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R 140934Z NOV 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 4707
INFO RUCPDOC/USDOC WASHDC
RUEHNE/AMEMBASSY NEW DELHI 0204
RUEHKA/AMEMBASSY DHAKA 9586
RUEHIL/AMEMBASSY ISLAMABAD 6514
RUEHKT/AMEMBASSY KATHMANDU 4571
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RUEHC/DEPT OF LABOR WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP

UNCLAS SECTION 01 OF 02 COLOMBO 001902 
 
SIPDIS 
 
SENSITIVE, SIPDIS 
 
DOL/ILAB FOR TINA MCCARTER 
 
DRL/IL FOR LAUREN HOLT 
 
STATE FOR SA/INS 
 
MCC FOR D NASSIRY AND E BURKE 
 
 
E.O 12958: N/A 
TAGS: ECON ELAB EIND ETRD PHUM SOCI EAID CE
SUBJECT:  SRI LANKA:  TRANSPORT AND PETROLEUM DEVELOPMENT MINISTER 
WANTS DEVELOPMENT, BUT DOESN'T WANT TO PAY 
 
¶1.  (SBU) Ambassador Blake called on Minister A. H. M. Fowzie 
October 25 to discuss transportation and petroleum development. 
Fowzie is Minister of Railways and Transport and Minister of 
Petroleum and Petroleum Resources Development.  Fowzie's political 
career began 47 years ago, including significant experience in 
transport ministries, but little in petroleum matters. 
 
Offshore Oil Development 
------------------------ 
 
¶2.  (SBU) The Ambassador told Fowzie that he wanted to promote trade 
between Sri Lanka and the US, and development of Sri Lanka's 
infrastructure.  The Ambassador listed the various forms of 
assistance the USG is providing to ensure the successful development 
of Sri Lanka's offshore oil and natural gas reserves.  Fowzie 
expressed appreciation for the various USG programs underway to 
develop Sri Lanka's offshore oil and natural gas resources.  He 
agreed to a timeline presented by the Ambassador.  However, the 
following week, a Petroleum Ministry official informed EconOff that, 
due to time limitations, the GSL would not require assistance for 
development of its production sharing contract. 
 
Dilapidated, Bankrupt Railway System; Seeks China Credit for Engine 
Purchases 
-------------------- 
 
¶3.  (SBU) The Ambassador asked about Fowzie's views of Sri Lanka's 
mass transit systems.  Fowzie replied that the trains, which are 
state-owned, are losing 5 billion rupees annually (approximately USD 
50 million) and blamed the near 100 percent subsidy given to 
Government of Sri Lanka (GSL) employees.  (Comment:  A Railway fare 
for the average commuter costs around 53 Sri Lanka cents per km, 
resulting in a 30 mile commute costing about USD 15 cents.  With the 
subsidy, GSL employees pay only 3 Sri Lankan cents for the same 
commute, and can commute round trip for two days before paying one 
US cent.  The operational cost of railway is 1.25 Sri Lankan rupees 
per km, resulting in an 85 percent subsidy for the non-governmental 
commuter and a 97 percent subsidy for governmental workers.  End 
Comment.) 
 
¶4.  (SBU) Fowzie said it was extremely difficult to improve the 
railway system, noting that railway employees belong to more than 
100 unions, and that he needed to spend much of his time working on 
union matters.  He described a time in 1970 when he served as the 
minister responsible for the railroad system.  Back then, he fought 
against a proposal to increase railway fares, arguing that it was 
not fair to increase fares when the system needed fixing.  Thirty 
six years later, with a railway system in shambles, Fowzie still 
expressed opposition to a fare increase.  He said that the railroad 
should give its passengers "something worthwhile, rather than 
dilapidated cars." 
 
¶5.  (U) Fowzie mentioned several potential railroad projects, 
including a credit package from China for train engines and the 
renovation of the railroad between Galle and Matara which is to be 
supplied through India.  He also said that a study had been prepared 
by a German company for a Colombo monorail system, but did not 
indicate that he anticipated this would develop. 
 
Oil Refinery Stymied Because of Privatization Fears; Hambantota 
Refinery Production for Export 
----------------------------------------- 
 
¶6.  (SBU) Ambassador asked Fowzie about a proposal submitted by a US 
company for construction of an oil refinery just outside Colombo on 
a built-own-operate-transfer (BOOT) basis.  The refinery would have 
been built alongside a currently existing state-owned refinery. 
Fowzie replied that the project would not go forward, due to 
objections of some, saying that the purpose of the proposal was to 
"destroy" the state-owned refinery. 
 
¶7.  (SBU) Asked about the plans and purposes for a refinery in 
Hambantota in the deep south, Fowzie replied that its production 
 
COLOMBO 00001902  002 OF 002 
 
 
will be exported.  He added that the production could always be used 
in case of emergency within Sri Lanka. 
 
Comment 
------- 
 
¶8.  (SBU) Minister Fowzie is a career politician who has managed to 
survive through many governments with their varying platforms. 
While not discussed during the meeting, Fowzie staunchly supported 
the need to subsidize gasoline, diesel, and kerosene earlier this 
year, and then reduced or eliminated subsidies on the first two 
products.  He recently refused demands from private bus owners to 
increase bus fares of dangerously overcrowded busses (arguing that 
people can't afford such an increase).  Fowzie still holds fast to 
the opinion he held in the 1970s that people should not pay dearly 
for limited resources.  The problem is that Sri Lanka is getting 
what it pays for:  dangerous, overcrowded systems that don't serve 
anyone very well, and suck funds away from higher priorities. 
 
BLAKE