Sri Lanka is depleting its natural resource base at an accelerated pace. Its population density is one of the highest in the world, and a significant proportion of the population is largely, if not exclusively, dependent upon natural resources for its livelihood. Sri Lanka's present and future economic growth, and increased employment opportunities for the poor, will depend significantly on the sustainability of its natural resources across sectors, but particularly in the agriculture and tourism sectors. Insecure land tenure, lack of water rights, and predominant public ownership of land are root causes of degradation of natural resources. In many coastal areas, coral reefs and estuaries also suffer from the disposal of untreated waste, coral mining and over-fishing, and the effects of urban and industrial problems. Sri Lanka's ability to accelerate and sustain its economic growth is dependent upon steps it takes over the next five years to establish sound practices for environment and natural resources management.

USAID environmental activities produced very positive results in 1995. The implementation of the revised, comprehensive National Environmental Action Plan continued, advancing the priorities set for GSL environmental investments over the next five years. USAID also assisted the GSL in continuing to strengthen the institutions responsible for pressing forward with environmental policies, regulations, and awareness. In 1995, over 88,000 people benefitted from the adoption of environmentally sound practices, and the number of targeted hectares of land with agricultural conservation practices increased by nearly 10,000 hectares. The percentage of targeted industries implementing pollution prevention and control measures was 41.3 %, far exceeding USAID's target of 15%. The number of households with secure land tenure and natural resources rights increased by 50,000 households in1995. USAID commenced activities in 10 field sites to demonstrate the practical implication of community participation in natural resource management.

USAID also supported the introduction of the Extended Cost Benefit Concept to the national planning process as a planning and policy development tool. Masters Degree programs in four environmental disciplines were established in Sri Lanka, the very first such programs in Asia. And finally, USAID assisted the GSL in improving the Environmental Pollution Licensing (EPL) Scheme. The EPL scheme will help reduce industrial pollution through regulations and fines, combined with incentives for reducing pollution through waste minimization and water treatment.

With USAID's support, Sri Lanka successfully completed a comprehensive, internationally acclaimed coastal zone management plan which, when implemented, will protect the coastal area's rich natural bio-resources. As tourism drives continued developments along the coastal areas, and as industrial development increases, it will be vitally important to support environmental policies which stem the current trend of environmental degradation. If the depletion of natural resources across the country continues, the 70,000 jobs which rely on the tourism industry will be in jeopardy.

In 1997, USAID will support the GSL's continued efforts to implement the National Environmental Action Plan. The program will address policy reform and institutional strengthening in the areas of natural resource management, biodiversity conservation and sustainable use, urban and industrial environmental management, and energy conservation and efficiency. USAID also will help raise awareness of environmental issues at the local level while promoting community based management of natural resources. In 1997, USAID will invest about $3.5 million in the Sri Lankan environment.

Ordinary Sri Lankans have relatively limited opportunities to participate in, let alone influence, decision making that affects their political, social, and economic well-being. Although great progress has been achieved by Sri Lanka in some social indicators, unemployment, poverty, social unrest, ethnic conflict, and dependency on government continue to threaten the sustainability of progress made to date. Broader participation, improved public information, and more responsive and capable democratic institutions are essential for broad-based citizen empowerment and Sri Lanka's goal of becoming a modern developed society.

Concepts of individual freedoms, tolerance for other points of view, and the protection of minorities' rights need to be reinforced. The lives of people living in the North and East have been profoundly affected by the war. There is still a relative paucity of fora and institutions that engage the voices of ordinary people in discussions with local and national decision-makers. Decentralization of government authority to the local level has made little progress, and in fact has stalled. An escalation of the thirteen-year-old ethnic conflict during 1995, has increased the sense of powerlessness.

In 1995, USAID began implementation of activities to increase access to justice and to improve the media. The number of backlog cases in the courts of appeal decreased by 2,660 in 1995, far exceeding the target of 1,000. Also demonstrating an increase in people's access to justice, the number of people using mediation boards totalled 200,000 in 1995. Assistance to improve greater protection and promotion of citizen's rights is being provided by the Sarvodaya Legal Services Movement which runs district-level legal aid clinics for the public and conducts legal awareness programs for local government officials and council members. The grant also supports a human rights program to raise awareness among school children, teachers and local government officials, about the general concepts of human rights and, more specifically, of women's and children's rights. The program has the capacity to attract as many as 1,000 children in one day. To date, eleven such programs have been held across the country. In 1995, public awareness and training programs forover 30,000 people, including judges and lawyers, have enhanced their knowledge of human rights issues and the rule of law.

In 1995, USAID also supported practical training and technical skills components of the University of Colombo Journalism Program. Students are introduced to the media community through structured practical internships to improve the quality of professional education and ultimately, the quality of journalism in Sri Lanka.

USAID is beginning an activity to strengthen NGOs and local government in 1996. This activity will work to strengthen local citizen groups and NGOs as a means to empower people and encourage broader participation in the identification and implementation of development activities. It also will help strengthen local governments to work with citizen's groups and their representatives on development issues. In 1997, USAID will continue to help improve legal institutions, both formal and informal, to increase citizen's access to legal services, dispute resolution, and protection of fundamental rights. Finally, USAID will assist in improving the professionalism of the media, and in increasing the access of ordinary people to information which will help them participate in decisions which affect their lives. Overall investment in this strategic objective will be approximately $1.1 million in FY 1997.

Agency Goal: Providing Humanitarian Assistance

The thirteen-year old ethnic war in the Northern and Eastern Provinces, has left many people homeless and unemployed. Approximately 57,000 civilians have been killed and thousands more injured. Many local and international NGOs have been active in providing limited humanitarian assistance to the civilians in the conflict areas. However, much remains to be done, and an end to the conflict does not appear imminent. Pending a peace accord, USAID will provide grants to international private voluntary organizations (PVOs) and local NGOs to provide assistance to families in the conflict areas to help them return to normal lives with adequate food and incomes.

Over the past ten years, USAID has provided grants to PVOs and NGOs for humanitarian assistance. These grants have helped to improve the nutrition and income of families through home garden projects; provided water and sanitary facilities including volunteer community leadership development; helped to establish income generating activities in domestic dairy and goat farming; provided vocational training; assisted with farm production to increase food availability for residents in the conflict areas; and finally provided assistance to internally displaced families and children living in camps outside the conflict areas to improve their health, nutrition, and psychological development.

To date, humanitarian assistance has benefitted 85,566 people affected by the ethnic conflict in the Northern and Eastern provinces of Sri Lanka. In addition, feeding and employment programs were implemented for urban slum dwellers, and rehabilitation activities for 3,084 mentally handicapped and 4,494 physically handicapped people were supported.

In 1995, USAID also provided humanitarian assistance to address problems in the North through two grants with international PVOs, the International Federation of the Red Cross (IFRC) and Terres Des Hommes. IFRC provided assistance to 48,000 displaced persons living in 220 camps. This assistance included mobile health units in the non-conflict areas. Terres Des Homes provided assistance to 1,350 displaced children. In 1996, USAID expects to support the production of artificial limbs for approximately 1,500 civilian war victims, and to continue its support to the internally displaced.

Agency Goal: Stabilizing World Population and Protecting Human Health

While Sri Lanka is categorized as a low prevalence country, an increasing threat of HIV/AIDS is apparent. It can be mitigated by focused assistance to the NGO community. Approximately 85 percent of the NGOs involved in HIV/AIDS work are implementing general education and awareness activities. Moreover, coordination between the NGOs and the GSL has been insufficient. In 1997, USAID will continue to support policy advocacy, capacity building and public education by NGOs, and the AIDS prevention work of the International HIV/AIDS Alliance in Sri Lanka. Investment in this special objective will be $300,000 in 1997.

To date, 665,000 people have been exposed to issues of HIV/AIDS and drug abuse by seminars, workshops, training, information, education, and communication materials. Six counseling centers, managed by a local PVO, have been established in the Central and North Central Provinces, and sixty volunteers have been trained as counsellors. Vocational training and rehabilitation have been provided to male-child prostitutes in a major tourist resort area.

Purpose: To increase employment opportunities and improve incomes.

Background: Unemployment and underemployment is high in Sri Lanka with the estimated unemployment rate at 13%. Average income is less than $50 a month and income distribution patterns disfavor the poor. The best way to increase employment and income opportunities for poor people is through an expanding private sector.

USAID Role and Achievements to Date: USAID's support includes technical and financial assistance to small and microenterprises, promotion of economic liberalization and privatization, transferring of new technology and skills, strengthening of formal market institutions and mechanisms, and encouraging free market agricultural reforms. To date, over 25,000 people have increased their income through full or part time employment from micro-enterprises, self employment, and medium and large enterprise development. To date, $6 million in matching technology grants have been completed, and business assistance to approximately 410 private firms has been provided. USAID has worked with 2,800 clients on business planning and new techniques in crop production, processing, marketing and financing. Through USAID agro-business activities $4.8 million in investment has been facilitated, including the introduction of new technologies to Sri Lanka. USAID's support of financial markets development has produced an 800% increase in Colombo Stock Exchange market capitalization from $328 million in 1988 to $2.6 billion in 1995. To date, close to $113 million in Government assets and land have been transferred to long term private control. Finally, approximately 63,000 below medium income families (with an income of less than $113 per month) have received long term credit for housing, with a total loan value of $17.6 million.

Description: USAID activities will support enterprise development and job creation via direct grants for technology, technical assistance on financial management and marketing (particularly for small-farm agriculture and export marketing), and microenterprise lending. USAID will complement these activities by assisting the GSL to identify and implement policy reforms that promote openness to trade and investment, support agriculture and rural enterprise, develop incentives and reduce GSL involvement in infrastructure, production, marketing and food pricing. A new effort to enhance business skills training will help to better meet the growing demands of the increasing export-oriented private sector. In order to expand employment, activities will improve business skills, promote new technologies, and expand small to medium sized manufacturing firms, agro-enterprises, farmer associations and micro-enterprises. USAID Sri Lanka will also assist microenterprises and small businesses, and thereby the poorest men and women, to become economic participants by enhancing their access to capital through development banks and self-sustaining financial institutions, including credit unions that service small savers and borrowers.

Host Country and Other Donors: USAID Sri Lanka's programs complement World Bank and Asian Development Bank (ADB) programs, especially those related to sectoral policy reforms. The ADB's Financial Sector Program is assisting with a wide range of financial sector reforms, including banking, leasing and insurance supervision and private debt market development. The World Bank also has a major private finance development project which is aimed at improving macro-economic management by the Central Bank and the Ministry of Finance. USAID is now working closely with the World Bank in formulating a joint program to assist the GSL's privatization program.

Beneficiaries: Direct beneficiaries include the people whose income are improved and who gain new or better employment which is sustainable. Indirect beneficiaries include the families whose lives are improved due to increased family incomes.

Principal Contractors, Grantees, or Agencies: USAID will implement activities through nonprofit organizations, (i.e. International Executive Service Corps and Oregon State University) and the private sector.

Major Results Indicators:

Baseline Target

Total employment in targeted enterprises 17,642 (1994) 6,950 (1997)

Employment generated by companies raising
new capital on the Stock Exchange 10,000 (1994) 10,000 (1997)

Prevalence of stunting and wasting among
pre-school children 31.4% (1994) 29.0% (1997)

Background: If economic growth is to be sustainable, close attention must be given to the country's current trend of resource depletion. The reliance of the rural majority on natural resources for their livelihood makes sound management of resource endowments imperative. Because of inadequate incentives for environmental resource management there is a low compliance of environmental laws. The results of this situation are:

encroachment into parks and protected areas: unsustainable agricultural patterns, conflicts over irrigation water; uncontrolled urban and industrial pollution; and inefficient energy use. There are adverse impacts on health from declining air and water quality, loss of biodiversity in forest and coastal ecosystems, soil depletion and erosion, energy shortages, and other long-term detrimental environmental impacts.

USAID Role and Achievements to Date: As a direct result of USAID assistance, Sri Lanka now has a national framework for environmental policies and programs within its overall economic development strategy. Evidence of this may be seen in the development and revision of the National Environmental Action Plan (NEAP), and the 1993 passage of strict Environmental Impact Assessment (EIA) methodology. A strong foundation of current and future environmental institutions has also been established. Since it was established in 1991, the Ministry of Environment has grown to its current stature as national environmental policy coordinator. Four Master's Degree Programs, including Asia's first in environmental economics, are now producing in excess of 100 graduates each year.

The environmental NGO movement has benefitted substantially from USAID assistance and is playing an increasingly important role in setting the national environmental agenda and seeing it implemented at the grass roots level. Pollution prevention and waste minimization approaches have now been accepted as essential elements of a national industrialization program. Four hundred and eighty-three user groups involving 67,400 members were formed to share control of various natural resources with their local governments in two pilot watersheds. Since 1993, a total of 71,000 low income people have participated in community-based resource management activities including improved sanitation and income generating schemes.

Description: USAID activities will continue to develop institutional and policy capacity within the GSL to achieve national level impact on citizen's health, well being, and livelihood. USAID will provide technical assistance, training, limited commodity support, and pilot demonstrations in five key areas: policy reform and institutional strengthening, biodiversity conservation, urban and industrial and environmental management and land and water resources management. USAID will continue to work with NGOs to increase local resource management at the community level and introduce pollution prevention and control technologies to the private sector.

Host Country and Other Donors: USAID plays a leadership role in the donor community on environmental matters, sponsoring donor coordination meetings and supporting such efforts within Environment Ministry. USAID will continue to work closely with the World Bank on the development and implementation of the NEAP and development of the Bank's two major planned investments in SriLanka's environmental sector: The Colombo Environmental Improvement Project, and the Environmental Action 1 Project. This will result in a leveraging of over $100 million of World Bank-financed resources by the end of FY 1997. ADB is developing a national water resources management planning system.

Beneficiaries: Direct beneficiaries include the people whose health and quality of life are improved due to improved environmental practices, in all sectors, but particularly those people living in communities where community-based resource management is taking place.

Principal Contractors, Grantees or Agencies: USAID will implement activities through the Environment Ministry, private companies (i.e. International Resource Group (IRG) ) and U.S. and host country NGOs.

Major Results Indicators:

Baseline Target

Number of people benefitted by adoption
of environmentally sound practices 100,030(1994) 13,000(1997)

Expanded hectares of targeted land
with conservation practices 5,979(1994) 10,000(1997)

Percentage of industries implementing
pollution prevention/control measures 10%(1994) 53%(1997)

Percentage of municipal solid waste
disposed through environmentally
sound systems 0% (1994) 40% (1997)

PROGRAM: SRI LANKA
TITLE AND NUMBER: Greater Empowerment of People to Participate in Democracy, 383-S003
STATUS: Ongoing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $1,700,000, DA INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2000

Purpose: To increase people's empowerment to participate in democracy.

Background: Sri Lanka has a long democratic tradition, and its constitution guarantees a wide range of fundamental rights, comparable to rights guaranteed in many democracies. A well established legal system exists to enforce the rule of law. A system of provincial and lower level councils was established to devolve greater power to provincial and local governments. Nevertheless, the weaknesses of basic democratic institutions (e.g. local government / judicial system) constitute a major constraint to sustainable development. Sri Lanka still faces challenges in its efforts to develop a more broadly based democracy. Long standing ethnic tensions have been exacerbated by low growth and lack of employment opportunities and, as the political process failed to produce a solution, resulted in a costly ethnic conflict. Devolution of power to local government has made little, if any, progress leaving most citizens few means of expressing their needs and interests, thus reducing their level of participation and limiting the means available to them for addressing their problems and improving their lives.

USAID Role and Achievements to Date: USAID's democracy activities focus on empowering ordinary citizens to participate in the development and political decisions which affect their lives. In doing so, USAID strengthens the role of NGOs by increasing their ability to advocate for policies and programs that enhance the quality of life for all citizens, especially vulnerable populations. USAID has made considerable progress on increasing people's access to justice. USAID has worked closely with U.S. and Sri Lankan NGOs on human rights issues, rule of law and justice through training programs and seminars for 54,321 judges and lawyers. Contributing activities toward increased effectiveness of dispute resolution systems have commenced, and a sub-grant to the Courts of Appeal of Sri Lanka is working with formal and informal dispute resolution mechanisms. This includes automation of the court administration system to efficiently monitor and analyze bottlenecks and delays in the court system. The backlog of cases in Courts of Appeal declined from 14,000 in 1994 to 11,340 cases in 1995. This greatly exceeds the target of cleared backlog cases, providing many Sri Lankans with access to justice.

USAID support for training of the mediation boards has had a large impact. The mediation boards have played a significant role in informally settling minor disputes among generally less affluent Sri Lankans. Public confidence in the boards has been won and the credibility and success of the mediation boards to date is evidenced by the continuing increase in the number of people using the mediation boards. In 1995, the number of people using the boards increased from 184,000 to 203,988.

Humanitarian assistance was delivered to 85,566 people affected by the ethnic conflict in the Northern and Eastern provinces of Sri Lanka, including feeding and employment programs for urban slum dwellers, and rehabilitation activities for 3,300 mentally and 4,500 physically disabled people.

Description: USAID will work directly with local NGOs at the community level and assist them to promote, protect and refine participatory democracy, encourage more responsive government activities and educate and enable citizens regarding their rights and responsibilities. Programs will incorporate training components, technical assistance and grants to strengthen organizations in advocacy, needs assessments, financial management, and project design and implementation. USAID will also strengthen local governments by assisting them to assess local needs and set development priorities. USAID will continue to provide technical assistance and training to senior journalists and editors to

expose them to international practices and improved management techniques. USAID will also help to upgrade the university journalism program. And finally, USAID will contribute to more efficient formal and informal dispute resolution mechanisms through improving the court administration systems, upgrading the skills of judges and lawyers in case management, and supporting legal aid clinics and community legal awareness programs.

Beneficiaries: Direct beneficiaries include disadvantaged citizens who have been left out of the mainstream of social and economic development, NGOs that can enlist and empower other citizen's groups; Local Governments, especially "Pradeshiya Sabhas", institutions both formal and informal, which improve citizen's access to legal services, dispute resolution and protection of fundamental rights; and media organizations.

Principal Contractors, Grantees or Agencies: USAID will implement activities through private nonprofit organizations (i.e. The Asia Foundation) and U.S. and host country NGOs.

Major Results Indicators:

Baseline Target

Increased expenditure by local (1995) To be (1997) To be
government determined determined

Percentage of people with access (1995) To be (1997) To be
to legal services and inform- determined determined
ation

Percentage of people who believe (1994) To be (1997) To be
local government is responsive determined determined
to their needs

STRATEGIC OBJECTIVE INDICATORS	BASELINE	TARGETS
Total employment in targeted enterprises :	17,642 (1994)	40,142 (1997)
Employment generated by companies raising new capital on the Stock Exchange:	10,000 (1984)	37,000 (1997)
Prevalence of stunting and wasting amongst pre-school children	31.4% (1994))	29.0%(1997)