Moments in U.S. Diplomatic History

USAID Helps Sri Lanka Respond to 1996 Bombing of Central Bank–And Avert Financial Chaos


One of the deadliest terror acts in Sri Lanka’s long civil war was the 1996 bombing of the Central Bank, which cost almost 100 lives–and threatened to unleash economic and financial chaos.  USAID was able to move quickly to replace the bank’s computer system, restoring its vital functions, and preventing panic from spreading through the country. Mission Director David Cohen recalls our response in this ADST oral history.

Sri Lanka’s bloody 1983-2009 civil war grew out of longstanding ethnic and religious disputes.  The Liberation Tigers of Tamil Eelam (LTTE) developed into a formidable military and terrorist force, prompting an increasingly violent government response, culminating in the group’s destruction.  While it was active, the LTTE held significant amounts of Sri Lankan territory and carried out multiple high-profile operations, including the assassinations of former Indian Prime Minister Rajiv Gandhi and Sri Lankan President Ranasinghe Premadasa.  In the 1996 bombing of the Central Bank, LTTE operatives crashed a truck carrying explosives through the main gate. The attack killed roughly 100 people and injured dozens more. By 2009, LTTE had been reduced to pockets of hard-core fighters. The government’s killing of LTTE leader Vellupillai Prabhakaran effectively marked an end to the war.  

David Cohen was interviewed by John Pielemeier on January 23, 2018.

Read David Cohen’s full oral history HERE.

Drafted by Randy Huang

 

“As a guerilla operation, they were brutally effective.”

 

A Complex Struggle, Including Hardline Buddhist Monks: The most salient concerns of the conflict involved ethnic issues of language, religion, education, and economic discrimination. The combatants were the Sinhalese Buddhist Government of Sri Lanka and the Liberation Tigers of Tamil Eelam, otherwise known as the LTTE. The Tigers were officially listed by the USG as a terrorist group. As a guerilla operation, they were brutally effective. For more than three decades, they held off a much better trained and equipped Sri Lankan military. By my guesstimate, they were able to seize and hold more than 20 percent of the country’s landmass. The goal of the Tigers was the establishment of an independent homeland

While the Tamil people certainly shared the cultural and economic grievances of the LTTE, many did not embrace the brutal violence of the Tigers. The existence of such potentially moderating elements offered an avenue for a possible peaceful resolution of the conflict. Indeed, over the years, there were a number of opportunities to do this. A phrase that one frequently heard in this context was “devolution of power.” In essence, this meant decentralization of overall governance in the entire country, giving communities more say in many of the things that affected their daily lives.

However, it was not only LTTE intransigence that interfered with the peace process. An equally aggressive disruptive force interfering with any steps toward resolution of the conflict was the country’s Buddhist monks. The monks and their followers saw any possible tolerance for the Tamils having a more equal role in governing their lives as unwanted competition for the Buddhists and their influence in the country. Thus, when subjects such as possible steps toward devolution or greater Tamil participation in governance were discussed in the parliament, they often were undermined and defeated by those who were at the service of the Buddhist monks. This came as such a surprise to me. Having been in my 20s during the 1960s “decade of love,” I had understood Buddhist monks to be about peace, kindness and acceptance. This was not the revised image I formed during my tour in Sri Lanka.

 

“… [W]ithout functioning computers . . .  the basic operation of the country’s economy would be paralyzed.”

 

A Devastating Blow to Key Economic Infrastructure: The LTTE’s bombing of the Central Bank of Sri Lanka perhaps was the largest act of terror ever experienced in Sri Lanka up to that time. The bombing of the Central Bank caused numerous deaths of Bank employees and people in adjacent buildings, including the Hilton Hotel. Something that caught my eye soon after the explosion was the fact that all of the Central Bank computers and, therefore, their recordkeeping, were destroyed. The absence of such assets threatened to substantially disrupt the entire economy and to do it very quickly. This would have undermined the political stability of the country. During my early months in-country, I had developed a rather close working relationship with the Governor of the Central Bank. I called him and confirmed that the Bank’s computers had, indeed, been destroyed. Then, I verified that the Bank had maintained a daily offsite data backup of their computer system. However, without the functioning sophisticated computers, the Bank’s operations would be paralyzed. Checks could not be cleared and other actions vital to the basic operation of the country’s economy would be paralyzed.

The resulting panic could cause chaos, exactly what the bombing had been targeted to accomplish. I suggested to the Governor that, working together, we could … respond to the current crisis. I could sign a “foreign policy interest” waiver, which would enable USAID to make an expedited emergency procurement of the necessary replacement computer equipment. As I mentioned, this was fairly sophisticated equipment, less than a mainframe, but much more than a desktop. Not surprisingly, the Governor was very relieved and excited to hear this. We made an immediate decision to proceed.

[One] element in our program portfolio was an activity to develop a Colombo stock exchange. As it happened, that program had in country, on a long-term TDY, an American technician who was an expert in sophisticated computer procurement. I called him (and his boss) and explained the situation. Not surprisingly, they were excited to be able to help. We immediately put our specialist together with the Central Bank’s experts. In surprisingly short order, they developed a list of the specs they required. Our technician then did a phone solicitation around the region (e.g. Hong Kong, Singapore, Taiwan). They found what they needed and did an emergency procurement out of Singapore.

 

By the time the Central Bank reopened a week later, we had the computer equipment in place that allowed them to operate normally.

 

Recovery:  By the time the Central Bank reopened a week later, we had the computer equipment in place that allowed them to operate normally. In doing that, the country was able to avoid the economic chaos and panic that would not have served the interests of Sri Lanka, the region or the U.S. In terms of moments of career satisfaction that I have felt, this was one of the big ones.

There is an additional point to make here, something important to note. USAID/Sri Lanka was able to accomplish what it did with the Central Bank because of devolutions of authority from Washington that empowered mission directors to move expeditiously when there was a demonstrable foreign policy need. This authority allowed me to issue a waiver of the usual procurement procedures for the purchase of the Central Bank computer, based on the national security interests of the U.S. Government. Of course, I was very open about doing the waiver and consulted early on with both the Ambassador and the front office of the Asia Bureau in AID/Washington. But the salient fact is that, without my delegated authority to issue a waiver, what took days to accomplish might have taken weeks or months and might have thrown Sri Lanka into state of political and economic chaos. I do not believe that current mission directors have the same waiver authorities. If I am correct about that, it is indeed unfortunate as that would hamstring the effectiveness of our field missions to accomplish important objectives when time-limited, program critical opportunities may occur.

TABLE OF CONTENTS HIGHLIGHTS

Education

     BA in Latin American Studies, Rutgers University

     MA in Brazilian Affairs in Economic Development, New York University                        1966-1968

     MA in International Development, Cornell University

Joined the Foreign Service                                                                                                       1969

     Rio de Janeiro/Brasília, Brazil—Economist                                                                             1969-1974

     Santo Domingo, Dominican Republic—Program Officer                                                       1974-1977

     Georgetown, Guyana—Deputy Mission Director                                                                     1980-1982

     La Paz, Bolivia—Deputy Director, USAID                                                                                 1982-1987

     Panama City, Panama—Director, USAID                                                                                  1987

     Washington, D.C., USA—Director of the Office of Carribean Affairs                                  1988-1989

     Port-au-Prince, Haiti—Mission Director                                                                                   1990-1993

     Port-au-Prince, Sri Lanka—Mission Director                                                                           1994-1997

     Washington, D.C., USA—Professor of National Security Policy                                           1997-1999

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USAID Helps Sri Lanka Respond …

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