Sri Lanka - Fourth Small and Medium Industries (SMI IV) Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9515-CE STAFF APPRAISAL REPORT SRI LANKA FOURTH SMALL AND MEDIUM INDUSTRIES PROJECT (SMI IV) APRIL 26, 1991 Industry and Energy Division Country Department I Asia Region This document has a restrict., distribution and may be used by recipients only In the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENT (As of December 31, 1991) Currency Unit - Sri Lanka Rupee (SLR) Sri Lanka has a floating exchange rate. For SNI I a rate of US$1 - Rs 17.5 was used; for SNI II a rate of US$1 - Rs 20.0 was used; and for SHI III the rate was US$1 - Rs 28.5. For the proposed SHI IV the following rates prevailing as of December 31, 1990 are useds US$1 - SLRs 40 SLR 1 - US$0.025 SLRs 1 million = US$25,000 FISCAL YEARS Government of Sri Lanka = January 1 to December 31 C.-nmercial Banks = January 1 to December 31 National Development Bank = January 1 to December 31 DFCC - April 1 to Harch 31  FOR 1A;FICnAL USE ONLY ABBREVIATIONS AND PRINCIPAL ACRONYMS ADB - Asian Development Bank AGSL - Auditor General of Sri Lanka AWPR - Average Weighted Prime Rate AWDR - Average Weighted (Non-Demand) Deposit Rate BOC - Bank of Ceylon BTT - Business Turnover Tax B14R * Balancing, Modernmizng and Rehabilitation CB - Commercial Banks CBOC - Commercial Bank of Ceylon CBSL - Central Bank of Sri Lanka CEA - Central Environmental Authority CIBSL - Credit Information Bureau of Sri Lanka DCE - Department of Customs and Excise DFCC - Development Finance Corporation of Ceylon DFI - Development Finance Institution EDB - Export Development Board EIA - Environmental Impact Assessment ERR - Economic Rate of Return FIAC - Foreign Investment Advisory Committee FIS - Financial Institutions Study GCEC - Greater Colombo Economic Comeission GOSL - Government of Sri Lanka HNB - Hatton National Bank IDA * International Development Association _DB Industrial Development Board ISS Industrial Strategy Statement MIST - Ministry of Industry, Science and Technology MTRID - Ministry for Tourism and Rural Industries Development MHTI - Ministry of Handlooms and Textile Industries NDB - National Development Bank of Sri Lanka NGO - Non Government Organizations PB - People's Bank PCI - Participating Credit Institution PMEs - Public Manufacturing Enterprises RRDB - Regional Rural Development Banks SCB - State Commercial Bank SMI - Small and Medium Industries TA - Technical Assistance TAF - Technical Assistance Fund TBR - Treasury Bill Rate TOR - Terms of Reference This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  SRI LAN= FOURTH SMALL AND MEDIUM INDUSTRIES (SMI IV) PROJECT Credit and Project Summary Borrowers Democratic Socialist Republic of Sri Lanka. Beneficiaries: The National Development Bank of Sri Lanka (NDB) and eligLble ParticLpating Credit Institutions (PCIs) including public and private sector commercial banks and development financing institutions. Technical asue- tance would be provided to the Central Bank of Srl Lanka (CBSL) and NDB as the Apex Ageucy, to improve SMI operations, and to the two State Comercial Banks (SCBs)--the Bank of Ceylon (BOC)9 and the People's Bank (PB)--to improve their overall operations. Amount: SDR 33.3 million (US$45.0 million equivalent). Termss Standard IDA terms with 40 years maturity. Relending Terms: GOSL would onlend the credit proceeds to NDB for 15 years, including a five-year grace period, at an initial rate equlvalent to the Average Weighted Deposit Rate (AWDR) of interest-bearing term deposits of the Greater Colombo branches of domestic comuercial banks (excluding the Naticnal Savings Bank). In turn, NDB would fund PCI subloan operations at the AWDR. The PCIe would relend the proceeds at a market rate determined (fixed or variable) sufficient to cover their costs of operation and the project risk, with repayment based upon a composite subproject amortization schedale. NDB would receive a fee of 12 on the credit amount disbursed and outstanding. As interest rates will be market oriented, the rates charged to end users will indirectly reflect the foreign exchange risk on the operation. Given this sltuation, and