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Sri Lanka
FY 2001 Program Description and Activity Data Sheets
>> Regional Overview >> Sri Lanka Overview
FY 2001 Program
USAID's program will continue to support Agency goals for broad-based economic growth and agricultural development, strengthening democracy, and providing humanitarian assistance. Technical assistance will be provided to the private sector to support industry clusters to improve their competitiveness and dialogue with government on competitiveness issues facing Sri Lanka, and to improve business strategies on a sector-wide basis. The GSL will be assisted for improvements in financial market and trade/investment systems, policies and practices necessary to attract the level of investment required for sustained growth and competitiveness. USAID's democracy programs also support efforts of the GSL and the NGO community to improve protection of human rights and improve the ability of the judiciary to resolve complaints efficiently and effectively. USAID will extend its programs of humanitarian assistance through NGOs to reach children and families most affected by the conflict and related violence in Sri Lanka in order to help them return to a normal life.
ACTIVITY DATA SHEET
PROGRAM: Sri Lanka
TITLE AND NUMBER: Improved Framework for Trade and Investment, 383-001
STATUS: Terminating. Strategy revised. See SO 383-004.
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $500,000 DA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: -0-
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2000Summary: In 1998, when USAID began to work on this objective, the Government of Sri Lanka (GSL) had made improvements in the macro-economic framework, but Sri Lanka remained weak in terms of its competitiveness. This raised the concern that Sri Lanka would not be able to diversify its economy further and create the kind of jobs needed for educated but unemployed youth. The purpose of the SO is adoption of at least nine significant policy and regulatory reforms in financial markets and trade and investment systems to improve Sri Lanka's competitiveness. The direct beneficiaries include the Sri Lankan private sector, new entrants into the private sector, and their employees. Improving the enabling environment for trade and investment is a key component of the Mission Performance Plan's emphasis on broad-based economic growth.
Key Results: By the end of 1999, eight policies and regulatory reforms had been adopted that will contribute to an improvement in Sri Lankan competitiveness. These included adoption of new seed trade and agro-trade policies, equal taxation treatment for bonds and shares listed on the Colombo Stock Exchange, and the reorganization/strengthening of the Department of Commerce.
Performance and Prospects: Performance in 1999 was greater than expected. In the area of financial market reforms, the Colombo Stock Exchange (CSE) and Sri Lankan Securities and Exchange Commission adopted significant new rules and procedures with USAID technical assistance. These include listing rules of corporate debentures through the CSE and adoption of a code of conduct for primary dealers of government debt securities, both of which will strengthen capital markets in Sri Lanka. In addition, the GSL removed the stamp tax on mortgage backed securities and adopted new rules on taxation of listed corporate debentures to be similar to listed equity securities as USAID had recommended. In 2000, USAID support will include technical assistance and training on corporate and government bond market development, tax policy analysis in Sri Lanka's Ministry of Finance and Planning and in tax policy implementing agencies.
Dialogue between the public sector and private sector on agricultural technology also improved. With support from USAID for technical assistance, studies and study tours, agricultural associations identified a range of tariff and non-tariff trade policies as barriers to the import of new agricultural technologies. With better information in hand and strategies for dialogue with government, the associations were able to persuade government regulators to remove many of the impediments in 1999, including, for example, establishment of procedures for the free import of hybrid and other improved seed into Sri Lanka. A new partnership between an agro-business association supported by USAID and the Sri Lanka's National Plant Quarantine Service Center was also instrumental in liberalizing this sector. Under the new system, the association provides seed to the Quarantine Service for serological testing. As a result, the Quarantine Service approved the importation of 60,000 kilograms of a hybrid corn seed in 1999, the first time that such an import has been allowed.
The GSL embarked on a new initiative to promote the use of information technology. With USAID technical assistance, the GSL Export Development Board instituted a "CyberTrader" facility. Small companies, including those from regions outside Colombo and the Western Province, began using the facility in 1999 to access buyers and suppliers, find up-to-date information about competitive markets and trade over the Internet.
GSL policy reform expected in 2000 includes: (a) progress towards adoption of a revised Intellectual Property Rights Law; (b) policies and strategies for livestock sector development in Sri Lanka 1999 - 2010; (c) a national trade strategy in line with WTO principles, including strengthening of the Department of Commerce, and (d) an agro-industrial policy framework. USAID technical assistance, studies and training will be provided in 2000 to promote these initiatives.
The Ceylon Chamber of Commerce also took steps to improve corporate governance in Sri Lanka with technical assistance from USAID. Good corporate governance, including better accountability and transparency, is necessary to improve prospects for foreign investment in Sri Lankan firms. One of the largest Sri Lankan companies appointed two non-executive members to its board of directors for the first time in its 150-year history, sending a strong signal to the business community that good corporate governance is necessary for future growth and investment.
In 1999, USAID also initiated technical assistance and related support for the development of competitiveness clusters. Program activities support private sector associations, firms, suppliers and service providers in a given industry to work as a cluster and develop competitive strategies for their cluster. To start the initiative, USAID funded a South Asia regional conference on competitiveness and the global challenge in November 1999. Forty-five delegates from six South Asian countries, plus 250 from Sri Lanka attended the conference. Studies on benchmarking of key macro-level competitive factors of South Asian countries against other countries were included. Following the conference, fifteen industry groups approached USAID for assistance in forming a cluster, including traditional industries of rubber and tea as well as software exporters.
Possible Adjustments to plans: Presidential elections were held in December 1999 and parliamentary elections are scheduled for 2000. This has delayed benchmarking of public sector institutions and cluster programming for public sector services, which will be postponed until after the elections.
Other Donor Programs: Programs of the World Bank and Asian Development Bank emphasize continued progress on macro-economic reform and improvement in infrastructure. Other bilateral donors providing support for private enterprise development include Germany, Norway and Japan. The ILO provides assistance on management/labor issues. The International Finance Corporation provided assistance to the Central Bank to bring an international credit rating agency to Sri Lanka in 1999, as recommended by USAID's financial markets technical assistance.
Principal Contractors, Grantees or Agencies: Grantees and contractors include International Executives Service Corps; Oregon State University/Development Alternatives Inc.; International Science and Technology Institute and J. E. Austin Associates.
Selected Performance Measures: Baseline
(1997)Actual
(1999)Target
(2000)Cumulative number of policies, regulatory reforms or practices adopted 0 8 9 U.S. Finance Table (Microsoft Excel)
ACTIVITY DATA SHEET
PROGRAM: Sri Lanka
TITLE AND NUMBER: Enhanced Economic and Social Opportunities for Disadvantaged Groups 383-003
STATUS: Continuing
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $300,000 CSD
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: -0-
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2003Summary: The 16-year ethnic conflict in the north and east has displaced a large population including children. Providing short-term relief and resettlement assistance to displaced groups is a high priority of the GSL. Another serious threat to the well being of children in Sri Lanka is sexual exploitation and abuse of mostly boys in the western and southwestern coasts. The purpose of this objective is to assist these groups to recover from adverse circumstances and provide an opportunity for returning to a normal life. Beneficiaries include displaced children and families, orphans and youth exploited by the sex trade.
Key Results: Results determined necessary to achieve the objective include: 1) Increased child participation in community-based and facilitated psychological and social activities; and 2) Provision of artificial limbs to amputees.
Performance and Prospects: The FY 2000 program continues activities previously funded by the Global Bureau. An international NGO will continue to work with local NGOs and community based organizations in the North Eastern and Central Provinces. These NGOs provide opportunities for children affected by the conflict and at risk to participate in their communities. In addition, the programs also help to build bridges between children of different ethnic groups. Other activities include nutrition and health programs as well as programs to help children to re-enter schools. Skills training programs will be provided to vulnerable youth and sex workers to seek alternative employment and socially acceptable income-generating opportunities. In 1999, these programs exceeded the target of assisting 14,127 participants.
In addition, War Victims Funds from the Global Bureau are provided to the only NGO in Sri Lanka that serves the needs of amputees on a large scale. In 1999, the program provided 1,344 artificial limbs to 1,272 amputees as against a target of 1,500 amputees. Travel restrictions for amputees and disrupted supply of components due to increased military operations in the north and east account for the shortfall in the number of amputees assisted. However, it is important to note that prosthetic devices were provided to all patients who requested a limb.
Other Donor Programs: The GSL remains committed to allowing NGOs to work effectively in the north and east. USAID activities complement efforts of the UN agencies such as UNICEF, WHO, UNHCR and international voluntary organizations, which are providing health care and shelter to the displaced. UNDP is involved in removing landmines and pressure mines in the war torn areas.
Principal Contractors, Grantees or Agencies: Terre Des Hommes, The Salesian Brothers and Sarvodaya.
Major Results Indicators: Baseline
(1997)Actual
(1999)Target
(2000)Cumulative increase in the number of participants in community-based and facilitated psychological and social activities 9,768 14,859 14,900 Cumulative number of amputees fitted with prosthetic devices 1,300 3,830 5,800 U.S. Finance Table (Microsoft Excel)
ACTIVITY DATA SHEET
PROGRAM: Sri Lanka
TITLE AND NUMBER: Increased Sri Lankan Competitiveness in the Global Marketplace, 383-004
STATUS: New
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $2,750,000 DA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $3,000,000 DA
INITIAL OBLIGATION: FY 2000 ESTIMATED COMPLETION DATE: FY 2003Summary: The high level of unemployment among Sri Lanka's educated but unemployed youth continues to threaten efforts to promote greater political stability in the country. Increased employment among this group requires an accelerated transition of the Sri Lankan economy away from its dependence on basic commodity exports and low cost advantage. The SO's purpose is to increase Sri Lanka's competitiveness in international markets. The overall measurement used to track progress will be an increase in the value-added exports of targeted cluster members relative to their sectors as a whole. Direct beneficiaries of the SO will be approximately 500 member firms of the ten to fifteen industry clusters who produce goods or services for export, or who provide essential services to such industry clusters, and their employees. Improving competitiveness is a key component of the Mission Performance Plan's objectives on broad-based economic growth and open markets.
Key Results: Three key results are necessary. First, 10-15 industry clusters must create and implement competitive business strategies. Second, the Sri Lankan Government must implement effective policy and regulatory frameworks, services and infrastructure for competitiveness, and third, there must be effective dialogue between public and private sectors on competitiveness.
Performance and Prospects: The SO continues competitiveness activities initiated under the Improved Framework for Trade and Investment Strategic Objective. The potential gains that can be made by improving competitiveness are significant. Sri Lanka's human capital base, a key factor of competitiveness, is relatively high, but few of its companies are taking advantage of this resource to produce more complex exports for niche markets. For example, approximately half (by value) of Sri Lanka's tea exports are in bulk form, another 40 percent in loose-leaf packages, and only 10 percent in tea bags or instant tea. The rubber industry provides an example of more rapid emergence into competitive performance, with exports of manufactured products based on rubber now outpacing export values of basic rubber products. Other countries with vibrant jewelry industries rely upon Sri Lanka's gem exports, 50% of which are exported uncut. The diamond cutting and jewelry export industry, however, has never taken off in Sri Lanka. Tourism brings Sri Lanka only about $58 from each tourist per day. The garment industry has produced much of Sri Lanka's recent growth in exports, jobs and investment, but firms that do not rely on quotas for business growth account for only about a third of export earnings. With the removal of quotas in 2005, Sri Lanka garment companies will have to target higher value-added niche markets if they are to survive.
In the past year, a USAID-funded regional conference and sector-wide meetings in Sri Lanka raised awareness about key concepts and tools of the competitiveness methodology. Under the SO, USAID is providing technical assistance in response to the high level of demand from industries to help them form competitiveness clusters. To be effective, such industry clusters require participation of all entities involved in getting a product to the customer: from producer to manufacturer, packer, shipper, vendor, the government that creates the platform upon which all these entities work, as well as research and development organizations. In Sri Lanka, helping companies overcome resistance to cooperating with one another in a cluster is an important first step and part of the awareness campaign.
The methodology applied by USAID's program avoids picking winners and losers. Success of the competitiveness process ultimately depends on the participants' commitment to developing and implementing a strategy, including committing necessary resources. To ensure they have the necessary commitment, clusters receiving specific technical assistance will use their own resources to assign or hire a cluster coordinator to work with USAID's technical advisors and will sign a memorandum of understanding with the project. Potential clusters include financial sector and banking industry, information technology, education, garments, tea, rubber, tourism, eco-tourism, horticulture, gems and jewelry.
To attract additional investment needed for development of new products and expansion into new markets, clusters need to develop a competitiveness strategy. USAID's technical assistance will help these clusters with strategy sessions on how to maximize a given cluster's participation in international markets while delivering sustained increases in productivity and income gains in the domestic economy. USAID will also fund studies and technical assistance to develop and support cluster strategy implementation, public sector policy change, and public-private dialogue. Other types of assistance might include study tours to countries or areas that have developed their competitive advantage, participation at international trade fairs, and attendance at seminars or workshops on competitiveness. USAID may provide limited funding for the purchase of necessary equipment.
By the end of FY 2000, ten of the initial twelve clusters will have completed benchmarking of their industries against competitors and identified niches where the cluster can differentiate its products, including the development of innovative new products in Sri Lanka. The more advanced clusters may also have developed a cluster strategy to better compete in the global marketplace. The competitiveness methodology will be extended to areas outside Colombo and the Western Province. By the end of FY 2000, the competitiveness program will conduct awareness campaigns in key secondary cities of Sri Lanka.
In FY 2001, USAID's technical assistance will help these clusters with strategy sessions on how to maximize a given cluster's participation in international markets while delivering sustained increases in productivity and income gains in the domestic economy. USAID will also fund studies and technical assistance to develop and support cluster strategy implementation, public sector policy change, and public-private dialogue. Other types of assistance might include study tours to countries or areas that have developed their competitive advantage, participation at international trade fairs, and attendance at seminars or workshops on competitiveness. USAID may provide limited funding for the purchase of necessary equipment.
By the end of FY 2001, eight of the initial twelve clusters will have completed business strategies detailing how they will better compete in the global marketplace, and some will begin implementing these strategies. The more advanced clusters may have attracted increased investments to meet their strategy and may see the value of their exports increase relative to the industry sector as a whole. The competitiveness methodology will be extended to areas outside Colombo and the Western Province. By the end of FY 2001, the competitiveness program will include clusters based in key secondary cities of Sri Lanka.
Possible Adjustments to Plans: None.
Other Donor Programs: The programs of the World Bank and Asian Development Bank on further macro-economic reform and infrastructure are important to the success of USAID's initiative. Their support for activities that increase private sector development of key infrastructure projects such as improvement of the Colombo port, private power generation, rural electrification and loan guarantee programs for small and medium enterprises contribute to the enabling environment for private sector competitiveness. Among bilateral donors, NORAD plans to provide assistance to clusters in a way that would complement USAID's program, and it may channel assistance to selected clusters through USAID contractors. The Japanese private sector program in Sri Lanka uses a government-led rather than private-sector-led approach to improving competitiveness but works primarily in sectors not covered by USAID's program.
The GSL has made efforts to improve its tax structure, draft a new intellectual property rights law that exceeds WTO requirements, and promote the development of capital markets. It has also taken the difficult and sometimes controversial steps necessary to privatize previously state-owned enterprises in the plantation (tea and rubber estates), transport (Sri Lanka Airlines and Colombo port), telecommunication (Sri Lanka Telcom) and power generation sectors. The GSL has also eliminated all customs duties on the import of automated data processing equipment and permitted establishment of private internet service providers, both important to private sector use of information technologies.
Principal Contractors or Agencies: Grantees and contractors include J.E. Austin and Associates through the Nathan/Management Systems International consortium in association with the International Executive Service Corps, The Asia Foundation, The Sri Lankan Institute of Policy Studies and Org-Marg Smart.
Selected Performance Measures: Baseline
(1999)Target
(2000)Target
(2001)Number of competitiveness clusters established with coordinators hired 0 12 12 Number of industry clusters who have completed benchmarking of their industry 0 10 10 Number of clusters who have developed business strategies 0 3 8 Number of clusters with increased investments 0 0 3 Percentage increase in the value-added exports of targeted clusters relative to the industry sector as a whole 0 0 2% U.S. Finance Table (Microsoft Excel)
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Last Updated on: November 17, 2000 |
