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Sri Lanka, beacon
of hope for peace in the world -World Bank What are
the World Bank plans for reconstruction of the north and the east? There are three
packages of assistance - three ways in which we are helping. There
has been a project ongoing for the past three years which took some
time to start, relating to. irrigation and agriculture in the northeast
region. That continues to support or mainly to resettle displaced
communities. It is more than $ 30 million. Late last year
we began utilizing money unspent from other projects - about $ 30
million.
Is there
a component in current aid plans for helping armed cadres to reintegrate? There is a
general World Bank programme called Disarmament, Demobilisation
and Reintegration (DDR) of armed cadres. The government or the LTTE
hasn't spoken to us about this. We have implemented the DDR programme
in many countries and I have been personally involved in it in Sierra
Leone. We are discussing
with the International Labour Organisation on how we could do that
here in the future. But there are no resources for it right now. The interesting
thing in the new package is grants for internally displaced people
returning to their homes. We are providing the resources for the
Rs. 25,000 that each family gets when they return. But weren't
returning families getting some government assistance? They haven't
had anything for a year. Originally they used to get Rs. 15,000
when there was some money available. Many people are eligible for
this but they have not been getting the money for the last year
because of a shortage of money at the centre (government). What are the
bank's other plans? The other project
is the creation of the Northeast Reconstruction Fund which the World
Bank has been asked to administer and run. We have to set it up
and make sure the money gets out and helps those in need. Will this
fund be exclusively run with the money pledged at last year's Oslo
summit or include pledges from the June meeting in Tokyo? Initially it
would be using the money from the Oslo meeting. It is up to donors
to decide on making additional pledges and in what form they wish
to deliver it. Most donors may find it convenient to use this fund
for the additional pledges (in Tokyo). How much
was pledged in Oslo? Its difficult
to say because it was never made public. What we have seen (in reports)
is that it is between $ 60 to $ 70 million of which a fair portion
would be loans. Grants are around $ 30 million. The Tokyo
donor meeting is discussing Sri Lanka development as a whole, not
only the northeast. How would the meeting be structured? There are two
basic reference documents that would presented and discussed at
the meeting. They are Regaining Sri Lanka which includes the government's
Poverty Reduction Strategy and sets out the government programme
for the entire country, and a Needs Assessment Study that is currently
being carried out for the north and the east by the World Bank,
ADB and the UN system. That is trying to come up with some detailed
analysis of what it would cost over the next, several years - not
just immediate needs. Regaining Sri
Lanka while taking the country as a whole does not have any projects
in the north and the east. Any (financial)
numbers we can talk about in relation to the extent of money required
for the north and the east reconstruction phase? Not really
but it going to be big, really big. How much?
Thousands … millions of dollars? I don't know
whether it is going to be a multiple of millions but one is looking
at very large numbers. How does
the development of the whole of Sri Lanka figure here? What the government
is planning to do is to take the numbers that would emerge from
the Regaining Sri Lanka document which (since recently) has been
made into a much more comprehensive and detailed report unlike the
one that was seen earlier. That would have the financing needs for
the north and the rest of the country including addressing poverty
in the south. What about
the government's poverty reduction strategy that has been prepared
(over the past few years)? That's been
incorporated into the Regaining Sri Lanka initiative. The revised
version of this document is the Poverty Reduction strategy. What happens
to the annual Sri Lanka development forum meeting organized by the
World Bank? Would that be held this year? The last one
was held here in June and an original plan to have another one in
December was put off because of the Oslo meeting in November which
had a high political profile and the Tokyo meeting in June, again
with a high political profile. It would have been too many meetings
if we held one in December. The expectation
is that after Tokyo we will follow up with the more low profile
development forums. That process will kick back after Tokyo where
we would also decide on the timing for the next forum meeting. What happens
if war breaks out in the Gulf? How would donors respond at the Tokyo
meeting in the backdrop of fighting in the Gulf? The world didn't
stop doing business during the 1991 Gulf war. However the problems
of Africa and South Asia won't get better if there is a war on.
If anything, they get worse. Also the need for assistance from other
parts of the world rises because the economic consequences are mostly
negative. I am sure the
Tokyo meeting would continue even if there is a conflict in the
Gulf. Sri Lanka is a beacon of hope for peace in the world and a
conflict that is turning around. I would not expect the Gulf war
to impact heavily on the Tokyo meeting. The primary resources of
assistance that are anticipated are not from resources that are
likely to be diverted to the Middle East. The resources that the
World Bank makes available to Sri Lanka are not the same resources
that we may make available to Iraq, which is a much less poorer
country in case there is a conflict. It is unlikely
to have an impact on ADB resources or resources from Japan. I am
more worried about the economic impact of the Gulf war on Sri Lanka
than the aid impact. Like what? There are four
areas of concern. I am not too concerned about remittances. Tea
would be a problem with Iraq being a major market with consumption
likely to fall and transport in the region being dislocated. The
price of oil mostly likely would be a short-term concern. But most
worrying is the impact on tourism. That could have a major impact. Why …
because people won't travel? People will
get nervous about travel even though they would be flying around
the Gulf and not over it. But in their minds they would be flying
over the Gulf to come here. Tourism numbers
here have increased in the past few months and with the incidents
in Bali, Sri Lanka is becoming a favourable destination. There would
be less travel on long haul trips by Europeans who would prefer
shorter flights, maybe Spain, Greece or Portugal. The World
Bank has been persistent in private sector involvement in the reconstruction
effort. Could this be construed as interference in the domestic
affairs of a country? (Laughing)
Almost anything that we do can be construed as interfering in a
country's internal affairs. We give advice. One of the main functions
of the World Bank with its long years of experience is to advise
countries in development. So we are constantly interfering in that
sense. Yes …
but is it advice of insistence? Yes, in some
cases it is insistence. In this
particular case, what would it be? Would you like to see the private
sector involved or would you want the private sector involved? When it comes
to construction, yes we would insist that the first attempt would
be to try to utilize the domestic private sector. Now is that interference?
I don't know. The government's policy is to promote the private
sector and reform the public sector. We think it would be very unfortunate
if reconstruction was seen as an excuse to reinforce the public
sector and was not taken as an opportunity to boost the role of
the private sector to encourage the creation of new firms, new employment
opportunities. It would not only be good for prospects of development
in the medium term as new companies come into being but would also
mean the construction money is going to go further because the efficiency
of the private sector makes it cost effective. If the public
sector were more cost effective than the private sector, we would
go with the public sector. I don't think this is controversial.
Both the government and the LTTE are supportive of private sector
involvement. This is a huge opportunity to revive the prospects
of the private sector. It is very rare that an economy gets an external
boost like this and we must make sure that it is used in a way that
has lasting benefits. Is it unusual for the World Bank and donors to have discussions with the LTTE? Is this something new that is happening in the world or are there previous instances? I can give you
two parallel examples of this happening in the past. When the PLO
was still classified as a terrorist organization and before lasting
peace was achieved, we had a lot of contacts with the PLO. The other
one where there was collaboration was with the African National
Congress when it was a banned organization. We didn't work with
the South African government but worked with the ANC helping them
get ready for the day when they would take over. In Sierra Leone,
we worked with the Revolutionary United Front while it was still
classified as a rebel organization. I think if one needs to address
development in the north and the east, one has to do it (talk to
the Tigers). If the government didn't want us to talk to the Tigers,
we would have not done it. We are not a humanitarian organization
… we are a development organization and we wouldn't be going
into the north and the east for humanitarian reasons during a conflict
if it was against the wishes of the government. We answer first
to the government of the day. Therefore it has always been with
the blessings of the government that the international community
has had contacts with the LTTE. Not that they (government) watch
over us but they always know when we are going. There have
been times (in the past) when the donor community put money in reconstruction
only to see the peace process being disrupted and fighting resuming.
Shouldn't donors wait for permanent peace to invest or is it that
development is one of the ways of ensuring the peace process lasts? I think we
have learnt in many other conflicts that if you wait to do anything
you might have to wait forever. Because if the benefits of peace
doesn’t start to flow in terms of improved economic prospects
then it might increase the risks of a conflict breaking out again.
What we are seeing and would continue to see is that support is
beginning to come in. It's not in huge numbers, however … let's
be clear about it … its not huge amounts of money being made
available. For instance now apart from the World Bank and the ADB
there is very little money being spent in the north and the east We believe
the donors and international institutions will be providing assistance
in line with the progress of peace talks. It is not that we are
going to Tokyo and returning with a huge amount of money in the
bag. Money will
continue to flow … there would be an increase at Tokyo provided
we see progress in the peace talks. But if the
commitments that people are going to make in Tokyo are to be translated
into deliveries of resources over the course of the next couple
of years, that would require a continued momentum in the peace process.
If the momentum stalls … if it goes backwards, the donors will
react accordingly. For donors
on the bilateral side (much more than the multilateral side), it
is the quality, depth and speed of the peace process that will determine
the quantity and speed of delivery of the commitments. How do you
view the progress of the peace process in the context of some serious
violations (of the ceasefire agreement) in the past month? I view these
incidents (speaking from the perspective of an economist) as disturbing.
This is a setback to a surprisingly, incident-free period during
the ceasefire. In Sierra Leone, we were up and down for years with
many incidents. Even during a period when we were making a lot of
forward progress, there were clashes between rebels, government
troops and militia. People died on either side during such fighting.
That kind of incident we haven't seen here except for these recent,
big events. On the other
hand, the fact that they have not derailed the process yet shows
that this process is getting mature and seems to indicate the strong
determination from both sides to continue to make progress, because
these incidents could have been breakers of the peace process in
the past. There is
opposition criticism that the money generated from donors comes
as loans and not grants thereby raising the country's debt burden.
Any comments? It is a combination.
The Northeast Reconstruction Fund is for grants. The World Bank
provides mostly very, very soft loans of zero interest which are
repaid over 40 years. The ADB follows a similar pattern. Because of
Sri Lanka's special circumstances of emerging from conflict, we
are also going to provide some grants for the first time. We gave
the first one and will provide more in the next few months. The
grant amount should exceed $ 50 million this year. Is this
the first time the bank is providing grants and is much of it due
to the success, so far, of the peace process? The bank has
begun giving grants for the first time starting this year to a number
of countries. It was a change
initiated a few months ago and reflected the concerns of the debt
situation of the poorest countries. We have been trying to reduce
the debt of many of the poorest countries particularly in Africa
where efforts were made to halve the level of external debt because
it was inhibiting development. Grant aid is
reserved for three purposes - prevention of HIV/AIDS with the first
grant of $ 12.5 million being made a few months ago to Sri Lanka;
to the poorest of the poor countries (excluding Sri Lanka) in the
social sector, and countries (like Sri Lanka) emerging from conflict. Is this
part of the World Bank pledge in Tokyo? Yes. But the
World Bank's programme of assistance for Sri Lanka over the next
four years will be announced before the Tokyo meeting because we
(bank board) would approve it next month. We are announcing it earlier
because there is a lot of interest in it. It is longer
than the usual assistance period which is for two or three years. You have
recently expressed concern over double taxation in the north (by
the government and the LTTE). Could you elaborate? We say this
is not acceptable. Aid should not be taxed. Aid is goods and services
for the people, not to finance governments or other organizations.
The same is true for the government - they can't and shouldn't tax
aid money either. It is important
that both sides sort out the way in which the north would be financed.
Double taxation is unacceptable as it raises the cost of doing business
and will create some uncertainty as these are not legal fees or
a legal tax. We have had
situations where we receive bids for work in the north where the
bid document also contains a tax the contractor has to pay the LTTE.
That is very bad for business. We are not against taxes but all taxes must be legal. The system of finance in the north must be sorted out during the peace process. What was
the LTTE's response to your concerns? We raised the
issue with them and their response is that since these projects
financed by the World Bank are to benefit the poor in the north,
there won't be any taxation. So far our experience has been that. There are
many concerns raised by the public over irregularities and corruption
in government tenders particularly over the bus privatisation. Given
that the World Bank is concerned about governance, does this worry
you? We keep an eye on these issues constantly. We are alert to the fact that there is a lot of noise (on tenders here) and it would be foolish of us not to pay attention to that. We are particularly alert in the areas where World Bank resources are used. With a lot
of funds expected to flow into the north and the east, how would
you ensure accountability? This is an
important issue and funds have to be constantly monitored to make
sure they are properly used. We would
be appointing a local monitoring agency in the north to handle this
task. What happens
to the south with this build up in the north? It is important
to understand that less than 10 percent of the World Bank money
for Sri Lanka is spent on the north and the east and it would remain
that way except for some increase after the Tokyo meeting. A large proportion of our funds are going into poverty alleviation projects in the south and that process will continue. |
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