Wikileaks: Bond Concern 2009: Excellent Response From Diaspora In Europe – Cabraal Tells US

&#8220Ambassador opened by noting his surprise that the Central Bank Governor had gone public so soon (March 3) about the Government&#8217s intention to negotiate an agreement with the IMF. Cabraal responded that he had information that the Opposition UNP Party was about to leak the data with a hugely unfavorable spin, so the President had authorized him to clarify the Government&#8217s motives for in search of IMF assistance. Cabraal stated the choice had been correct, and opposition criticism therefore far had been a lot more muted than expected&#8221 the US Embassy Colombo informed Washington.

Cabraal - UNP was about to leak the information with a highly unfavorable spin

Cabraal &#8211 UNP was about to leak the data with a hugely unfavorable spin

The Colombo Telegraph discovered the connected leaked cable from the WikiLeaks database. The unclassified cable discusesSri Lanka’s debut sovereign bond problem. The cable was written by the Ambassador Robert O. Blake on march 12, 2009.

The US Embassy wrote &#8220Ambassador observed that the IMF apparently would be looking for to support Sri Lanka strengthen and stabilize its reserves and reduce its spending budget deficit. Cabraal agreed those would be essential ambitions. With respect to the foreign exchange picture, Cabraal stated existing reserves are adequate to cover six weeks of imports, but the Government wants money flow. Therefore it is negotiating currency swaps with Malaysia and probably other nations. Cabraal stated Sri Lankan exports had declined by 10 percent in January 2009, but imports had dropped by 30 percent in worth due to lower oil rates. Asked about remittances, a traditionally strong source of foreign exchange for the government, Cabraal did not consider remittance revenues would drop substantially. He stated that his counterparts from India, Pakistan, and Nepal had all told him not too long ago that they also were not experiencing substantial drops in remittances. Moreover, far more of Sri Lanka remittances were coming by means of the banking system than informal means such as hawalas. Asked about the Central Bank&#8217s efforts to raise foreign exchange by way of sovereign bonds, Cabraal mentioned there had been a &#8216good&#8217 response from the Sri Lankan Diaspora in Europe. He estimated that the Government had raised &#8216tens of millions&#8217 of US dollars as a result far towards its 2009 goal of 500 million dollars.&#8221

&#8220Cabraal stated the Government would address its fiscal deficit, both by raising revenues and cutting spending. He declined to specify what particular revenue measures Sri Lanka has in thoughts, noting only that new taxes on imports are beneath consideration, even though such taxes would adversely impact inflation, which recently had come down to 7 %. He also predicted the Government would comprehend savings from declines in defense spending as the war in northern Sri Lanka winds down. Cabraal told Ambassador that he expects the IMF group to come back to Sri Lanka in the really close to future with a view to negotiating an agreement in as tiny as one month&#8217s time.&#8221 Blake additional write.

Stolen State Assets Recovery Activity Force Member Resigns From Sri Lanka Customs

A member of the Unique Presidential Activity Force for the recovery of illegally acquired state assets, Jagath Wijeweera has resigned from his post as Director General of Sri Lanka Customs.

 Jagath Wijeweera

Jagath Wijeweera

The Finance Minister Ravi Karunanayake has announced his resignation final evening. He stated the exact reason for Wijeweera’s resignation has not yet been revealed, but the minister stated that Wijeweera may possibly have resigned due to ongoing investigations to decide the factors for the considerable loss that had been reported in the Customs Division in the recent past.

Director General of Customs had allegedly involved in multi-million rupee scams under Rajapaksa regime, was appointed by President Maithripala Sirisena to the Particular Presidential Process Force for the recovery of illegally acquired state assets. The other members are former Solicitor Basic Bimba Tillakaratne Pc, H.M.L.T. Mudalige, H. Amaratunga, C.A.H.M. Wijeratna, Senior Assistant Secretary to the Justice Ministry A.K.D.D. Arandara, L.S. Pathinayake, Director Common of the Commission to Investigate Bribery or Corruption Dilrukshi Dias Wickramasinghe, Commissioner Basic of Inland Income Division Kalyani Dahanayake, D.G.N. Jayawardena, C.A. Premashantha, Extra Solicitor General Yasantha Kodagoda Computer and senior lawyer J.C. Weliamuna.

The Presidential Job Force is empowered to “investigate, identify, trace, seize and transfer to Sri Lanka, state assets and income which are due to the government that have been illegally or unlawfully acquired or procured by Sri Lankan nationals and other persons acting on behalf of Sri Lankan nationals or otherwise, and are being concealed or kept outside the territory of Sri Lanka by such persons and other folks acting on their behalf, and take successful steps to result in their seizure and transfer or return to Sri Lanka to be confiscated and vested in the Common Treasury.”

The recovery of stolen state assets was a main slogan in the election platform of President Maithripala Sirisena at the last Presidential poll. &#8220Wijeweera has no moral proper to remain on as a member of the Unique Presidential Activity Force for the recovery of illegally acquired state asset&#8221 a very good governance activist told Colombo Telegraph.

Connected stories

Customs Officials Demand Ransom Of Rs.120 Million – Custom Chief Wijeweera Under Fire

Deal Or No Deal: Customs Chief Wijeweera In A Rs.one hundred Million Defraud Deal?

Lawlessness In Customs Costs Govt Dearly: Tyre Importer Says

Customs DG’s Collusion To Embezzle Hundreds Of Millions Tax Income Reported To President Sirisena

Exposed: Rajapaksa’s Blood Ivory Robbery: Justice Rohini Lies Internationally

WikiLeaks: Bond Situation 2007 ‘UNP Will Not Be In a position To Honour Repayment’ – Ranil Wrote To JP Morgan, Barclays & HSBC

“The CEO of HSBC in Sri Lanka discounted the UNP threat as ‘silly… political tub-thumping.’ He said there was no way a future UNP government would voluntarily default, and was confident that international markets would be unconcerned by the UNP position. Other international bank and credit rating agency reps gave Econoff the same assessment.” the US Embassy Colombo informed Washington.

Opposition leader Ranil Wickramasinghe listens to journalists during a National Council coalition party news conference in ColomboThe Colombo Telegraph found the related leaked cable from the WikiLeaks database. The unclassified cable discusesSri Lanka’s debut sovereign bond issue. The cable was written by the Ambassador Robert O. Blake on September 05, 2007.

The ambassador wrote; “The Government of Sri Lanka plans to issue the country’s first international sovereign bond, in hopes of raising $ 500 million to fund infrastructure projects. However, the main opposition United National Party has announced that a future UNP government would not honor the bonds, which it claims the country cannot afford. UNP reps told us that their effort to sink the bond issue is primarily political though — an effort to keep the government from being able to buy the continued loyalty of former UNP MPs who joined the government as ministers last January. While markets will likely correctly view the UNP threat as a political move that would never materialize, the timing of the pending bond issue appears to be as bad or worse as sixteen months ago, when the government shelved an earlier plan for a $ 1 billion sovereign bond issue. Sri Lanka has had little good news to reassure currently skittish international debt markets. Nevertheless, market watchers say that the relatively small bond issue will probably appeal to a sufficient number of international investors who remain interested in diversifying their holdings of high-yielding emerging market debt.

“The Central Bank of Sri Lanka, which will float the bond on behalf of the Government, has selected JP Morgan, Barclays Capital and HSBC as joint lead managers of the issue, from among twelve local and international banks that bid on the role. According to a senior Central Banker, the bank plans an October road show to financial centers like New York, London, Frankfurt, Singapore, and Hong Kong to publicize the planned bond issue.”

“The opposition United National Party has challenged the government’s plan to issue the bonds. UNP leader Ranil Wickremesinghe wrote to JP Morgan, Barclays, and HSBC August 24, stating that ‘the bond issue is in violation of the law’ and that the ‘a future Government formed by the United National Party will not be able to honour the repayment obligations under this bond issue.’ In the letters, Wickremesinghe charges that the government has not informed Parliament of its plans to issue the bonds; that interest payments on the bonds ‘will hamper the sustainability of Sri Lanka’s long-term programme for servicing its existing public debt repayments'; and that the bonds may contribute to corruption, since planned ‘major infrastructure projects… have all been funded by bilateral and multilateral’ lenders. Wickremesinghe sent similar letters to U.S. Securities and Exchange Commission Chairman Christopher Cox and to Cox’s UK equivalent, urging them to ‘consult with the banks concerned and bring to a halt the issuance of this sovereign bond.’” Ambassador Blake further wrote.

Read the cable below for further details;

UNCLAS SECTION 01 OF 03 COLOMBO 001218

SIPDIS

SENSITIVE

SIPDIS

STATE FOR SCA/INS AND EEB/IFD/ODF
MCC FOR S. GROFF, D. TETER, D. NASSIRY AND E. BURKE
TREASURY FOR LESLIE HULL

E.O 12958: N/A
TAGS: ECON EINV EFIN KMCA CE

SUBJECT: SRI LANKA: GOVERNMENT REVIVES SOVEREIGN BOND ISSUE PLANS;
OPPOSITION SEEKS TO BLOCK

REF: A. 06 Colombo 550 B. Colombo 170

¶1. (SBU) Summary: The Government of Sri Lanka plans to issue the
country’s first international sovereign bond, in hopes of raising
$ 500 million to fund infrastructure projects. However, the main
opposition United National Party has announced that a future UNP
government would not honor the bonds, which it claims the country
cannot afford. UNP reps told us that their effort to sink the bond
issue is primarily political though — an effort to keep the
government from being able to buy the continued loyalty of former
UNP MPs who joined the government as ministers last January. While
markets will likely correctly view the UNP threat as a political
move that would never materialize, the timing of the pending bond
issue appears to be as bad or worse as sixteen months ago, when the
government shelved an earlier plan for a $ 1 billion sovereign bond
issue. Sri Lanka has had little good news to reassure currently
skittish international debt markets. Nevertheless, market watchers
say that the relatively small bond issue will probably appeal to a
sufficient number of international investors who remain interested
in diversifying their holdings of high-yielding emerging market
debt. End Summary.

$ 500 MILLION BOND TO FUND
INFRASTRUCTURE, “SET A BENCHMARK”
———————————

¶2. (U) The Government of Sri Lanka has revived plans for the
country’s first international sovereign bond issue. The government
seeks to raise $ 500 million, or more if demand is strong. The
government says it intends to invest the cash it raises in
infrastructure projects. It also expects the bonds to provide an
interest rate benchmark for private Sri Lankan companies seeking to
borrow in international capital markets. This is the second time
the government has prepared to tap international markets for a large
bond issue (ref A). In mid-2006 the government abandoned plans to
raise $ 1 billion when advisor Citibank judged that the resumption of
civil war made the timing inopportune.

¶3. (SBU) The Central Bank of Sri Lanka, which will float the bond on
behalf of the Government, has selected JP Morgan, Barclays Capital
and HSBC as joint lead managers of the issue, from among twelve
local and international banks that bid on the role. According to a
senior Central Banker, the bank plans an October road show to
financial centers like New York, London, Frankfurt, Singapore, and
Hong Kong to publicize the planned bond issue.

OPPOSITION SEEKS TO BLOCK THE BOND ISSUE
—————————————-

¶4. (U) The opposition United National Party has challenged the
government’s plan to issue the bonds. UNP leader Ranil
Wickremesinghe wrote to JP Morgan, Barclays, and HSBC August 24,
stating that “the bond issue is in violation of the law” and that
the “a future Government formed by the United National Party will
not be able to honour the repayment obligations under this bond
issue.” In the letters, Wickremesinghe charges that the government
has not informed Parliament of its plans to issue the bonds; that
interest payments on the bonds “will hamper the sustainability of
Sri Lanka’s long-term programme for servicing its existing public
debt repayments”; and that the bonds may contribute to corruption,
since planned “major infrastructure projects… have all been funded
by bilateral and multilateral” lenders. Wickremesinghe sent similar
letters to U.S. Securities and Exchange Commission Chairman
Christopher Cox and to Cox’s UK equivalent, urging them to “consult
with the banks concerned and bring to a halt the issuance of this
sovereign bond.”

¶5. (SBU) A UNP economic advisor told Econoff, however, that if given
the opportunity to do so in a future government, the party does not

COLOMBO 00001218 002 OF 003

in fact intend to default on the bonds. The move, he said, is
rather a political tactic in the UNP’s strategy to bring down the
Rajapaksa government. The UNP believes that, if it can block the
bond issue, it will be able to lure back former UNP members of
parliament who joined the Rajapaksa government as ministers in
January (ref B). Conversely, the UNP believes that if the bond goes
through, the government will be able to buy the continued support of
those MPs by allocating much of the cash to the ministries they
control. The advisor stuck with the UNP’s charge that the bond
issue would violate the law, saying that it would cause the
government’s total outstanding debt to exceed a maximum established
by Parliament. One of the UNP ministers who joined the SLFP in
January likewise told Ambassador that the UNP had made, but not
followed through on, a similar threat to block the partial
privatization of the national airline in the 1990s.

¶6. (SBU) The CEO of HSBC in Sri Lanka discounted the UNP threat as
“silly… political tub-thumping.” He said there was no way a
future UNP government would voluntarily default, and was confident
that international markets would be unconcerned by the UNP position.
Other international bank and credit rating agency reps gave Econoff
the same assessment. (The Colombo-based JP Morgan representative
told Econoff he could not comment on the impact of the UNP’s letter
to JP Morgan while his firm conducted due diligence preparations for
the bond issue.)

¶7. (SBU) As for the government’s legal right to proceed with the
bonds, the senior Central Banker told Econoff that in fact the
government had notified Parliament, in its November 2006 budget
proposal for 2007, that it planned “foreign borrowings up to one
billion dollars.” Finance Ministry and Central Bank officials told
EconFSN that Foreign Loans are covered under Sri Lanka’s Foreign
Loans Act and therefore do not need special parliamentary approval
and that debt levels under the Fiscal Management Responsibility Act
are only targets to improve transparency and accountability, not
binding limits.

S&P SAYS SRI LANKA CREDIT OUTLOOK “STABLE”
——————————————

¶8. (U) On August 9, Standard & Poor’s Ratings Services upgraded its
outlook on Sri Lanka’s credit ratings from “negative” to “stable.”
(According to S&P, a negative outlook is used to signal that the
rating may be lowered in the near future, whereas stable signals the
rating is unlikely to change.) S&P kept Sri Lanka’s long-term
foreign currency rating unchanged at B+, or four tiers below
investment grade. S&P attributed the improved outlook to “higher
tax collections, strengthening of fiscal and macroeconomic
coordination, elimination of fuel subsidies and revision of
electricity prices” and “the limited impact on the economy from the
renewed fighting.”

¶9. (SBU) The senior Central Banker told Econoff that JP Morgan had
been influential in the S&P outlook decision, both by helping the
Bank prepare for the S&P assessment and by convincing S&P during its
deliberations that the Sri Lankan economy was in fact holding
stable. According to the Central Banker, Citibank had not been as
helpful in preparing the bank for the April 2007 Fitch Ratings
assessment, which ended with Fitch keeping its outlook at
“negative.” The new local Citibank head acknowledged to Econoff
that JP Morgan had beaten Citibank on “customer service,” but
maintained that Citi would have been a better choice than JP Morgan,
Barclay’s or HSBC to lead the bond issue.

COMMENT: POLITICS ASIDE, TIMING FAR FROM OPTIMAL
——————————————— —

¶10. (SBU) Aside from its political agenda, the opposition seeks to
block this bond issue because it doubts the government will

COLOMBO 00001218 003 OF 003

productively invest the proceeds in infrastructure projects. This
is a valid concern on three levels. First, as the opposition fears,
the government may well use the funds to retain the loyalty of
ex-UNP ministers by permitting them to pursue pork-barrel projects.
Second, the government has said it intends to build infrastructure
even where there is not currently a market demand (like the
Weerawila airport), or which could be built more efficiently by the
private sector (like an expanded oil refinery at Sapagaskunda).
Third, the government is showing signs of being short on cash to
bridge an apparently growing fiscal deficit, so it will likely use
some of the bond funds for current, rather than capital,
expenditures.

¶11. (SBU) While markets will likely correctly view the UNP threat as
a political move that would never materialize, the timing of the
pending bond issue appears to be as bad or worse as sixteen months
ago, when the government shelved its earlier sovereign bond issue
plan. Aside from the S&P outlook returning to stable, Sri Lanka has
had little good news to reassure currently skittish international
debt markets. Nevertheless, market watchers say that the relatively
small bond issue will probably appeal to a sufficient number of
international investors who remain interested in diversifying their
holdings of high-yielding emerging market debt.
BLAKE

WikiLeaks: Bond Issue 2007; ‘UNP Will Not Be Able To Honour Repayment’ – Ranil Wrote To JP Morgan, Barclays & HSBC

“The CEO of HSBC in Sri Lanka discounted the UNP threat as ‘silly… political tub-thumping.’ He said there was no way a future UNP government would voluntarily default, and was confident that international markets would be unconcerned by the UNP position. Other international bank and credit rating agency reps gave Econoff the same assessment.” the US Embassy Colombo informed Washington.

Opposition leader Ranil Wickramasinghe listens to journalists during a National Council coalition party news conference in ColomboThe Colombo Telegraph found the related leaked cable from the WikiLeaks database. The unclassified cable discusesSri Lanka’s debut sovereign bond issue. The cable was written by the Ambassador Robert O. Blake on September 05, 2007.

The ambassador wrote; “The Government of Sri Lanka plans to issue the country’s first international sovereign bond, in hopes of raising $ 500 million to fund infrastructure projects. However, the main opposition United National Party has announced that a future UNP government would not honor the bonds, which it claims the country cannot afford. UNP reps told us that their effort to sink the bond issue is primarily political though — an effort to keep the government from being able to buy the continued loyalty of former UNP MPs who joined the government as ministers last January. While markets will likely correctly view the UNP threat as a political move that would never materialize, the timing of the pending bond issue appears to be as bad or worse as sixteen months ago, when the government shelved an earlier plan for a $ 1 billion sovereign bond issue. Sri Lanka has had little good news to reassure currently skittish international debt markets. Nevertheless, market watchers say that the relatively small bond issue will probably appeal to a sufficient number of international investors who remain interested in diversifying their holdings of high-yielding emerging market debt.

“The Central Bank of Sri Lanka, which will float the bond on behalf of the Government, has selected JP Morgan, Barclays Capital and HSBC as joint lead managers of the issue, from among twelve local and international banks that bid on the role. According to a senior Central Banker, the bank plans an October road show to financial centers like New York, London, Frankfurt, Singapore, and Hong Kong to publicize the planned bond issue.”

“The opposition United National Party has challenged the government’s plan to issue the bonds. UNP leader Ranil Wickremesinghe wrote to JP Morgan, Barclays, and HSBC August 24, stating that ‘the bond issue is in violation of the law’ and that the ‘a future Government formed by the United National Party will not be able to honour the repayment obligations under this bond issue.’ In the letters, Wickremesinghe charges that the government has not informed Parliament of its plans to issue the bonds; that interest payments on the bonds ‘will hamper the sustainability of Sri Lanka’s long-term programme for servicing its existing public debt repayments'; and that the bonds may contribute to corruption, since planned ‘major infrastructure projects… have all been funded by bilateral and multilateral’ lenders. Wickremesinghe sent similar letters to U.S. Securities and Exchange Commission Chairman Christopher Cox and to Cox’s UK equivalent, urging them to ‘consult with the banks concerned and bring to a halt the issuance of this sovereign bond.’” Ambassador Blake further wrote.

Read the cable below for further details;

UNCLAS SECTION 01 OF 03 COLOMBO 001218

SIPDIS

SENSITIVE

SIPDIS

STATE FOR SCA/INS AND EEB/IFD/ODF
MCC FOR S. GROFF, D. TETER, D. NASSIRY AND E. BURKE
TREASURY FOR LESLIE HULL

E.O 12958: N/A
TAGS: ECON EINV EFIN KMCA CE

SUBJECT: SRI LANKA: GOVERNMENT REVIVES SOVEREIGN BOND ISSUE PLANS;
OPPOSITION SEEKS TO BLOCK

REF: A. 06 Colombo 550 B. Colombo 170

¶1. (SBU) Summary: The Government of Sri Lanka plans to issue the
country’s first international sovereign bond, in hopes of raising
$ 500 million to fund infrastructure projects. However, the main
opposition United National Party has announced that a future UNP
government would not honor the bonds, which it claims the country
cannot afford. UNP reps told us that their effort to sink the bond
issue is primarily political though — an effort to keep the
government from being able to buy the continued loyalty of former
UNP MPs who joined the government as ministers last January. While
markets will likely correctly view the UNP threat as a political
move that would never materialize, the timing of the pending bond
issue appears to be as bad or worse as sixteen months ago, when the
government shelved an earlier plan for a $ 1 billion sovereign bond
issue. Sri Lanka has had little good news to reassure currently
skittish international debt markets. Nevertheless, market watchers
say that the relatively small bond issue will probably appeal to a
sufficient number of international investors who remain interested
in diversifying their holdings of high-yielding emerging market
debt. End Summary.

$ 500 MILLION BOND TO FUND
INFRASTRUCTURE, “SET A BENCHMARK”
———————————

¶2. (U) The Government of Sri Lanka has revived plans for the
country’s first international sovereign bond issue. The government
seeks to raise $ 500 million, or more if demand is strong. The
government says it intends to invest the cash it raises in
infrastructure projects. It also expects the bonds to provide an
interest rate benchmark for private Sri Lankan companies seeking to
borrow in international capital markets. This is the second time
the government has prepared to tap international markets for a large
bond issue (ref A). In mid-2006 the government abandoned plans to
raise $ 1 billion when advisor Citibank judged that the resumption of
civil war made the timing inopportune.

¶3. (SBU) The Central Bank of Sri Lanka, which will float the bond on
behalf of the Government, has selected JP Morgan, Barclays Capital
and HSBC as joint lead managers of the issue, from among twelve
local and international banks that bid on the role. According to a
senior Central Banker, the bank plans an October road show to
financial centers like New York, London, Frankfurt, Singapore, and
Hong Kong to publicize the planned bond issue.

OPPOSITION SEEKS TO BLOCK THE BOND ISSUE
—————————————-

¶4. (U) The opposition United National Party has challenged the
government’s plan to issue the bonds. UNP leader Ranil
Wickremesinghe wrote to JP Morgan, Barclays, and HSBC August 24,
stating that “the bond issue is in violation of the law” and that
the “a future Government formed by the United National Party will
not be able to honour the repayment obligations under this bond
issue.” In the letters, Wickremesinghe charges that the government
has not informed Parliament of its plans to issue the bonds; that
interest payments on the bonds “will hamper the sustainability of
Sri Lanka’s long-term programme for servicing its existing public
debt repayments”; and that the bonds may contribute to corruption,
since planned “major infrastructure projects… have all been funded
by bilateral and multilateral” lenders. Wickremesinghe sent similar
letters to U.S. Securities and Exchange Commission Chairman
Christopher Cox and to Cox’s UK equivalent, urging them to “consult
with the banks concerned and bring to a halt the issuance of this
sovereign bond.”

¶5. (SBU) A UNP economic advisor told Econoff, however, that if given
the opportunity to do so in a future government, the party does not

COLOMBO 00001218 002 OF 003

in fact intend to default on the bonds. The move, he said, is
rather a political tactic in the UNP’s strategy to bring down the
Rajapaksa government. The UNP believes that, if it can block the
bond issue, it will be able to lure back former UNP members of
parliament who joined the Rajapaksa government as ministers in
January (ref B). Conversely, the UNP believes that if the bond goes
through, the government will be able to buy the continued support of
those MPs by allocating much of the cash to the ministries they
control. The advisor stuck with the UNP’s charge that the bond
issue would violate the law, saying that it would cause the
government’s total outstanding debt to exceed a maximum established
by Parliament. One of the UNP ministers who joined the SLFP in
January likewise told Ambassador that the UNP had made, but not
followed through on, a similar threat to block the partial
privatization of the national airline in the 1990s.

¶6. (SBU) The CEO of HSBC in Sri Lanka discounted the UNP threat as
“silly… political tub-thumping.” He said there was no way a
future UNP government would voluntarily default, and was confident
that international markets would be unconcerned by the UNP position.
Other international bank and credit rating agency reps gave Econoff
the same assessment. (The Colombo-based JP Morgan representative
told Econoff he could not comment on the impact of the UNP’s letter
to JP Morgan while his firm conducted due diligence preparations for
the bond issue.)

¶7. (SBU) As for the government’s legal right to proceed with the
bonds, the senior Central Banker told Econoff that in fact the
government had notified Parliament, in its November 2006 budget
proposal for 2007, that it planned “foreign borrowings up to one
billion dollars.” Finance Ministry and Central Bank officials told
EconFSN that Foreign Loans are covered under Sri Lanka’s Foreign
Loans Act and therefore do not need special parliamentary approval
and that debt levels under the Fiscal Management Responsibility Act
are only targets to improve transparency and accountability, not
binding limits.

S&P SAYS SRI LANKA CREDIT OUTLOOK “STABLE”
——————————————

¶8. (U) On August 9, Standard & Poor’s Ratings Services upgraded its
outlook on Sri Lanka’s credit ratings from “negative” to “stable.”
(According to S&P, a negative outlook is used to signal that the
rating may be lowered in the near future, whereas stable signals the
rating is unlikely to change.) S&P kept Sri Lanka’s long-term
foreign currency rating unchanged at B+, or four tiers below
investment grade. S&P attributed the improved outlook to “higher
tax collections, strengthening of fiscal and macroeconomic
coordination, elimination of fuel subsidies and revision of
electricity prices” and “the limited impact on the economy from the
renewed fighting.”

¶9. (SBU) The senior Central Banker told Econoff that JP Morgan had
been influential in the S&P outlook decision, both by helping the
Bank prepare for the S&P assessment and by convincing S&P during its
deliberations that the Sri Lankan economy was in fact holding
stable. According to the Central Banker, Citibank had not been as
helpful in preparing the bank for the April 2007 Fitch Ratings
assessment, which ended with Fitch keeping its outlook at
“negative.” The new local Citibank head acknowledged to Econoff
that JP Morgan had beaten Citibank on “customer service,” but
maintained that Citi would have been a better choice than JP Morgan,
Barclay’s or HSBC to lead the bond issue.

COMMENT: POLITICS ASIDE, TIMING FAR FROM OPTIMAL
——————————————— —

¶10. (SBU) Aside from its political agenda, the opposition seeks to
block this bond issue because it doubts the government will

COLOMBO 00001218 003 OF 003

productively invest the proceeds in infrastructure projects. This
is a valid concern on three levels. First, as the opposition fears,
the government may well use the funds to retain the loyalty of
ex-UNP ministers by permitting them to pursue pork-barrel projects.
Second, the government has said it intends to build infrastructure
even where there is not currently a market demand (like the
Weerawila airport), or which could be built more efficiently by the
private sector (like an expanded oil refinery at Sapagaskunda).
Third, the government is showing signs of being short on cash to
bridge an apparently growing fiscal deficit, so it will likely use
some of the bond funds for current, rather than capital,
expenditures.

¶11. (SBU) While markets will likely correctly view the UNP threat as
a political move that would never materialize, the timing of the
pending bond issue appears to be as bad or worse as sixteen months
ago, when the government shelved its earlier sovereign bond issue
plan. Aside from the S&P outlook returning to stable, Sri Lanka has
had little good news to reassure currently skittish international
debt markets. Nevertheless, market watchers say that the relatively
small bond issue will probably appeal to a sufficient number of
international investors who remain interested in diversifying their
holdings of high-yielding emerging market debt.
BLAKE

Vadamarachchi – Was President JR A Traitor?

By Izeth Hussain &#8211

Izeth Hussain

Izeth Hussain

A number of concerns arose in my mind whilst reading the opening paragraphs of K.M. de Silva’s Sri Lanka and the Defeat of the LTTE (2012). In May possibly 1987 the armed forces led by Common Cyril Ranatunge routed the LTTE at Vadamarachchi, and Prabhakaran together with some of his best associates fled in disarray to Tamil Nadu where they had been accommodated by the regional government. Basic Ranatunge had planned to proceed thereafter to Jaffna town and its environs, but he desisted on the orders of President JR Jayewardene. The purpose for the President’s decision was that he had been warned by the Indian Government that the military move into Jaffna would be resisted by the Tamils, resulting inevitably in a blood bath and that would be unacceptable to India. The Indian Government took up that position due to the fact of pressure from Tamil Nadu.

The author points out that it took twenty two much more years to comprehensive what Common Ranatunge had begun. “Those of us who knew what had occurred were disappointed at the consequences of this Indian intervention but always felt that the LTTE could be defeated militarily ….” There followed the years and decades during which the defeatist notion prevailed that the war was unwinnable. “General Ranatunge’s Vadamarachchi campaign was one particular of the forgotten episodes of the struggle against the LTTE, forgotten by the politicians in Sri Lanka, such as heads of government”. In his retirement he would speak about the accomplishment of the Vadamarachchi campaign to guests, “especially those whom he trusted to be discreet …..”. Common Sarath Fonseka, who was a lieutenant colonel in the Vadamarachchi operation, knew that the war was winnable and proceeded to win it in 2009.

Briefing the President of the intended Vadamarachchi battle plan

Briefing the President of the intended Vadamarachchi battle program

We have to ask no matter whether the Indian Government was justified in demanding that the armed forces desist from going into Jaffna, and regardless of whether President Jayewardene was justified in providing in to that demand. The distinct question that arises in that connection is whether or not there was anything untoward in the Vadamarachchi operation, something that went against the established norms of war, something that in any way outraged the moral sensibility of the international neighborhood. The issue of food shortages in Jaffna was significantly bruited about in the weeks preceding the air-drop of 1987. In the course of that period I was second-in-command at the Foreign Workplace, and I recall a considerable exchange that I had with Higher Commissioner Dixit when he met me on a matter that had nothing to do with the ethnic difficulty. Soon after finishing with that matter, I asked him what really was the food predicament in the North. He began his reply with a statement that surprised me. It went anything like this:”I am glad that at last somebody has asked me that question”. It signified a serious failure in communication among the two Governments. He went on to say that at the moment men and women in Jaffna ate only 1 meal a day, which was inadequate for human sustenance, and sooner or later 1 or much more persons would die of hunger. When that occurred all hell would break loose in Tamil Nadu, and the Delhi Government would find itself in a hard position.

Even so, none of that happened and the Government was not accused of utilizing starvation of Tamil civilians as a weapon of war against the LTTE to any severe extent, which would have been regarded as morally reprehensible by the international neighborhood. There definitely have been meals shortages in the North but that was not a aspect in the military operations that decided the outcome at Vadamarachchi. Moreover there were no allegations of war crimes as in 2009. What took place in Vadamarachchi in 1987 was a simple military operation illustrating one of the basics of guerilla warfare: guerilla forces can not win against Government troops in positional warfare except at the final stages right after demoralization has gone far among the government troops and they begin operating, as in Vietnam in 1975.

So, taking count of prevailing international norms, nothing at all ought to have precluded General Ranatunge proceeding to Jaffna and ending the LTTE rebellion after and for all. We should bear in mind, above all, that the State has the primordial duty of placing down armed rebellion as otherwise it loses its quite raison d’être: according to Weber’s definition the State legitimizes itself by getting a monopoly of the indicates of violence. So why did the Indian Government demand that our troops desist from going into Jaffna and why did President JR succumb to that demand? Numerous Sri Lankans, possibly most, will hold that it was a case of Indian imperialist bullying of a modest neighbor. I hold that the explanation is that Rajiv Gandhi believed that he could bring about a negotiated answer of the ethnic dilemma, which would obviate a troublesome fall-out in Tamil Nadu of a LTTE military defeat. I think that there was a division within the Indian Government on how to deal with the LTTE. I recall that on April 19, 1995, when the LTTE broke the ceasefire and started fighting once more, the Indian Ambassador in Moscow told me that he was not in the least surprised by what had happened. Although he was Advisor on foreign relations to Rajiv Gandhi he had led one thing like five rounds of talks with the LTTE led by Prabhakaran. He had come to the firm and abiding conclusion that Prabhakaran was a psychopath with whom it would by no means ever be feasible to reach a negotiated remedy. Alas, Rajiv G’s pacifist line prevailed in 1987.

Why did President JR succumb to the Indian demand? If there had been any responsible considering on that demand it would have quickly become apparent that the international community would frown on it. How can any sovereign state be denied the correct, or rather the primordial duty, to place down an armed rebellion by military indicates? There would have been collateral damage of course but that could be simply contained, if necessarily with Indian assist, considering the tiny extent of Sri Lankan territory. There was no reason to suspect that there would not be affordable observance of humanitarian standards during the fighting. Considering all that, it would have soon turn out to be apparent that India would not have dared invade Sri Lanka more than that demand. In that occasion it would have incurred widespread international opprobrium, and also it would have grow to be embroiled in a completely messy imbroglio in Sri Lanka.

The explanation for JR’s selection could just be that he committed a monumental blunder. He was undoubtedly a man of massive ability, as shown by the truth that he was the initial South Asian leader to grasp that the State-centric economy could only brig further disaster. But in most approaches his reign brought disaster for Sri Lanka since of his blunders. The question can’t be evaded – whilst acknowledging the possibility of a monumental blunder – regardless of whether he played the role of a traitor in 1987. This question arises since his nationalism has usually been regarded as suspect, as attested by the reality that he was identified for decades as Yankee Dick. There are Sri Lankans who think that in reality he hated the Sinhalese, more particularly the Sinhalese Buddhists, the explanation for which they say is to be discovered in his household history. It is known that in the late nineteenth century and the early decades of the final century the low-country Sinhalese who rose into the elite sought status by marrying into the Kandyan aristocracy. JR’s loved ones was a singular exception.

It is relevant to recall something that reportedly happened at one of Sir John Kotelawala’s well-known egg-hopper breakfasts when he was Prime Minister. JR came to see him on some matter and when he was going away Sir John pointed at him and stated, “That fellow wants to become Prime Minister. If he ever does, he will destroy this country”. The story was recounted to me also by a well-known Sri Lankan – his is a household name – who said that he was present on that occasion. I recall also what was stated by the late Karl Goonewardene, Professor of History, when some horrible injustice perpetrated by the 1977 Government was getting discussed by some of us. It went some thing like this: “The issue genuinely is JR. He hates the folks of this country, and considering that that is so he can only bring disaster to this nation.” I recalled Karl even though the horror of July ’83 was taking place, and I recalled him also while reading the first couple of paragraphs of de Silva’s book.

Bar Condemns Jaffna Court Attack

The Bar Association of Sri Lanka has right now called upon the Lawyer Common and the other law enforcement authorities to bring the perpetrators who attacked the Jaffna Court premises to justice.

Geoffrey Alagaratnam President Bar Association of Sri Lanka

Geoffrey Alagaratnam
President Bar Association of Sri Lanka

We publish under the statement in full

The Bar Association of Sri Lanka (BASL) expresses its strong condemnation and abhorrence of the incident which took place in Jaffna exactly where the Court premises came under attack. The Bar Association of Sri Lanka is of the view that this conduct amounts, to a critical and unwarranted interference with the administration of justice and the judicial procedure.

The Bar Association of Sri Lanka calls upon the Honourable Attorney Common and the other law enforcement authorities, which includes the Inspector Common of Police, to bring the perpetrators to justice.

Additionally, the Bar Association of Sri Lanka calls on the authorities to supply the&#8217 &#8211 needed safety to Court premises to defend the honour, dignity and the respect of the holders of judicial workplace and of the judicial method.

The Bar Association of Sri Lanka affirms that the honour, dignity and safety of the Court and Court premises are essential for making certain the suitable functioning of a democracy and the upholding of the Rule of Law.

Colombo Port City: Do The Chinese Have A Hidden Agenda?

By DNR Samaranayaka

DNR Samaranayaka

DNR Samaranayaka

The controversial Colombo Port City (CPC) project, which has been designed to reclaim the seabed and develop a large commercial centre in an area covering 230 hectares adjacent to the city of Colombo, remains under suspension since early March 2015. A plethora of articles has appeared about the CPC, which is financed by the China Communications Constructions Company (CCCC), since the Sirisena government was formed and especially after the announcement by the government spokesperson, Rajitha Senaratne that the new government has given the green light to go ahead with the project. This announcement contradicted the promise made by the coalition during the election campaign about its imminent closure, if elected. Ironically, the approval of the CPC by the new government was made without giving any reasons or explanations as to why the government retracted from its earlier commitment.

Because of these articles, highlighting various issues that are associated with the CPC, there has been a significant interest and an awareness of the project among professionals, journalists, politicians and others in the country. Most of the articles written on this subject argue that due mainly to environmental implications of the project on the western coastline it should not be undertaken. Other issues such as the cost of the project to the country, sovereignty, regional security, impact on domestic physical resources required for the construction of the project and possible congestion in the Colombo city and its surroundings have been cited as objections. Some writers also argue that the project has certain benefits that can help the country to attract more investments, and, therefore, if the project is abandoned it will adversely affect the investment flow to the country. Others dismiss the environmental concerns claiming that they are just a gimmick used to prevent the project going ahead. A number of journalists have also contributed to the debate. An editorial in a leading English newspaper justified the project because the termination of it could impact negatively on the relationship between the two countries. Some journalists have also focused on the plight of the workers due to its suspension and they urge the government to consider its continuation. The Chinese too have actively participated in the debate through advertisements in the print media justifying the project.

Unawtuna Beach: an example relevant to CPC

The initial opposition to the CPC was from the environmentalists. They opposed the implementation of the project on the basis that the environmental assessment, carried out by the Moratuwa University, does not provide a complete and comprehensive assessment of the effects of the proposed project on the coastal environment. However, they did not pursue this matter any further because of the fear of prosecution by the former regime if they protested against the project. Although this issue had been highlighted during the presidential election by the coalition, it was not considered important once the Sirisena government was formed, but it is one of the issues currently under consideration by the review committee appointed by the government. Its inclusion in the review now implies that it is one of the key issues that will determine the status of the project. As stated by Eran Wickramratne, deputy minister of investment promotion, if the environmental impact of the project on the Western coastline is going to be too great, then the project is likely to be discontinued.

port cityWhile the review committee is considering the environmental effects of the CPC, the Unawtuna Beach in Sri Lanka is gaining attention in a far- away country as an example of the adverse effects of building breakwaters along the shoreline. A decision to build a breakwater to resolve beach erosion in the Westmoreland resort in Jamaica has been objected by the Negril Chamber of Commerce using the effects of the breakwater in the Unawatuna beach in Sri Lanka. According to a report appeared in the Jamaica Observer on April 23, 2015. It said, “ … the once flawless crescent of sand along a palm-lined shore with turquoise waters is now blanketed with jagged rocks. The Unawatuna beach spans nearly 1 ½ kilometres and has attracted both the local and foreign tourists for over half century.” It further said, “The Sri Lankan breakwater, which stretches nearly a kilometre into the ocean, has disturbed the natural balance of the echo system and is wasting away the sand from one half of the beach, and depositing it on the other half. The government of Sri Lanka is now working to partially remove the breakwater in order to rectify the situation and has resorted to beach nourishment with 300, 000 metric cubic meters of sand being pumped from the middle of the ocean in order to recreate the beach.”

This assessment of the impact of the breakwater on the Unawtuna beach clearly highlights the difficulty of determining a disturbance to the natural flow of ocean water on the beach and its immediate environment. Highly sophisticated statistical models are currently used to forecast the movements of the ocean water under various scenarios; however, they cannot predict the actual impact of the disturbances created by breakwaters or similar structures. It will only be known only after the project is implemented. This illustrates how the CPC could disturb the natural flow of currents and waves as well the beachfront beyond the immediate vicinity of the CPC project and they could be permanent and irreversible. This is one of the reasons that the fisher folks are seriously objecting to the construction of the CPC. According to the Media the CCCC was willing to compensate those affected by the project living in the coastal areas, but this is not going to stop with the current generation; it will continue to affect all future generations. Furthermore, this offer also implies the recognition, by the Chinese, of the possibility of such adverse outcomes because of the CPC.

Claims of corrupt practices by the CPC investor

Another issue that has been heavily publicized is the scale of corruption in projects funded by the Chinese government. In an interview with Andrew Stevens of CNN, finance minister, Mr Ravi Karunanayake, described the extent of corruption under the previous government by saying ‘bridges were built where there were no rivers and airports were constructed in the middle of nowhere: that was the level of corruption that was going on.’ In the same interview, Mr Ravi Karunartane said, “The Chinese companies used the opportunity of a corrupt regime to crowd out other companies coming in’. This statement clearly implies that some Chinese companies use unethical practices to secure development projects solely for the benefit of the company or the contractor. Frequently, these projects exaggerate the benefits to the country even though such claims are never supported with evidence. Although the minister did not mention any project specifically, the CPC, among the projects funded by the Chinese government, is of particular importance since it is still at initial stages. All other projects are already completed or nearing completion. The funds that were used on these projects cannot be recovered; the only thing that can be done is to take action against those involved in such corrupt practices. In the case of the CPC, there is still a possibility to stop it. According to the evidence emerging from various sources and the actions being taken by the Bribery commission to investigate large-scale corruption, not only the politicians, but also some high-level officials appear to be involved in such corrupt practices.

Based on the information currently available to the public on the status of the CPC, it appears that the government is not investigating any corruption in the CPC. After the President’s visit to China, for example, Mr Liu Jianchao, assistant Minister of Foreign Affairs has said ‘President Sirisena has stressed that what happened around the port city is rather temporary, and the problem does not lie with the Chinese side and hopes to continue with the project after things are sorted out.’ On the following day, the deputy Foreign Minister, Ajith Perera, denied this report that the president had given such an assurance. Another statement made by Mr Ravi Karunanayake, Minister of Finance, giving an interview to the South China Morning Post also said ‘we are telling Chinese companies that we are keen to have clean, transparent and accountable investments. Port City should not be the benchmark. There are serious problems with the project that we are trying to fix. It has nothing to do with our attitude to Chinese investments’. Both statements made by Mr Maithripala Sirisena and Mr Ravi Karunanayake have been issued outside of Sri Lanka and they both clearly indicate the approval of the project once the formalities are completed.

However, there are good reasons for this matter to be thoroughly investigated since there is reliable evidence that CCCC has a history of employing unethical or corrupt practices in foreign funded projects. According to a communiqué, issued by the World Bank, CCCC is barred from undertaking any project funded by the World Bank for eight years from July 2011 to July 2017 because of its fraudulent practices involving the Philippines National Roads Improvement and Management project. Posting this sanction on the internet, the World Bank informs the seriousness of the charges levelled against the CCCC and gives a warning to other countries who are engaging the CCCC as a contractor for large-scale infrastructure projects. The action by the World Bank creates serious doubts about the credibility as well as the integrity of the CCCC. The World Bank statement clearly suggests that CCCC has been responsible for blowing up project costs to provide kickbacks to politicians and high-level officials to secure lucrative projects. Such a black mark shows the extent to which CCCC would go to secure contracts and to make the already corrupt regime even more corrupt. This ruling by the World Bank also raises the concern as to whether the Sri Lankan government should be dealing with a company that has been black listed.

Uneconomical projects undertaken by Rajapaksa regime

Some of the projects undertaken during the Rajapaksa regime were intended to provide some economic and social benefits for the people. Among these are the roads and highways; these two areas had received very little attention prior to 2005. Some of these projects were undertaken under the patronage of the former defence secretary, Gotabaya Rajapaksa. Although these projects do not provide direct financial benefits, they are still needed for any developing economy to provide wide ranging economic and social benefits to the public such as to improve accessibility and mobility across the country as well as to promote income-generating activities that would help economic growth and employment generation. While what the former government had done in these areas need to be recognized and appreciated, there is, however, a serious issue if the costs of these projects are inflated much beyond the actual costs. This is what the people are hearing since the fall of the Rajapaksa regime. Statements such as ‘the highest cost of road construction per kilometre in the world has been reported from Sri Lanka under the Rajapaksa regime’ clearly support that the corrupt practices in the road sector had been rampant. Any difference between the actual costs and the reported costs of the the project is then siphoned by someone else. It appears therefore these projects are simply undertaken for the benefit of those directly involved in the decision making process. In fact, the statement that ‘roads that go nowhere’ made by Ravi Karunanayake appeared to be referring to such projects. If this is the case, these projects were undertaken not for the benefit of the people, but to provide an opportunity to amass wealth by a few through corrupt practices. The benefits that the society receives, under such circumstances, will have only a residual value.

Two other projects financed by the Chinese that have attracted criticisms from writers from various backgrounds are the Hambantota harbour and the Mattala airport. The initial estimate of the harbour was US$ 360 million and the Chinese reportedly financed about 80% of this estimate. After the completion of the project, it was found out that the harbour is not suitable for large vessels due to a massive rock blocking the mouth of the entry thus preventing the inward and outward movements of large-scale vessels. Unfortunately, these things were not discovered or remained unknown at the time the decision was made to build the harbour. In fact, there is no evidence that a comprehensive feasibility had been carried out to determine the suitability of the site and the potential benefits of the project. If that had been carried out, the mapping of the sea bed around the proposed project would have detected the blockage to the harbour. The failure of the authorities cost the government an additional amount of US $ 221 million, increasing the cost to US 580.0 million.

The expected income from commercial operations of the Hambantota harbour was estimated at Rs 15 billion (US$ 150 million) at the design stage. It began its commercial operations in 2012 and received an income of Rs 1.1 billion from October 2012 to December 2013. Its income in 2014 has increased by about Rs 4.0 billion, from bunkering services provided to 230 foreign vessels, to over Rs 5 billion. The revenue generated by commercial operations is still far too little in terms of the loan repayment liabilities and the annual cost of maintence of the harbour. The loan is payable over an 11 year period, with one year grace period. At an annual interest rate of 6.3%, which is significantly higher than the international lending rate determined by LIBOR, the financing of the debt incurred by the harbour could be around US$ 800 million or Rs 80 billion, which includes the loan (US$ 580 million) and the interest on the loan (US$ 219.3 million). However, this amount could go up if any payment is defaulted since it will add interest on the unpaid amount. Since the revenue from the harbour is unlikely to reach the expected target, servicing the loan will be a severe burden for the cash trapped treasury at present.

A loan of US$ 200 million provided by the Chinese government helped finance the Mattala airport built at a cost of US$ 209 million. The airport has a 10,000 square meter capacity and a runaway extending up to 3,500 meters. It has been built to accommodate A 380 airbus with 555-seater capacity, which is one of the most advanced aircrafts currently in operation. The commercial operations of the airport began in October 2012; however, due to lack of business it was closed on 30 April 2015 under the Sirisena government. During this period, the airport had been used by 36,137 passengers: 22,853 outgoing, 13,284 incoming and 13,284 transits. The total income up to September 2014 had been Rs 143.9 million and the expenditure Rs 2,900 million, resulting a loss of Rs 2,756 million. Even with such huge losses, this airport would have been in operation if former president returned to power because it would add to his profile of an unshakable leader. The new government is now faced with a monthly payment of Rs 250 million (US$ 2.5 million) to service the loan on the airport.

Out of these two projects, Mattala airport, surrounded by the least developed area in the country, should not have been considered in any event. Even someone with no project experience would have known that Mattala airport is uneconomical because the airport can never generate a traffic volume to make it a profitable venture. The problem with the Hambantota harbour is not so much with its location, but its highly inflated cost of construction. Based on the commercial operations of the port since 2012, it appears that it has the opportunity to be used as a transits hub, but the huge cost of construction has made it a very unprofitable venture. Choosing the location with a blockage has cost an additional 65% to the original cost to the harbour. Furthermore, it is becoming common knowledge that about 30% to 40% of the total cost of infrastructure projects is also misappropriated by the politicians and the officials under the Rajapaksa administration.

The government is now faced with a serious debt service burden due to the large scale projects undertaken during the Rajapaksa administration. With very limited foreign reserves, servicing the debt will be a huge challenge for the new government. This will certainly affect the country’s borrowing capacity for projects that are really needed. The ability to borrow for future requirements has been significantly constrained by the decisions that were made to glorify the achievements of the Rajapaksa clan.

Implications of Chinese investments on unprofitable projects

There has been an interest on the Hambantota harbour since the beginning of 2000. A number of prefeasibility studies were carried out at that time and the most comprehensive feasibility was carried out by a Canadian firm. They concluded that the Hambantota Harbour is not economically viable because it has no competitive power to capture bunkering operations from other ports using this route. It is, therefore, difficult to understand why the Chinese government agreed to fund the harbour project. Usually large-scale projects of this nature are always subject to extensive feasibility studies to determine their financial viability. There is no evidence that the Chinese have done a comprehensive pre-feasibility, and if the Chinese had done feasibility, they too would have come to the same conclusion. In the case of the Mattala airport, there is no legitimate reason for the Chinese to support this project with a loan of US$ 200 million. Before the airport was built, there was no development in or around the site of the airport and even after it was built, there is hardly any development that had taken place. The airport was built by clearing the forest and the possibility of the availability of the land to build the airport was the only aspect that received consideration by the government. They never thought about the financial viability of operating an airport in an isolated location.

In this context, the commitment of the Chinese to invest on uneconomical projects in Sri Lanka raises a serious issue as to whether the Chinese always knew that these projects were not going to be financially viable. They probably knew, especially after winning the LTTE terrorism, the intentions of the Rajapaksa administration was to build projects that would promote his image. As a result of this victory, he was bestowed with a king-hood by the local populace. These projects undertaken by the Rajapaksa administration and the projects that were in the pipeline to be implemented in his third term in office were essentially to establish Hambantota as a modern city fit for a king. The funds for such projects too would undoubtedly come from the Chinese. This arrangement appears to have worked perfectly well for both parties since Rajapaksa wanted loans from the Chinese and the Chinese wanted to establish their regional power in the Indian ocean. According to some reports, the port city concept was also originated from the Chinese

How the loans of these two projects would have been repaid if Rajapaksa returned to power also add to the argument that the Chinese knew about the difficulty that the Rajapaksa administration would face. They also knew that Rajapaksa administration could not borrow from any other source and, therefore, they were ready to provide financial support to service the loans. This arrangement entails borrowing from the Chinese to pay back the Chinese loans, and it would have entangled the Rajapaksa administration in a severe debt trap. In that event, what the former president would have done can be gauged from the handing over of 20 hectares of sovereign land to the Chinese ownership in the CPC project after its completion. Even though the entire loan of the Hambantota harbour is to be paid back at a 6.3% interest rate, the Chinese also have some controlling power of the harbour. This is another example that tells what the intentions of the Chinese are. The CPC could also fall into this trap if the Sri Lankan government cannot find the funds to develop the CPC. In that event, some form of acquisition of this site by the Chinese is very difficult to avoid.

Applying Yahapalanaya to CPC

The decision to continue or discontinue the CPC now lies with the government. An announcement in this regard is expected once the ongoing review, focussing on certain irregularities involving the CPC, is completed. Whatever the decision by the government it should disclose fully the details of the decision. This is because the public has the right to know on what basis the decision was made, especially if the decision is to continue the project. Although the government has committed to practice Yahapalanaya, it remains as a slogan introduced simply for the purpose of winning the last election. There is hardly any difference between Yahapalanaya and Mahinda Chinthanaya since they both are hollow slogans. Even the partners of the new government find fault with the Yahapalanaya principle. Field Marshal Sarath Fonseka openly criticise yahapalanya by saying that both the president and the prime minister are compelled to look after corrupt high-ranking politicians in their own camps. Among others that are incompatible with the Yahapalanaya concept are the Central Bank bond issue and the appointment of President’s brother as the CEO of the SLT and giving him a whopping raise from Rs 950,000 to Rs 3 million per month. The question that most people would like to know is what did he do to deserve this increase? Unfortunately, the answers from the government are hard to come by.

*The writer is an economist. He also published another article earlier under the title ‘Economics of the Colombo Port City Project’ in the Colombo Telegraph.

Sirisena Manages To Place Mahinda Rajapaksa In Tight Spot: Alan Keenan

Sri Lanka appeared to turn a new leaf with the election in January 2015 of President Maithripala Sirisena. This place an finish to rule of this country of 21 million men and women by Mahinda Rajapaksa, who is closely related with a brutal 2009 victory more than the Tamil Tiger insurgency and authoritarian government. Alan Keenan, International Crisis Group’s senior analyst discusses how a lot President Sirisena, previously a minor figure in Rajapaksa’s government, has changed politics on the South Asian island. We publish be the interview accomplished by the International Crisis Group.

You recently returned from Sri Lanka. It’s now been four months given that Sri Lanka’s President Maithripala Sirisena came to office. Did the political atmosphere in the nation feel various from prior to?

Alan Keenan: Totally. The most striking modify is that individuals are no longer afraid to talk. Under former President Mahinda Rajapaksa, men and women had been quite careful in what they mentioned publicly or even privately: they consistently felt that they have been becoming monitored and feared the consequences. That has changed substantially with the election of Sirisena. In public areas, in cafés, in restaurants, folks speak openly about corruption and war crimes, about the want to hold politicians, safety forces and armed groups accountable for abuses of power. Academics and activists are publishing and speaking publicly again. In my view, this is Sirisena’s greatest achievement so far. The word that a lot of individuals used when talking to me was that they felt “relief”.

Maithri MahindaSirisena came to power in January with an ambitious one hundred-day agenda. We are now nearly a month previous those 100 days. How significantly progress has he produced on his agenda?

Attaining Sirisena’s agenda – especially the constitutional changes – was usually going to be a challenge, given that his government does not have a majority in parliament. In spite of being the common secretary of Rajapaksa’s own Sri Lanka Freedom Celebration (SLFP), Sirisena defeated Rajapaksa thanks to the help of the SLFP’s wonderful rival, the United National Party (UNP) and a coalition of smaller sized parties. Even right after bringing two-dozen SLFP members into his government in March, Sirisena’s government, headed by prime minister and UNP leader Ranil Wickremesinghe, had far significantly less than the two-thirds majority required to amend the constitution. On virtually every issue, Sirisena has struggled to gain the cooperation of the SLFP, with many opposed to his collaboration with the UNP, and a significant wing of the celebration wanting to see Rajapaksa return as prime minister of an SLFP government.

Sirisena is thus in a difficult position. He remains the head of the SLFP and he does not want to damage his personal party in advance of the upcoming parliamentary elections. At the quite least, he doesn’t want to be known as the person who took over the SLFP, investigated them all for corruption, only to have them be soundly defeated in the subsequent election. So he’s attempting, in a lot of ways, to find the middle path between pushing as well hard and not pushing challenging enough, regardless of whether it is with respect to corruption, to ethnic problems, to war crimes allegations, or to relations with China, Western powers and India.

Nonetheless, after months of uncertainty and difficult negotiations with the SLFP, the late April passage of the nineteenth amendment to the constitution – just a few days previous the 100 days goal – allowed Sirisena to deliver on the most essential promise on his agenda: to cut down the excessive powers of the Executive Presidency, which his predecessor Rajapaksa had expanded considerably. Whilst the amendment that passed didn’t reduce powers as a lot as many of Sirisena’s supporters wanted – thanks largely to alterations the SLFP insisted on – it was still a considerable step. It re-imposes a two-term limit to the presidency and removes the president’s powers to dissolve parliament anytime he wants. It also removes some of his immunity, makes him answerable to parliament and, possibly most important, drastically increases the energy of the prime minister and the cabinet of ministers.

An additional important promise – and 1 of Sirisena’s government’s very first moves in workplace – was to pass a customer and employee-friendly spending budget, lowering rates on meals and rising salaries for public servants. This was in response to the widespread sense that the price of living was becoming unbearable, with even middle-class households beneath extreme economic pressure.

Sirisena also promised to reform the electoral system within his 1st one hundred days. How is he undertaking with that?

Sirisena’s strategy – which he is struggling to implement, even if it has widespread acceptance as a common thought – is to eliminate the preferential voting method, noticed as a key cause of election violence, and return to a largely 1st-previous-the-post system, while preserving some degree of proportional representation. But the smaller sized parties and these representing geographically dispersed minorities, such as Sri Lanka’s Muslims, fear that the new model does not give adequate emphasis to proportionality and will decrease their quantity of seats. Others, like the Tamil National Alliance, which represents the country’s Tamils in the north and east, are worried the delimitation of new constituencies will shrink the number of constituencies with Tamil majorities, offered how numerous Tamils have left Sri Lanka the past thirty years. Sirisena hopes that all the major parties will be able to reach a consensus inside a month, but offered these complexities, that’s a extremely optimistic timeline.

As on many concerns, the Sirisena government and the diverse coalition of parties that brought him to energy are split on the timing and sequence of electoral reforms, which will demand an additional constitutional amendment. Several of his supporters, along with the SLFP, want the new electoral technique approved and want the upcoming parliamentary elections – promised to be named soon after the conclusion of Sirisena’s initial 100 days – to be held under the new system. With the method of drawing new electoral district boundaries anticipated take at least two or 3 months after passage of whatever new program is agreed, this would involve a considerable delay. The SLFP would be pleased with this, as they see their election possibilities rising with time.

On the other hand, the UNP and some of the smaller sized parties backing Sirisena want an election as soon as possible. At this stage, they’d prefer to address electoral reforms in a new parliament, but if reforms are to be agreed now, they want the elections to come right away after, and to be held beneath the old voting technique. The UNP’s hope is to come back in a new parliament with a majority and a strengthened political position. This is important if they are to face a quantity of challenging troubles that the UNP and Sirisena have promised to tackle, which includes a domestic mechanism for investigating and prosecuting any crimes committed throughout the civil war, and generating progress on reconciliation between the majority Sinhalese and the smaller sized Tamil population. But tackling these topics will produce a lot of resistance from nationalists and the supporters of former President Rajapaksa, who nonetheless enjoys considerable backing among Sinhalese voters and sections of the security forces.

In light of this, one particular of the Sirisena government’s initial moves on coming to energy was to request a six-month deferral of an upcoming UN report on atrocities committed during and after the war – from 2002 to 2011 – which was due to be released for the March session of the UN Human Rights Council. With the additional time, the government hoped it could have the elections behind them and be in a stronger position when it received the negative news anticipated in the report. The U.S., UK and EU supported the request for a deferral on this identical basis, assuming that by September, the government would have had time to take measures and develop a plan that could win the approval of the Human Rights Council.

So, one of Sirisena’s key decisions over the subsequent month is whether or not to call elections in time to get previous them prior to the UN report is released in August and ahead of the Human Rights Council session starts in September. Sirisena has promised to have unveiled by then a domestic “accountability mechanism”, to investigate and hold accountable any person discovered guilty of war crimes and other severe human rights violations committed in the course of the armed conflict with the Tamil Tigers. Even though the new government has refused to cooperate with the ongoing UN inquiry, it has expressed a willingness to accept “technical assistance” from the UN when conducting its personal domestic method. It remains to be observed how large a part the UN or other international knowledge will be invited to play.

How are these frictions between Sirisena’s government and the country’s former leaders affecting reconciliation with the country’s 12 per cent Sri Lankan Tamil population?

Throughout his very first months in workplace, Sirisena has created a number of modest but positive moves to address longstanding grievances of Tamils in the north and east exactly where they are the majority. His government has returned some military-occupied land to its extended-displaced owners. And though the military has not withdrawn any troops, it is maintaining a reduced profile than ahead of and interfering less in civilian affairs. Sirisena also appointed two new governors in the north and east, both of whom are well-respected former civil servants, to replace the retired generals that Rajapaksa had appointed. And he has released some detainees held below the prevention of terrorism act.

Nonetheless, Sinhala nationalism remains strong. According to its vision, Sinhalese and Buddhists have been historically – and remain today – under threat from various outsiders, whether or not those are Muslims, Tamils, Westerners or Christians. Under Rajapaksa, this vision was encouraged as de facto state policy, and it remains a very potent element in Sri Lankan politics, courted by Rajapaksa and his supporters. Now, given the tensions within the SLFP and the recognition that Mahinda Rajapaksa nevertheless enjoys, it is clear that Sirisena is becoming forced to choose his battles. The current choice to ban Tamil commemorations of their war-dead in the north, and the appointment of General Jagath Dias, a single of leading commanders in the final months of fighting in 2009 and virtually undoubtedly to be cited as a essential perpetrator in the forthcoming Office of the Higher Commissioner for Human Rights (OHCHR) report, as army chief of employees, were well-known with Sinhalese nationalists but outraged the Tamils, for instance. I do not think we can count on any big moves on reconciliation, meaning either far more releases of land to Tamils or a genuine scaling back of the military, till after the parliamentary elections.

On a far more clearly good note, Sirisena has produced clear he will not tolerate the violent campaigning against Muslims and evangelical Christians that flourished beneath Rajapaksa. Muslims faced specifically intense pressure in 2013 and 2014 from militant Buddhist organisations that clearly had the backing of the former regime. The organisations burned out their organizations, attacked people on the street, and pressed for legislative adjustments to weaken the Muslim community. All this was done in the name of opposing “Islamic extremism”, which does not really exist in Sri Lanka. All of that has come to an end under Sirisena, even though some of the problems raised by militant Buddhists stay potential flashpoints that will need cautious management by the government and neighborhood leaders.

How do you see the government’s relations with other countries in the region and internationally?

The new government, with its significant shift in priorities, has been welcomed by most globe powers, with the exception of the Chinese. Indian Prime Minister Modi visited soon soon after the election, the initial pay a visit to of an Indian prime minister in 28 years. U.S. Secretary of State John Kerry was just in Colombo in early May. Senior EU and UN officials arrived before that. All have issued really constructive statements. The purpose Beijing is significantly less thrilled is that the Sirisena-UNP government has deliberately distanced itself from the very close ties that Rajapaksa had cultivated with China. Rajapaksa had relied on China for political help on the Safety Council and Human Rights Council against investigations into alleged war crimes. But he also depended economically on China, which has pumped billions of dollars in loans, investments and development help into Sri Lanka over the past decade. The new government has made clear it does not want to reduce its ties with China but is rather trying to recalibrate them, not least due to the fact of worries that the country’s developing dependence would bring strings that could be harmful for Sri Lankan sovereignty. In the coming years, Sri Lankans will surely nonetheless need Chinese funds and help, but will want to have it along with support from India and the West. This will be a difficult balancing act, but shouldn’t be impossible to pull off.

Who is winning the political tug-of-war among President Sirisena and Mahinda Rajapaksa?

Sirisena wasn’t a non-entity beneath Rajapaksa, he was the basic secretary of the SLFP, but he didn’t have a higher public profile. His character and demeanour are quite quiet, unassuming, modest, and he remained a bit of an unknown even in the initial months of his presidency. Over time, although, we’ve seen Sirisena emerge with a specific leadership style which is considerably much more consultative, modest, not about rising his energy but about acquiring as numerous individuals to sign on as attainable. This is really uncommon in Sri Lankan politics. A lot of discover the change refreshing and encouraging others criticise Sirisena as weak and say his “national government” experiment is beginning to unravel.

Progressively, even though, Sirisena appears to have place Rajapaksa in an increasingly tight spot: through the eventual passage of the nineteenth amendment his moves to weaken pro-Rajapaksa forces in all kinds of intra-SLFP and intra-Sinhalese political battles and continued legal stress on the former ruling family and its close associates. These contain investigations and arrests of former Rajapaksa government officials like the former president’s brother, the ex-minister for economic improvement, Basil Rajapaksa. Mahinda and an additional really powerful brother, the former defence secretary Gotabaya Rajapaksa, have each been summoned for questioning by the bribery commission. These moves triggered street demonstrations and an uproar in parliament from the pro-Rajapaksa wing of the SLFP that succeeded in delaying debate on the nineteenth amendment. But it failed to cease the passage of the amendment by an massive majority, after the pro-Rajapaksa camp realised it didn’t have the votes to defeat it.

Most positively, the tradition of robust debate and difficult authority in Sri Lanka has returned. One particular of the most striking factors about the election campaign was that suddenly all these voices have been speaking out against Rajapaksa since they had a automobile, finally, to challenge him. Folks were willing to take the threat of writing letters essential of him, of functioning for his defeat. Because they believed there was a possibility of alter. Crucially I consider many folks thought it was their final likelihood, since most people think a lot of of these who opposed him would have been arrested or faced worse outcomes had Rajapaksa won. President Sirisena himself speaks of how he was risking his life running against Rajapaksa, saying it was like jumping into the sea with my family, “would we sink or swim, would we discover land again”? Now, the changed environment is tangible.

Nevertheless, the aggrieved and potentially violent streak in Sinhalese nationalist politics is getting actively courted by former President Rajapaksa and his supporters. Amongst the big queries about the upcoming parliamentary elections are: who will champion this constituency? Will Mahinda Rajapaksa himself join the campaign? Or will it be his proxies? How strongly will they push the classic fears of Sinhalese nationalism: Tamil separatism, Muslim extremism, Christian evangelicals, a Western-led worldwide conspiracy? All these remain really potent ideologically within Sri Lanka, and the nation still has some way to go to consolidate its democratic transition.

“Unfolding In Duly Ordained Fashion”

By Emil van der Poorten

Emil van der Poorten

Emil van der Poorten

If the responses to my recent columns to Colombo Telegraph have accomplished nothing else, they have provoked responses that need to give at least a couple of of us lead to for even a small degree of optimism: there ARE people who perceive the deception and deceit that is being performed below cover of Yahapalanaya, covering the backsides of these who have done extremely nicely, thank you, below the Rajapaksa dispensation!

Even so, identifying the problem (not merely the symptom) as folks is not sufficient, in and of itself. We need (particularly us septuagenarians who may well be of match mind but somewhat feeble physique!) to rally the troops since the generations that have succeeded us are tech-savvy to an extent that handful of of us can aspire to. We require to maintain them rolling as they seem to have carried out during the final Presidential election where, I recognize, young people familiar with the use of neighborhood media such as Twitter and Facebook and fluent in the national languages of this country played no small portion in the demise of the leader of the most violent and corrupt government this nation has ever encountered. I hope that what I am about to relate strikes a chord with them and that they will expend their energies to expose easy monetary self-interest parading as some kind of “freedom of the press.”

The reality that Ranil Wickremesinghe seems driven to surround himself with a Praetorian Guard of old boys of his alma mater is one of the saddest spectacles confronting this country. Apart from the fact that it appears to provide proof of some fairly deep-seated insecurity not befitting somebody with ambitions of major Sri Lanka and whilst his team may well be a far more “civilized” bunch than the Rajapaksa Mafia, it is NOT all that is necessary to deliver the goods.

Ranil Royal ColleheI will continue to espouse the “Feet to the fire” slogan relative to Mr. W’s bunch whose primary qualification appears to be to have entered that educational institution down Reid Avenue and/or belonged to the traditional Uncle Nephew Party clique of yore. As an aside to this, might I suggest that Ruwan Wijewardene finds an individual with at least minimal speech-writing abilities ahead of he next addresses such as the Kotelawela Defence Academy? There was little substance or style in what he delivered and undoubtedly a wonderful deal to be preferred in the matter of the “facts” that he sought to detail. Those of us who grew up in that time and had the benefit of Aubrey Collette’s cartoons and Tarzie Vittachchi’s biting prose have a far much better and a lot more correct image of John Lionel Kotelawala than Mr. Wijewardene who probably depended on the “official line” of those who constitute the energy behind the current throne – the Wijewardne newspaper dynasty of which he is a element &#8211 who In no way distinguished themselves as champions of democracy but merely defenders of their personal narrow class and business interests. One point that can be attributed to them, even so, is consistency in the matter of knowing on which side their bread was buttered, although they had typically, I am positive, to hold each slice by the edges since the dairy solution was so generously applied to each of the bigger surfaces!

A recent example of this was the two web page paean of praise to Gotabaya Rajapaksa’s private armed force, parading as a news item although, really certainly, an “advertorial.” I do not know to which of the three armed solutions it belongs seeing as how it possibly has connections to all of them, from the acquire of MiG jets to the use of assault rifles typically linked with the army and operating on the high seas! This ran in two of the English language newspapers to my knowledge and, while I do not recall in which it first appeared, it undoubtedly had a very prominent spread in the Sunday Times, with no advantage (to the public) of so much as a mention of the reality that it was an advertisement for a large and sophisticated private shore/sea-primarily based armed force with out a semblance of government oversight of any description entering into the equation.

That a newspaper owned and operated by the existing Prime Minister’s uncle and supposedly not the creature of the late-unlamented Rajapaksa regime need to descend to such depths seems to confirm what these allegedly on the “loony left” have had to say about the two principal political configurations of Sri Lanka: they are two peas in a pod, six of a single and half a dozen of an additional.

When I expressed my surprise at what the Wijeya Newspapers group had accomplished, my interlocutor at the time had a very basic explanation: “The marketing rupee supersedes all other considerations, definitely those of principle or journalistic ethics.”

Probably, this is so. Even so, I think it is up to those of us who nonetheless cling to the last vestiges of democratic practice and morality of even the most minimal sort to expose these firms pretending to act in the public interest for what they are: merely profit centres, devoid of anything resembling principle. When the Sunday Leader was at its shrill but, nevertheless, vibrant peak beneath the guidance of Lasantha Wickrematunge and Frederica Jansz, these same media power brokers manipulated the annual awards to the journalistic fraternity so that their workers won even when they had been not qualified to compete in the categories in which they walked away with the prizes. That such as the Sri Lanka Press Institute and The Editors Guild of Sri Lanka turned a Nelsonian eye on this kind of powerful-arm journalism just remains a matter of record. In fact, I would suggest that the initial blow, against what was the “Last Man Standing” among Sri Lanka’s independent newspapers, was struck then and what followed, culminating in a creature of the Rajapaksas taking more than comprehensive manage of the Sunday Leader was tiny more than a coda to that overall performance.

There have been some substantial stirrings amongst younger writers contributing to the electronic pages of Colombo Telegraph and other publications devoted to public affairs and I hope and trust that they will direct their interest to the hypocrisy and duplicity of these who have apparently succeeded in taking cover under the Yahapalanaya blanket right after making their contribution to the monstrosity that paraded as “governance” under the Rajapaksas. Each they and the income-grubbers who’ll sell their personal mothers for an advertising dollar require to be exposed and so exposed that they will feel twice prior to they indulge their duplicitous abilities in help of fascism, dictatorship and private armies, no matter in what disguise.

Females In Sri Lanka Seek 25% Boost Of Women’s Political Representation

Women’s Groups in Sri Lanka have these days urged all political parties to take required measures to improve the number of females in Parliament.

Issuing a statement following a consultation held on the 11th May possibly on the draft 20th Amendment to the Constitution, the Ladies and Media Collective says &#8220taking into consideration that it is a sine qua non of great governance (yaha palanaya) that all citizens ought to be given equal access to political representation, regardless of gender, class, caste, ethnicity, and so on.&#8221

Kumudini Samuel - the founder of Women and Media Collective

Kumudini Samuel &#8211 the founder of Ladies and Media Collective

We publish under the statement in complete

Political Representation of Ladies- Making certain 25% Boost

Suggestions made by Women’s Groups in Sri Lanka to the 20th Amendment to the Constitution At the moment under Discussion

Women in Sri Lanka have had the correct to vote from as early as 1931, but quite little chance to turn out to be the people’s elected political representatives-not in either Parliament or in Provincial or Neighborhood Government. This reality has been highlighted worldwide in official statistics, where the nation rates shockingly low on the global index of women’s political representation, even in South Asia, Sri Lanka ranks 140 out of 153 in terms of female representation in Parliament.

Because of this lack of political representation, women’s interests and concerns are barely heard and exert small influence at any level of government. Essential policy decisions, including legal reform, are made in essential regions such as security, economic improvement, reconciliation and democratization whilst barely consulting perspectives particular to females, 52 per cent of the population, and citizens who do not have the identical perspectives as guys do, since they do not take pleasure in the privileges that males have as men in Sri Lankan society. The lack of a sturdy representation of women in selection creating positions is, with no doubt, a main result in of gender blind policy creating.

President Maithripala Sirisena echoed this concern in his 100 day Function Programme, proposing that legislation would be introduced to make certain at least 25% women’s representation in Provincial Councils and Regional Government.

We, citizens and ladies concerned with democratic modify, urge all political parties in Sri Lanka to take needed steps to increase the number of women in Parliament, taking into consideration that it is a sine qua non of good governance (yaha palanaya) that all citizens need to be provided equal access to political representation, regardless of gender, class, caste, ethnicity, and so on.

We, girls, voters and citizens, get in touch with on all political parties assistance the following provisions and consist of them in the 20th Amendment:

165 First Past the Post seats

Reserve seats for females : We ask that electorates that have a majority of women be designated only for females candidates or one electorate per district be allocated only to ladies candidates. This electorate can be chosen on a rotating basis. This guarantees that ladies will get 22 seats. Comparable provisions have been made in India.
Mandatory reservations of 25% girls, in nomination lists submitted by parties: this guarantees that ladies are provided the opportunity to contest the Very first Past the Post seats

District Proportional Representation List

Since this list is modest and limited to 31 seats, every district might only have one or two appointments feasible in numerous instances this may be limited to one PR appointee per district. For that reason, there must be a mandatory appointment of a lady as the very first candidate in the District PR list.

The National List

The national list has a limitation of a maximum quantity of 59 members, but this could go down to 37 in the occasion of seats being allocated from the overhang. As a result the demand is that each and every 2nd appointment from the National list be given to a lady. This will allow females to be appointed to at least 18 seats.

Multi Member Constituencies

Given the probability that some electorates may be designated as multi-member constituencies, a minimum of one particular woman candidate must be nominated to contest these seats.