15th June, 2003 Volume 9, Issue 47
















The Tiger reaction to the Tokyo conference

“It is the little rift within the lute, that by and by will make the music mute, and ever widening slowly silence all”

— Alfred Tennyson

By D. B. S. Jeyaraj

Twenty four hours was all that the Liberation Tigers of Tamil Eelam (LTTE) took to dispel the euphoria generated by the ‘successful’ Tokyo donor conference aimed at strengthening the peace process in Sri Lanka.

The LTTE issued a hard-hitting statement from its Kilinochchi based headquarters in the Wanni on June 11. While reiterating its hardline stance on the question of establishing an interim administrative structure for the Tamil majority North Eastern Province of Sri Lanka, the LTTE also made it crystal clear that it would not be bound by any provision in the unanimous declaration adopted at the tail end of the conference in Japan.

Furthermore, the Tigers went on to complain about international interference in Sri Lankan affairs and even implicitly censured the accredited facilitator, Norway.


Unable or unwilling to publicise its inner motivations in keeping away from Tokyo, the LTTE increased pressure on Prime Minister Ranil Wickremesinghe to yield on the interim issue. The international community, however, felt that the LTTE’s course of action was inappropriate and that the Tigers should have participated in Tokyo in the interest of the Tamil people.

With the LTTE defying such opinion, the international community too began flexing its muscles. It became a matter of prestige, particularly for the hosts. A strong signal that the world would not be cowed by Tiger threats had to be sent.

The congratulatory words of US Deputy Secretary of State, Richard Armitage to Japan for not capitulating to LTTE “blackmail” is indicatory of this international mindset. The Tokyo summit, therefore, went ahead in spite of the LTTE boycott.

The two day sessions resulted in an unprecedented bonanza for Sri Lanka. Earlier it was envisaged that Sri Lanka would get US$ 3 to 3.5 billion for a three year period. The Tokyo conclave went far beyond these expectations. A staggering amount of US$ 4. 5 billion for four years from 2003 to 2006 was pledged.

It appeared that the donor community wanted to impress upon the LTTE that its absence would not hinder support for the peace process in anyway. Contrary to predictions in the Tiger camp that envisaged aid will decrease because of LTTE non-attendance, the Tokyo summit resulted in a massive increase that left the Sri Lankans jubilantly stunned.

The generosity displayed by 51 countries and 22 international organisations at Tokyo was not unconditional. Even though the Tiger absence prevented a joint signatorial obligation by both the government and the LTTE the donors did make certain stipulations governing the pledged aid that linked aid to progress in the peace process.

Special attention was paid to the plight of the north east and recognising the LTTE’s importance in this regard; the door was left open for a Tiger re-entry. These formed part of the Tokyo Declaration and relevant excerpts are as follows:

 “The conference notes that during the past sessions of the peace talks, significant progress was achieved. Donors remind the government of Sri Lanka and the LTTE of the importance for both parties to make their utmost efforts to further promote the peace process founded upon the principles reflected in the Oslo Declaration. Donors recognise the urgent need to support the people in the conflict-affected areas of the north and east, and make allocations towards this purpose.

“With regard to the north and east, priority-setting and project-implementation will take place with the government working in partnership with the LTTE, and with adequate safeguards for the interests of all communities. The conference expects that the government will ensure that the assistance pledged by the donor community to the reconstruction and development of the north and east is utilised specifically for that purpose.

“The conference also urges the parties to move expeditiously to a lasting and equitable political settlement. Such a settlement should be based upon respect for human rights, democracy and the rule of law. In this regard, the conference looks forward to the parties reaching early agreement on a human rights declaration, as discussed at the sixth session of peace negotiations at Hakone.

“The conference welcomes the LTTE’s commitment to the negotiated peace process and urges the LTTE to return to the peace talks as soon as possible. The people in the conflict affected areas of the north and east must be able to enjoy the dividends of peace immediately. Manifest commitment by both the government of Sri Lanka and the LTTE to further the peace process will be necessary for the provision of international assistance to the reconstruction and development of the conflict affected areas of the north and east.

“Assistance by the donor community must be closely linked to substantial and parallel progress in the peace process towards fulfilment of the objectives agreed upon by the parties in Oslo. The conference encourages the government of Sri Lanka and the LTTE to enter into discussions as early as possible on a provisional administrative structure to manage the reconstruction and development aspects of the transition process.”

Roadmap with clear milestones

“The process would need the expeditious development of a roadmap with clear milestones indicating the path towards a mutually acceptable final political solution. With this in view, the international community intends to review and monitor the progress of the peace process closely, with particular reference to objectives and milestones including:

a. Full compliance with the ceasefire agreement by both parties.

b. Effective delivery mechanisms relating to development activity in the north and east.

c. Participation of a Muslim delegation as agreed in the declaration of the fourth session of peace talks in Thailand.

d. Parallel progress towards a final political settlement based on the principles of the Oslo Declaration.

e. Solutions for those displaced due to the armed conflict.

f. Effective promotion and protection of the human rights of all people.

g. Effective inclusion of gender equity and equality in the peace building, the conflict transformation and the reconstruction process, emphasising an equitable representation of women in political fora and at other decision-making levels.

h. Implementation of effective measures in accordance with the UNICEF-supported action plan to stop underage recruitment and to facilitate the release of underage recruits and their rehabilitation and reintegration into society.

i. Rehabilitation of former combatants and civilians in the north and east, who have been disabled physically or psychologically due to the armed conflict.

j. Agreement by the government of Sri Lanka and the LTTE on a phased, balanced, and verifiable de-escalation, de-militarisation and normalisation process at an appropriate time in the context of arriving at a political settlement.”

The Tokyo Declaration, therefore, laid down some basic expectations of the donor community as to how the peace process should continue. While the LTTE had escaped being a signatory to specific guarantees, the declaration certainly outlined some behavioural principles.

The explicit condition that money allocated to the north east should be spent only in those areas and that the government should work in partnership with the LTTE to that purpose was quite favourable to the Tigers. Thus, Colombo too could not ignore the LTTE in utilising aid. Continuous aid depended on the pace of peace, thereby making the LTTE indispensable in sustained procurement.

Administrative structure

Wickremesinghe himself announced the government’s decision to install what he termed a “provisional administrative structure” for the north east. He invited the LTTE for direct talks to formulate the structure. This meant that the Tigers could re- enter the process again and determine the modalities of reconstruction and development in the region. A needs assessment study had allocated US$ 1. 38 billion for north eastern utilisation.

Despite this enticing carrot, the LTTE feared the hidden stick more. After decades of being a law unto themselves, the Tigers were not prepared to accept international dictates in spheres like “human rights for all people; recruitment of underage children as combatants; phased, balanced and verifiable demilitarisation,” etc.

The Tiger response was swift and brutal. Commenting on the resolutions and declarations adopted by the donor community at the Tokyo conference, the LTTE’s statement said that the document has no binding obligations on the organisation.

“The LTTE was not involved in the deliberations or in the formulation of these declarations. We have not been consulted on the set of propositions and resolutions enunciated in the Tokyo Declaration. The Colombo government, with the active assistance of the facilitator and its international ‘tactical allies’ has formulated this strategic paper to super-impose its own agenda on the LTTE. This is unacceptable to us,” the LTTE statement said.

Thus it was patently clear that the LTTE regarded the Tokyo outcome as an exercise in entrapment and an effort to impose conditions on it. It was not prepared to accept those conditions. It was the LTTE’s version of an ‘aid without strings attached’ requirement.

The Tigers went on to deliver what was perhaps a severe indictment of international involvement. It charged “the government of Ranil Wickremesinghe for complicating the peace process by allowing undue and unwarranted interference by extra territorial forces in the ethnic conflict, which is an internal political affair that has to be resolved by the parties in conflict,” according to the statement.

LTTE Chief Negotiator Anton Balasingham in a previous letter to Wickremesinghe had made veiled references to the international factor in Sri Lanka. Now this official LTTE statement was bluntly critical. It accused the Colombo government of conspiring with its international tactical allies in imposing conditions on the LTTE.

The somewhat uncomplimentary reference to Norway for providing “active assistance” in this enterprise was intriguing. Oslo had become facilitator due to the consent of the then government under President Chandrika Kumaratunga and the LTTE.

President Kumaratunga has been critical of the Norwegian role in recent times and members of her party had even denigrated the Scandinavians as “salmon eating busybodies.” Now the LTTE too was expressing its disapproval for different reasons.

This meant that ‘locus standi’ for a Norwegian role in Sri Lanka was diminishing. With the LTTE having announced a temporary suspension of the peace talks, Oslo too had been circumscribed. Norway was present in Tokyo as a delegate nation and not as facilitator. Earlier it was expected to be a co-chair of the conference. Now its role was shrinking further.

Interestingly enough it was the LTTE that had insisted upon international mediation saying that Tamils could not trust a Sinhala government. Now the Tigers were saying that it “is an internal political affair that has to be resolved by the parties in conflict.”

This assertion is somewhat reminiscent of the time India was involved directly in Sri Lankan peacemaking. The very same LTTE that said “we love India,” did an about-turn later and described India as an outsider intefering in a dispute between brothers.

Safety net

“The compulsions that arose from severe economic and political bankruptcy have compelled the government to seek the ultimate refuge in the so-called ‘international safety net’ to resolve the economic and political crisis of the country.

“By seeking this ‘safety net’ the Colombo regime has shifted the peace process from third party facilitation to the realm of international arbitration by formidable external forces that has far-reaching consequences to the political and economic destiny of the island,” the LTTE’s statement declared.

Wickremesinghe had been describing the international role as a “safety net” in a bid to reassure the Sinhala people of the viability of the peace process. This attempt to strengthen the process has seemingly had a counterproductive effect. The LTTE suspects Wickremesinghe as using that net to trap the Tiger. The international safety net was an entrapment device in Tiger eyes.

Apparently, in Tiger perception, the international dimension was becoming a problem. As long as LTTE’s wishes were fulfilled unconditionally, international “interference” was ‘good.’ The moment it sought to introduce universal standards of human rights and democracy it was ‘bad.’

Nothing is wrong with external forces as long as the political and economic destiny of the country is shaped according to Tiger whims and fancies. Any sign of deviation and the tryst with destiny has to be censured and possibly ended.

The international donor community, pledging massive amounts of aid, was entitled to lay down some conditions. The Tigers, however, were reversing the proverbial saying about “he who pays the piper calls the tune.”

The LTTE wants the money as well as call the tune. If this is not agreed upon, then international involvement is criticised. With both President Kumaratunga and the LTTE becoming critical of Norway’s facilitatory efforts, the continuing role of Norway as facilitator has become tenuous and questionable.

In a stinging blow to Wickreme-singhe’s hopes of an early rapprochement, the LTTE reiterated its position that it would “participate in the negotiating process only when the Sri Lankan government puts forward a clearly defined draft framework for an interim administrative structure for the north east.”


The LTTE also rejected in its statement “the offer made by the Prime Minister, Mr. Ranil Wickremesinghe of a ‘provisional administrative structure’ within the laws of the land as a re-statement of his previous position with a new terminology.”

“We are disappointed to note that the Prime Minister’s statement does not offer anything new. The so-called ‘provisional administrative structure’ is the new name given to the apex council proposed by him for development and rejected by us as extremely limited and inadequate,” the LTTE statement said.

“The Prime Minister has not responded to our call for a draft framework for an innovative and effective politico-administrative structure. Contrary to Mr. Wickremesinghe’s statement to the international donor community, we seriously differ in perception in connection with what the LTTE leadership proposes and what his government offers. While our leadership has proposed an interim administrative framework, a politico-administrative structure for the north east with wider participation of the LTTE, the Sri Lankan government has offered a council with a structure and mechanism for the development of the region. The Prime Minister is taking cover behind the laws and constitution of Sri Lanka, which have effectively institutionalised racism against which the Tamil people have been struggling for decades,” the statement observed.

“Furthermore, the LTTE and Mr. Wickremesinghe’s government also hold starkly divergent views as to the nature of the final political solution to end Sri Lanka’s protracted ethnic conflict. While the Prime Minister envisages piecemeal reforms to the present constitution, the LTTE has proposed a radical transformation of the system of governance in Sri Lanka, through the institutionalisation of a new, secular and equitable constitution which recognises the Tamils’ right to self-determination and homeland. It is whilst recognising that this is an impossible task for Mr. Wickremesinghe’s fragile ruling coalition that our organisation proposed the establishment of an interim administration,” the LTTE statement further said.

 If there was any chance earlier that talks could resume on a ‘re-defined agenda’ on setting up an interim administration for the north east, those hopes were dashed by the LTTE statement. Four aspects of LTTE strategy were highlighted in the statement.

Firstly, the LTTE was not going to rush into any type of discussion to lay its hands on the pledged aid. It wants to ostensibly set up a mechanism beforehand. The government may have been successful in persuading the donor community to pledge money for an exercise in placing the development cart before the conflict resolution horse, but the LTTE was going to insist on a north eastern administrative structure under its full control being set up before financial aid was procured.

Secondly, the LTTE wanted the framework of Wickremesinghe’s proposed provisional structure to presented in writing. There were two reasons for this. One was that Wickremesinghe’s earlier pre-election promise of an interim structure had been merely conceptual. Later, from a Tiger perspective, he had backtracked.

Specific outline

Now the Tigers wanted a specific outline instead of vague intentions. Two, the Tigers know that there are legal and constitutional hurdles to setting up an innovative structure. Written documents would help the LTTE to gauge government opinion better and perhaps suggest improvements and alterations.

Thirdly, the LTTE wants to emphasise the divergence in perspective between itself and the government. The LTTE sees the interim structure as one having great politico-administrative powers encompassing the north east.

The government perceives it as a provisional arrangement for rehabilitation and reconstruction needs alone. The Tigers want it to be an extra-constitutional authority. The government envisages it as conforming to the laws of the land.

Even though Balasingham has said that the Tigers are not seeking an interim administration as an end unto itself, there is no doubt that if the provisional structure is ‘innovative’ enough for the LTTE it would continue with this arrangement for an extremely long period under the guise of ‘exploring’ federalism.

Fourthly, the LTTE wants to de-link international involvement from the workings of the interim mechanism. Wickremesinghe has set about conceptualising the structure as one spending the money pledged in Tokyo for the north east. This means an enhanced role for the donors in monitoring and indirectly supervising projects.

It also means the LTTE should adhere to the minimum levels of good governance required. This is anathema to the Tigers. The LTTE, living in a world of its own, wants to use the money without interference. So it is quite particular about the proposed structure and wants to ensure international non-involvement.

It is against this backdrop, therefore, that the LTTE has issued its recent statement concerning the Tokyo summit. In one stroke it has undermined the success of the Tokyo conference. It has also been daringly defiant of international opinion by asserting its independence towards the Tokyo Declaration.

By continuing its politics of brinkmanship, the LTTE is hoping to pressure a beleaguered Colombo into granting all that it desires on a platter. It remains to be seen, however, as to whether this dangerous course of action will result in the LTTE gaining its desired ends or lead to a complete collapse of the fragile peace.

Tigers may not talk, but the
money soon will...

By George Rumsbottom

The partiality of the proverbial drowning man to clutch at straws is legendary. But faced with an alternative, like say, grabbing weakly at an archaic Kadirgamar-ism, a drowning male or for that matter female or even more for that matter a big cat, will readily do so.

Thus, I observe cleverly as is my usual style, that the Tiger variety has now clutched at the straw of internal affairs and the Kadirgamar-ism of illegal intervention.

Richard Armitage, a bloke well in with the affairs of you natives, has been concerned that the eye of history will 

judge very harshly those who don’t seize this opportunity for peace. Well put Sir. Clap clap. But has he forgotten the eye of the Tiger?

The Tiger chaps, bless their souls are fellows if you will, who have grown up with an innocent belief in Santa Claus and the Tooth Fairy. They see the international community as swooshing down the chimney, leaving a large bag of gold, caskets of silver and goblets of myrrh near their political beds and tip toeing off before they awake. These beds they loathe to share with any other fellows, lest they have to share the goodies also.

Thus the type of unsporting donor who was all too prevalent in Tokyo, the one who preferred to link the participation in the peace process with the handouts was not their glass of palmyrah arrack.

This Kadirgamar chap who has suddenly become the Tiger’s quotable quote, I glean from discarded native newspapers, was a chap not only detested by his own kind for scampering hither and thither in a dither like a demented zither, denying propaganda spewed out by Goebellian machines, but also regarded as bit of a trailing arbutus by the diplomatic community for his inclination to be a tad xenophobic.

An insular kind of bloke, he detested any modicum of interest in your native isle shown by foreigners. He had the uncomfortable habit of calling people names. ‘Sissy’ he hissed at Shane Warne. ‘Interferer’ he hinted at Kofi Annan. As I said, a man with a remarkable talent for nicknames.

However, the single most pressing reason for Kadirgamar’s demise from the international circuit was his annoying tendency to repeat the words ‘internal affair’ in a frenzied sort of way, in the hearing of highly placed US diplomats sipping Martini’s and spiking olives at cocktails.

Was he talking about Sri Lanka’s civil war or a possible intimate moment a British High Commissioner had shared with a Peruvian Deputy on the lawn of a Rumanian Counselor’s residence? These ambiguities were making the diplomatic corps sick with unholy anxiety. What next? They felt. A bit of a pill this Kadirgamar, they thought.

As such, talking in loud whispers in a suspicious manner about interference, illegal intervention and internal affairs, not to mention territorial borders and all that sort of thing, especially in this new borderless world was not going to get the man anywhere. I mean to say Sir. If this world were not borderless some one please explain to me how Uncle Sam’s boys and a few of our own blokes, of a morning recently, were able to pack a few tanks and guns and things into their back packs, cleverly bypass Iraqi immigration and customs, enter the modern Babylonian state, and bring down the idol of Nebuchednezzar. Or was it Saddam? How easily one forgets? Names, I mean.

So judge of my surprise when the big cats, having rummaged feverishly through old newspapers stacked up for the paper man, dug up the famous Kadirgamar-ism and popped it into the system as a reason to stay out of the peace process.

By Gad Sir! You natives never cease to amaze me.

On the one hand that delightfully pink chap, your pee em, announces at the Tokyo conference about a ‘provisional administrative structure.’ On the other hand the Tigers are sniffing at it in disdain, while accusing your native government of using the international community to twist its arms into submission.

Oops! Were these chaps born yesterday? Me thinks that was the general idea all along. I most liked the line about not ‘allowing undue and unwarranted interference by extra territorial forces in ethnic conflict, which is an internal political affair that has to be resolved by the parties in conflict.’ Isn’t that a mouthful of bovine excrement?

These Tiger chaps, most of them chefs who have turned accountants or was it vice a versa, yearn for the paper work. No job is finished till the paper work is done. Accustomed to burning the midnight oil, soaking the foot in cold water, fermenting the forehead in balm and bending the back over a profit and loss sheet, these chappies have put their foot down. The one not soaking in the hot water.

No peace talks they say, until Ranil puts forward a ‘clearly defined draft framework’ for the structure proposed by him. Meanwhile I learn from my trusty native slave that the Tiger chappies do not feel that any documents signed or declarations adopted by the donor community in Tokyo are binding on them.

Hmm! Let us wait and see shall we? By George, let us wait and see.

Mark my words you impoverished Griseldas. Even if the Tigers refuse to talk, the money soon will.

The great aid bonanza!

By Asgar Hussein

During the 10 year period 1993-2002 Sri Lanka’s net receipts of foreign assistance amounted to Rs. 207 billion. However, at last week’s donor conference in Tokyo, the nation was pledged an unprecedented aid package exceeding Rs. 400 billion. This included a sizeable grants component.

The outcome of the conference was hailed by the local business community, which saw it as an endorsement of the government’s initiatives on the peace front and economic policies. The Colombo stock market reacted to the news by a rise in the indices.

Concerns were however expressed on Sri Lanka’s poor track record of aid utilisation, which has been under 20% in the past. An unanimous opinion was that the country should speedily implement development programmes and build its infrastructure to catalyse future economic growth. Special emphasis was also laid on rebuilding the north and east.

Speedy implementation

Prime Minister Ranil Wickre- mesinghe was quick to promise speedy implementation of projects and optimise the aid pledged. He stated that the nation “has to overcome the delays, the blockages and the inertia of its bureaucratic apparatus and transform it into one capable of speedy implementation where work is done efficiently  and effectively.”

Many would also have been heartened when Finance Minister K. N. Choksy stated that the government has taken steps to increase aid utilisation to 45% by the end of next year from the 2002 figure of 16%.

It was initially expected that Sri Lanka could obtain an aid package of around US $ 3 billion at the Tokyo Conference on Reconstruction and Development of Sri Lanka. However, the participants who took a positive view of developments in the country ultimately pledged a record US $ 4.5 billion over the four year period 2003-2006.

Japan offered aid amounting to US $ 1 billion, while the European Union pledged grants of US $ 293 million. The Asian Development Bank (ADB) also promised to contribute US $ 1 billion and the US pledged US $ 54 million.

This is in addition to the US $ 567 million granted by the IMF under the Poverty  Reduction and Growth Fund and the Enhanced Fund Facility. The World Bank  had also earlier promised aid to the tune of US $ 800 million under its Country Assistance Strategy.

The 51 countries and 22 international organisations that participated at the conference also endorsed the government’s ‘Regaining Sri Lanka’ initiative which they described as a comprehensive programme to develop the nation on a balanced and equitable basis.

They also emphasised the need to provide urgent humanitarian assistance to rebuild the conflict-hit areas in the north-east. They further stressed the need to adopt economic policies to reduce poverty, noting that sustainable development also hinges on economic growth and job creation as well as encouraging private enterprise.


The initial euphoria over the huge aid package is yet to die down, but it must be remembered that the sums offered are merely pledges. There yet remain the urgent tasks of obtaining the monies and implementing the projects. Furthermore, some of the loans and grants could be withheld if the peace process faces obstacles. Also, the donors would have imposed other conditions such as the requirement to source expertise and equipment from those particular countries.

CEO, Frontier Research, Amal Sandaratne noted that concessionary loans which have to be repaid do not now have the favourable lower interest rate advantage as much as they did in the past.

He pointed out that global interest rates have declined to extremely low levels with expectations of deflation in the future. For instance, in Japan the government borrows at rates well below 1%, close to zero. In the U. S., short-term treasury bills  are under 1%, and a 10 year note is close to 3%.

According to Sandaratne, the presently prevailing situation means that if the Sri Lankan government obtains a loan from Japan at the supposed low rate of 1% or 2%, then the Japanese government actually stands to make a profit as their borrowing cost is so small.

He also said that in addition to the general conditions (such as progress on the peace front), part of the loans pledged will also carry conditions such as the demand to source expertise and equipment from the donor country. This may not be in the nation’s best interest.

Sovereign rating

Now that Sri Lanka’s economic situation seems better, Sandaratne believed the government should consider going for a sovereign rating. It could also possibly obtain guarantee facilities on loans from multilateral financial institutions such as the World Bank and Asian Development Bank, and then source loans from the international bond market.

He pointed out that India has successfully tapped the non-resident expatriate communities to raise funds. He believes that such a source could be successfully tapped by the LTTE if they want to develop the north-east without conditions attached.

He said the LTTE can use their network to tap the Tamil expatriate community to fund projects in the north-east without having to adhere to the conditions laid down in Tokyo.

Sandaratne also notes that the funds pledged do not necessarily translate into monies. He pointed out that about US $ 5 billion was pledged for Afghanistan, but their ability to utilise that aid was limited; also because the world was distracted by the Iraq war very little aid has actually reached that country.

President of the Sri Lanka Association of Investment Professionals, Ravi Abeysuriya said the onus is now on the government and citizens to adopt a bipartisan approach and make best use of these funds to usher in prosperity and generate sufficient income to repay the debts and improve the living standards of the populace.

He noted that Sri Lanka had no option but to borrow, since our capital productivity is low.

Abeysuriya stressed that the funds should be utilised most productively to generate income, so that the country will be better off even after paying its debts.

“We would like to see, as in China, the transport and power sectors being developed,” he stated. He added that attention should be paid to developing the highways network and providing power at rates comparable to other countries in the region.

Debt burden

Abeysuriya pointed out that previous governments that have borrowed funds have not put the monies to the best use, and as a result we have accumulated a huge debt burden which is already 105% of GDP. He was referring to a Central Bank report which stated that the country’s total debt burden - as a percentage of GDP - was 105.3% at the end of last year, with domestic debts accounting for 59.8% and foreign debts 45.5%.

He also noted that Sri Lanka has received Rs. 207 billion during the last 10 years as loans and grants. He however lamented that the nation has largely failed to put these loans and grants to the best possible use. Loans from 1993 to 2002 totalled Rs.135 billion while grants amounted to Rs.72 billion. It was also stated that our debt servicing ratio for 2002 was 13.2%, which is fairly high. He said that lending to Sri Lanka has been conditional, and part of the monies revert to the donor countries. It was also noted that during the past 10 years, 35% of the aid utilised has been in the form of grants.

Poor utilisation

Abeysuriya also said that the utilisation of foreign aid pledges in previous years has been under 20%. This fact was also recently referred to by ADB President Tadao Chino. Chino praised the government’s intention to streamline its project implementation procedures and establish management structures to improve aid utilisation.

According to Abeysuriya, Sri Lanka has a poor track record of utilising donor funding and channeling it to the majority of people living below the poverty line. He also stressed that the monies pledged for resettlement and rehabilitation should be channelled to the affected, so that they can upgrade their quality of life.

President, National Chamber of Commerce of Sri Lanka, Asoka de Z. Gunasekera said the aid package is a clear indication that donor countries and funding agencies such as the WB and ADB have the fullest confidence in the government’s peace initiatives and its sincerity in implementing the development programmes laying special emphasis on the north and east.

He added that the ministries and state agencies responsible for implementing the projects utilising the huge funds “should quickly get on the job and utilise this funding as early as possible.”

Gunasekera pointed out that three prominent business chambers in the island had made recommendations to the governments of Sri Lanka and Japan regarding areas where the funds should be utilised, laying emphasis on the development of infrastructure. They had also proposed measures to overcome delays.

“We are happy that funding agencies and donor countries are very eagerly supporting the peace initiative,” he said. He added that the government should involve the LTTE in the development programme of the north-east.

 Chairman, Ceylon National Chamber of Industries, Ranjith Hettiarachchi said that project contracts arising from the aid pledged should be given to local construction firms rather than foreign companies. He emphasised that local firms have the necessary expertise and capability to handle most of the projects.

He said that at a meeting by the private and public sectors about a month ago, it was decided that the funds should be utilised for the development of the power sector, highways and transport (especially the railway system) and uplifting IT education in the country.

Transparency and efficiency in the utilisation of funds was also emphasised.

Opposition comments 

By Shezna Shums

PA Spokesman Dr. Sarath Amunugama commenting on the Tokyo donor conference said he is happy that the event took place. However regarding the US $4.5 billion in aid that the country was pledged, he said “this quantum of money assistance consists largely of loans so every cent will have to be repaid with interest so there is no reason for euphoria.”

“Sri Lanka is falling into a debt trap. The UNP, particularly when the Prime Minister was in the then opposition, constantly warned the government against getting into debt. He is not only getting into a debt trap but he got in and closed the gate,” he added.

Amunugama stated that every Sri Lankan living today and the generations to come will have to repay the loans to which many conditions have been attached.

He went on to say that he does not know the reaction of the LTTE with regard to the continuation of the peace process.

There are directions from the World Bank, International Monetary Fund and the Asian Development Bank that there should be large scale restructuring of banks and the public sector, said Amunugama.

According to him, large-scale dismissing of workers and shutting down of government agencies will lead to a total attack on the working class.

“With this assistance and drift towards the right there will be tremendous suffering experienced by the working class,” explained Amunugama.

“Also, we do not know what projects this money will be used for, whether it will be in the north or south. We should also know whether the LTTE will drop their demand for a separate state before the country underpins these loans for the north-east”.

Democratic Workers Congress Leader Mano Ganesan stated the pledges demonstrate the confidence of the international community in the peace process, but not necessarily  in the government.

“There is a principal need for a federal system in the north and east and we are happy that  the Prime Minister is openly talking about this, as previously the word federalism in the political sense was considered a bad word.”

If not for the peace process, there would be no donor aid or international aid, pointed out Ganesan.

Speaking to The Sunday Leader, Lanka Sama Samaja Party General Secretary Batty Weerakoon said, “Aid is not the only important issue here, the aid given will help any government that is accepting the capitalist system.”

“We are grateful to get the large amount of aid but the main question is the peace process itself,” he added.

The significance of this aid is that the international community has accepted the present position and the LTTE cannot have its own way.

With the aid negotiations the international community went ahead with whatever contributions they could make, explained Weerakoon.

“This is something the LTTE did not anticipate. Now they have to climb down and change their own stance.”

Speaking to The Sunday Leader regarding the Tokyo donor conference, EPDP MP V. Thavarasa emphasised on the development activities that would arise from the money granted.

He said that all the parties concerned in the north and east should have participatory roles in the decision-making and implementation process.

There should also be a political solution between the government, LTTE and other parties so that a setback (non-participation of the LTTE) of this nature will not happen.

Previously there were no political issues discussed, except federalism. Therefore with the help of all parties a political solution should be found first, Thavarasa said.

 *  *  *

Positive stock market reaction

The unprecedented aid pledged at the donor conference in Tokyo buoyed sentiment in the Colombo stock market.

The All Share Price Index which closed on Friday (June 6) at 903 basis points, rose to 915 on Monday and 918 on Tuesday.

Head of Research, Asia Securities, Dushyanth Wijesinghe said sentiment was basically driven by the fact that funds pledged could raise the rate of economic growth in the future, especially with a large proportion of funds being deployed to develop infrastructure.

He noted that one of the main reasons behind the stifling of economic growth has been the inadequate infrastructure in areas such as transport and power.

He felt the upturn in the market last week could be partly attributed to the positive sentiment arising from the donor conference and also the very positive corporate results for the financial year ended March 31, 2003

According to him, there should be a market correction. He added that the outlook for corporate earnings is very positive, and they are looking at a 22% corporate earnings growth in the current year. This figure could be higher if the north-east situation improves. With regard to the aid pledged, Wijesinghe noted however that the real issue concerns the deployment of funds, and what really is necessary is that appropriate structures be in place to utilise the funds.

*  *  *

New system to implement foreign funded projects

Prime Minister Ranil Wickremesinghe has announced that the government is introducing a completely new organisation to implement foreign-funded projects. This will also incorporate the External Resources Department.

He said that it will ensure a timely and professional tendering process, and would have the ability to bring in the best qualified individuals and firms from outside government to manage and implement projects. Transparency and accountability will be significantly improved, he pledged.

According to him, the new system will provide the basis for substantial improvements in the utilisation of the assistance necessary for the reconstruction and rehabilitation in the north-east and other conflict affected areas. It will also provide the foundation for the economic transformation of the nation and raise incomes and reduce poverty.

The Prime Minister also noted the weaknesses of the bureaucracy in handling foreign-funded projects. “Our public service is too large, too poorly paid and lacks the capacity to handle the increased rates of project design and implementation,” he said. 

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