Not least the Japanese nation to whom we are highly indebted for hosting this conference. My thanks go, in particular, to the Prime Minister of Japan His Excellency Junichiro Koizumi for organising the conference and for so graciously attending today. I would also like to thank Her Excellency Yoriko Kawaguchi Minister for Foreign Affairs, and Ambassador Yasushi Akashi Japan’s Special Envoy for Peace and Development in Sri Lanka. Their continued support and inspiration reflects our friendship with the Japanese people which goes back many decades. It is one that I hope personally will grow ever deeper in the years to come.

I would also like to thank the United States for their support both as a co-chair of this conference and for their backing of the pre-conference seminar in Washington. The importance the United States places upon this conference is evident by the presence of Deputy Secretary of State Richard Armitage.

That we should have two more co-chairs from the European Union and from Norway further demonstrates how fortunate we should count ourselves.

Although there are many friends of Sri Lanka in this room today I must make special mention of the work of the Royal Norwegian Government in their role as facilitators of the peace process. They have an international reputation for such work and every day they demonstrate their commitment to peace. Although there must be moments when they would like to feel a little more appreciated by some of the people they seek to help. For our part we look forward to their continued participation as facilitators in this important process.

Mr Chairman, Ladies and Gentlemen, 18 months ago the people of Sri Lanka gave a mandate to a new Government to recapture lost opportunities. They charged us with the job of solving some serious challenges.

At the time of independence we were a literate, prosperous and peaceful country and in many respects setting the pace in Asia. Many countries in South East Asia talked of emulating Sri Lanka as they built their own economies.

Today we are no longer the nation we were. But the people of Sri Lanka are courageous and determined. They will tolerate a lot. Nevertheless they had grown weary of the lack of success of our country. Being below par was not good enough for them. So they set us the task of delivering in three critical areas.

The first was to lay a foundation for a lasting peace. We had become a divided nation filled with ethnic hatred and bitterness, a nation at war destroying itself and its people.

The second was to rebuild an economy which was on its knees. The people recognised that our whole economic way of life had to be restructured and reformed. Nor could the economy sustain an expensive and meaningless war any longer. We had to place ourselves in a position where we could compete and prosper in the newly globalised world.

The third was to resolve the problems of a deeply politically divided society. One where over the past fifty or more years the political gap has widened. Where consensus between the political parties was more words than deed and where elections had become increasingly violent and discordant.

Unlike previous elections the people went further by electing a new government with an incumbent President who was leader of the Peoples Alliance. They gave a loud and clear signal that they wanted the political parties to bury their differences and start working together.

In the Peace Process the role of the President had been significant. In a courageous move it was she who had started the process and had appointed the Norwegians as facilitators. Today we appreciate the way in which she continues to support the peace process in principle. It is with such support that we persist in working on building bridges of understanding.

When we took office the rationale behind our thinking on the Peace Process was based on humanitarian needs. We decided that to wait for a political settlement before rehabilitating the North and the East was unacceptable. The hatred and distrust between the two sides was too deep seated and would take years to resolve. We agreed that whilst negotiating, if the funds could be found, we should try to give back the lives to our people in those war torn areas.

This was, of course, a high risk strategy because in peace processes elsewhere donors had always wanted to see a peace agreement before committing funds. It was even more high risk because with every peace process there are ups and downs. There would be times when the talks reached an impasse and progress would be slow. Then how would the donors react?

We are in one such impasse at the moment. The timing is unfortunate but I believe that progress has been sufficient over the past fifteen months since the Permanent Ceasefire Agreement for you the donors to see that both sides are genuine about the ultimate outcome.

That the LTTE are not here today is a matter of sadness because the ultimate losers could be the people of the North and the East. Especially since this conference was to be a partnership effort between the LTTE and the Government. However I believe that the peace process is mature enough for you to see that we can and will move forward very soon. An encouraging sign is the way in which contact is still being maintained at grass roots level and the opportunities for trust building continue.

By now you will also have recognised that this is a responsible government. One which will continue to find innovative ways to look after all the people of our country regardless, and that very firmly includes the Tamil people. We will work for the development of the North East in partnership with the LTTE. We also have a responsibility to safeguard the interests of all the communities in the North East

When the Peace Talks start again then of course we have to continue the process of finding an ultimate solution almost certainly within the framework of a Federal state. Bearing in mind our determination to deal with humanitarian issues from the very beginning we have looked at ways of delivering a reconstruction, redevelopment and rehabilitation programme.

The actions of the LTTE in the past few weeks has demonstrated what we too were realising. It was clear that the structures we had put in place were too cumbersome and too distant from the people to be acceptable or to react quickly enough. The people needed a much faster response than the Government was able to deliver.

We designed a new structure with the multilateral agencies and the donor community. We did this for two good reasons. The first was that we could see the donor community were as frustrated as the Government and the LTTE at the lack of implementation. The second was that from the very beginning we had realised that any solution to our particular problems were resolvable only with the widest possible involvement by you the donor community. Regrettably, so far, we have not managed to reconcile our proposals with the thinking of the LTTE.

Whilst talking about the donor community I would like to thank those agencies who put so much time and energy into preparing the North East Needs Assessment paper. This project was prepared through a partnership between the Government, the LTTE and the International Community. The delivery will also be implemented through a partnership between the parties. The United Nations, The World Bank and the Asian Development Bank who have graced this conference have worked tirelessly on this assessment. I know that they will be presenting their findings during the course of the conference.

Meanwhile it is clear that much political work still has to be done. The North East Needs Assessment gives us the opportunity to carry forward the programme of reconstruction, rehabilitation and reconciliation. With your commitment of the resources needed to carry out this programme we can bring much needed relief to the people of the North and the East. We want to use that money in partnership and cooperation with the LTTE to see all our communities benefit in this war torn area.

Meanwhile the differences between us over an administrative structure are not that far apart.

In Oslo both the government and the LTTE jointly agreed a significant statement and I quote:

“ ... the parties agreed to explore a solution founded on the principle of internal self-determination in areas of historical habitation of the Tamil-speaking peoples, based on a federal structure within a united Sri Lanka. The parties acknowledged that the solution has to be acceptable to all communities”

It is now important that we develop a roadmap with milestones to get there. In this context we would need to set up an innovative provisional administrative structure. It will be responsible for the Reconstruction and Development of the North East and the administrative aspects of the transitional process. It will have to achieve the following objectives:

Ø to be efficient, transparent and accountable;
Ø safeguard the interests of all communities in the North East;
Ø enable the LTTE to play a significant role;
Ø and not to be in conflict with the laws of Sri Lanka

The powers of this provisional administrative structure will include,
· rebuilding the war damaged economy;
· reconstruction
· resettlement, and
· providing effective delivery of essential services

so as to uplift the lives of the people.

In order to move forward, it is of vital importance that a Muslim delegation should participate in the Peace Talk to articulate the concerns of the Muslims.

We will introduce constitutional reforms when we have negotiated a final political solution, which we are fully committed to take to the people of Sri Lanka through a referendum for the ultimate decision.

In addition, given the lack of confidence between the two sides it is essential that the international donor community identify ways and means through which they could meaningfully underpin this process. It is important that we now think introspectively of the way forward beyond Tokyo and as to how the donor community can stay engaged. Tokyo marks the end of one phase and the beginning of another in Sri Lanka’s search for peace and economic reconstruction.

In the next few days, at the end of our deliberations it is important that all of us present here re-dedicate ourselves in a resolute manner and with renewed vigour.

This Government will continue to do its best to approach the problems with sincerity and determination and with full consideration of the wishes of the people. To do anything less would be to derogate our responsibility to the people.

Moving to the economy, at the time of independence our economy was top of the Asian economic league table. Today it is at the bottom. Eighteen months ago we took on an economy that was close to collapse. For too many years as a nation we had plucked the fruit from the tree before the tree had grown.

We had to take hard decisions. The people had suffered much poverty and hardship over the years and to do nothing would have resulted in a worsening of their living standards. The one good piece of news was that our social indices were much better than in many countries. The imbalance was between the social indices and the economic position. For this reason we were able to put in place a policy which, in the short term is deeply painful, but which in the long term will re-stabilise our economy.

You will all understand that this is not the politicians dream position. As politicians we like to give the people what they want, but for us the choices were limited. The state was running too many antiquated, inefficient and overstaffed institutions. This coupled with the costs of conflict diverted resources away from essential services such as education, health and housing. We were living beyond our means.

Reinstating a strong fiscal policy was imperative yet painful. Reforming and liberalising the economy was necessary. Creating the environment to allow our entrepreneurs to compete in the global market place was a must. But most significantly it was essential that we brought jobs and prosperity to all our people.

Around two thirds of the economic activity of Sri Lanka is conducted in the Western Province where about 5.4 million of our 19 million people live. Elsewhere in the country the infrastructure is poor, the facilities are poor and our people suffer from poverty.

That is why we instigated the Regaining Sri Lanka programme. For many reasons our people in the South have suffered in unique ways to those in the North and the East. But the suffering is no less painful.

That is why we seek your help in the short and medium term in the North and the East. To rebuild our war-torn areas through the North East Needs Assessment. Whilst in the medium to long-term we rebuild the whole of our country through ‘Regaining Sri Lanka’ to give the lives back to the people who have suffered so much.

We are not looking for hand outs, rather for a hand up. With your help we hope to have the resources to rebuild our country and turn it into a prosperous and modern society where poverty is reduced to the minimum and where our people can live comfortably.

The third issue on which I touched earlier was the question of the politically divided society. Ask any Sri Lankan and they will tell you that they are embarrassed by the conduct and the antics of some of the politicians. Elections have become opportunities to offer everything to everyone. Political promises always outweigh the ability to deliver. Elections have also become violent affairs where all too often Government used the mechanisms of state to ensure re-election.

The bitterness and rivalry between the two main political parties has spilled over on many occasions in the past. When a new Government has come in to office, or should I say power, good professional people have been thrown out of jobs to make way for political appointees. Not so with this Government.

So change is in the air. Opposition should be responsible in its approach. Yes they should question Government, even make them feel uncomfortable. They should oppose on matters of principle or policy. But to oppose simply to bring a Government down is to betray the people and to destabilise an already precarious system.

Government too has to be responsible. They should be honour bound to consult through Parliamentary procedures. They should allow the opposition time to question and to probe. They should seek to involve the opposition in the decision making process wherever possible.

With recent announcements I hope that we are starting to do that. We are bringing in opposition members to chair and run oversight committees that will scrutinise the work of the Government. We are also freeing up the media and opening up Government to the scrutiny of the people.

For my part I seek to inform and consult with the President as widely as possible. I believe our regular discussions continue to probe the ways of seeking greater consensus between two leaders from different political parties.

I hope that we can build on these and bring dignity and honour back to our political system. It will, nevertheless, be a long hard road to change attitudes and approaches.

On one issue I publicly request the support of all our politicians. Seeking to resolve the Peace Process should not be a partisan matter. War and the resolution to peace should not become an opportunity to destabilise a Government. To do so is to betray the people and to put lives in jeopardy. The end result could be too horrific. I urge all of our politicians to put aside their differences on this one matter and to support the Government in finding the way forward to a lasting peace.

I would like to turn to one final issue that is of great concern to many of you, overcoming the problems that have hampered our ability to implement the foreign assistance that has been provided in the past. It is fair to ask, Why does Sri Lanka need a significant increase in assistance if we are not sure whether it can be utilized effectively?

The shortcomings in the implementation process are one of the key impediments in our negotiations with the LTTE. They must be overcome if we are to build a lasting peace and provide the improved economic opportunities and substantially reduce poverty throughout Sri Lanka.

The Government has taken a number of important steps to improve the system for project implementation and we have made significant progress during the last 18 months. But there are fundamental problems with the system that cannot be overcome with procedural patches. Our public service is too large, too poorly paid and lacks the capacity to handle the increased rates of project design and implementation.

So today I can tell you that the Government is introducing a completely new organization that will also incorporate the External Resources Department. It will be responsible for all of the tasks of implementing foreign funded projects. It will ensure a timely and professional tendering process. And it will 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.

This new system will provide the basis for substantial improvements in the utilization of the assistance necessary for the reconstruction and rehabilitation in the North East and the other conflict affected areas. It will also provide the foundation for the economic transformation of Sri Lanka that will raise incomes and reduce poverty throughout the country.

We know that these changes will not be easy, nor will they be popular with everyone. There are some that have a stake in the current approach. But the stakes for Sri Lanka are too high not to take these necessary steps and to do so quickly. This new system can be in place before the end of this year and then it will be implementation, implementation, implementation.

However, to design and introduce this new system in the next seven months, will require the active support and cooperation of the donor community. We will, for example, need guidance in identifying the most efficient procedures and international best practices. We will also need assistance in training and equipping the staff that will operate this new system.

So in your deliberations over the next two days I hope you will see that we demonstrate the determination to see this project through.

On peace we shall never give up and our sincerity will never be in doubt. On the economy we are pushing ahead with our plans and our resolve is clear for you to see from our actions in the last year. Politically we face many challenges but we are dealing with each in a systematic way. On implementation our own frustration is driving us to seek innovative solutions.

For many years now I have had a clear view of the sort of Sri Lanka I wish to see. One where the people are living in a free, tolerant, peaceful society. One where everyone shares in the benefits of a prosperous economy and one where the values of our culture can shine through for the world to see.

Eighteen months ago and at the start of my premiership I spoke to our people that the challenge of the Government was to grow a garden of fresh flowers in a field of thorns.

For the sake of our children let the flowers blossom once more.

With your help I know that we can deliver.

Thank you.