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 1997 FY 1998 FY 1999 Actual Estimate Request Development Assistance.............. $3,500,000 $3,000,000 $1,500,000
IntroductionThe USAID program supports U.S. interests through promoting U.S. economic opportunities, protection of human rights, and mitigating the adverse 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
Economic performance in 1997 underscored the strong resilience of the country's private sector, with moderate increases in GDP growth and exports. Although annual GDP growth averaged only 4% over the past two decades, the GSL is projecting GDP growth in 1998 at 6%, the same as current 1997 estimate, with manufacturing leading the way with a 9% growth rate. In 1997, average inflation fell from the 1996 level of 16% to 9% and unemployment dropped from 14% to 10%. Exports increased in 1997 by 14%. The 1998 budget estimated the debt service ratio for 1997 at 13.0%, a decline from 15.1% in 1996. However, these positive trends must be supported by a strong commitment to reform, and USAID is perfectly positioned to assist the GSL with key policy reforms, as well as the continuation of the development of an open and strong financial sector.
The primary development constraint in Sri Lanka today is the ethnic conflict based in the North and East Provinces of the country. 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 challenge is to begin to lay the foundation for a truly democratic society, free from human rights abuses, once the conflict is resolved. In the meantime, efforts to protect human rights, increase the efficiency and effectiveness of the judicial system, and provide legal aid to disadvantaged groups is of paramount importance.
Sri Lanka is a responsible and accountable development partner. The 1998 budget takes steps in the policy reform area: corporate taxes have been reduced, duties on capital and intermediate goods for targeted industries have been reduced or eliminated, and tax incentives are being offered to encourage direct and portfolio investment. However, without significant additional progress in economic growth and the development of better functioning democratic institutions, 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; an improved, but still inadequate macro policy and regulatory environment; fragile economic growth (caused in part by low levels of investment); weak democratic institutions; and persistent poverty.
Other Donors
In 1996, total donor disbursements to Sri Lanka was about $531 million. The United States, with about 4% of total disbursements, was the third largest bilateral donor, and the fifth largest overall. The leading donors were Japan, the Asian Development Bank, the International Development Association, Norway, and the United States. In 1996, total donor assistance to directly improve the
policy environment and strengthen capital markets was approximately $30.0 million. If this level continues, USAID's contribution in FY 99 will be 5% of the total. However, USAID is the lead donor working with the Colombo Stock Exchange, the Central Bank, the Securities Exchange Commission and in developing a policy reform program through private sector associations.
FY 1999 Program
USAID's goal in Sri Lanka is expanded broad-based participation in sustainable development. To achieve this goal, USAID has a Strategic Objective for economic growth to improve the framework for trade and investment, complemented by a Special Objective to better protect citizens' rights. USAID will also continue to provide humanitarian assistance through the Global Bureau's War Victims Fund and the Displaced Children and Orphans Fund.
USAID's Strategic Objective will focus on two themes:
Financial Markets Improved. USAID will continue its highly successful programs with the Central Bank and the Colombo Stock Exchange to improve the performance of the country's financial markets. An efficient, transparent, but well regulated and managed financial sector is critical to attracting investment and to raising the capital necessary for growth. USAID's efforts to expand the stock exchange will increase investment in total, and broaden the investor base. Work with the Central Bank will put mechanisms in place (e.g., Government borrowing through open market operations) which will provide fiscal discipline, since the Government will be borrowing at market-determined rates. This component of the program will increase investor confidence, make Government borrowing practices more efficient and market-oriented, and will help Sri Lanka avoid the type of financial crisis now being felt by several East Asian nations.
Liberalized trade and investment policies. 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. USAID will help to implement key economic policy reforms related to financial markets, agriculture, manufacturing and trade liberalization. Business and other associations will be the key partners in a program that supports their efforts to improve policies which negatively affect their members. This component of the program will also assist Sri Lankan companies (on an industry or sector level working through business and other associations) with the adoption of international standards, such as ISO 9000 and 14000. Other impediments to global competitiveness will also be addressed: improvement in intellectual property rights, the development of a long-term trade and growth strategy, for example.
USAID's goal will be reinforced by its Special Objective to better protect citizens' rights. Technical assistance and other support will be provided to the new Human Rights Commission so that it may better fulfill its mandate to identify, monitor and reduce human rights abuses. At the grassroots level, NGOs will provide practical advice on citizens' rights, as well as direct legal aid for disadvantaged groups. The judicial system will be improved through a series of activities: court modernization, expansion of the current system of mediation boards, and the training of lower court judges. These activities will help reduce the tremendous backlog of court cases and reduce the time for court settlements, as well as improve the administration of justice (training for judges). Together, these activities will mitigate many of the injustices and abuses taking place currently and will also lay a foundation for an efficient and fair judicial system, with a minimum of human rights abuses, when the current ethnic conflict is finally resolved.
SRI LANKA
FY 1999 PROGRAM SUMMARY
(in thousands of dollars)
USAID Strategies and Special
ObjectivesEconomic
Growth &
Agriculture
Population & Health
Environment
DemocracyHuman
Capacity
Develop-ment
Humanitarian
Assistance
TOTALSS.O 1. Improved framework for trade and investment.
- DA
1,500
1,500
Sp.O. 1. Citizens' rights better protected in law and practice
- ESF
Totals
- DA
- ESF
1,500
1,500
* USAID will continue to support humanitarian assistance programs through the Global Bureau's War Victims and Displaced Children and Orphans Funds.
USAID Mission Director: Lisa Chiles
ACTIVITY DATA SHEET
PROGRAM: SRI LANKA
TITLE AND NUMBER: Improved framework for Trade and Investment, 383-SO01
STATUS: Revised
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999 $1,500,000 DA
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2003
Purpose: The economic growth program will focus on two themes: 1) continuation of efforts to improve the efficiency and stability of financial markets by improving financial market practices; and 2) liberalization of policies/regulations which impede increased trade and investment.
USAID Role and Achievements to Date: USAID's previous support to increase private sector employment and income resulted in the creation of a significant number of new jobs. Under this program, financial markets and institutions were strengthened through policy reform and instituting best practicies; technical and financial assistance was provided to hundreds of individual businesses (including agribusinesses); and new technologies, e.g. state of the art computers were made available. Last year the Colombo Stock Exchange (CSE) became one of the most technologically advanced stock exchanges in the world. The Central Bank of Sri Lanka (CBSL) introduced two and four year bonds as first steps towards establishing a long-term debt market in Sri Lanka. To date over 40,000 people have increased their income through full or part time employment from micro-enterprises, self employment, and medium and large enterprise development. Technology grants and business assistance to manufacturing and agribusiness firms strengthened the private sector's contribution to the country's economic growth.
Description: USAID's current program will continue to improve financial market practices in Sri Lanka by working with the Securities Exchange Commission, the CSE and the CBSL. USAID will strengthen the regulatory framework of the financial and capital markets to ensure that markets operate with standards of integrity. Work with the CBSL will put mechanisms in place to make Government borrowing practices more efficient and market oriented. In concert, these efforts will increase investor confidence and attract capital needed for sustained growth. USAID activities will also build on its established relationships with the private sector and work directly with advocacy groups (e.g., business associations) to identify and analyze policy and regulatory impediments. Advocacy groups will be provided with institutional support, technical assistance to adequately document the negative impacts of poor policies/regulations, and assistance to resolve these issues with the appropriate decision-making authorities. These activities will be complemented by assisting the GSL in the development of long-term trade and industrial diversification strategies and policies.
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 the GSL to establish a credit rating agency and is planning a Capital Market Development Program. The World Bank has a major private finance development project which is aimed at improving macro-economic management.
Beneficiaries: Beneficiaries include the people who gain new or better employment which is sustainable as a result of business expansion and increased availability of capital; Sri Lankan and foreign institutional investors (including U.S. investors), who benefit from access to an efficient capital market; and private sector businesses and individuals who produce goods and services for the export and domestic markets.
Principal Contractors, Grantees, or Agencies: USAlD will work with the International Executive Service Corps, Oregon State University, Development Alternatives, the CSE, SEC, CBSL, the Ministry of Industry, the Ministry of Commerce, various chambers and private sector associations.
Major Results Indicators: Baseline 1997 Target 1999 2003 Key policies and practices adopted (cumulative) 0 4 10 (e.g. reforming foreign exchange trading practices and overall banking operations, increase value of government securities at public auction)
ACTIVITY DATA SHEET
PROGRAM: SRI LANKA
TITLE AND NUMBER: Citizens' rights better protected in law and practice 383-SPO01
STATUS: New
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1999 $ (to be determined)
INITIAL OBLIGATION: FY 1998; ESTIMATED COMPLETION DATE: FY 2003
Purpose: This human rights/democracy program will seek to ensure that the rights and obligations conferred by law are in actual practice understood by all citizens and that their rights are better protected.
USAID Role and Achievements to Date: Significant progress has been made in increasing national attention on human rights abuses. Human rights support initiatives include legal awareness campaigns, the establishment of legal aid services, alternative dispute resolution mechanisms such as the Mediation Boards and community counselling. During 1995-1997 the Asia Foundation (TAF) and a number of local sub-grantees were involved in implementing a program aimed at efficient administration of justice, professional training, citizens' rights, and increasing access to justice. A computerized case tracking system installed at the country's Courts of Appeal brought down the backlog of cases from 13,000 in 1995 to 8,700 in 1997. Support to the mediation boards program achieved a major policy change by the GSL, which introduced a law stating that all disputes below the a certain value must be referred to a mediation board before action can be filed in the formal courts. Four local NGOs were supported to provide free legal aid for victims of human rights violations. There were a total of 500,000 direct beneficiaries in these programs during 1995-1997.
Description: The Mission will work with two principal partners, The Human Rights Commission of Sri Lanka and TAF to achieve the special objective. TAF will work through government and non-government organizations including Ministry of Justice (mediation boards program) and Sarvodaya (the largest indigenous NGO in Sri Lanka). Based upon past experience, the program will reinforce previous successes in increasing awareness of legal rights by expanding legal literacy programs into new areas in the north and east of the country, expanding legal aid to disadvantaged people, and improving the effectiveness of formal and non-formal dispute resolution systems. A comprehensive program approach will be used in educating the public about their rights and methods of redress, providing legal aid to enable disadvantaged people to use their rights, increasing the efficiency of formal and informal dispute resolution systems, and improving the general environment of human rights by increased monitoring and reporting of violations.
The war-affected areas in the north and east will receive special attention. The Human Rights Commission has established offices in five cities in the north and east, and logistic and technical assistance will be provided. Courts in many areas of the north and east are now functioning and legal aid will be provided to people of these areas to have their cases legally represented at no cost. Indigenous NGOs operational in the north and east will be supported to conduct legal awareness and legal aid programs. The Ministry of Justice has already set up some mediation boards in the east, and assistance will be provided to set up boards in the north.
Host Country and Other Donors: Other donors involved in these activities include UNDP, CIDA, NORAD, SIDA, ODA, JICA and the World Bank.
Beneficiaries: All citizens, especially disadvantaged people including children, women and ethnic minorities.
Principal Contractors, Grantees, or Agencies: USAID will implement activities through TAF and its five partners (Sarvodaya Legal Services Movement, University of Colombo - Center for the Study of HumanRights, Bar Association of Sri Lanka, Center for Policy Alternatives and Center for Women's Research) and the Human Rights Commission.
Major Results Indicators: Baseline 1996 Target 1999 Number of legal aid cases 9,000 11,000 Number of cases referred to 101,639 130,000 alternate dispute resolution systems
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