parties Reconciliation Council (APRC), a panel
of experts and political actors from varied backgrounds appointed by
the president to develop a reconciliation plan. Between the APRC
recommendations, the constitutional amendments, and other proposals
suggested, different options available include such things as
devolution of power to provinces, a second house in the parliament
modeled somewhat after the U.S. Senate, and independent oversight
bodies meant to serve as a check on powerful state institutions.

9. (SBU) President Rajapaksa has not shown a preference yet for one
approach over the others. He has stated that he will not tackle any
such political reform until after presidential and parliamentary
elections take place in early 2010. Naturally this delay engenders
skepticism from many in the Tamil community, but it is true that he
would be able to implement much deeper reforms if he obtained a
two-thirds' majority in the parliament, enabling him to amend the


10. (SBU) Presidential elections are likely to be held earlier than
the regularly scheduled date in 2011, but the scenario remains
unclear. Earlier it was widely assumed the president would call
presidential elections in January followed by regularly scheduled
parliamentary election in April. Recently, however, rumors have
circulated that the two elections would be held together in April.
The president is scheduled to announce his intentions at the
ruling-party conference in November. The president's opponents are
largely disorganized and share little common ground. The rumor mill
has suggested that General Sarath Fonseka, seen as the architect of
the military victory over the LTTE, may run against Rajapaksa, but
potential allies have not yet agreed to join together to back him as
their candidate and seem to prefer if he would join just their own
party instead.

The Economy

11. (SBU) Sri Lanka's economy grew relatively well throughout the
war years, and Sri Lankans hope the end of the war could trigger an
economic boom. Sri Lanka averaged 5 percent GDP growth over the
last 20 years, and they have attained a per capita income of USD
2,000, the highest in South Asia after the Maldives. Sri Lanka has
developed a strong textile industry, which constitutes 43 percent of
their total exports, and they still have significant tea exports.
But economic opportunities are unevenly distributed. The Western
Province, where Colombo is located, contributes almost 50 percent of
Sri Lanka's GDP, while there are many fewer opportunities in other
areas, especially the former conflict regions. President Rajapaksa
supports a state-directed economy that emphasizes infrastructure
development, such as roads, and splashy projects, such as the
enormous Hambantota port being constructed by the Chinese in the
South in the president's home region. Private investors are coming
to look at Sri Lanka, but it is unclear whether the government will
create a business-friendly environment to capture foreign
investment, except in sure-fire areas such as tourism. Due to
political strains with the U.S. and the West, Sri Lanka is looking
more to its "new friends" in China, Iran and Libya, but these
countries do not have the export markets to replace the U.S. and the
West. Perhaps the biggest threat looming on the horizon is loss of
the EU's GSP-Plus trade concessions, which could result in the loss
of USD 150 million in trade and the possible loss of thousands of

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U. S. Assistance

12. (SBU) The U.S. has many assistance programs with Sri Lanka in
the areas of civil society, economic development, international
visitor exchanges, humanitarian assistance training for the military
and more. One of the most important components of U.S. aid to Sri
Lanka is USAID assistance. USAID has invested more than USD 1.9
billion in Sri Lanka since 1956. In 2008, the USD 134.5 million
tsunami reconstruction program was completed successfully, and the
rehabilitated infrastructure was handed over to the Government of
Sri Lanka. Current programs focus on the Eastern province and
adjoining areas, and USAID plans to extend assistance to the north
by helping conflict-affected communities return to normalcy as
quickly as possible. In 2009 the overall USAID budget was USD 43.12

13. (SBU) USAID's economic growth programs are helping to create
public-private partnerships, which will foster stability, create
sustainable jobs, and jump-start much-needed economic development
particularly in conflict-affected areas. Democracy and governance
programs provide technical training and support to local government
institutions, civil society organizations, community reconciliation
groups, and professional journalists. USAID is working in special
post conflict programs addressing the reintegration needs of ex-
combatants in the community. Small-scale infrastructure programs
have helped to rehabilitate seven schools and one hospital damaged
during the conflict. USAID provides humanitarian assistance to Sri
Lanka through both food and non-food aid and in 2009 provided around
USD 36.3 million in assistance. More than 280,000 internally
displaced people (IDPs) were assisted by providing water and
sanitation facilities, temporary shelters, emergency medical
treatment, and mobility aids for the disabled. Emergency assistance
provided food to more than 50 percent of the IDPs in the former
conflict areas.


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