Sri Lanka - Third Industrial Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15123 IMPLEMENTATION COMPLETION REPORT SRI LANKA THIRD INDUSTRIAL DEVELOPMENT PROJECT (IDP-III ) (CREDIT 1948-CE) NOVEMBER 28, 1995 Private Sector Developmsnt & Finance Division Country Department I South Asie Region This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EOUIVALENT Currency Unit - Sri Lanka Rupee (annual average) Rs. Per US$1.00 US$ Per Rs.1.00 1986 28.017 0.0355 1987 29.445 0.0339 1988 31.807 0.0314 1989 36.047 0.0277 1990 40.063 0.0249 1991 41.372 0.0241 1992 43.830 0.0228 1993 48.322 0.0206 1994 49.500 0.0200 1995 51.000 0.0196 ABBREVIATIONS ADB - Asian Development Bank BOC - Bank of Ceylon CBSL - Central Bank of Sri Lanka CEA - Central Environmental Authority CISIR - Ceylon Institute of Scientific & Industrial Research DFIs - Development Finance Institutes DFCC - Development Finance Corporation of Ceylon EDB - Export Development Board ERD - External Resource Department GOSL - Government of Sri Lanka IMU - IDP Monitoring Unit IPS - Industrial Policy Statement NDB - National Development Bank of Sri Lanka NERDC - National Engineering & Research Development Center PB - Peoples Bank PCI - Participating Credit Institutions PFDP - Private Finance Development Project PMEs - Public Manufacturing Enterprises SAR - Staff Appraisal Report SLSI - Sri Lanka Standardization Institute SMI - Small and Medium Industries TDF - Technology Development Fund FISCAL YEARS GOSL = January 1 to December 31 Commercial Banks = January 1 to December 31 Development Finance Corporation of Ceylon (DFCC)= April 1 to March 31 National Development Bank of Sri Lanka (NDB) = January 1 to December 31  FOR OFFICIAL USE ONLY TABLE OF CONTENTS Page Preface Evaluation Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i PART I: PROJECT IMPLEMENTATION ASSESSMENT . . . . . . . . . . . . . . . . . . . 1 A. Statement/Evaluation of Objectives . . . . . . . . . . . . . . . . . 1 Project Objectives. . . . . . . . . . . . . . . . . . . . . . . . 1 Evaluation of Objectives . . . . . . . . . . . . . . . . . . . . 1 B. Achievement of Objectives . . . . . . . . . . . . . . . . . . . . . . 2 Implementation of the Credit Component . . . . . . . . . . . . . . 2 Implementation of TA component . . . . . . . . . . . . . . . . . . 2 Policy Reforms / Sector Reforms. . . . . . . . . . . . . . . . . 3 Upgrading Technology Development . . . . . . . . . . . . . . . . . 4 TA to the Telecommunications Authority . . . . . . . . . . . . . . 5 C. Major Factors Affecting the Project . . . . . . . . . . . . . . . . . 6 D. Project Sustainability . . . . . . . . . . . . . . . . . . . I . 6 E. IDA Performance . . . . . . . . . . . . . . . . . . . . . . . . . . 7 F. Borrower Performance . . . . . . . . . . . . . . . . . . . . . . . . 7 C. Assessment of Outcome . . . . . . . . . . . . . . . . . . . . . . . . 8 H. Follow-up/Future Operations . . . . . . . . . . . . . . . . . . . . . 8 I. Lessons Learned. . . . . . . . . . . . . . . . . . . . . . 8 PART II: STATISTICAL TABLES . . . . . . . . . . . . . . . . . . . . . . . . . 10 Table 1 - Summary of Assessments . . . . . . . . . . . . . . . . . 10 Table 2 - Related Bank Credits . . . . . . . . . . . . . . . . . . 11 Table 3 - Project Timetable . . . . . . . . . . . . . . . . . . . 12 Table 4 - Credit Disbursements: Cumulative Estimated and Actual 12 Table 5 - Key Indicators for Implementation . . . . . . . . . . 13 Table 6 - Key Indicators for Project Operation . . . . . . . . . . 14 Table 7 - Studies Included in Project . . . . . . . . . . . . . . 15 Table 8A - Project Costs . . . . . . . . . . . . . . . . . . . . . 16 Table 8B - Project Financing . . . . . . . . . . . . . . . . . . . 16 Table 9 - Fconomic Costs and Benefits . . . . . . . . . . . . . . 16 Table 10 - Status of Legal Covenants . . . . . . . . . . . . . . . 17 Table 11 - Compliance With Operational Manual Statements . . . . . 18 Table 12 - Bank Resources: Staff Inputs . . . . . . . . . . . . . . 18 Table 13 - Bank Resources: Missions . . . . . . . . . . . . . . . . 19 STATISTICAL ANNEXES: I. Sub-Loan Financing - Under IDA Credit . . . . . . . . . . . . . . . 20 II. Sub-Project Approval - DFCC . . . . . . . . . . . . . . . . . . . . 21 III. Sub-Project Approval - NDB . . . . . . . . . . . . . . . . . . . . 22 IV. Sectoral Distribution of Sub-Projects . . . . . . . . . . . . . . . 23 V. Geographical Distribution of Sub-Projects . . . . . . . . . . . . . 24 VI. Sub-Projects' Performance . . . . . . . . . . . . . . . . . . . . . 25 VII. Financial Performance Indicators - DFCC . . . . . . . . . . . . . . 26 VIII. Financial Performance Indicators - NDB . . . . . . . . . . . . . . 27 IX. Technical Assistance - Allocation and Utilization . . . . . . . . . 28 X. People's Bank and Bank of Ceylon Operational Review . . . . . . . . 29 APPENDIXES: A. ICR Aide Memoire and Government's Statement of Sector Policy . . . 30 B. Borrower's Contribution to ICR . . . . . . . . . . . . . . . . . . 37 C. Map 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.   IMPLEMENTATION COMPLETION REPORT SRI LANKA THIRD INDUSTRIAL DEVELOPMENT PROJECT (CREDIT 1948-CE) Preface 1. This is the Implementation Completion Report (ICR) for the Third Industrial development Project (Credit 1948-CE) in the amount of SDR 31.7 million (US$ 43.8 million equivalent inclusive of US$ 7.8 million technical assistance) was approved on July 26, 1988 and made effective on March 9, 1989. The Credit was closed as originally scheduled on June 30, 1995. Final disbursement took place on November 14, 1995, at which time a balance of US$ 3.0 million was cancelled. Cofinancing for the project was provided by the Asian Development Bank (ADB). 2. The ICR was prepared by Shideh Hadian, Private Sector Development and Finance Division of the South Asia Region and reviewed by Messrs. Frederick Kilby (Division Chief) and Fakhruddin Ahmed (Project Advisor). The borrower provided comments that are included as appendix B to the ICR. 3. Preparation of this ICR was begun during the Bank's final supervision/completion mission, April 1995. It is based on material in the project file. The borrower contributed to the preparation of the ICR by preparing the data on different component of the project, preparing own evaluation and commenting on the draft ICR.   IMPLEMENTATION COMPLETION REPORT SRI LANKA THIRD INDUSTRIAL DEVELOPMENT PROJECT (IDP-III) (CREDIT 1948-CE) Evaluation Summary Introduction 1. Five IDA Credits (intermediation operations) totaling US$ 109 million had been approved for the development of small, medium, and large scale industries in Sri Lanka during eight years preceding this project. These credits, in addition to meeting the long-term investment financing for private sector industries, supported the Government's policy reform programs and institutional strengthening of the participating financial institutions and concerned government agencies. Project Objectives 2. This project had two components: (i) a credit component of US$ 36.0 million with the objective of financing the foreign exchange cost of the capital investment in the private manufacturing enterprises; and (ii) a Technical Assistance (TA) component of US$ 7.8 million for assisting the Government in the implementation of the policy reforms and institutional strengthening in the areas of tariff administration, export promotion, capital market, technology development and implementation of a regulatory framework for telecommunications. Specifically, the objectives were to: (a) continue the institution building of the two Development Finance Institutions (DFIs), namely National Development Bank (NDB) and Development Finance Corporation of Ceylon (DFCC) as well as other Participating Credit Institutions (PCIs); (b) assist the Government of Sri Lanka (GOSL) to implement the Second Export Development Plan and its phased tariff reform program; (c) assist the GOSL to initiate implementation of its 1987 Industrial Policy Statement (IPS) objectives to strengthen industrial technology development (ITD); (d) assist in developing a more efficient capital market with the objective of increasing the sources of equity finance for industry; and (e) provide support to the GOSL to prepare the regulatory framework for establishing an independent commercial telecommunication authority. In addition, the project addressed environmental issues by providing TA for environmental review capabilities of the PCIs and strengthening the coordination among the Central Environmental Authority (CEA), line ministries, and the PCIs. 3. IDP-III complemented IDA's previous industrial sector operations and was in line with the Bank's country assistance strategy and the IMF's structural adjustment program. The project objectives and timing were right for the GOSL's policy reforms and development priorities and the implementation of the 1987 IPS's objectives. The scope of the project, however, was very broad with no clear terms of reference for some of the policy related objectives. The size of the project was right and realistic and, together with the Asian development Bank's (ADB) fund, met about 95 percent of foreign exchange requirement of total project cost. ADB fully supported the objectives of the project and provided US$ 40.5 million for project financing and technical assistance through a parallel line of credit.  - ii1 - ImDlementation experience and Results 4. The credit component was satisfactorily implemented and met its development objectives. The success of this component was attributed to efficient operations of the two DFIs and satisfactory performance of the financed sub-projects. The DFI's performance was highly satisfactory both in credit delivery and their internal operations and maintained financial criteria (collection ratio, profitability, liquidity, etc) under the project. Based on the information provided by DFIs, over 92 percent of sub- projects performed well with respect to their profitability and debt servicing. The credit component was 91 percent utilized, mainly through the DFIs and had significant impact on employment generation (about 7,500 jobs were created). 5. The TA for institutional development of DFIs and other participating institutions was successful in capacity building for project lending and human resource development. The TA that was provided to the Telecommunications Authority to start operations and strengthen its institution capacity and functions was implemented satisfactorily but with delays. The TA for technology development of the private sector industries was found very useful by the entrepreneurs and implemented successfully. The result of TA for development of public research/technology agencies varied by type of assistance and institutions and, on balance, its impact was low with respect to cost-effectiveness and value-added. 6. The TA for policy reforms was implemented with mixed result. Since 1989, there have been considerable efforts to implement policy reforms in the areas mentioned in para 2. IDA has supported the GOSL's reform programs and development priorities through a series of industrial and adjustment projects with mutually reinforcing objectives. IMF and ADB were simultaneously active in financing and dialogue. As a result, progress that have been made in reform programs, during the life of IDP-III, is attributed to a series of industrial and adjustment projects initiated by the Bank, IMF and ADB. 7. To assist the GOSL to further develop and promote exports, TA was provided to Export Development Board (EDB) to review and fine-tune the available instruments and schemes and to remove the bottlenecks and constraints for exporters, in particular indirect exporters. In addition, it was proposed that EDB embark on strategy study so that it can more effectively fulfill its function as the leader in promoting and developing Sri Lanka's exports. Sizeable amounts were utilized on several important studies for improving development policies and incentive systems (Table 7). However, few recommendations were accepted by EDB and implemented. The recommendations of the strategy study was not implemented due to the political environment. The objectives of the TA for tariff administration under this project was partially achieved and implementation delayed (Table 7). 8. The overall impact of the project was satisfactory. The key factors that enabled the project to achieve its objectives were: (i) operational efficiency and financial viability of the two DFIs which in turn had significant impact on the satisfactory implementation of the credit component; (ii) strong and healthy demand by the private manufacturing enterprises for capital investment; (iii) good financial and debt servicing performance of sub-projects; and (iv) continued successful Bank's and IMF's dialogue with the GOSL on the policy reforms and expansion of private sector investment. The impact of the TA component in certain areas, however, was low. The main contributing factors were: (i) lack of commitment and incentives by some ministries to effectively utilize the TA funds and strengthen the relevant institutions; (ii) absence of an effective and  - iii - efficient unit in the Government to coordinate, monitor, and follow-up the TA programs; and (iii) lack of clear objectives and terms of reference in the Staff Appraisal Report (SAR) for certain TA programs. Proiect Cost. Financing, and Time Schedules 9. Project costs were estimated at US$ 124.3 million during the appraisal, and the actual costs were about US$ 117.3 million. The project was prepared, signed, became effective, and closed as originally scheduled. Prolect Sustainability 10. Under IDP-III, strong performance and financial viability of the two DFIs have been a major factor in successful implementation of the project. The Government's timely compliance with needed reform in the areas of trade and industrial policy and financial sector operations is, however, instrumental to the long-term sustainability of the project. Other key factors to achieving project sustainability are: (i) the performance of the sub-borrowers with respect to the financial viability and profitability of their operations, and the rate of return of their investment; and (ii) efficient use of the supporting TA funds for capacity building of the institutions involved in the project. In the absence of the adeq-uate information on ex-post sub-project rates of return, it is not possible to precisely assess the sustainability of benefits of the sub-projects. The PCIs need to develop their information system in order to collect necessary information on financed sub-projects for a more systematic evaluation of sub-projects's performance. IDA and Borrower Performance 11. The performance of IDA and GOSL was satisfactory in identification and timely preparation of IDP-III. IDA also played an important role in DFIs institutional development and improvement of their operations under this and other related projects. Project supervision was adequate in terms of its frequency; they were, however, generally lacking details of the TA component. IDA supervision missions were in general, combined with those of other industrial projects; therefore, because of the ambitious objectives and broad scope of the TA programs and large number of beneficiaries under these projects, the supervision of TA became more difficult and less effective. Findings, Follow-up/Future Operations, and Lessons Learned 12. To complement and expand the objectives and achievements of the IDP-III and previous related industrial projects, IDA approved two industrial sector operations, Fourth Small & Medium Industries (SMI-IV) in 1991 and Private Finance Development Project (PFDP) in 1993. The main objectives of these projects were to make further contributions to policy reform and institutional strengthening in the areas of trade policy and financial sector operations and to provide credit through the banking system for long-term capital investment in small, medium, and large scale industries. The two projects are under supervision and implementing satisfactorily. A Second PFDP line of credit is being prepared by the Bank focusing on further improvement in the efficiency of the financial sector. 13. Successful operations and sustainability of industrial finance projects, by and large, depends on: (i) the internal efficiency of the  - iv - participating credit institutions; (ii) the policy and reg4ulatory environment in which these institutions operate; and (iii) success of the financed sub-projects with respect to their profitability. The long-term sustainability of the benefits from this project depends on the GOSL's commitment to continue the implementation of the supporting TA programs in the areas of trade policy, financial sector reform, and institutional strengthening of the relevant agencies. 14. Effective supervision and monitoring of the project by GOSL and IDA is an integral to the success of the project. The lack of an effective monitoring unit in the Government to coordinate and follow-up the TA programs resulted in poor implementation of TA in certain areas. 15. Design of TA is also critical to effective implementation of the project. For TA to be effective, it should be more specific and targeted. Goals should be set realistically and tasks should be set so that the recipients feel capable of implementing the program. Despite continuous efforts by the Bank and other donors to improve the institutional capabilities of the publicly funded research and technology services, these agencies remain inefficient and are unable to provide quality services to the private sector. Therefore, the GOSL should make efforts at moving these institutions towards demand-driven and commercially oriented technology support services with qualified staff and advanced technology. Private sector involvement in the management of these institutions could also significantly improve the effectiveness and efficiency of these institutions. November 28, 1995  IMPLEMENTATION COMPLETION REPORT SRI LANKA THIRD INDUSTRIAL DEVELOPMENT PROJECT (IDP-III) (CREDIT 1948-CE) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Statement/Evaluation of Objectives 1. Project Objectives - The objectives of the project were to: (i) provide credit through the banking system to medium and large scale private industrial enterprises; and (ii) support implementation of policy reform and institutional strengthening in the areas of tariff administration, export promotion, capital market, and technology development. Specifically, the objectives were to: (a) continue the institution building of the two Development Finance Institutions (DFIs), namely National Development Bank (NDB) and Development Finance Corporation of Ceylon (DFCC) as well as other Participating Credit Institutions (PCIs); (b) assist the Government of Sri Lanka (GOSL) to implement the Second Export Development Plan and its phased tariff reform program; (c) assist the GOSL to initiate implementation of its 1987 Industrial Policy Statement (IPS) objectives to strengthen industrial technology development (ITD); (d) assist in developing a more efficient capital market with the objective of increasing the sources of equity finance for industry; and (e) provide support to GOSL to prepare the regulatory framework for establishing an independent commercial telecommunication authority. In addition, the project addressed environmental issues by providing Technical Assistance (TA) for environmental review capabilities of the PCIs and strengthening the coordination among the Central Environmental Authority (CEA), line ministries, and the PCIs. 2. Evaluation of Obiectives - At the time, these were the right objectives and important for the GOSL's development programs in the areas mentioned above. These objectives were also in line with the Bank's country assistance strategy and supportive of the IMF's Structural Adjustment Facility. The project gave particular attention to the capacity building of the concerned institutions and took further steps to support the industrial enterprises through development of alternative sources of technical services and strengthening the publicly funded technological infrastructure. IDP-III correctly identified the bottlenecks to the private sector growth (inefficiencies in Public Manufacturing Enterprises (PMEs), absence of a developed capital market, shortages of critical human skills in industrial sector, etc.) and provided assistance to the Government and implementing institutions to alleviate these constraints. The scope of the project, however, was very broad with no clear terms of reference for the implementation of the TA programs in certain areas such as capital market and environment. 3. The prevailing ethnic disturbances was a risk to the implementation of the project and performance of the DFIs and the sub- projects. In view of this, steps were taken to carefully monitor the DFI's operations and performance and viability of existing sub-projects. Moreover, because most of the industrial activities and sub-projects are concentrated in areas not directly affected by the ethnic disturbances, the ethnic problems did not have much impact on the project implementation. As the project supported the GOSL's IPS and the agreed IMF program, the risk involved in implementing a fairly comprehensive policy reform program under  2 this project was minimized. The size of the IDP-III lending was geared to the term lending capacities of the DFIs, demand by the private sector for industrial finance, and the total project cost. Based on the project pipeline of the DFIs and expected rate of growth of the manufacturing sector, the total investment requirements by the PCIs for medium and large scale industries was estimated at about US$ 120 million for FY88-90 of which about 68 percent (US$ 81 m) was in foreign exchange. About 95 percent of this amount was mobilized from multilateral funds and the balance of investment requirement was provided by the sponsors. The Asian Development Bank (ADB) supported this project by providing US$ 40.5 million for project financing through a parallel line of credit on same terms and conditions as those of IDA's. B. Achievement of Obiectives 4. The main components of the project were: (i) a credit component of US$ 36.0 million for sub-project financing; and (ii) a TA component of US$ 7.8 million for supporting the implementation of GOSL's policy reforms and institutional strengthening. 5. Implementation of the Credit Component - The credit component was implemented highly satisfactorily and achieved its objectives. The success of the lending component, by and large, was due to the effective operations of the two DFIs; in particular, their performance in sub-project appraisal and supervision and their loan collection performance. Commitments and disbursements were ahead of the rate anticipated at the time of appraisal mainly due to healthy and strong demand for term lending by the private manufacturing industries. The credit component was 91 percent committed to 126 medium and large scale industries and had significant impact on employment generation. About 7,500 jobs were created with average fixed investment per job of about US$ 10,400 (Annex I). As the commercial banks participated late in the life of this projects their activities limited to three banks and approval of 5 sub-loans. 6. One of the positive features of IDP-III lending was low incidence of problem loans. Based on the information provided by the DFIs on the financed sub-projects, over 92 percent of sub-projects are performing satisfactorily, completed at cost, are profitable and are regular in debt servicing (Annex VI) . The sectoral distribution of sub-loans was consistent with the major areas of activity expected to be financed at the time of appraisal (Annex IV) . About 85 percent of sub-projects by amount and 95 percent of those by number were concentrated in a few Districts in the Western Province (Annex V). Demand for sub-project financing in other parts of the Island was low mainly because of lack of sufficient infrastructure. Due to continued ethnic disturbances in Northern and Eastern Provinces no sub-project lending had taken place in these two Provinces. 7. Implementation of TA component - The implementation of TA for institutional development of the participating intermediaries was highly satisfactory and achieved its objectives. The project provided funding for the development of the two DFIs' senior management and in-house expertise to enable the institutions implement the diversification strategies with the assistance of expatriate experts. Both NDB and DFCC fully and effectively utilized their TA allocations and, by improving the organization structure/managements and strengthening their human resources, have been able to improve the efficiency of their operations and better service the needs of the clients.  3 8. The IDP-III TA programs for institutional development of PCIs were also implemented satisfactorily and made significant contributions to improving institutional capacities of the beneficiaries (Annex IX) . The training programs have proven to be useful and successful in capacity building mainly due to commitment of these banks in improving human resources, staff motivation and carrier development objectives, and availability of funds to benefit large number of staff. 9. TA was also provided to the Bank of Ceylon (BOC) for its operational review. Although this component was not within the original objectives of the project, the program was in line with the overall objectives of the IDA Third Small and Medium Industries Project (SMI-III; Credit 1860-CE) which was approved in 1988. SMI-III initiated measures to improve the financial sector operations including TA to the two state owned commercial banks, People's Bank (PB) and BOC. The operational review of these banks (Annex X) that started in 1988 under SMI-III and IDP-II was undertaken by two international consultancy firms. These studies were continued and further funded under IDP-III and SMI-IV and completed in 1992. BOC has taken appropriate actions to implement the recommendations of the studies to improve the credit policies and procedures. It, however, failed to implement the recommendations in the area of technology (disregarding the consultants' recommendations on suitable computer software) and human resources (because of possible adverse reactions from staff unions). BOC has reorganized the head office and some of the regional offices and is in the process of reorganizing its branches. BOC's Management Information System has also been improved. 10. Policy Reforms/Sector Reforms - As a result of civil disturbances spreading to the South in 1988-89 and later the Parliamentary and Presidential elections in September/November 1989, the macro-economic environment deteriorated sharply during 1987-88 period. In 1989, the new Government lunched an adjustment program aimed at restoring macro-economic balances and improving the incentive structure for the private sector through privatization, trade reforms and fiscal adjustment. The 1989 adjustment program was supported by an IMF's Structural Adjustment Facility and subsequently complemented by the IDA's Economic Restructuring Credit (ERC; Credit 2128-CE). As the policy reform programs were also supported under six other IDA (industrial and adjustment) projects during late 1980s and early 1990s, it is not possible to evaluate precisely the impact of IDP- III TA on the policy reforms. The IMF was simultaneously active in financing and dialogue. As a result, the success of reform programs addressed by IDP-III and macroeconomic developments during the life of the project may not all be attributed to this project. The TA for policy reform programs funded under this project was implemented with mixed result. 11. Since 1989, there have been considerable efforts to implement policy reforms in the areas mentioned above. On trade policy reform, the import tariff structure was substantially simplified, stamp duties on letters of credit were reduced, and export taxes were eliminated. To promote exports, the incentive structure consisting of duty rebates, tax holidays, and flexible exchange rate were maintained. In order to offer further incentives to the private sector, income taxes were substantially simplified and both personal and corporate income taxes were reduced. With the introduction of excise taxes and strengthening of tax administration, the custom tariffs were reduced (Table 7) and the turnover tax structure was simplified. To further attract the foreign private investment, restrictions on such investments were removed. In 1989, the GOSL also started to reform the public enterprises through commercialization, peoplization and contracting of management. The privatization program has made significant progress in divesting a number of the PMEs since 1989. To ensure stability of financial system and safeguard the public deposits, GOSL has taken  4 necessary measures and has made some progress in improving the debt recovery legislation since 1990. 12. The incentive framework for direct exporters was broadly appropriate; there was, however, a need to extend these incentives to indirect exporters as well. There was also a need for technical assistance to further promote export development more effectively; fine-tune some of the available instruments; make improvements in the areas such as export financing, freight policy; and re-examine the institutional role and functions of the Export Development Board (EDB). To assist the GOSL to achieve these objectives, a US$ 400,000 TA was provided to EDB under this project. A number of studies have been carried out by EDB on potential new export promotion schemes and on the EDB's structure and operations (Table 7l. While the studies on identification of export promotion schemes were useful, only a few recommendations were implemented and, overall, the impact of the studies was low. Recommendations of some of the studies were not practical and could not be implemented due to the political environment. Findings of some of the studies on policy reforms were already identified by the GOSL and the Bank and therefore, carrying out the study by EDB was not necessary. In addition, these studies were initiated by EDB, which is a public advisory agency and has no authority for policy implementation, and for most parts were not reviewed by the Government implementing authorities, such as Ministry of Finance and Planning. Recommendations of the study on the organizational review of EDB were not implemented due to EDB's resistance to change and lack of strong management. Based on the human resources development study, some ad hoc foreign training programs were crganized by EDB. 13. TA was also provided for streamlining the custom clearing roccedures and tariff reforms. A study tour was arranged in 1991 to familiarize a number of government officials with the custom clearance procedures in the countries in the region. On their return, they recommended to the GOSL the adoption of the Pre-shipment Inspection (PSI) for imports and exports. No action was taken by the government at that time for the implementation of PSI. The matter was, however, revived in 1995 and decision has been taken to introduce PSI in Sri Lanka. For study on tariff reform see table 7. 14. Upgrading Technology Development - The Government recognized that, while the industrial and trade policy environment plays a major role in determining the pace of ITD, the need for industry to become more competitive in terms of integrated technology, quality and productivity is equally important. To assist the government in meeting these needs and overcome the constraints (absence of demand oriented technological infrastructure and shortages of managerial, technical and skilled workers) to technology development, IDP-III provided US$ 1.7 million TA fund for this purpose (Annex IX) . This TA component provided assistance for: (a) strengthening of technological infrastructure by promoting and facilitating linkage between publicly funded research/standards/technology institutions and industry through appropriate strategy and incentive system; and (b) establishment of a technology development fund (TDF) as a temporary financial incentive to private industrial enterprises, and on a cost sharing basis, for financing of eligible and viable sub-projects. The result of TA in this area varied by type of assistance and institutions.  5 15. IDP-III provided US$ 1.0 million to three public research and technology institutions l with the objective of making these agencies more demand-oriented and more responsive to the industry's need. The CISIR utilized the TA fund effectively and efficiently and, by and large, achieved these objectives. In 1992, CISIR with the help of its counterpart in Singapore (SISIR) has made substantial improvement in its organizational structure and functions and human resources development. The CISIR shifted its focus from scientific supply-oriented research to industrial demand- oriented projects, has moved toward a more commercially oriented institution, improved the capacity of its staff through training programs, and upgraded its equipments and laboratories. The SLSI's utilization of the allocated fund was poor and the TA barely achieved its objectives. The TA was basically used for SLSI institutional development including improving in the accounting/database computer system and staff training and promotion of standards for small industries which were not the target groups under IDP- III. NERDC also failed to achieve most of the above objectives due to lack of clear goals, strategy, and motivation. 16. To assist the improvement of technology development in the private industrial enterprises, IDP-III allocated US$ 500,000 through the PCIs as partial grant to the private sector for financing TA programs (technology adoption, efficiency improvement, promoting productivity, etc.). The objective of the TDF was to provide a temporary financing scheme to overcome the difficulties caused by lack of venture capital and technology financing, share the risk with private enterprises for R&D projects in absorbing and modifying imported technology, stimulate technology supply and demand, and promote alternative technology sources in industry. The utilization of TDF was slow at the beginning because of lack of knowledge about availability of the fund. However, as this fund was aggressively publicized by NDB and other PCIs, utilization of fund improved substantially in later years. Due to attractiveness and usefulness of this scheme, additional fund was allocated in 1994-1995 from the unutilized TA funds and by the time of project closing about US$ 900,000 TA was provided to about 100 industries for their technology development sub-projects. 17. Although the project addressed issues in the capital market activities, no TA was provided for the development of capital market and the project did not have any impact in this area. The same is true for the environmental issues mentioned in para 1. 18. TA to the Telecommunications Authority - To ensure effective and orderly supervision and regulation of the massive telecommunications development which started in late 1980s, the GOSL decided to restructure the Sri Lanka Telecommunications Department as part of its privatization strategy. The Department was restructured into a Telecommunications Authority (SLTA) for regulating telecommunication services and a Telecommunication Corporation for provision of such services. The SLTA was formed in July 1991. The IDP-III TA was designed to assist the SLTA in starting its operations and acquire necessary skilled staff and equipment. A total of US$ 3.3 million was provided for: (i) procurement of instrumentation system for monitoring the usage of radio frequency; (ii) recruitment of national experts to undertake the main tasks entrusted to this body in the first year of operations; and (iii) consultancy of International Telecommunication Unit (ITU) to help the implementation of the project (technical assistance, training, etc). This project was implemented satisfactorily; however, there were delays in implementing certain 1/ Ceylon Institute of Scientific and Industrial Research (CISIR); Sri Lanka Standardization Institute (SLSI); and National Engineering and Research Development Center (NERDC).  6 components. The development of the regulatory authority since 1991 resulted in a massive private sector investment in the telecommunications which made Sri Lanka the most liberalized market in Asia. The instrumentation system was installed satisfactorily and is operational. The ITU completed a study on the SLTA operations and structure in 1992. Its recommendations for management, training and suitable hardware and software system have not been fully implemented. The SLTA has not been able to fill the required skilled staff position approved by the Cabinet and therefore, has not been able to fully implement the ITU recommendations for management, training and suitable hardware/software systems and has not been able to operate at full capacity (Annex IX). C. Malor Factors Affectina The Project 19. Factors Subject to Implementing Agency Control: Effective utilization of TA by the DFIs and commercial banks for institutional upgrading and their commitment to improve their operations were instrumental to the satisfactory implementation of the credit component (para. 7). Other Factors: There was a strong demand by the private manufacturing sector for long-term capital investment. Satisfactory sub-projects' performance in profitability and debt servicing also contributed to the project success. Factors generally subject to Government Control: On the positive side, continued Bank/Fund dialogue with the GOSL on policy reforms also had major impact on improvement of trade and industrial policy and paved the way for Bank's further assistance in industrial finance. On the negative side, one of the factors that affected the implementation of the TA programs in the policy reform areas and institutional development for public technology services was that the commitment made by the relevant ministries to effectively utilize the TA funds for the implementation of these programs did not fully materialize during project implementation. To coordinate and monitor the TA programs, IDP-III proposed the establishment of an IDP Monitoring Unit (IMU) in the Ministry of Finance (MOF). IMU was not effective in monitoring the TA programs mainly because of staff shortage and lack of the necessary follow-up and a proper recording system. Despite IDA's efforts in supporting the unit through funding the consultants, computers, and training, IMU was not able to improve its functions and did not properly and effectively monitor the TA activities. This adversely affected the implementation of some TA programs and achievements of the project objectives in certain areas. D. Proiect Sustainability 20. Strong performance and financial viability of the finance institutions participated in the project have contributed significantly to the success of the credit component under the project. The PCIs loan collection performance, which is an indicator of their internal efficiency, has been highly satisfactory under this project and other IDA operations. However, the positive impact of this project and other financial intermediation operations may not be sustainable in the long-term without further improving the efficiency in the financial sector and strengthening the institutional and regulatory framework within which financial institutions operate. Insufficient access to term savings, weakness in debt recovery legislation and banking supervision, and lack of secondary markets in debt instruments have been the major constraints to the efficient operations of the financial system in Sri Lanka. Financial policy issues which were addressed under this project were focused by the two following operations, SMI-IV and Private Finance Development Project (PFDP). GOSL's  7 success in implementing the elements of the financial sector reform program is the key to the long-term sustainability of the intermediation operations that have been designed to support the industrial sector projects. 21. While the DFIs' performance in the sub-project appraisal, commitments and disbursements was satisfactory, they were not able to effectively follow-up the sub-projects performance after the sub-loans were made and did not have any information on sub-projects ex-post economic rate of return. This weakness has made it difficult to precisely and systematically assess the sustainability of benefits of the sub-projects. Based on the information on sub-project's profitability, employment generation, and debt servicing performance (Annex VI), as well as strong demand for this type of financing by the private manufacturing industries, expected net benefit of sub-projects is likely to be sustainable. IDP-III, like the previous two IDPs, required 30 percent equity participation by industries. Encouraging high6r equity contribution to investment financing by the sub-borrowers and decreasing IDA's and ADB's refinancing shares can have significant impact on the sub-projects' success and sustainability. E. IDA Performance 22. The IDA's performance in identifying and designing IDP-III was timely and in line with the GOSL's development objectives and the Bank's country assistance strategy of 1988-93 (para 2). The project did not provide a clear objective and terms of reference for the IDP Monitoring unit and overestimated the EDB's capabilities to implement the recommendations of certain studies on policy reform areas. 23. IDA sent 10 supervision missions beginning with project effectiveness (May 1989), with last mission in May, 1995 prior to project closing (June 30, 1995). Although the project supervision was adequate in terms of its frequency, the comprehensiveness and details of the TA supervision reports were generally lacking. For instance, while SAR made references to developing capital market and environmental review of industrial projects and allocated TA for the CEA, neither supervision reports nor the documents in the project file contained discussions regarding these components. Combined supervision missions with those of IDA's other industrial sector projects, ambitious objectives and broad scope of the TA programs under these projects, various policy related issues, large number of beneficiaries, and lack of clear and detailed terms of reference and implementation timetable for some TA programs made supervision of the TA more difficult and less effective. Other contributing factors were insufficiency of time in the field and number of people to carry out missions (one person per supervision mission). IDA enforced the compliance with the financial and loan covenants and also the Bank policies and procedures, it was not, however, effective in enforcing the compliance with audit and reporting requirements. F. Borrower Performance 24. The GOSL's close cooperation with IDA and its responsiveness to meeting the agreed policy measures during the preparation of the project were important factors in the timely approval of the project. The performance of the two DFIs in the utilization of TA component for their institutional development, their management in channeling the credit components to the sub-borrowers, and their compliance with the financial and reporting covenants was highly satisfactory (Annexes VII & VIII). SLTA and  8 CISIR performed well and were committed to implement their respective projects. The performance of other government institutions (EDB, SLSI, NERDC), however, was poor in implementing various TA components both for institutional development and policy reform projects. Project reporting by DFIs for the credit component was satisfactory; that for the TA component was sporadic and of poor quality mainly as a result of the weaknesses of the IMU and its lack of coordination with TA beneficiaries. GOSL's performance in providing timely audits of the Project Accounts was unsatisfactory. G. Assessment of Outcome 25. The overall project performance has been rated satisfactory, as the project achieved, for the most part, its development objectives and was implemented satisfactorily (para 4-18). H. Follow-up/Future Operations 26. To further contribute to policy reforms and institutional strengthening in the areas of trade, industrial and financial sector policy, two projects (SMI-IV and PFDP) were approved by the Board in 1991 and 1993, respectively (para 20). The main objectives of these projects were to complement and expand on the objectives of the IDP-III, and provide credit for long-term capital investment to the growing private manufacturing sector. The GOSL's statement of sector policy under these two projects outlined its longer term commitment to rationalize the public sector and provide an environment that further develop the private sector, continue the improvement of tax administration and reforms, and further develop the financial sector in order to facilitate more efficient mobilization and allocation of domestic resources for the development objectives.2 GOSL has taken significant steps in achieving these objectives and establishing a financial system more conducive to industrial development. A lot has been achieved although more remains to be done. The GOSL is committed to continue to reform the present financial and industrial policy under the two ongoing projects, SMI-IV and PFDP. The Bank is currently preparing a follow up project to PFDP, PFDP-II, which focuses on further improving the efficiency of the financial sector. I. Lessons Learned 27. Based on the above assessment of the project, the main lessons learned, some of which brought out by the completion reports for earlier IDP projects, are summarized as follows: (i) The sustainability of the financial intermediary operations is a function of several factors: o Financial viability of the credit institutions and their efficient loan administration (sub-loan appraisal and supervision). The satisfactory implementation of the credit component was, by and large, due to the efficient operations of the two DFIs. 2/ See Appendix A for GOSL's Statement of Financial Sector Policy under the PFDP.  9 o Satisfactory implementation of the supporting TA programs. Sound financial system and efficient regulatory and institutional framework is conducive to the long-term sustainability of term finance for the development projects. GOSL's continued efforts in implementing the elements of the financial sector reform is the key to achieving these objectives. o Satisfactory rate of return of the sub-projects. In the absence of information on ex-post economic rate of return, it is difficult to precisely assess the benefits of the sub-projects. The PCIs need to streamline their information system and monitoring activities in order to obtain a more systematic information on the economic benefits of sub-projects. (ii) Absence of an effective and proper system for monitoring and recording of the TA programs and lack of coordination between the TA recipients and the government implementing authorities contributed to the poor utilization, lack of sustainability, and low impact of TA in certain areas. In order to improve the effectiveness and utilization of TA, the GOSL needs to develop a proper procedure for evaluation, monitoring, supervision, and documenting/reporting of the TA programs. Given the ambitious objectives and broad scope of the TA programs and given weak management and organizational capabilities of the Government, IDA needs to strengthen the emphasis of its supervision effort for the TA activities and improve upon the design of the TA programs. (iii) The design and scope of the TA is also critical to achieving the project objectives. For TA to be effective, design and objectives should be more specific and targeted. o Precise and clear terms of reference for the TA programs should be defined and realistic time table for implementation should be set in the project implementation plan. o Goals should be set up so that they can be reasonably achieved within a reasonable time period. o Tasks should be set up taking into account the capabilities of the TA recipient as well as the prevailing political constraints. O The right incentive system should be in place to ensure that the TA recipients support the changes and maintain their commitment throughout the life of the project. In Sri Lanka, despite continuous efforts by IDA and other donors at strengthening the role of the publicly funded research, advisory, and technology services (CISIR, NERDC, SLSI, EDB), deficiencies still exist due to lack of: (a) incentive to improve and change, (b) clear direction, and (c) private sector demand for their services. In order to improve the efficiency of the public advisory organizations and make them more responsiveness to private sector demand, efforts should be made at moving these institutions towards demand-driven, commercially oriented support agencies with more advanced technology and qualified staff. Private sector involvement in their management could also significantly improve the effectiveness of these institutions for acquisition and diffusion of technology. November 28, 1995  10 STATISTICAL TABLES Table 1: Summary of Assessments A. Achievement of Obiectives Substantial Partial Nezfitible Not Applicable Macroeconomic policies () () () (4) Sector policies ( ) (4) ( ) ( ) Financial objectives (V) ( ) ( ) ( ) Institutional development DFIs(4) Public Agencies(H) ( ) ( Physical objectives ( ) ( ) ( ) (V) Poverty reduction ( ) ( ) ( )() Gender concerns ( ) ( ) ( ) (4) Other social objectives ( ) ( ) ( ) (4) Environmental objectives ( ) ( ) (4) ( ) Public sector management ( ) (4) ( ) ( ) Private sector development (4) () () () Other (specify) - Employment generation (4) ( ) ( ) ( ) B. Project Sustainability Likely Unlikely Uncertain el) 0 0 Hiahly C. Bank performance Satisfactory Satisfactory Deficient Identification (4) ( ) ( ) Preparation assistance (4) () ( ) Appraisal () (4) () Supervision () (4) () Hiahlv D. Borrower performance Satisfactory Satisfactory Deficient Preparation (4) () () Implementation () (4) () Covenant Compliance ( ) (4) ( ) Operation (if applicable) ( ) ( ) ( ) Highly Highly E. Assessment of outcome Satisfactory Satisfactory Unsatisfactory Unsatisfactory 0 (4) ( (  :i Table 2: Related Bank Credits Loan/credit Purpose Year of 1 Status Title approval l Preceding Operations 1. Small and Promote private industrial development focusing on SMI's 1979 Closed Medium assistance through addressing constraints hindering their on Industries, rapid growth in order to increase their contribution to 06/30/85 $ 16 m (SMI I) employment generation, export expansion, and economic Credit 942-CE growth. 2. Second Small To support and expand on the SMI I objectives. 1981 Closed and Medium on Industries 12/31/87 Proj., $ 28 m (SMI II) Credit 1182-CE 3. Industrial Provide term credit through DFIs to assist in strengthening 1983 Closed Development the system of industrial financing, assist in trade and on Project (IDP-I) industrial reforms, and provide technical assistance to 09/30/88 $ 25 m improve selected PMEs. Credit 1401-CE 4. Second Complement previous and on-going industrial sector 1986 Closed Industrial operations to provide credit through banking system to on Development medium- and large-scale private industrial enterprises, 06/30/94 Project $ 20 m support implementation of GOSL's policy reforms and (IDP-II) institutional strengthening. Credit 1692-CE 5. Third Small Complement and expand previous industrial sector operations 1987 Closed and Medium by: (i) providing credit to the SMI private manufacturing on Industries enterprises; and (ii) make a further contribution to policy 06/30/93 Project reform and institutional strengthening in the areas of $ 20 m tariff (SMI-III) administration, export promotion and financial sector Credit 1860-CE operations. Following Operations 1 Public To support a reform program to commercialize, modernize and 1990 Closing; Manufacturing privatize public manufacturing enterprises to promote extended Enterprise efficiency and growth. to 05/96 Adjustment Credit $ 120 m (PMEAC) Credit 2185-CE 2. Fourth Small Complement previous and on-going industrial and financial and Medium sector intermediation; to provide credit for SMI development 1991 On-going Industries and to make further contributions to policy reform and Closing Project institutional strengthening in the area of trade policy 06/30/97 $ 45 m administration and financial sector operations. (SMI-IV) Credit 2250-CE 3. Private Provide investment finance to the private sector; assist in 1993 On-going Finance domestic resource mobilization for long-term investment by Closing Development stimulating the development of local bond market; further 06/30/99 Project, $ 60 m assist the GOSL in improving the financial sector operations (PFDP) Credit through strengthening the financial intermediation including 2484-CE the key players such as contractual savings institutions.  12 Table 3: Project Timetable Steps in project cycle Date planned Date actual/ latest estimate Identification October 1986 October 1986 Preparation November 1987 November 1987 Appraisal March 1988 March 1988 Negotiations May 1988 May 1988 Letter of development policy (if NA NA applicable) Board presentation July 1988 July 1988 Signing September 1988 Septeiber 1988 Effectiveness March 1989 March 1989 First tranche release (if NA NA applicable) l Midterm review (if applicable) NA NA Second (and third) trance release NA NA (if applicable) l Project completion June 1994 June 1994 Loan closing June 1995 June 1995 NA = Not Applicable Table 4: Credit Disbursements: Cumulative Estimated and Actual (US$ Million) FY89 FY90 FY91 FY93 FY5 FY96 Appraisal 7.0 13.0 21.0 31.0 38.0 41.0 43.8 0.0 estimate Actual 4.3 8.0 18.5 29.2 38.3 40.0 40.1 40.8 Actual as t of 61.4 61.5 88.0 94.1 100.7 97.5 91.5 estimate Date of final disbursement November 14, 1995  13 Table 5: Key Indicators for Project Implementacion I. Key implementation indicators in SAR/President's Report Estimated Actual 1. Sub-loan financing 1. Utilization of credit 1. Details of the impact of component for increasing loan financing is presented capital and employment in in Annex I the private sector. SAR required at least 25% of loan proceeds be utilized for above free limit (US$ 500,000) sub-loans. 2. disbursement rate 2. Disbursement of credit 2. See Table 4 component based on the schedule in SAR 3. Financial performance of 3. Implementation of their 3. Business diversification the DFIs and their loan business diversification plan was successfully collection performance plan to improve efficiency implemented (para. 7). Both in their operations and DFIs are performing well in maintenance of the financial terms of profitability, covenants required under the efficiency, and liquidity. project Also see Annexes VII & VIII for their compliance with the criteria under the project. 4. Sub-project performance 4. Adequate number of viable 4. See Annexes I and VI sub-projects to be materialized in order to fully utilize the credit fund 5. Sectoral distribution of 5. Major areas of activities 5. See Annex IV sub-loans per SAR: agro-industries, chemical, rubber products, light engineering, construction-related, industrial services. II. Modified indicators Not Applicable (NA) NA (if applicable) III. Other indicators (if NA NA applicable)  14 Table 6: Key Indicators for Project Operation I. Key operating indicators in SAR/President's Report Estimated Actual 1. DFCC and NDB Strategy 1. Formulation of 1. The consultancies were on Corporate Planning. corporate strategy, successfully completed. organizational Both DFCC and NDB are restructuring to suite financially sound, the diversified efficiently managed, and activities, and human they can now better serve resource development. the clients. II.Modified indicators (if NA NA applicable) III. Modified indicators NA NA for future operation (if applicable)  15 Table 7: Studies Included in Project Purpose as defined Study at appraisal Status Impact of the Study 1. Restructuring Improve its carried Recommendations were not of EDB operational an out in implemented; had limited impact financial autonomy, August- on human resource development its human September resources, and its 1990 effectiveness in promoting exports in Sri Lanka 2. Targeting of To reduce Carried Had no impact as the export Oriented unemployment and out in recommendations found to be Companies in improve December impractical due to difficult Korea and Hong technological 1991 political environment Kong for advancement. relocation to Sri Lanka - EDB 3. Identification To improve market Carried Implemented to some extent. of New Export and product out in Products for development January Development and 1991 Promotion in Sri Lanka - EDB 4. Sea Freight To improve freight Carried The study was unnecessary as Policy - EDB policy to further out in problems were already identified help exporters December by the GOSL; reforms were 1991 underway 5. Export Trading To link the small Carried Recommendations were revised by House -EDB producers to large out in EDB and adopted; an Export scale exporters to December Trading House scheme was designed market the SMI 1991 by EDB and proposal was submitted products to GOSL few years after the study was completed 6. Human Resource To strengthen the Carried Local and foreign training Development Study skills and capacity out in programs were organized and - EDB of the staff August funded under IDA projects 1991 l 7. Study on Analyzing the four Carried recommended the four-band tariff tariff structure band tariff out in structure of 50%,35%,20t, & 10% carried out by structure and study November instead of 13-band system; the PTC restructuring the 1992 abolition of surcharges on import export tariff duties; reduce and then abolish ad valorem duty on tea; etc. Recommendations were mostly incorporated and GOSL has even progressed beyond the recomm. of report. Presently max. tariff is 35% and 3-band system is in operation; some export duties were removed; etc.  16 Table BA: Project Costs Appraisal estimate (US$M) Actual/latest estimate (US$M) Item Local Foreign Total Local Foreign Total Costs Costs Costs Costs 1. Sub-projects 38.0 75.5 113.5 36.0 71.0 107.0 Investment 2. Technical 2.0 8.8 10.8 2.0 8.3 10.3 Assistance Total 40.0 84.3 124.3 38.0 79.3 117.3 Table BE: Project Financing Appraisal estimate (US$M) Actual/latest estimate (US$M) Local Foreign Total Local Foreign Total Source Costs Costs Costs Costs IDA 43.8 43.8 _ 40.8 40.8 Cofinancing - 40.5 40.5 - 38.5 38.5 Institution (ADB) Sponsors (local) 39.0 - 39.0 37.0 - 37.0 Domestic 1.0 - 1.0 1.0 - 1.0 contribution (GOSL) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ TOTAL 40.0 84.3 124.3 37.7 79.3 117.3 Table 9: Economic Costs and Benefits [Ex-post ERR was not calculated for Sub-projects]  17 Table 10: Status of Main Legal Covenants Agreement Section Covenant Present Original Revised type status fulfillment fulfillment Description of covenant Comments date date Credit Article 4 2 Complied 4 months after No revision Borrower to provide records of The project audit reports (a-i) with each FY project/Special Accounts and were continuously delayed; delays for SOEs audited in accordance the 1994 audit has not been previous with sound auditing principles submitted yet. years by independent auditors no later than four months after the end of each fiscal year. Article 4 2 Complied 4 months after No revision The PCIs to provide IDA their Satisfactory compliance (a-ii) with each FY audited financial statements no later than four months after the end of each year. Schedule 12 Partial See Comment The Borrower shall carry out No date was specified in DCA. 4 (2) compliance export development measures, The policy reform programs tariff reform, strengthening were also supported under six of DFCC and NDB, and debt other IDA projects during recovery improvements. late 1980s and early 1990s. IMF was simultaneously active in financing and dialogue. Article 4 2 Complied DFCC and NDB maintain a Debt/equity requirement for with debt/equity ratio of 8:1 and NDB was changed to 8:1 in 4:1 respectively. They early 1993. PCIs should maintain a minimum collection comply on continuous basis. ratio of 75%, a minimum return on equity of 9%, and debt service ratio of 1.2. Other PCIs should maintain 10' return on asset, 14:1 debt/equity ratio, and 15% portfolio infection ratio.  18 Table 11: Compliance with Operational Manual Statements There are no incidence of non compliance with Operational Manual Statements Table 12: Bank Resources: Staff Inputs Stage of Planned 1/ Revised 1/ Actual project cycle Weeks US$ Weeks US$ Weeks US$ (000) Through appraisal 84.6 178.6 Appraisal-Board 27.1 58.3 Board-effectiveness NA NA Supervision 102.0 229.6 Completion 8.0 17.5 221.7 484.0 TOTAL 1/ Available only after FY94.  19 Bank Resources: Missions 1/ Performance rating Stage of project Month/y Number Days Specialized cycle ear of in staff skills Implementation Development Types of persons field represented status impact problems Through appraisal 10/1986 4 20 Economists 12/1987 4 16 (Trade 03/1988 4 21 Economists) & Financial Analysts Appraisal through NA NA NA Board approval Board approval through NA NA NA effectiveness Supervision 1/ 05/1989 1 10 Financial The rating has The Implement 08/1989 1 7 analysts; been development ation of 12/1989 1 15 Economists satisfactory impact has TA in 11/1990 1 20 throughout the also been certain 07/1991 2 11 project satisfactory areas; 07/1992 2 14 supervision . Audit and 06/1993 2 16 reporting 11/1993 2 17 by the 04/1994 2 20 GOSL 05/1995 2 20 Completion 05/1995 2 5 Financial analyst; Economists 1/ The IDP-III missions were, in general, combined with those of other IDA's intermediation operations. No record is available as how the time/number of staff was split between the projects. Therefore, time for supervision missions, spent on the IDP-III was much less than time indicated above.  20 IMPLEMENTATION COMPLETION REPORT Annex I THIRD INDUSTRIAL DEVELOPMENT PROJECT SUB-LOAN FINANCING - UNDER IDA CREDIT NDB DFCC Total NDB + DFCC 3/ Amount/No. % of Total Sub-project's costs (Rs. Million) 1,171 1,970 3,141 100% Of which: IDA 538 768 1,306 42% Client 633 644 1,276 41 /o Other - 559 559 18% % of Sub-Projects Above Free Limit Amount (Net of Cancellations) 50% 46% Number 12% 14% Number of Sub-Projects 57 64 126 Of Which: Export-Oriented Sub-Projects 21 28 49 39% Expansion Sub-Projects 41 55 96 76% Number of Jobs Created 2,678 4,783 7,461 Average Cost / Jobs (Rs.) 437,080 411,978 420,988 Average Cost / Jobs (US Dollar) 1/ 10,838 10,216 10,439 Average Size of Sub-Loans (US Dollar) 1/ 234,046 297,560 257,019 1/ Conversion factor is the average exchange rates for 1989-1992.  21 IMPLEMENTATION COMPLETION REPORT Annex 11 THIRD INDUSTRIAL DEVELOPMENT PROJECT SUB-PROJECT APPROVAL - DFCC (In SDR) Date Amount Amount Net Amount Project No. Authorized Subproject Name Approved Canceled Committed Disbursed Su b-project above iree limit (US$ 500,000) 1 A1.1 04/19/89 Celltel Lanka Ltd. 1.482,554 75.776 1,405,778 t.405.778 2 A1.4 07/26/89 Ceylon Brewery Ltd. 619,420 15.432 603.988 603,986 3 A1.5 07/27189 Lever Bros (Ceylon) Ltd. 2.144,409 919,857 tU224.552 1.224,552 4 A1.6 07131/89 Nihila Garments Ltd. 645,700 455,238 t90.462 190,462 5 A1.7 03/12/90 James Finlay & Co. (Colombo) Ltd. 955,175 1109 954,066 954.066 6 At.8 081t3/90 Maghooras Industries 364.271 21,487 342,794 342.784 7 A1.9 10122/90 Swadeshi Industrial Works 662.350 103,396 558,954 558,954 8 A1.10 01/28/91 Deutsch LankaTextile Mills 991,096 991,096 991.095 9 A1.1 1 06/06/91 Van Rees 469,425 7/928 397,497 397,497 Total "A" Sub-projects 9.763,866 3,835.504 5,9289362 6,669R76 Sub-project below free limit (US$ 500,000) tO B1.1 03/1t2/89 BataSlhoe 199.526 64.8t9 134,707 134,707 11 B1.2 04/26/89 Unichela Ltd. 69.320 20,346 46,974 48,974 12 81.3 04/26/89 BataShoe Co. Ltd. 23t,050 86,949 t44,101 144,101 13 B1.4 07/14/89 Lankem Ceylon Ltd. 15.9t0 2,536 13.374 t3,374 14 B1.5 07/14(89 Ceylon Glass Co. Ltd. 115,000 25.569 89,431 89.431 15 61.6 07114/89 Ceylon Glass Co. Ltd. 265,150 79.072 186,078 186,078 16 61.7 07114/89 Unichela(Pvt)Ltd. 380,600 103.702 276.798 276,798 17 6t.9 07/t9189 Pure Beverages Co. Ltd. 2tS,750 46,5tt t72,239 t72,239 18 B1.11 08/15/89 Shums Products 23,100 4,509 18.592 18,592 19 61.12 t t/06189 St. Anthony's Consolidated Ltd. t1.400 6,592 7,808 7,908 20 61.13 11/22/89 D. Samson Industries Ltd. 168.200 20,484 147,716 147.7t6 21 61.14 11/22/89 Unichela (Pvt.) Ltd. 63,200 5,506 57,694 57.694 22 B1.15 01/19/90 Williams Confectionery Ltd. 138,970 28.064 110,906 110.906 23 61.16 02(07(90 Etacol Colombo 257,650 44.226 2t3.424 213.424 24 61.17 02)07/90 Blow-O-Matic 95,425 4,773 90.652 90,652 25 B1.18 03/01/90 Atken Spence (Garments) Ltd. 21t9200 64,656 153,544 153.544 26 B1.19 03/15/90 PolypakSecoo 207.310 5,811 201,499 201,499 27 61.20 03/15190 Ceylon TeaService 191.035 13,619 177.416 177,416 28 B1.21 03115190 Assoc. Battery 339,395 32.6t0 306,785 306,785 29 B1.22 03(15(90 Mackwoods-Winthrop 114,620 25.804 88,816 88.816 30 B1.23 04/19(90 Glaxo Ceylon 66,600 7.874 58,726 58,726 31 81.24 10/12/90 New Interior Pvt Ltd. 115,210 6,9857 109,353 109,353 32 61.25 10/12(90 WrjayaTeaFactory 9,500 132 9.368 8,368 33 61.26 10/12/90 Ranweli(Pvt) Ltd. 63,974 2,854 61,120 61,120 34 61.27 10112190 Ceymac Rubber 80.849 23,460 57,389 57.389 35 61.29 10(12/90 Shermans Sons Limited 19.700 288 19,412 19.412 36 B1.30 10(12/90 Link Natural Products 88,512 4,978 83,534 83.534 37 61.31 10(12190 Nihon International Invest 60,670 8.181 52,489 52.489 38 61.32 10/22/90 Pure Bleverages 256,060 12,469 243,991 243.591 39 B1.33 10/22(90 Moosajees Ltd. 22,650 6.544 16 106 16,106 40 61.34 10/26/90 Ravi Industries 208.640 59.934 148,706 148,706 41 61.35 11(21(90 Ceylon Glass Co. Ltd. 256.170 30.653 225,517 225,517 42 B1.36 11(21/90 Singha Valley Tea Factory 104.850 21,446 83,404 83,404 43 B1.37 11(21(90 Diesel & Motor Engineering 209,707 83,911 125,796 125.796 44 B1.38 01(07/91 Ceylon Paints & General Ltd. 271,290 151.777 119,513 119,513 45 B1.39 01/07/91 Polypak Secco Limited 133.545 9.996 124,649 124.649 46 B1.40 01(07(91 Samson Industries Limited 71,035 21.129 49,906 49,906 47 B1.41 01(07(91 E/W(Clearing & Forwarding) Lld. 32,360 639 31,721 31,721 48 61.42 01128(91 Inter Brush Lanka Limited 142.145 142,145 142,145 49 B1.43 06(06/91 Beico Link Carbons (Pvt) Ltd. 147,455 14,804 132,651 132,651 50 B1.44 03(09/92 Ceylon Footwear Ltd. 32,860 5864 26,996 26.996 51 61.48 03/09/92 Ceylon Brewery Ltd. 210,165 72255 137,910 137,910 62 B1.46 04113192 Pure Metals 187,460 9,331 179,129 178,129 53 61.47 04(13(92 Regency Garments Lld. 255.656 28,452 227,204 227,204 54 61.49 03(19892 Rockland Distilleries 261,600 19,522 243,078 243.078 55 61.50 03(19(92 Varna Ltd. 94,177 9910 84,267 84.267 66 61.51 04(13/92 Midaya Pvt. Ltd. 61,130 2537 48.593 48,593 57 61.52 06/11/92 Tri-StarApparel Exports Ltd. 248,420 97,379 151.041 151.041 58 61.53 10/06892 Rauarata Garments Limitted 202,250 2241 200,009 200,009 59 61.54 10t06/92 Kama! PVC Ltd. 40,434 92 40.342 40,342 60 61.55 10(06892 Maxim Pvt. LimItted 60,674 266 60,408 60.408 61 61.56 10(21/92 Jewelknit Limited 320,405 22,056 298,349 298,349 62 61.57 10(21/92 Orient Garments Ltd. 320,405 12750 307.655 307,655 83 B1.58 12(02/92 Penguin Sportswear 207.141 100849 106.292 106,292 64 B1.59 12/02/92 M Samson Silva 360.246 14938 345,308 345.308 Total " Sub-projects 8,946,756 1,957.525 6,989,231 6,989.231 TOTAL "A. B" Sub-proects 18,710,622 5,793.029 12.917,593 13,658,407  22 IMPLEMENTATION COMPLETION REPORT Annex III THIRD INDUSTRIAL DEVELOPMENT PROJECT SUB-PROJECT APPROVAL - NDB Sub-project Date Amount Amount Net Amount No. Approved Sub-project Date Approved Cancelled Committed Disbursed Sub-projects above tree limit (USS 500,000) t A2.1 04/19/90 Shadowline (Pct.) Ltd. 516,920 223,309 293,611 293,611 2 A2.2 08/08/90 Ceylon Petroleum Corp 2,080,010 471,914 1,608,096 1,608,096 3 A2.3 11/05/90 Ceylon Tobacco Co 963,580 153,047 810,533 810,533 4 A2.4 11/05190 Richard Peiris Exports Ltd 473,312 473,3t2 473,3t2 5 A2.5 02/27/91 Lanka Multi Moulds (Pvt) Ltd. 440,435 124 440,311 440,311 6 A2.6 02/27/91 Dankotuwa Porcelain (Pvt) Ltd 425,460 38,385 387,075 387,075 7 A2.8 02/28/91 Pugoda Textile Mills (Modern) 459,674 459,674 459,674 Total "A" Sub-projects 5,359,390 886,779 4,472,611 4,472,611 Sub-projects below free limit (US$ 500,000) 8 B2.1 03/12/89 Macson Mesh 242,415 68,926 173,489 173,489 9 B2.2 03/12/89 Tootal Thread 109,447 18,611 90,836 90,836 10 B2.3 03/12/89 Hanwella Rubber 166,787 12,204 154,583 154,583 11 82.4 03/12/89 CSD Auto Service 168,635 43,977 124,658 124,658 12 B2.5 03/12/89 Tropical Foliage 28,830 2,823 26,007 26,007 13 B2.7 03/12/89 ABC Containers 52,419 6,428 45,991 45.991 14 B2.8 03/12/89 Performance Motors 166,787 56,052 110,735 110,735 15 B2.11 03/12/89 SMAWorldwide 139.101 59.802 79,299 79,299 16 B2.12 03/12/89 Hemas Drugs 129,387 34.591 94,796 94,796 17 B2.13 03/12/89 United Tractor 129,387 34.591 94,796 94,796 18 B2.16 03112189 Heenatigala Garments 70,111 70,111 70,111 19 B2.17 03112/89 McLarens Service 71,556 3,289 68,267 68,267 20 B2.18 01119190 Andriez Co. Ltd. 15.670 2.848 12,822 12,822 21 B2.19 01119/90 Shatez Industries 62,260 11,938 50,322 50,322 22 B2.22 01/23/90 Lakmedura Pvl. Ltd. 64,750 11.131 53,619 53,619 23 B2.23 01/23/90 Three Acre Farms 109.980 34.338 75,642 75,642 24 B2.24 02/16/90 D. Samson Industries 62.562 16.870 45,692 45,692 25 B2.25 02/16/90 Samson Intl. Pvt. Ltd. 59.895 9.475 50,420 50,420 26 B2.26 03/15/90 Sithara Ltd. 46.805 12.012 34,793 34,793 27 B2.27 04/12/90 Plast Coat Industries 152.100 133.984 18.116 18,116 28 B2.28 04/12/90 Nisol Corrugated Cartons Ltd. 230.070 31,555 198,515 198,515 29 B2.29 04/12/90 Tootal Thread LId. 148,250 47,223 101,027 101,027 30 B2.30 04/12/90 Aitken Spence &Co. Ltd. 243,600 75,856 167,744 167,744 31 B2.31 05/07/90 SPI Exports (PVt) Ltd. 33,550 3,119 30,431 30,431 32 B2.32 05/15/90 Keelis Food Products Ltd. 214,000 126,743 87,257 87,257 33 B2.34 08124/90 M/S LasnkaTranstormers Limited 176,648 176,648 176,648 34 B2.35 10/16/90 MKC Industries 77,561 77,561 77,561 35 B2.36 10/16/90 MKC Industries 24,792 24,792 24,792 36 B2.37 10/19/90 ABC Containers (Pvt) Ltd 100,239 100,239 100,239 37 B2.38 10/24/90 Gunaratne Offset Ltd. 110,984 110,984 110,984 38 B2.40 11/05/90 Meeyan Leather Stires 24,470 1,818 22,662 22,652 39 B2.43 11/13/90 Manchester Yarn & Thread (Pvt) Limite 42,115 482 41,633 41,633 40 B2.45 01/07/91 Chemenex Limited 27,970 9,253 18,717 18,717 41 B2.46 01/07/91 Raigampura Apparels (Pvt) Ltd. 85,280 9,193 76,087 76,087 42 B2.48 01/07/91 Trico Maritime (PvF) Ltd. 124,310 13,044 111,266 111.266 43 B2.50 02/27/91 Upali Electronics Company 32,595 12,631 19,964 19,964 44 82.51 02/27/91 Tristar Apparel Exports (Pvt) Ltd. 139,530 41,531 97,999 97,999 45 B2.52 02/27/91 Keells Food Products Ltd. 57,925 5,072 52,853 52,853 46 B2.53 02/28/91 PugodaTextile Mills (Expan Proj) 275,270 51,522 223,748 223,748 47 B2.54 03/28/91 Richard Pieris & Company 101,747 25,978 75,769 75,769 48 B2.55 10/23/92 High Level Textiles 147,021 11,788 135,233 135,233 49 B2.56 05120/92 Ranier Tea Pvt. Ltd. 56,453 8,324 48,129 48,129 50 B2.57 05/20/92 Dankotuwa Porcelan Pvt. Ltd. 99,217 (12,264) 111,481 111,481 51 B2.58 05/01/92 Tea Tang Ltd. 135.430 23,416 112,014 112,014 52 B2.59 05/20/92 Express Newspapers 282,926 99,291 183,635 183,635 53 B2.60 08/01/92 Kings tnt. Garments Pvt. Ltd. 47,400 2,112 45,288 45,288 54 B2.63 06/15/92 ABC Containers (PvI) Lim ted 22,726 0 22,726 22,726 55 B2.64 10/13/92 Standard Trading Pvt Ltd. 100,102 (620) 100.722 100,722 56 B2.66 10/14/92 Kenmartex Pvt. Ltd. 200,147 200,147 200,147 57 B2.67 12/04/92 Dilruk Garment Limited 150,602 12,317 138,285 138,285 Total "B" Sub-projects 5.561,813 1,173,273 4,388,540 4,388,53 TOTAL "A+ B" Sub-projects 10,921.203 2,060,053 8,861,151 8,861,150  23 IMPLEMENTATION COMPLETION REPORT Annex IV THIRD INDUSTRIAL DEVELOPMENT PROJECT SECTORAL DISTRIBUTION OF SUB-PROJECTS NDB DFCC TOTAL No. of Amount Approved Amount No. of Amount Approved Amount No. of Amount Approved Amount Sub-Proj (Rs. Million) 0 Share Sub-Proj (Rs. Million) % Share Sub-Proj (Rs. Million) % Share Food, Beverages&Tobacco 4 63 11.70/o 11 165 21.50/o 15 228 17.5% Agriculture, Agro Business & Fishery 3 6 1.1% 3 6 0.5% Textile&Weaving Apparel 17 123 22.9% 21 271 35.3% 38 394 30.2% Wood and Paper Products 1 11 2.0% 4 24 3.1% 5 35 2.7% Rubber and Leather Products 6 43 8.0% 18 201 24 244 18.7% Metal, Non-metalic Minerals/Chemical 9 195 36.2% 5 34 4.4% 14 229 17.50/c Services Industries 13 62 11.40/c 1 4 0.50/c 14 65 5.0% Miscellaneous 4 36 6.6% 4 69 9.00/0 8 105 8.0% Total Amount (Rs. Million) 57 538 100.0% 64 768 100.0% 121 1,306 100.00/c %/ of Total 47.1% 41.2% 52.9% 58.8%  24 IMPLEMENTATION COMPLETION REPORT Annex V THIRD INDUSTRIAL DEVELOPMENT PROJECT GEOGRAPHICAL DISTRIBUTION OF SUB-PROJECTS NDB DFCC Total No. of Amount Amount No. of Amount Amount No. of Amount Amount Sub-Proj. (Rs. M) % share Sub-Proj. (Rs. M) % share Sub-Proj. (Rs. M) % share Colombo 25 171 31.8% 39 485 63.2% 64 656 50.2% Gampaha 19 276 51.2% 11 131 17.1% 30 407 31.1% Galle 3 10 1.8% 4 16.2 2.1% 7 26 2.0% Badulla 1 9.6 1.3% 1 10 0.7% Kandy 2 16.5 2.1% 2 17 1.3% Kalutara 2 6 1.1% 2 11.5 1.5% 4 18 1.3% Rathnapura 1 12 2.3% 1 12 0.9