Note: This document may not always reflect the actual appropriations determined by Congress. Final budget allocations for USAID's programs are not determined until after passage of an appropriations bill and preparation of the Operating Year Budget (OYB).
SRI LANKA
FY 1998 Development Assistance: .......... $7,000,000
Introduction
The USAID program supports U.S. interests through promoting U.S. economic opportunities, enhancing prospects for peace in the 14-year-old ethnic conflict, and mitigating the humanitarian effects of the ongoing conflict. With the Government of Sri Lanka (GSL) focusing on bringing an end to the conflict, and with clear potential for achieving sustainable economic growth, USAID is helping to move the country through an important economic transition.
The Development Challenge
Human development progress notwithstanding, poverty persists. The civil war has severely limited development, incurring high human and economic costs. The distribution of the benefits of a growing market economy has not been equitable. There are wide disparities in socio-economic status and access to employment opportunities. Although Sri Lankans are better educated than people in other South Asian countries, there is a disconnect between their levels of education and the extent to which they actively participate in defining their own problems, and become integrally involved in solving them.Economic growth has been concentrated in urban areas, primarily in the industrial and service sectors. Such expansion has not been sufficiently broad-based to absorb under- and unemployed labor throughout the country. Unemployment is officially estimated at 11%, but unofficially believed to be about 35% if underemployment is included. Income distribution patterns disfavor the poor, and much of the poverty is concentrated in the rural areas, where about 80% of the population resides.
The primary development constraint in Sri Lanka today is the ethnic conflict based in the North and East Provinces of the country. An escalation of this violence in 1996, including major military offensives by the Sri Lankan military and the rebel Tamil Tigers, resulted in a loss of productive lives, an ever-increasing strain on budgetary resources, and lackluster economic performance. The civil war will continue to place a strain on limited Government resources and threaten overall economic and political stability. The need for humanitarian assistance, to provide relief to the estimated one million internally displaced persons, much of it furnished by the Government itself, will continue to grow over the next two years.
The budget deficit stood at 8.4% of GDP in 1995. Sri Lanka's total outstanding debt increased to around $11.7 billion at the end of 1995, primarily because of accumulated foreign debt and increased domestic borrowing. Sri Lanka, however, has maintained an unblemished record for servicing its debt. This year, the cost of the war has significantly increased the budget deficit to around 10% of GDP. The adverse impact of a prolonged drought on the production of paddy and coconut, interruption in manufacturing and selected service industries because of long hours of power cuts, and setbacks in the tourist industry because of terrorist incidents in Colombo have imposed further strains on the performance of key sectors of the economy.
However, the economic performance in 1996 underscored the strong resilience of the country's private sector, with moderate increases in GDP growth and exports. Late in the year there were slight signs of recovery in portfolio investment (both foreign and domestic). Performance was disappointing in terms of the increased budget deficit, increasing inflation, stagnant foreign direct investment, and lower than expected proceeds from an ambitious privatization program.
Sri Lanka is a responsible and accountable development partner. However, without significant additional progress in economic growth and the development of better functioning democraticinstitutions, Sri Lanka will not be able to bring more of its people into the economic mainstream and sustain its gains to date. In summary, the country's main constraints to equitable, sustainable development are: the ongoing civil war, persistent poverty, macroeconomic imbalances, fragile economic growth, inadequate economic infrastructure, and weak democratic institutions.
Other Donors
In 1995, total donor assistance to Sri Lanka was about $617 million. The United States, with about 5.7% of total assistance, was the second largest bilateral donor, behind Japan, and the fifth largest overall. The leading donors are Japan, the World Bank, the Asian Development Bank, the International Monetary Fund, and the United States. There are 13 bilateral and five multilateral donors active to Sri Lanka. Total donor assistance, which averaged about 9% of gross national product (GNP), or about $50 per capita during previous years, dropped in 1995 to about 4.8% of the GNP, or about $34 per capita.FY 1998 Program
USAID's goal in Sri Lanka is expanded broad-based participation in sustainable economic growth and development. To achieve this goal, USAID has a single Strategic Objective for economic growth to increase private sector employment and income. This strategic objective is closely complemented by a Special Objective for humanitarian assistance and participatory development.Agency Goal: Encouraging Broad-based Economic Growth
USAID has a successful track record of efficiency, effectiveness and results in addressing these economic growth constraints. USAID's program activity results are impressive in terms of employment generation, enterprise start-ups and expansion, and economic policy reform and implementation. Sri Lankan counterparts in both the public and private sectors highly value USAID's economic growth activities. In addition, USAID's program activities help support U.S. political and commercial interests in Sri Lanka by reducing business risks and improving the overall business enabling environment.As of FY 1998, USAID will focus on two economic growth themes:
1) Expanding Private Enterprise Growth. In order to expand private enterprise growth, USAID will improve Sri Lankan enterprises' access to new technology, markets and finance, thus increasing their productivity and competitiveness. The end result is to directly assist people through increases in employment and improved income opportunities. The central thrust of the Sustainable Economic Growth Program (SEGP) will be direct assistance to micro- (less than 10 employees), small- (10-50 employees) and medium-sized (51-500 employees) enterprises, through the ongoing and highly successful Technology Initiative for the Private Sector (TIPS) and Agro-Enterprises (AgEnt) activities. TIPS will focus on manufactured exports and environmental technology, while AgEnt will focus on agro-based production, processing and marketing. TIPS and AgEnt will consolidate certain cross-sectoral activities, including those related to quality improvement, productivity and rural outreach. Both TIPS and AgEnt have a strong focus on promoting U.S.-Sri Lankan business linkages, thereby supporting U.S. commercial interests. The Mission will continue to support microenterprise development activities through SEGP's Micro-Enterprise Support Activity. This will help to facilitate the provision of financial services to the poor and micro-enterprises.
2) Improving the Enabling Environment for Accelerated Economic Growth. By improving the enabling environment for economic growth, USAID will help create better conditions for broader participation (across all sectors and sizes of enterprises, socio-economic strata, and among foreign and domestic investors) in the growth process. Under the TIPS and AgEnt activities, USAID will also help to: (i) increase private sector savings and investment; and (ii) implement key economic policy reforms related to financial markets, privatization, agriculture and trade liberalization. In addition to USAID/Sri Lankaresources to improve the enabling environment for economic growth, USAID/Washington resources to be utilized include the following programs: Housing Guaranty (housing finance for below-median income families), Loan Portfolio Guaranty (commercial bank loans for small enterprises) and the U.S.-Asia Environmental Partnership (access to U.S. environmental technology goods and services).
By the end of 1998 employment opportunities in targeted enterprises are expected to increase by an additional 12,750. USAID assistance will address the major constraints to access and opportunity in the private sector: inconsistent government policies and regulations; insufficiently developed financial market regulations; inadequate economic infrastructure; government interference in the agriculture sector; and a shortage of adequately trained private sector managers. USAID will help strengthen both the rural and urban economies through small and microenterprise development, financial markets development, promoting economic liberalization, privatization, finding new and expanded markets, strengthening formal market institutions and mechanisms, and encouraging free market agricultural reforms.
* Strategic Objective 1 : Increased Private Sector Employment and Income
Agency Goals: Providing Humanitarian Assistance and Building Democracy
USAID's Strategic Objective for economic growth will be reinforced by its Special Objective to provide humanitarian assistance and grants to enable rural people to participate more effectively in their local communities and economies.To date, humanitarian assistance has benefitted 85,566 people affected by the ethnic conflict in the Northern and Eastern provinces. 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. From 1995 through 1996, USAID provided assistance, including preventive mobile health services to 55,000 displaced persons living in 220 camps and assistance to 1,350 displaced children in the East. In 1997, USAID expects to support the production of prosthetic limbs for approximately 1,500 civilian war victims, and to expand its support to the internally displaced.
* Special Objective 1: Improved Quality of Life for Disadvantaged People
SRI LANKA
FY 1998 PROGRAM SUMMARY
($ 000)
Encouraging Economic
Growth
Stabilizing Population
Growth and Protecting Human Health
Protecting the
Environment
Building Democracy
Total
USAID Strategic Objective 1. Increased Private Sector Employment and Income Dev. Assistance
$6,000
$6,000
SpO 1. Improved Quality of Life for Disadvantaged People Dev. Assistance
$1,000
$1,000
Total Dev. Assistance
$7,000
$7,000
USAID Mission Director: David A. Cohen
ACTIVITY DATA SHEET PROGRAM: SRI LANKA
TITLE AND NUMBER: Increased Private Sector Employment and Income, 383-SO01
STATUS: Ongoing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998 $6,000,000 DA INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2000
Purpose: To increase private sector employment opportunities and improve incomes.
Background: Unemployment and underemployment are high in Sri Lanka with the estimated un- employment rate at 13%. Average income is less than $50 a month. 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 30,000 people have increased their income through full or part time employment from micro-enterprises, self employment, and medium and large enterprise development. $5.37 million in matching technology grants have been completed, and business assistance to approximately 574 private firms has been provided. USAID has also worked with over 4,700 clients on business planning and new techniques in crop production, processing, marketing and financing. Through USAID agro-business activities $10.5 million in investment has been facilitated, including the introduction of new technologies to Sri Lanka. To date, over $421 million in Government assets have been transferred to private control. Finally, over 65,700 below median income families (with an income of less than $113 per month) have received long term credit for housing, with an average loan size of approximately $250.
Description: USAID activities will support enterprise development and job creation via direct grants for technology, technical assistance in 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 financial markets reforms, openness to trade and investment, privatization, and support agricultural rural sector reforms. In order to expand employment, activities will 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 and the World Bank has a major private finance development project which is aimed at im- proving macro-economic management. USAID maintains active policy dialogue with the World Bank and GSL counterparts to assist the GSL privatization objectives.
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 work with non-government organizations, for profit contractors, government counterpart agencies and the private sector.
Major Results Indicators: Baseline TargetJobs created in targeted enterprises 17,642 cumulative (1994) 5,800 additional (1998)
Jobs generated by companies raising new capital on the Stock Exchange 10,000 additional (1994) 11,000 additional (1998)
ACTIVITY DATA SHEET PROGRAM: SRI LANKA
TITLE AND NUMBER: Improved Quality of Life for Disadvantaged People 383-SPO01
STATUS: Ongoing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1998 $1,000,000 DA INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2000
Purpose: To provide humanitarian assistance and assist rural people to participate more effectively in their local communities and economies.
Background: Approximately 57,000 civilians have been killed by the North & East conflict and thousands more injured, left homeless and unemployed. There are more than one million internally displaced persons, most of whom are living in camps and other temporary holding areas.
The GSL has proposed a political settlement of the conflict through a devolution of power to the provincial, municipal and local levels. If this ambitious devolution proposal is implemented, and in the event of peace, there will be an urgent need for rehabilitation of the war-torn areas. USAID has a continuing role to play in both facilitating the devolution, and in supporting relief and rehabilitation programs.
USAID assistance has also included support for activities such as HIV/AIDS public education, counseling and vocational training to return disadvantaged persons to productive lives. Even outside of the war circumstances, ordinary Sri Lankans have relatively limited opportunities to participate in, let alone influence, decision making that affects their political, social, and economic well-being. Broader participation is essential for citizen empowerment and Sri Lanka's goal of becoming a modern developed society.
USAID Role and Achievements to Date:
To date, humanitarian assistance has benefitted 85,566 people affected by the ethnic conflict in the Northern and Eastern provinces. 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. From 1995 through 1996, USAID provided assistance, including preventive mobile health services to 55,000 displaced persons living in 220 camps and assistance to 1,350 displaced children in the East.
In encouraging empowerment and participation by ordinary Sri Lankans, USAID has assisted during FY 1996 four communities to join with their local government counterparts to both create community employment and income generating activities, while at the same time agreeing on means to conserve their natural resources. Under such participatory grants, 91 new, rural commercial activities have been linked to larger markets; 12,942 hectares of targeted land has come under conservation practices; and 11,145 rural households have obtained secure land tenure and natural resource rights to enable their increased employment and incomes with sustainable practices.
Description: Humanitarian assistance and participatory development activities will be implemented through continued grants to international and non-governmental organizations. These activities complement the Strategic Objective by responding to situations of urgent human need, and enabling the disadvantaged to again productively participate in the economy. These grants are currently helping to save lives, reduce suffering, and return war victims toself-sufficiency.
Citizens will work with local authorities for community based management of natural resources--thus ensuring their sustainable economic use. Grants will also help communities to freely associate for identifying their common problems and formulating solutions. Modest policy reform activities for example, workshops to discuss devolved systems of governance as well as practical recommendations that would lead to fiscal and administrative devolution of authority will be provided.
Host Country and Other Donors: USAID assistance for displaced children and families affected by war, and HIV/AIDS awareness programs are carried out in the conflict and non-conflict areas. Other donors involved in these activities include UNHCR, UNDP, Canadian CIDA, NORAD, ODA, JICA and the World Bank.
Beneficiaries: Direct beneficiaries include displaced persons and children, war victims, HIV/AIDS victims and rural community groups.
Principal Contractors, Grantees, or Agencies: USAID will implement activities through non-government organizations and government counterpart agencies.
Major Results Indicators: Baseline TargetNumber of people benefitted 379,450 (1998) by humanitarian assistance
![[USAID Home]](/images/usaid.gif)
[USAID Home]
[CP 98 Home]