VZCZCXRO4028
RR RUEHLMC
DE RUEHLM #0484/01 0871121
ZNR UUUUU ZZH
R 281121Z MAR 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 2928
INFO RUEHNE/AMEMBASSY NEW DELHI 9420
RUEHKA/AMEMBASSY DHAKA 9048
RUEHIL/AMEMBASSY ISLAMABAD 5937
RUEHKT/AMEMBASSY KATHMANDU 3973
RUEHCG/AMCONSUL CHENNAI 6483
RUEHML/AMEMBASSY MANILA 1510
RUEHBK/AMEMBASSY BANGKOK 2916
RUEHJA/AMEMBASSY JAKARTA 0556
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 04 COLOMBO 000484 
 
SIPDIS 
 
STATE FOR SA/INS; MANILA FOR USADB; MCC FOR D NASSIRY AND E 
BURKE; TREASURY FOR S.CHUN; DEPT PLEASE PASS USTDA FOR 
MBASSETT 
 
SENSITIVE, SIPDIS 
 
E.O 12958: N/A 
TAGS: EAID ECON CE
SUBJECT:  Slow but Steady Progress on Sri Lankan Tsunami 
Reconstruction 
 
Ref: 05 Colombo 1705 
 
¶1.  (U) Summary:  Despite a change in Government in late 
2005, and resultant changes in ministries and personnel 
handling tsunami reconstruction, Sri Lanka continues to 
make steady, if not speedy, progress in rebuilding.  The 
new Government has rolled back the problematic ?buffer 
zone,? thus moving thousands out of the donor driven 
housing program into an owner-driven cash grant program. 
By its own admission though, the Government has set an 
unrealistic goal of building 22,000 houses by the end of 
¶2006.  The International Federation of the Red Cross, the 
largest housing donor, has completed approximately 1,000 
houses (out of a promised 15,000), has 2,500 tendered and 
identified land for 7,000.  Key obstacles to progress 
include a lack of skilled labor, insufficient funding for 
the owner-driven cash grant program and bureaucratic 
inefficiencies.  Corruption, while undoubtedly present, has 
not been an enormous problem, and most charges of 
corruption could be more accurately labeled as 
inefficiencies.  USAID projects are on target, but subject 
to potential delays due to the lack of skilled labor, 
materials shortages or the potential drawdown of key USAID 
personnel.  End Summary 
 
Progress Slow, but Steady 
------------------------- 
¶2.  (U) As the 18 month post-tsunami mark approaches, Sri 
Lanka has made good progress, though continued changes to 
the nation's coastal conservation policy and a presidential 
election have meant disruptions along the way. 
 
¶3. (U) Housing remains the most critical infrastructure 
need.  Following Presidential elections in November 2005, 
the Government of President Mahinda Rajapaksa rolled back 
the 100m/200m coastal 'buffer zone' in favor of the 
regulations that existed prior to the tsunami (a 1997 law 
on coastal conservation) (Note: Rajapaksa had pledged to do 
this in his campaign. End Note).  While this expanded space 
available for rebuilding, confusion over the policy and 
entrenched bureaucracy in the construction approval process 
remained. 
 
International Federation of the Red Cross 
----------------------------------------- 
¶4.  (U) The International Federation of the Red Cross 
(IFRC) is the largest housing donor in Sri Lanka.  IFRC 
committed to build 15,000 new homes.  With the rollback of 
the buffer zone, however, IFRC expects approximately 5,000- 
6,000 of these people to elect to transfer into the 'owner- 
driven housing project' (ODHP) in which affected homeowners 
are eligible for a series of grants to rebuild their homes 
themselves (Note: under the 'donor-driven' housing program 
(DDHP) the government contracts with donors to provide 
houses for affected families outside the previously 
identified buffer zone.  End Note).  This would leave 
approximately 8,000-10,000 homes under IFRC's commitment. 
IFRC has about 1000 homes under construction, has tendered 
for 2,500, and has agreed on location for 7,000. 
Approximately 1,100 plots offered by the GSL have been 
rejected as unsuitable (for various reasons).  IFRC is 
working with the GSL to find appropriate sites. 
 
Moving Beneficiaries from One Program to Another 
--------------------------------------------- --- 
¶5.  (SBU) Saliya Wickramasuriya, Chief Operating Officer of 
the newly formed Reconstruction and Development Agency 
(RADA), told Econchief on March 13 that the Government has 
set a goal of completing all permanent housing by the end 
of 2006.  Wickramsauriya admitted that the GSL cannot 
complete such a task on its own and hopes to move 
beneficiaries out of the DDHP and into the ODHP. 
Wickramasuriya estimates the GSL will need to complete an 
additional 22,000 homes in order to meet this goal in 2006. 
 
Key Obstacles to Progress 
------------------------- 
 
COLOMBO 00000484  002 OF 004 
 
 
¶6.  (U) While the number of homes and identification of 
beneficiaries are daunting challenges, the single biggest 
hurdle to timely completion of home reconstruction is the 
lack of suitable, skilled labor.  Over the last 10-20 
years, many skilled laborers in Sri Lanka have found 
greener pastures abroad.  Many donor agencies (including 
USAID) are stepping up skills training programs, often with 
a gap between program implementation and employment.  The 
USAID-funded skills training programs are being designed 
with job placement in mind, offering apprenticeships, 
internships and other forms of practice through the 
certification programs. 
 
¶7. (U) Another hurdle to reconstruction has been the lack 
of support and sufficient funds under the ODHP.  Under the 
ODHP, homeowners are entitled to grants of up to USD 2,500. 
It generally costs about USD 5,000 to complete a new home 
that meets post-tsunami housing reconstruction standards. 
Therefore, the World Bank and IFRC are working with other 
donor agencies and NGOs to provide a ?top-up? program, 
which could provide the additional funds. 
 
¶8.  (SBU) The GSL continues to struggle internally as it 
moves ahead.  Bureaucratic infighting remains a problem. 
RADA replaced the Task Force for Rebuilding the Nation 
(TAFREN) following the November elections, but has still 
not presented its implementing legislation to the cabinet 
(a required step prior to its presentation in parliament). 
The Finance Secretary, moreover, has suggested that unless 
he sees significantly improved outcomes, particularly in 
homebuilding progress, he may hold up the legislation 
indefinitely.  Wickramasuriya, on the other hand, has 
suggested that RADA needs to be able to work directly with 
donors, including the Multilateral Development Banks 
(MDBs), to bypass the Finance Ministry on issues not 
related to reconstruction financing.  Wickramasuriya has 
also said that other relevant ministries see his agency as 
a threat, thus creating a challenge for developing 
cooperative working relationships. 
 
Corruption Allegations 
---------------------- 
¶9. (U) As reported reftel, there have been numerous 
allegations of corruption throughout the post-tsunami 
reconstruction process.  An Auditor General's report that 
was widely circulated as having highlighted 'corruption' 
identified actions that would be more correctly labeled as 
'inefficiencies.' 
 
¶10. (U) Then-Prime Minister Rajapaksa (now Sri Lanka's 
President) faced allegations of corruption prior to the 
November 2004 Presidential election, when it was determined 
that he had placed Rs 82 Million (USD 820,000) of tsunami 
donations in a private bank account.  The President was 
accused of not following procedures outlined in Sri Lankan 
financial regulations for accepting, accounting for and 
using donations.  In particular, Sri Lankan financial 
regulations do not allow the transfer of funds received by 
the government in to a private trust.  The money has been 
accounted for, and the Supreme Court ruled prior to the 
November election that the case had been handled 
inappropriately by the police, who acted without the 
Attorney General's concurrence when they launched an 
investigation.  The President?s Secretary reportedly 
acknowledged the money had been put into private accounts 
as a way to hasten deployment for tsunami projects.  The 
Supreme Court ruled on March 27 that Rajapaksa's 
'fundamental rights' had been violated, and ordered 
payments totaling Rs. 500,000 (USD 5,000) from several 
individuals including the Chief of Police and opposition MP 
Kabir Hashim, the complainant, who, the court determined, 
did not have standing to sue. 
 
USAID Projects 
-------------- 
¶11. (U) USAID post-tsunami reconstruction projects are 
moving ahead smartly.  The following is a brief synopsis of 
 
COLOMBO 00000484  003 OF 004 
 
 
USAID programs to date: 
 
Transition from Camps to Communities (Livelihoods): 
 
REVIVE - project to restore 29,000 livelihoods through 
grants, loans and other assistance packages, including 
technical assistance to partner organizations.  10,000 
beneficiaries have been helped so far and activities to 
reach an additional 16,000 are currently being implemented. 
This project should be completed in FY 2006. 
 
Small Grants Program - Through USAID's Office of Transition 
Initiatives (OTI) 20,205 people have received cash-for-work 
grants and 1,888 fishermen in 8 cooperatives received 41 
boats with motors and necessary equipment. 
 
Small Scale Infrastructure: 
 
Physically Accessible Post-Tsunami Reconstruction - support 
to Motivation Charitable Trust to advocate that 
reconstructed tsunami structures be accessible by the 
disabled.  USAID support has led to passage of a cabinet 
directive and pursuant regulations ordering that all post- 
tsunami reconstruction be physically accessible.  In 
 
SIPDIS 
addition to the Motivation activities, USAID's prime 
contractor, CH2MHill will be designing vocational education 
schools that are accessible for persons with disabilities. 
Disability access construction is slated for completion in 
mid-FY 2008. 
 
Playgrounds for Tsunami Affected Children - USAID has 
completed 4 of 85 planned playgrounds for tsunami affected 
areas, with numerous others under construction.  This 
program is an excellent example of public-private 
partnership, and includes USAID, the American Jewish Joint 
Distribution Committee and the Bush-Clinton Tsunami Relief 
Fund.  At the current rate of construction, USAID expects 
to complete construction of the final playgrounds by the 
third quarter of FY 2008. 
 
Small Grants Program - USAID/OTI has committed USD 
1,043,254 of supplemental funding to support small scale 
infrastructure rehabilitation in six districts in the south 
and east.  To date OTI has funded 21 projects, including 
the rehabilitation of public markets, schools, 
transportation infrastructure, irrigation canals and roads. 
Eight of the projects have been completed and 13 are 
underway.  All small grant projects should be completed by 
second quarter FY-2008, but security constraints had, until 
recently, hindered progress in the eastern province and 
community consultations in the south were delayed by the 
November 2005 Presidential elections. 
 
Large Scale Infrastructure: 
 
Arugam Bay Bridge - the schedule for this activity is on 
target per the terms of the contract with CH2MHill.  A 
solicitation will be issued in the next couple of months 
for award of the construction sub-contract with a target 
award date of August 1, 2006, and a planned completion date 
of February 1, 2008.  A 3-6 month delay is possible, due to 
tsunami-related inflation pressures and increased demand 
 
SIPDIS 
for building materials. 
 
Fishing Harbor Repair and Improvements - sub-contract to be 
awarded June 27, 2006 with completion planned for July 1, 
¶2007. 
 
Vocational Education - sub-contract to be awarded on August 
1, 2006 with completion planned for September 1, 2007. 
 
Pottuvil Water Treatment Plant - sub-contract to be awarded 
November 1, 2006 with completion planned for August 1, 
¶2007. 
 
Technical Assistance Good Governance Programs: 
 
 
COLOMBO 00000484  004 OF 004 
 
 
Accountability in Local Governance - assistance is underway 
for 20 tsunami affected local authorities in southern and 
eastern provinces.  315 local authority officials have been 
trained in computing for finance, budget development, 
financial reporting and facilitating town hall meetings. 
20 participatory community consultations completed, 19 of 
the 20 authorities have completed tsunami recovery plans. 
17 of the 20 authorities have completed staff enhancement 
plans to provide surge capacity to address shortfalls in 
personnel needs. 
 
Anti-Corruption Program - assistance provided to the 
Commission to Investigate Allegations of Bribery and 
Corruption and the Auditor General's (AG) Department. 
Technical Assistance and training to both organizations, 
including help to the AG Department to prepare a plan to 
develop a software package for case management.  Program 
completion is slated for mid-FY 2008, but the pending 
retirement of the AG this summer could delay program 
implementation slightly. 
 
Comment 
------- 
¶12.  (SBU) As anyone who has remodeled a home knows, 
construction is a tricky business that does not hold to 
tight deadlines and fixed budgets.  Given the vagaries of 
Sri Lankan weather patterns (and election patterns for that 
matter), progress has been remarkably steady.  That said, 
the GSL continues to create unrealistic expectations with 
its pledges to complete all housing by the end of 2006.  If 
they achieve 50-60 percent of this target they will do 
extremely well.  Nonetheless, as long as progress remains 
steady, the GSL, its implementing partners and donors learn 
valuable lessons and apply new models, which help propel 
the process further.  We do not doubt a successful 
conclusion to this difficult chapter of Sri Lanka's 
history, but we need to avoid shutting our efforts down too 
quickly and diminishing the possible returns to the USG 
from these efforts. 
 
¶13. (U) While we are aware of the desire for quick delivery 
on these matters, we urge Washington to be cognizant of 
realities on the ground.  At this time, USAID programs are 
generally on target, but it is normal to anticipate 
possible implementation delays.  Key to the timely 
implementation and completion of the USAID-funded tsunami 
reconstruction activities will be the ability to maintain 
key operating expense (OE) account- and program funded- 
persons here in the field to manage the program.  The need 
to maintain adequate government oversight was an issue 
raised in a recent draft report by the Government 
Accountability Office on tsunami reconstruction progress. 
To that end, USAID is in the process of reviewing their 
internal program management needs.  End Comment 
Lunstead