April 2005
Island at Sea
By Eric Ellis
Sri Lanka’s efforts to rebuild after the tsunami have been slowed by bureaucracy and renewed ethnic tensions. Can President Kumaratunga use the disaster to transform the island’s political culture?
DR. TARA de MEL was enjoying a pleasant holiday breakfast with her family at the luxurious Lighthouse Hotel in Sri Lanka’s southern port of Galle on December 26 when the azure waters of the Indian Ocean suddenly turned violent.
She watched helplessly from the hotel veranda as 11 people were swept to their deaths from the beach below. Within minutes the 49-year-old, British-educated doctor was providing emergency relief to survivors alongside her husband, one of Colombo’s leading physicians, and her teenage son, a medical student.
“There was a lot of panic, a lot of uncertainty,” de Mel recalls. “People were hysterical. We didn’t know whether there were more waves coming, how high they would be. It was anybody’s guess as to what was going on, truly terrifying.”
By 4:00 p.m. that day the de Mel family was heading north to their home in Colombo, the relatively unscathed capital. Across the island some 32,000 people had perished, another 6,000 were missing and presumed dead, and fully 550,000 had been left homeless, making Sri Lanka the country hardest hit, after Indonesia, by a disaster that left an estimated 288,000 people dead or missing in 12 countries, according to the International Committee of the Red Cross.
Two days later de Mel, the senior civil servant in Sri Lanka’s Ministry of Education, was tapped by the country’s longserving president, Chandrika Bandaranaike Kumaratunga, to set up the Centre for National Operations, the war room for the country’s tsunami relief effort. “She told me I could hire anyone I wanted, I didn’t have to ask her,” says de Mel, who had become a close friend of Kumaratunga when the two were living in London in the late 1980s.
For the next few weeks, Sri Lankans frustrated by decades of civil war, ethnic tensions, bureaucracy and corruption glimpsed the potential that cooperation and efficiency had to transform their impoverished island state. Casting aside ancient grievances, ethnic Tamils and Sinhalese rallied to one another’s assistance.
De Mel and her 150 volunteers effectively ran the country, coordinating ministries, field hospitals, the soldiers of 20 nations, and 6,000 nongovernmental relief agencies and private direct-aid efforts. Within a month the operation oversaw the creation of 315 refugee camps and the distribution of 8,400 tons of food. It also supervised the rebuilding of the rail line for the Queen of the Sea express train, which had been swept away with a loss of 1,500 lives. Miguel Bermio, the Ecuadorian who heads the United Nations Development Program (UNDP) in Sri Lanka, calls the operations center “the most satisfying project I have ever been involved in.”
“In the first week the media said there would be starvation, epidemics, that people would have no place to stay, nothing to wear, no roads to travel on. And that has not happened in Sri Lanka,” Finance Minister Sarath Amunugama notes proudly.
President Kumaratunga praises the ability of her country, and her government, to rally in a time of crisis. “We were totally unprepared for the tsunami, and we just had to use our heads and start everything. And we did,” she tells Institutional Investor in an interview at President’s House in Colombo, in a meeting room where the English decor evokes the country’s past as a British colony. “I am satisfied we have got in control of the situation very well.”
The immediate relief effort was indeed impressive, but the task of rebuilding the country’s shattered infrastructure poses a far bigger challenge. The World Bank, the Asian Development Bank and the Japan Bank for International Cooperation have drawn up a $1.6 billion, three-year plan to rebuild villages, roads, railways and harbors washed away by the tsunami. Donors have pledged as much as $2 billion in aid, Amunugama says.
Three months after the disaster, however, the reconstruction effort is proceeding patchily at best, with large swaths of the coast just as devastated as they were on December 26. More worrying still, Sri Lanka’s political class appears to be reverting to the bureaucratic and sectarian ways that have stymied the nation’s development for decades.
This is a country that enjoys abundant natural resources and a stunning environment -- Sri Lanka means "resplendent island" in Sanskrit. But two decades of war with Tamil separatists -- and a history of violent political conflict in the Sinhalese south -- have prevented the country from exploiting those advantages. National income is just $930 per person, compared with $3,780 in Malaysia and $12,030 in South Korea. In the 1960s all three countries had similar per capita incomes.
The reconstruction effort is providing the country with a once-in-a-generation chance to jump-start the development process, if its leaders can overcome their political differences. "We cannot return this country to its previous poverty," says Peter Harrold, the World Bank's country head in Colombo.
Will Sri Lanka rise to the challenge? The early signs are not encouraging.
Hopes that the spirit of national unity engendered by the disaster would lead to a resumption of peace talks between the government and the Liberation Tigers of Tamil Eelam receded almost as quickly as the floodwaters. The Tigers waged a 20-year war to create a Tamil state in the north and east of the island before agreeing to a cease-fire in February 2002. Talks have been suspended since April 2003, when the Tigers withdrew after being excluded from a donor conference in Washington because the U.S. considers them a terrorist group. In November of that year, Kumaratunga declared a state of emergency and effectively unseated the government of thenprime minister Ranil Wickremasinghe, contending that he had offered excessive concessions to the Tigers.
The World Bank, which is coordinating the international effort in Sri Lanka, wants roughly 60 percent of relief devoted to the Tamil areas "because that is where 60 percent of the damage is," says Harrold. Kumaratunga says she is committed to seeing that happen. But the Tamils Rehabilitation Organization, an aid group linked to the Tigers, complains that the government has held up 50 TRO aid containers in Colombo's port and plans to impose a 15 percent value-added tax on the imports. The Sri Lankan army suspects that the Tigers are using tsunami relief as cover to smuggle in arms from abroad. The TRO's executive director, K.P. Regi, insists he isn't a Tamil Tiger and that the aid shipments are purely humanitarian. "The government is simply playing politics again with us," he says in an interview at his office in the Tigers' raffish capital, Kilinochchi.
The tsunami's aftermath also has raised tensions in Kumaratunga's ruling coalition, which, like the country's politics in general, is fractious at the best of times. The United People's Freedom Alliance, whose senior members are the president's populist Sri Lanka Freedom Party (SLFP) and the Marxist Janatha Vimukthi Peramuna, or People's Liberation Front, needed five months after winning parliamentary elections in April 2004 just to agree on a governing program. The JVP exacted a stiff price for its support, forcing the government to abandon plans to improve tax collection and privatize the state-owned People's Bank, which Sri Lanka had promised under a 2003 borrowing agreement with the International Monetary Fund.
Support for the JVP, a fiercely nationalist Sinhalese group, is widely believed to have strengthened in the wake of the tsunami. Its grassroots network provided some of the most visible relief and medical aid on the country's hard-hit south coast. The party also has been flexing its political muscle. In late February, while the government was negotiating with the Tamil Tigers on mechanisms to deliver aid to the Tiger-controlled northeast, JVP general secretary Tilvin Silva declared that the aid should be contingent upon a lasting peace settlement. The party's parliamentary leader, Wimal Weerawansa, warned that the JVP "will not hesitate to walk out" of the coalition, which likely would bring down the government.
Kumaratunga, 60, the third member of her family to rule Sri Lanka since it won independence from the U.K. in 1948, is clearly impatient with the tactics of her ostensible allies. She grumbles that JVP politicians "don't seem to understand what coalition politics is."
Even more striking, the president hints strongly that she believes the JVP was responsible for the assassination of her husband, Vijaya Kumaratunga, a leftist champion of the peasantry who was shot in 1988 after making peace overtures to the Tamil Tigers (see box).
"The JVP came in with the hope of strengthening themselves, grabbing the members from our party and becoming the major party very soon," says Kumaratunga. "That is the nature, the personality of former parties that use violence as their main means of politics."
No one has ever been convicted of Vijaya Kumaratunga's murder. The JVP's Silva denies his party was responsible for the death and dismisses rumors to that effect as "vicious propaganda" sown by the opposition United National Party of former prime minister Wickremasinghe. Silva insists his party has changed since the 1970s and 1980s, when it attempted to overthrow the government and set up a Marxist state in a violent campaign that claimed as many as 50,000 lives.
As the coalition partners bicker with increasing bitterness, the center-right UNP has maintained a low profile, hoping the government will collapse from its own infighting. Wickremasinghe styles himself as the peace candidate in a bid to win the presidential election in November and succeed Kumaratunga, who is barred by the constitution from seeking a third term.
Given this internecine political and ethnic conflict, is the government capable of leading the reconstruction effectively? "Maybe, but not right now, though I'm sure they are doing their best," says Yasushi Akashi, the Japanese government's peace envoy to Sri Lanka. "I think they have the potential."
On February 2 the government shut down the Centre for National Operations and dispersed its responsibilities to an alphabet soup of bureaucracies: the Commissioner General of Essential Services (CGES), the Task Force for Rebuilding the Nation (TAFREN) and the Task Force for Logistics and Law and Order (TAFLOL). Kumaratunga tells II that the operations center was closed because its relief work was finished, but the UNDP's Bermio says it should have remained open two months longer. Even the president's friend de Mel contends that the reconstruction effort has lost momentum since the center closed, a view that's seconded by aid officials.
"For a few golden weeks, this country saw what was possible, what it is capable of," says Jeremy Carter, who heads the IMF's Colombo office. "Now, I'm afraid, it seems as if it's business as usual." Liqun Jin, vice president of the Asian Development Bank, scolded officials on the slow pace of the recovery during a visit to Sri Lanka last month, saying the government's sluggishness was holding back the delivery of promised aid. "The government could enhance donor confidence if it increased the momentum of reconstruction," he said.
The challenges facing Sri Lanka parallel those in other countries devastated by the tsunami, but most of them have been quicker to respond. Thailand has already cleaned up much of the damage in the hard-hit tourist areas of Phuket and Khao Lak, where roughly 8,000 people died.
In Indonesia, where some 130,000 people died and nearly 100,000 more are missing and presumed dead, officials estimate it will take two years to rebuild the devastated Aceh province. But unlike the situation in Sri Lanka, where wrangling over relief has aggravated political tensions, there are hopeful signs in Indonesia. Aceh secessionists held peace talks with government officials in Helsinki in early March, something that would have been unthinkable before the devastation of December 26.
For all of the destruction wreaked by the tsunami, Sri Lanka's economy has been relatively untouched. The subsistence fishing communities that bore the brunt of the damage account for only about 2 percent of economic activity. By contrast, the textile and garment industry, which generates nearly two thirds of export earnings and employs 500,000 people, is located well inland from the affected areas. With reconstruction spending effectively offsetting the tsunami's damage to the economy, the IMF estimates that growth will remain steady at about 5.25 percent this year. Amunugama, the Harvard Universityeducated Finance minister, is more optimistic, predicting growth of 6 to 6.5 percent.
The economy will struggle to cope with one unexpected side effect of the disaster: a resurgent rupee. Buoyed by an influx of hard-currency aid, the rupee rose to 98.1 to the dollar in mid-January from a 2004 low of 105.3 in mid-December. Since then it has settled near the 99 level.
The currency's rise "is killing us," moans Mahesh Amalean, chairman of MAS Holdings, which makes clothing for such leading brands as Banana Republic, Gap, Nike and Victoria's Secret. The industry already faces growing competitive pressure from China as a result of the expiration in January of the Multi-Fiber Arrangement, a quota system that had given Sri Lanka preferential access to the U.S. and European markets.
Amunugama, however, turns a deaf ear to industry's complaints. He notes that the rupee was trading at about 96 to the dollar before the April 2004 election and the entry into the government of the Marxist JVP. "We are targeting to keep it at 99, just under 100," he tells II. "We have no option but to keep it at a steady rate."
The government stands to benefit from a debt service moratorium for disaster-hit countries proposed by the Paris Club of creditor nations. The move should save Colombo some $323 million this year on its $4 billion in Paris Club debt, according to IMF estimates. "We are going to save that so there is a big block of money that is available," Amunugama says.
Even with the moratorium, though, the minister must grapple with a budget deficit that is expected to hit 9.6 percent of GDP this year, up from 8.2 percent in 2004. One reason: After decades of largesse, vote buying and political horse trading, Sri Lanka has more than three quarters of a million civil servants, a huge figure for a country of just 19 million. The government also maintains a 130,000-member military. The national debt is a whopping 108 percent of GDP.
The leader of the country's preeminent political dynasty, Kumaratunga wears the mantle of power easily. Her father, Solomon Bandaranaike, split from the ruling, multiethnic UNP to found the SLFP in the 1950s. He swept to power in 1956 by promising jobs and other preferences for ethnic Sinhalese and vowing to make Sinhala the official language. That stance proved wildly popular with the island's 70 percent Sinhalese Buddhist majority, but it ignited the resentment of the Tamil and Tamil-speaking Muslim communities, which during the colonial era had formed the backbone of the business community and civil service. Bandaranaike tried to make overtures to the Tamils but was assassinated by a Buddhist monk in 1959.
The following year his wife, Sirimavo, became the world's first elected female prime minister. A lioness of the left and champion of nationalization who was close to India's long-ruling Gandhi family, Sirimavo served three terms. Among other things, she banned English as an official language in 1960, changed the country's name from Ceylon to Sri Lanka and declared it a socialist republic in 1972. Throughout the Bandaranaikes' years in power, Tamils began emigrating to Australia, Canada, Scandinavia and the U.K., a trend that accelerated after civil war erupted in 1983. "There are more Tamil doctors in Sydney than there are in Sri Lanka," says Balasingham Yogarajah, a Tamil-Norwegian and Oslo city councillor.
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Kumaratunga was educated at Catholic schools in Colombo and obtained a political science degree at the University of Paris-Sorbonne. After her husband, Vijaya, was murdered while preparing his own bid for the presidency in 1988, she fled to London for four years with her daughter, Yasodhara, and son, Vimukthi. She returned to Sri Lanka in 1992 to revitalize the family party, and was elected chief minister of Western Province in May 1993. The following year, campaigning as her father's political heir and promising to make peace with the Tamils, Kumaratunga won the presidency and ended the 17-year rule of the UNP, which was reeling from the Tigers' assassination of president Ranasinghe Premadasa the year before. She appointed her then-78-year-old mother, Sirimavo, as prime minister, a post she held until retiring in 2000, three months before her death. Kumaratunga won reelection in 1999 after a campaign in which she was targeted by a Tamil Tiger bombing and blinded in her right eye.
A charismatic but capricious leader, Kumaratunga has taken a personal role in the relief effort. On the day she met with II, the Thai ambassador came to her office to deliver a $250,000 check to her President's Fund. "Immediately, we gave him a receipt," she beams, adding that her fund is audited by the country's auditor-general.
The remark betrays her sensitivity to donor concerns about corruption in the relief effort. Given those concerns, and the political and financial weakness of her government, Kumaratunga has taken a novel approach to reconstruction: She intends to pair foreign donors with specific rebuilding projects identified by the government, which include 176 schools, 140,000 new houses and 21,000 fishing boats.
"We have told the donors that because they are giving us the money free -- they are all grants -- we will bypass the normal systems. It's your money, you give it to anyone you want, and you build them something," she says. "So there is no corruption from the government side, and I hope there will be accountability from the donor side."
The government's aid strategy has been welcomed by donors and agencies. "So far this system is generally effective," says Roland Steurer, country head for Germany's Agency for Technical Cooperation, or GTZ. The agency has budgeted $28.5 million for reconstruction and has already spent $200,000 to build six fishing boats for a cooperative in Tangalle on the south coast, putting 400 fishermen back to work. The government says donors have delivered or ordered 13,000 boats, more than half of the vessels destroyed or damaged by the tsunami.
In Weligama, near Galle, the aid agency CARE operates a cash-for-work initiative, paying 2,300 people $3 to $4 a day to clean debris and repair roads. The agency plans to construct 6,800 houses after the government finalizes its rebuilding guidelines. So far donors have pledged to rebuild more than 67,000 of the 110,000 houses that were destroyed or damaged.
A plethora of direct-aid groups have descended on the country, their good intentions not always matched by results. In mostly Buddhist Tangalle, the Antioch Community Church of Waco, Texas, proselytizes while handing out food and children's toys. "We just arrived here and wanted to do God's work; nobody stopped us from coming," says the group's leader, Pat Murphy. They plan to build a worship center but have strong competition from Buddhist charities, the Catholic group Caritas and Colombo's Presbyterian Scots Church, all of which are operating on the same beach. Their efforts have had little impact on Sujit, a local fisherman left homeless by the tsunami: He stretches out on a mountain of clothes donated by the Antioch group but has no use for the pair of in-line skates given by the Texans.
Japanese envoy Akashi estimates that the number of nongovernmental agencies operating in Sri Lanka has mushroomed to about 6,000 from just 400 before the disaster. "A lack of coordination is inevitable," he says. "Much more needs to be done by government, agencies and donors to minimize duplication."
The tsunami damage in the Tamil Tigercontrolled northeast is devastating. Mullaitivu, once a thriving fishing community of 9,000 residents, looks like a desert. Sand from the tsunami extends a full kilometer inland. As his sister, working on a concrete slab that used to be the family's kitchen, ladles a curry-and-rice lunch onto banana leaves, Selathambi Devarasa explains that he lost 47 members of his family -- brothers, children, cousins, parents, nieces and nephews. He says only the Tigers, not the government, are helping survivors.
The Tigers maintain firm control of the region. The ruthless and reclusive guerrilla leader Velupillai Prabhakaran has fashioned a rudimentary state with its own ministries, civil service and uniformed police. (This correspondent was fined $50 for driving two kilometers per hour above the 60-kilometer-per-hour speed limit while in Kilinochchi.) That control complicates the reconstruction effort. The Tigers are considered a terrorist organization by the Australian, U.S. and U.K. governments, which forbid their agencies from giving aid to the TRO.
Japan is one of the main donors active in the northeast, along with Germany's GTZ and Scandinavian agencies. (Norway is a sponsor of the aborted peace process.) Multilateral agencies also are active in the region. The ADB is backing a $40 million project to assist Tamil fishermen and farmers and plans to provide up to $150 million in additional aid to Tamil areas and to the south, says Robert Rinker, the ADB's deputy director for Colombo.
Effective rebuilding, however, requires a political breakthrough, officials say. "We desperately need a peace agreement as soon as possible, so aid can flow in the most efficient manner," says Japanese envoy Akashi. "It's what the victims expect and have every right to expect."
Unfortunately, the prospects for peace appear remote. The presence in the coalition government of the JVP, which is bitterly opposed to any compromise with the Tamil rebels, makes an agreement unlikely, says Thamilchelvan, the Tigers' political leader. "This is not a conducive environment to prosecute the peace process," he tells II.
Kumaratunga insists she is ready to resume peace talks but rules out any solution that could lead to a separate Tamil state. "The main obstacle is not anybody other than the LTTE leadership,'' she says, referring to the Liberation Tigers of Tamil Eelam. "They have killed off every single Sri Lankan leader who could be strong in the face of the LTTE. They would much prefer to deal with weak leaders, like some of the leaders of the opposition, because they get them to agree to secret pacts."
Wickremasinghe, the opposition UNP leader and former prime minister, is gearing up to campaign for president as a peace candidate. "War will destroy us," he warned in February. "We have to work not only to protect the cease-fire but also to take the peace talks forward."
Such negotiations hold the key not only to a successful reconstruction but to the country's future prosperity. "Our problems are not intractable," says Finance Minister Amunugama. "Look at our population, look at our resources, look at our geographical location. With the basic conditions right, which are man-made, we can really have a good spurt of growth."
For Sri Lanka, a failure to fulfill that vision would constitute another disaster.