Cablegate: Sri Lanka: Ambassador Discusses Trade and Investment With

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UNCLAS SECTION 01 OF 02 COLOMBO 001571

SIPDIS

SENSITIVE, SIPDIS

STATE FOR SCA/INS, EB/CBA

MCC FOR F REID, D NASSIRY AND E BURKE

GENEVA PASS USTR

E.O 12958: N/A
TAGS: ECON EINV ETRD CE
SUBJECT: SRI LANKA: AMBASSADOR DISCUSSES TRADE AND INVESTMENT WITH
MINISTER BOGOLLAGAMA

1. (SBU) Summary and comment: Ambassador Blake informed Minister of
Investment Promotion and Enterprise Development Rohitha Bogollagama
of developing plans for a U.S. trade mission to Sri Lanka in early
December, possibly followed soon after by a round of Trade and
Investment Framework Agreement (TIFA) talks. But the Ambassador
made a strong pitch to the Minister to resolve the AES contract
dispute before the arrival of the mission. Bogollagama's trade
promotion efforts will include a mission to New York and Los Angeles
in March 2007. He said Sri Lanka wants investors to build a new
export-oriented oil refinery in future southern port city
Hambantota, not outside Colombo as proposed by U.S. firm Global
Energy & Industrial Operations. Embassy hopes Minister Bogollagama
will improve Sri Lanka's appeal to new investors by applying some of
his energy and vision to reducing hassles for existing investors.
End summary and comment.

Trade Missions Planned in Both Directions
-----------------------------------------

2. (SBU) In a September 22 introductory meeting with Minister of
Investment Promotion and Enterprise Development Rohitha Bogollagama,
Ambassador reported that a major U.S. trade mission to India would
also include a side visit to Sri Lanka in December 2006. At the
minister's suggestion, post and Government of Sri Lanka (GSL) trade
and investment officials will meet soon to review plans for the
trade mission.

3. (SBU) Bogollagama noted that he planned to lead a Sri Lankan
trade mission to the United States in March 2007, with stops in New
York and Los Angeles. Sri Lanka is particularly interested in
attracting investment in infrastructure (ports, roads, water supply,
and power generation), oil exploration, information technology, and
textile production.

Oil Exploration and Refining; GEIO Project Out of Favor
--------------------------------------------- ----------

4. (SBU) During his mission, Bogollagama intends to meet with U.S.
oil companies to inform them of Sri Lanka's plans to license
offshore oil exploration in the coming year. Sri Lanka would also
like to attract investment in petroleum-related logistics and oil
refining, and has begun to discuss these sectors with Indian
refinery giant Reliance and the Indian state-owned Oil and Natural
Gas Corporation (ONGC), he said.

5. (SBU) Ambassador Blake noted that the U.S. Trade and Development
Agency was providing technical assistance to help Sri Lanka's
Petroleum Ministry prepare for the oil exploration licensing
process. He emphasized the importance of attracting as many bidders
as possible, in order to ensure that Sri Lanka got maximum benefit
from a highly competitive bidding process.

6. (SBU) Econoff added that U.S. firm Global Energy & Industrial
Operations (GEIO) was hoping to proceed with plans to build a USD
800 million oil refinery at Sapugaskanda, which would seem to
address the government's interest in attracting oil refining
investments. Minister Bogollagama explained that approval of the
GEIO project was unlikely because the government was more interested
in building an export-oriented refinery in Hambantota. The
state-owned Ceylon Petroleum Corporation (CPC) had plans to expand
its existing refinery at Sapagaskunda to service the domestic
market. Union leadership at the current CPC refinery opposed the
GEIO project because it could make some CPC workers redundant.
(Comment: Bogollagama's reply reflects the Rajapaksa government's
union-shy and statist leanings, and explains why progress on the
GEIO project halted when the current government came into office.)

AES Dispute
-----------

7. (SBU) The Ambassador stated that solving "irritants" would help
Sri Lanka realize its investment promotion goals. He said one
example was the AES power plant payment dispute, which had attracted
considerable attention in Washington. Minister Bogollagama, who had
in the past called for the government to pay what it owed AES, asked

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if the case was still stalled. Told that it was, he reiterated his
view that the government should honor its contracts and assured the
Ambassador that his concern about the case had "registered." (Note:
In a previously-scheduled meeting with AES and the Ceylon
Electricity Board later the same day, Bogollagama heard each side's
position, attempted to identify possible grounds for resolution, and
scheduled a subsequent meeting for September 26. He stressed during
the meeting that he had "promised" the Ambassador to seek
resolution, but also said that merely holding the meeting
demonstrated the GSL's interest in supporting investments. End
Note.)

Comment
-------

8. (SBU) Minister Bogollagama, who worked closely with the Embassy
as its lawyer before he went into politics, clearly understands what
it takes to attract investors. He travels widely and energetically
makes the case for Sri Lanka. Post will encourage him to spend more
time problem-solving within the government to ensure that Sri Lanka
actually delivers the returns he suggests can be made here. His
ability to make progress in the AES case will be a good indicator of
how serious he is about keeping investors happy.

BLAKE

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