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WikiLeaks: Loved ones-Run Airline Manager Vass Hyperlinks To Economic Impropriety

&#8220The Government of Sri Lanka (GSL) is arranging to launch a state-run airline aimed at providing low-expense travel for Sri Lankan migrant workers and tourists to the Middle East and India. The budget carrier, apparently conceived and sophisticated by close advisors to Sri Lankan President Mahinda Rajapaksa, is to be called Mihin Lanka, after the President (brief for Mihindu, which is the Pali name for Mahinda). The non-transparent way in which the President&#8217s coterie has sophisticated the airline has elicited extensive controversy.&#8221 the US Embassy Colombo informed Washington.

Mahinda and Vass

Mahinda and Vass

The Colombo Telegraph found the related leaked cable from the WikiLeaks database. The cable dated March 09, 2007 was written by the US Ambassador to Colombo,Robert O. Blake.

The US ambassador wrote &#8220Critics argue that the carrier&#8217s lack of transparency stems from its leadership &#8211 a handful of politicians and advisors close to the President. According to a Civil Aviation Authority gazette, the Board of Directors of Mihin Lanka will be composed of Defense Secretary Gotabaya Rajapaksa (the President&#8217s brother), Finance SIPDIS Secretary P.B. Jayasundera, Air Marshall Roshan Goonetilake, and Presidential Coordinating Secretary Sajin de Vass Gunawardena. Gunawardena, who has been appointed &#8216Accountable Manager in charge&#8217 of the airline, has been linked to a quantity of previous allegations of monetary impropriety involving government procurement.

&#8220The airline is to be a totally government-owned company utilizing state funds. The initial capital contribution is estimated at about 500 million Sri Lankan Rupees (around USD four.6 million), with an estimated total expense set at Rs. 1.5 billion (approx USD 13.eight million). The government initially intended to tap the state-run Foreign Employment Bureau and the Workers&#8217 Trust Fund for start up capital in the venture. Soon after a robust public backlash supported by damaging media reporting against employing public funds, the government could be in search of economic backing elsewhere, but has not publicly identified attainable alternate sources.

&#8220President Rajapaksa sacked Minister of Ports and Aviation Mangala Samaraweera, who had opposed the Mihin Lanka arrangement (ref A). Rajapaksa did not appoint a replacement for Samaraweera, alternatively keeping the Ports and Aviation portfolio for himself. On February 17, Samaraweera, who had also served as Rajapaksa&#8217s Minister of Foreign Affairs till he was removed in the January 28 cabinet reshuffle, sent a letter to the President listing a series of grievances (ref B). In this, Samaraweera stated his sturdy disapproval of the Mihin Lanka project due to the planned use of public funds and the rushed approval procedure that circumvented standard administrative and financial regulations.&#8221

Putting a comment the ambassador wrote &#8220Civil Aviation Authority officials and representatives of Airport and Aviation Solutions Ltd. appear significantly less than enthusiastic about the Mihin Lanka venture. In fielding Post&#8217s queries, they seemed cautious and uncomfortable, repeatedly stating that they had been not aware of numerous important operational particulars. Post also notes that neighborhood media coverage of the Mihin venture no longer mentions any of the earlier controversy around the airline. In reality, coverage disappeared completely for about two months, and only resumed this week with brief and uncritical coverage of the test flight described in para three. Numerous Sri Lankans view the Mihin Lanka venture as a sign that the populist and socialist President Rajapaksa could be tempted to practice crony capitalism if he can steer clear of press, opposition, and regulatory scrutiny.&#8221

Read the cable under for further specifics

VZCZCXRO0826 RR RUEHLMC DE RUEHLM #0394/01 0681026 ZNR UUUUU ZZH R 091026Z MAR 07 FM AMEMBASSY COLOMBO TO RUEHC/SECSTATE WASHDC 5614 Information RUCPDOC/USDOC WASHDC RUEHNE/AMEMBASSY NEW DELHI 0727 RUEHKA/AMEMBASSY DHAKA 9947 RUEHIL/AMEMBASSY ISLAMABAD 6916 RUEHKT/AMEMBASSY KATHMANDU 4991 RUEHGP/AMEMBASSY SINGAPORE 5670 RUEHBK/AMEMBASSY BANGKOK 3155 RUEHKP/AMCONSUL KARACHI 2157 RUEHCG/AMCONSUL CHENNAI 7489 RUEHGV/USMISSION GENEVA 1872 RUEHC/DEPT OF LABOR WASHDC RUEATRS/DEPT OF TREASURY WASHDC RUEHLMC/MILLENNIUM CHALLENGE CORPORATION
UNCLAS SECTION 01 OF 03 COLOMBO 000394 SIPDIS SENSITIVE SIPDIS STATE FOR SCA/INS AND EEB/TRA/OTP STATE PASS USTR, DOL/ILAB FOR TINA MCCARTER SINGAPORE FOR FAA E.O 12958: N/A TAGS: ECON EIND ETRD EAIR EINV KCOR CE Topic: SRI LANKA: ALLEGATIONS OF IMPROPRIETY IN CONNECTION WITH NEW STATE-OWNED Budget AIRLINE REF: A) COLOMBO 263 B) COLOMBO 324 ¶1. (SBU) SUMMARY AND COMMENT: The Government of Sri Lanka plans to launch in March 2007 a state-run airline aimed at providing low-price travel for migrant workers and tourists to the Middle East and India. The spending budget carrier, called Mihin Lanka, has elicited criticism from politicians, the press, and the airline business. The lately sacked Minister of Ports and Aviation has charged the President with circumventing procedural and economic regulations in the procedure of producing the airline. Public criticism may possibly have triggered the President to back away from allegedly organizing to deal free shares in the venture to himself and close loved ones members and political allies. Even so, the venture hardly appears to be in the public interest: 1st, the strategy to use civil service pension funds to start off the new venture is risky, as the South Asia region's price range airline marketplace is competitive and the GSL has a poor track record in operating airlines. Second, if the venture succeeds in constructing market place share, it will come at the expense of Sri Lankan Airlines, which is still 51 % government-owned. End summary and comment. CONTROVERSIAL Budget AIRLINE TO BE STATE-OWNED, NAMED FOR PRESIDENT, RUN BY Family members AND Buddies ¶2. (U) The Government of Sri Lanka (GSL) is organizing to launch a state-run airline aimed at offering low-expense travel for Sri Lankan migrant workers and tourists to the Middle East and India. The price range carrier, apparently conceived and sophisticated by close advisors to Sri Lankan President Mahinda Rajapaksa, is to be known as Mihin Lanka, right after the President (brief for Mihindu, which is the Pali name for Mahinda). The non-transparent way in which the President's coterie has advanced the airline has elicited in depth controversy. ¶3. (U) GSL officials say Mihin Lanka will commence operations this month. (Mihin Lanka offices at the airport and Colombo are now open, but a targeted launch of February four, Sri Lanka's Independence Day, came and went with no official explanation of the postponement.) On March 5, the airline secured a provisional license to fly soon after overcoming technical problems that temporarily delayed its maiden test flight. Its initial flight from Colombo Bandaranaike International Airport to India was a requirement for the airline to get an "air operating certificate" from Sri Lanka's Civil Aviation Authority (CAA). The certificate offers Mihin Lanka clearance to operate and handle all elements of a commercial flight utilizing a leased Fokker-27 aircraft. At this time, the airline does not own any aircraft. ¶4. (U) The GSL is billing Mihin Lanka as the country's only national airline. (Note: This is odd, due to the fact the government nevertheless has a 51 percent majority Sri Lankan Airlines Emirates Airlines owns 43 percent, and the remaining six percent is owned by Sri Lankan Airlines staff). This no-frills carrier is created to cater to nearby migrant workers traveling to the Middle East, and to vacationers to and from the Indian sub-continent. The government says Mihin Lanka will also function as a cargo airline, transporting goods produced by tiny and medium scale producers. The venture plans to directly or indirectly create 500 jobs, such as positions for Sri Lankan Air Force personnel who want to move into civil aviation. ¶5. (U) The airline is to be a completely government-owned business utilizing state funds. The initial capital contribution is estimated at about 500 million Sri Lankan Rupees (around USD 4.six million), with an estimated total price set at Rs. 1.5 billion (approx USD 13.8 million). The government initially intended to tap the state-run Foreign Employment Bureau and the Employees' Trust Fund for start off up capital in the venture. Soon after a strong public backlash supported by unfavorable media reporting against utilizing public funds, the government may be looking for economic backing elsewhere, but has not publicly identified achievable alternate sources. ¶6. (SBU) Critics argue that the carrier's lack of transparency stems from its leadership - a handful of politicians and advisors close to the President. According to a Civil Aviation Authority gazette, the Board of Directors of Mihin Lanka will be composed of Defense Secretary Gothabaya Rajapaksa (the President's brother), Finance Secretary P.B. Jayasundera, Air Marshall Roshan Goonetilake, and Presidential Coordinating Secretary Sajin de Vass Gunawardena. Gunawardena, who has been appointed "Accountable Manager in charge" of the airline, has been linked to a quantity of previous allegations of monetary impropriety involving government procurement. AVIATION MINISTER'S OPPOSITION Expenses HIM HIS JOB ¶7. (U) On February 9, President Rajapaksa sacked Minister of Ports and Aviation Mangala Samaraweera, who had opposed the Mihin Lanka arrangement (ref A). Rajapaksa did not appoint a replacement for Samaraweera, instead maintaining the Ports and Aviation portfolio for himself. On February 17, Samaraweera, who had also served as Rajapaksa's Minister of Foreign Affairs till he was removed in the January 28 cabinet reshuffle, sent a letter to the President listing a series of grievances (ref B). In this, Samaraweera stated his powerful disapproval of the Mihin Lanka project due to the planned use of public funds and the rushed approval procedure that circumvented normal administrative and economic regulations. LAUNDRY LIST OF IRREGULARITIES SUGGESTS IMPROPRIETY ¶8. (SBU) Because its conception, Mihin Lanka has appeared to evade a number of Sri Lanka's standard business start-up regulations, many of which former minister Samaraweera outlined in his public letter: -The President's October 2006 budget proposal for FY 2007 did not mention Mihin Lanka in spite of plans to use public money to capitalize it. -Presidential advisors submitted a memorandum to the Cabinet for endorsement of the airline only hours prior to the cabinet meeting at which they sought approval of the venture. -No capital appraisal report was performed on the venture. -The Board of Investment (BOI) allegedly authorized the airline proposal in less than 24 hours. -The Civil Aviation Authority had already brief-listed 3 price range airline operations prior to Mihin Lanka, but place further processing of their license applications on hold until soon after Mihin Lanka launches. DUBIOUS Enterprise MODEL: STEAL THE OTHER GSL AIRLINE'S Consumers ¶9. (SBU) Aviation market insiders told Econoff that if Mihin Lanka succeeds, it would only be by cannibalizing passengers from Sri Lankan Airlines' most profitable routes - those to India and the Middle East. They add that the government's program to launch the airline by wet-leasing a single plane makes tiny financial sense, as the higher price of a crew- and upkeep-included wet lease is unlikely to be covered by ticket sales in the low-expense travel sector. Ultimately, the regional aviation market place is skeptical of Mihin Lanka's prospects merely since the GSL had such a poor track record for several years operating Sri Lankan Airlines, ahead of bringing in Emirates Airlines as an operating partner. ¶10. (SBU) Comment: Civil Aviation Authority officials and representatives of Airport and Aviation Services Ltd. seem much less than enthusiastic about the Mihin Lanka venture. In fielding Post's queries, they seemed cautious and uncomfortable, repeatedly stating that they have been not conscious of a lot of essential operational specifics. Post also notes that local media coverage of the Mihin venture no longer mentions any of the earlier controversy about the airline. In truth, coverage disappeared entirely for about two months, and only resumed this week with short and uncritical coverage of the test flight described in para three. Numerous Sri Lankans view the Mihin Lanka venture as a sign that the populist and socialist President Rajapaksa might be tempted to practice crony capitalism if he can avoid press, opposition, and regulatory scrutiny. BLAKE

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