TOKYO, Feb 5 (Reuters) - International donors said on Wednesday economic aid to Sri Lanka could double in the next few years to support a delicate peace process to end two decades of conflict that had devastated the South Asian nation.
The country needs urgent help to rebuild its northeastern region and to boost investment nationwide following a truce agreed between the government and Tamil Tiger rebels a year ago, officials from the World Bank, the Asian Development Bank (ADB) and the Japanese government said.
The three parties account for 80-90 percent of external aid to Sri Lanka totalling around $600 million a year, but many other countries have already begun pledging bilateral aid, the officials said.
"We don't know the size that we will be looking for, but it's more likely to be a multiple of that," Peter Harold, World Bank country director for Sri Lanka, told reporters after a seminar to prepare for a donors' conference in Tokyo in June.
"I suspect we might end up requesting a doubling of the current level in the next two to three years."
An assessment on the needs for various assistance, both urgent projects and long-term ones with a five-to-seven year perspective, should be completed in March, he said.
"It's clear that almost everything is destroyed in the north and the east, and there needs to be balancing investments in the south," said John Cooney, ADB country director for Sri Lanka who is in charge of the needs assessment.
"This balancing between the north and the south of the country is extremely important," he added, referring to the need to address lingering political and ethnic tensions despite the peace process that aimed to permanently end the fighting that had killed 64,000 people.
A reconstruction fund, similar to that in Afghanistan, has been set up to channel bilateral aid from countries that do not plan on building up a big presence in Sri Lanka.
The fund will be administered by the World Bank and will tackle urgent issues, such as resettlement and de-mining.
The project could mark a turning point in the foreign policy of Japan, which is the largest donor accounting for about 45 percent of aid to Sri Lanka.
"Comments were made (at Wednesday's seminar) that this perhaps is a new model for Japanese foreign policy. Certainly it is going to be a new model of how Japan can use its overseas development assistance (ODA) for conflict resolution and bringing permanent peace to the countries," Harold said.
Japan's foreign aid policy has come under fire in recent years as vast sums have been spent on questionable projects, such as dams that are seen as harming the environment and feeding corruption.
Japan's struggling economy and deteriorating fiscal position has also forced it to cut the ODA by 10 percent in the current fiscal year to March and by a further 5.8 percent next year, but the government has vowed to spend where it counts.
Prime Minister Junichiro Koizumi said in an address to Japan's parliament last Friday that he would focus the ODA on projects to promote growth in Asia, post-conflict peace process and on environmental issues.
"Merely giving out ODA will not ensure lasting peace. We are faced with a difficult issue of how we use ODA to ensure peace," Motohide Yoshikawa, deputy director general of the Foreign Ministry's economic cooperation bureau.
- Reuters - Thomson Reuters Foundation
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