Document of The World Bank FOR OFFICIAL USE ONLY Report No 1/' PERFORMANCE AUDIT REPORT SRI LANKA SECOND INDUSTRIAL DEVELOPMENT PROJECT (CREDIT 1692-CE) June 21, 1996 Operations Evaluation Department 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. Currency Equivalents (annual averages) Iurrency Unit = Sri Lanka Rupee (Rs) 1986 US$1.00 Rs. 28.017 1987 US$1.00 Rs. 29.445 1988 US$1.00 Rs. 31.807 1989 US$1.00 Rs. 36.047 1990 US$1.00 Rs. 40.063 1991 US$1.00 Rs. 41.372 1992 US$1.00 Rs. 43.830 1993 US$1.00 Rs. 48.322 1994 US$1.00 Rs. 49.500 Abbreviations and Acronyms ADB Asian Development Bank DFCC Development Finance Corporation of Ceylon DFI Development Finance Institution ERD External Resources Department GDP Gross Domestic Product GOSL Government of Sri Lanka HRD Human Resources Development IDA International Development Association IDP Industrial Development Project IMF International Monetary Fund IMU IDP Monitoring Unit MOFP Ministry of Finance and Planning NDB National Development Bank NPD National Planning Department OED Operations Evaluation Department PAR Performance Audit Report PCR Project Completion Report Fiscal Year GOSL January 1 to December 31 NDB January 1 to December 31 DFCC April I to March 31 FOR OFFICIAL USE ONLY The World Bank Washington, D.C. 20433 U.S.A. Office of the Director-General June 21, 1996 Operations Evaluation MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Performance Audit Report on Sri Lanka Second Industrial Development Project (C1692-CE) Attached is the Performance Audit Report (PAR) on the Sri Lanka Second Industrial Development project (Credit 1692-CE, approved in FY86). The project was one of a series of financial intermediary loans (FILs) extended to the Government of Sri Lanka to help develop the industrial sector. The objectives of the project were to (i) help meet the demand for term finance in the industrial sector; (ii) support institutional capacity development in the participating development finance institutions (DFIs); and (iii) assist in the development and implementation of industrial policy reforms. The project responded to the immediate needs of the industrial sector for long-term finance and to the longer-term needs for policy reform and institutional development in the sector. The credit component achieved its objective of meeting part of the demand for long-term industrial finance by financing 75 viable industrial projects. The institutional development component helped the DFIs consolidate their presence in the long-term lending market, establish human resource development plans, and continue to upgrade technical and managerial skills. The policy reform component produced studies that contributed to the privatization and financial sector reform programs, although the project was unable to achieve industrial and trade policy reforms to the extent originally planned due to difficulties in the implementation of broad-based reforms. The project's contribution to industrial development is considered sustainable given the commitment of successive governments to market reforms and the depth of reforms achieved since 1977. The DFIs have been privatized and are in sound financial and operational positions and while the project itself did not address the deficiencies in the capital market, subsequent Bank projects and government efforts have done so. The contribution of the subprojects financed to sustainable growth is less certain given high effective rates of protection and no expost assessment of the economic efficiency of subproject resource allocation. Under the training component, there was only limited effort to develop local training capacity in the sector, which would have allowed for a more sustainable ability to gain and maintain high skill levels in Sri Lanka. The principal lessons of the project are that (i) initial conditions favoring successful implementation of FILs include a conducive environment for private investment, sound and well-managed intermediary institutions, and minimal government interference in the activities of the intermediaries; (ii) a successful FIL can only meet an immediate shortage in the supply of long-term finance and to be sustainable it must be accompanied by measures to develop the long-term capital market; and (iii) in a situation where the Government adopts policy reforms in principle but faces implementation obstacles, support for consensus- building and wider participation in the reform agenda may be necessary. The PAR ratings agree with those of the Implementation Completion Report. Project outcome is rated as satisfactory, institutional development as substantial, sustainability as likely, and Bank and Borrower performance as satisfactory. Attachment 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. u FOR OFFICIAL USE ONLY Contents Preface ...................... 3 Basic Data Sheet............ . .................................. 5 Evaluation Summary ............................................. 7 1. Background ........................3...... ...............13 Prior Bank Assistance ........................................ 13 2. Project Objectives and Design..................5.........15 Constraints in the Industrial Sector ................. ................ 15 Project Objectives...................................... 15 Project Design................................................... 16 Quality at Entry................ ........................... 17 3. Implementation and Evaluation of Results.................................. 19 The Financing Component ........................................19 Project Results ................... .................... 19 Sustainability ................................. .......21 The Institutional Upgrading Component ..................................22 Institutional Performance ................................22 Contribution of the Training Component .............. ........23 Sustainability ............................................24 Technical Assistance for Industrial Policy Reform Components ..... ........25 Contribution of the Industrial Policy Reform Component ............25 Developments in the Industrial Policy Framework ....... .........25 4. Conclusions and Lessons ..........................................29 Financial Intermediation for Industrial Development ........ ..........29 Institutional Upgrading of Financial Intermediaries ........ .......... 29 Industrial Policy Reform .................................30 Summary of Assessments: Sri Lanka Second Industrial Development Project .......................3... .........31 This report was prepared by Carl Jayarajah and Asita De Silva (Consultant) who audited the project in August 1995. Norma Namisato provided administrative assistance. The report was issued by the Country Policy, Industry, and Finance Division (Manuel Peflalver, Chief) of the Operations Evaluation Department (Francisco Aguirre-Sacasa, Director). Ti document has a restricted distribution and may be used by recipients only in the performance of their ofcial duties. Its contents may not otherwise be disclosed without World Bank authorization. 2 Annexes I. World Bank Lending to Sri Lanka...................................35 II. Related World Bank Loans to Sri Lanka .........................36 III. Sri Lanka: Economic Indicators ....................................37 IV. Comparison of Key Economic Indicators Between Sri Lanka and East Asian Countries............................................39 V. Industrial Production in Sri Lanka (1985-1994) ................. .........40 VI. Loans Approved by Long-term Credit Institutions (1987-1994) ....... ........41 VII. Summary Information of NDB Subloans Under C 1692 ....................42 VIII. Summary of DFCC Subproject Information Under C1692..................43 IX. NDB Financial Performance Summary (1985-1994) ................. .....44 X. DFCC Financial Performance Summary (1985-1994) ............... .....45 XL. NDB Lending Profile 1986-1994 .................................46 XII. DFCC Subprojects Under IDP II (C 1692) ......................47 XIII. NDB Subprojects Under IDP II (C 1692) .......................48 3 Preface This is a Performance Audit Report (PAR) for the Second Industrial Development Project (C 1692-CE) in Sri Lanka. The project was approved in May 1986 for the amount of US$20 million. A total of US$19.7 million (99 percent) was disbursed and the balance canceled. The loan was closed on June 30, 1994. The PAR was prepared by the Operations Evaluation Department (OED). The report is based on the Staff Appraisal Report, the Project Completion Report, the official files of the project, and Bank sector studies. A mission visited Sri Lanka in July 1995 and discussed the relevance and effectiveness of the project with the Government of Sri Lanka (GOSL), the intermediary development banks, and representative sub-borrowers. Their cooperation and assistance in the preparation of this report is gratefully acknowledged. The performance ratings of this PAR are the same as those of the PCR prepared by the Country Operations, Industry, and Finance Division of Country Department II, South Asia Region. The PAR expands on the PCR's analysis of the project's impact on the capacity development of the development finance institutions and on GOSL's industrial development policy. The draft PAR was sent to the Borrower for comments but none were received. 5 Basic Data Sheet SECOND INDUSTRIAL DEVELOPMENT PROJECT (CREDIT 1692-CE) Key Project Data (amounts in US$ million) Appraisal Actual or Actual as % of estimate current estimate appraisal estimate Total project costs 94 72.9 78 Loan amount 20 19.7 99 Cofinancing 20 26.7 Cancellation 0 0.3 Date physical components completed 12/93 6/94 Economic rate of return na na Cumulative Estimated and Actual Disbursements FY87 FY88 FY89 FY90 Appraisal estimate (US$M) 3 6 10 15 Actual (US$M) 6.3 13.2 16.7 19.3 Actual as % of appraisal 210 220 160 129 Cumulative Estimated and Actual Disbursements (Cont.) FY91 FY92 FY93 FY94 Appraisal estimate (US$M) 17 18.5 19.5 20 Actual (US$M) 19.7 21.3 21.6 22.3 Actual as % of appraisal 116 115 111 111.5 Date of final disbursement: February 1995 Project Dates Original Actual Initiating memorandum 3/85 3/85 Negotiations 7/85 7/85 Letters of Development Policy Board approval 5/86 5/86 Signing 7/86 7/86 Effectiveness 10/86 10/86 Closing date 12/93 6/94 6 Staff Inputs (staff weeks) FY85 FY86 FY87 FY88 FY89 FY90 FY91 Preappraisal 17.9 11.7 Appraisal 10.3 21.9 Negotiations 1 Supervision 14.6 8.5 12.8 8 5.9 Other Total 28.2 34.6 14.6 8.5 12.8 8 5.9 Staff Inputs (staff weeks) (Cont.) FY92 FY93 FY94 Total Preappraisal 29.6 Appraisal 32.2 Negotiations 1 Supervision 8.9 8.3 7.8 74.8 Other 8 8 Total 8.9 8.3 15.8 145.6 Other Project Data Borrower/Executing Agency: Republic of Sri Lanka FOLLOW-ON OPERATIONS Operation Credit no. Amount Board date (US$ million) Third Industrial Development Project 1948 43.8 7/26/88 Fourth SMI Project 2250 45 5/28/91 Private Finance Development Project 2484 60 4/20/93 7 Evaluation Summary Project Background and Design 1. This is the Performance Audit Report of the Second Industrial Development Project (IDP II) in Sri Lanka, approved in May 1986 for US$20 million. The Government of Sri Lanka (GOSL) had adopted market-oriented, outward-looking economic policies since 1977 and saw GDP growth rates increase from 3.1 percent per annum between 1970 and 1977 to 5.6 percent per annum between 1978 and 1986. Although growth declined to 2.2 percent per annum between 1986 and 1989, a further round of stabilization and adjustment measures and the end of a revolutionary movement in 1989, led to renewed GDP growth of 5.5 percent per annum between 1990 and 1994. This economic growth has been associated with increasingly healthy private industrial activity, and manufactured exports in particular. 2. The project was among a series of Bank operations to help develop the private industrial sector in Sri Lanka. Prior to the project, seven lending operations along with economic and sector work and an ongoing policy dialogue had helped establish two (originally publicly-owned) development finance institutions (DFIs), open the long-term lending market to the private sector, assess the environment for private industrial development, and institute tariff and industrial policy reforms. Subsequent to the project, a further six related loans including an economic restructuring credit furthered the policy environment for private investment, helped the two DFIs reach high financial and operational performance standards and become privately owned, and began to address constraints to the development of the long-term capital market. Objectives and Components 3. The objectives of IDP II were to assist GOSL (a) meet the existing demand for term financing in the industrial sector; (b) develop the institutional capacity of the participating DFIs; and (c) help develop and implement a comprehensive industrial development strategy. A credit component of US$18 million was to be channeled through the Development Finance Corporation of Ceylon (DFCC) and the National Development Bank (NDB) for on-lending to private and public manufacturing enterprises. The capacity of the DFIs was to be strengthened through a US$1 million technical assistance component focused on corporate strategy development, management information systems, and managerial and staff training. A further US$1 million technical assistance component was to help develop and implement an integrated industrial development strategy encompassing tariff structure, industrial incentives, fiscal and monetary policies, and public enterprise efficiency. Quality at Entry 4. While the project's success was acknowledged to depend on continued government commitment to policy reforms, and to be at risk due to the ongoing ethnic conflict, a number of conditions existed at the point of entry that weighed in favor of successful implementation of the project. They included: (i) the rapid commitment of the predecessor Industrial Development Project (IDP 1) which indicated the extent of private sector demand for industrial finance under existing conditions; (ii) the long association between the Bank and the DFIs along with their satisfactory performance under IDP I which provided a measure of their likely performance; (iii) 8 a sustained commitment to private sector development on the part of GOSL since 1977 and the implementation of a number of measures promoting private investment in industry; and (iv) an impending IMF financial sector rationalization study that was to provide the basis for financial sector reforms and the establishment of positive real interest rates. Implementation and Evaluation of Results The Financing Component 5. The financing component achieved its objective of meeting part of the demand for term financing for industrial projects. A total of 77 projects were financed and both DFIs reported a high percentage of performing subprojects. Most subloans were made to medium-sized, local market-oriented, private sector firms concentrated in the greater Colombo area. The sectoral distribution of subprojects is consistent with the growth pattern of industries during the period. Although it appears that many of the industries operated under high effective rates of protection, the DFIs did not conduct ex post economic analyses of the subprojects financed. 6. While it is not possible to isolate the project's contribution to growth in the sector, it is apparent that the private industrial sector significantly expanded its role in the economy and that various Bank interventions have substantially contributed to this outcome. The credit in itself did not address the causes of the lack of term financing for industry and both long-term debt and equity markets remain underdeveloped. NDB and DFCC remain the main suppliers of long-term credit to industry and they in turn have continued to depend on official credit lines for their sources of funds. 7. Continued growth and efficiency in the industrial sector is considered likely given the commitment of successive governments to building the private industrial sector as the engine of the country's growth and the depth of policy reforms achieved since 1977. In addition, while the project in itself did not address the underlying obstacles to increased availability of long-term finance, GOSL has been addressing these issues through policy reforms with the support of the Bank. In terms of the subprojects financed, limited efforts to assess the economic efficiency of their resource allocation prevents a conclusion as to their conformity with Sri Lanka's comparative advantage and thus contribution to sustainable economic growth. Institutional Upgrading Component 8. The project was one of a series of Bank operations that together have significantly helped develop the local financial institutional capacity to support industrial development. Bank assistance helped establish the DFIs which have both emerged as well-managed and financially sound institutions. The Government has minimized its influence over their operations, reducing its holdings in DFCC from 39 percent to 31 percent in October 1991 and privatizing NDB in March 1993. Both institutions have experienced and effective Chief Executive Officers and are able to attract high quality professional staff. The project allowed the DFIs to maintain intensive staff training and, following recommendations of a November 1993 Bank supervision mission, both DFIs established comprehensive human resource development programs. 9. Given the need for both DFIs to provide high returns to their shareholders, the two institutions seem to have moved away from a number of activities associated with their initial "development" objectives. For example, there is no felt need for systematic follow-up and 9 assessment of subprojects (whether performing or not) to establish the economic viability of industries financed. Both DFCC and NDB, moreover, have only limited sector research capabilities and only a limited degree of technical assistance is provided to borrowers by the DFIs to complement their lending services. 10. The sustainability of the project's contribution to institutional development is considered likely given the sound position of both DFIs. Although both institutions remain dependent on official sources of finance, their strong financial and management positions place them in a position to respond to GOSL's efforts to broaden the local and private foreign sources of long- term finance. For the training programs, however, the project did not address the need for local training capacity. This is still lacking and in need of attention to ensure a more sustainable ability to gain and maintain advanced skill levels. Industrial Policy Reform Components 1. The objectives of the industrial reform component were to help develop an integrated industrial development strategy, to sustain the progress in tariff reform, address industrial and export incentive issues and support public sector restructuring. A number of useful studies were funded by the project to support public enterprise reform and financial sector reform, but overall results in this area were limited. While successive governments have produced promising policy reform agendas, the implementation of an effective integrated industrial development strategy encompassing tariff structure, industrial incentives, fiscal and monetary policies, and public enterprise efficiency, as envisioned in the project's design, is not yet complete. It is apparent that political and social ramifications, wider macroeconomic implications, and established interest groups all mitigated against smooth implementation of sweeping industrial policy reforms. As a result, a continuing range of obstacles hamper the development of the private industrial sector. Lessons Financial Intermediation for Industrial Development * The project benefited from an environment conducive to private industrial investment, sound intermediary financial institutions, concurrent implementation of a broad financial sector reform program, and sustained government commitment to the removal of macroeconomic and sector distortions and to consolidating the position of private industry as the "engine of growth." * Assessment of a financial intermediary's contribution to sustainable growth in the real sector is difficult in the absence of expost analysis of the economic efficiency of resource allocation for at least a sample of subprojects. Such data collection and analysis should be required of participating DFIs in order to enable such an assessment, provide an indication of the level of distortions still present in the economy, and identify the degree to which the intermediary's economic appraisal skills are adequate. * While a successful financial intermediary loan can meet an immediate shortage in the supply of resources for long-term investment, to have a sustainable impact it must be accompanied by measures to develop the long-term capital market. 10 Institutional Upgrading of Financial Intermediaries * The good performance of the DFI's was facilitated by a supportive private investment climate, minimal government interference in their activities, and competent chief executive officers. * To ensure the relevance and effectiveness of individual training programs, it is essential that training programs be matched against comprehensive Human Resource Development programs and training plans in the beneficiary institutions. Industrial Policy Reform * In a situation where the Government accepts and adopts policy reforms in principle but faces implementation obstacles, effective Bank interventions must consider the need to support increased public participation and consensus building on policy reform decisions. For example, support for identifying and disseminating the costs and benefits of various reform measures with evidence from cross-country experiences contributes to this end. SUMMARY OF ASSESSMENTS: SRI LANKA SECOND INDUSTRIAL DEVELOPMENT PROJECT (C-1692) RATING TYPE RATING ASSESSMENT The project's objectives were relevant to the needs of the country at the time. The project responded to the immediate needs of the industrial sector for long-term finance and to the longer-term needs for policy reform and institutional development. The credit component achieved its objective of meeting part of the demand for long-term industrial finance by financing a number of viable OUTCOME SATISFACTORY industrial projects. The institutional capacity upgrading component achieved its objective by enhancing the technical and managerial capacity of the privatized DFIs. The project was unable to achieve industrial and trade policy reforms to the extent originally planned, although mid-course TA re-allocations contributed a number of useful studies to support ongoing financial reforms. The project also contributed to wider financial sector development by furthering the policy dialogue with the government and maintaining positive on-lending interest rates. The project was one of a series of lending and non-lending services provided by the Bank that together have significantly developed the local institutional capacity to support industrial development. Bank assistance helped establish the DFIs, open the INSTITUTONAL SUST AL long-term lending market to the private sector, introduce sector policy reforms, achieve high financial and operational DEVELOPMENT performance levels among the DFIs, and has more recently turned to developing the capital market and removing additional constraints to private sector development. IDP II helped the DFIs consolidate their presence in the long-term lending market, establish human resource development plans, and allowed continuity in upgrading technical and managerial skills. The project's contribution to industrial development is considered sustainable given the commitment of successive governments to developing the role of the private sector and market resource allocation in the economy and sufficient depth in policy reforms achieved since 1977 to enable reversal in the medium term unlikely. The DFIs have been privatized and are in sound financial and operational positions and poised to lead further development in the provision of financial services to the industrial sector. The SUSTAINABILITY LIKELY project's contribution to sustainable growth through the sub-project's financed is less certain given high effective levels of - protection in the sub-sectors of the industries financed along with limited efforts to assess the economic efficiency of subproject resource allocation. The project in itself did not address the deficiencies in the capital market, although subsequent Bank projects and government efforts have addressed this concern. There was also limited effort to develop local training capacity in the industrial and financial sector which would allow for a more sustainable ability to gain and maintain high skill levels in the country. During the course of the project, GOSL implemented industrial, financial and macro policy reforms that were essential to the success of the project as well as to sustainable growth in the industrial sector. However, difficulties in following through on a BORROWER number of reforms with perceived negative wider social, political, or economic effects, however, has resulted in an incomplete PERFORMANCE SATISFACTORY reform program and has prevented the emergence of a comprehensive and timely industrial development strategy. During the project, GOSL also had difficulty in properly monitoring and supervising disbursements under the TA components due to weaknesses in the IDP monitoring unit. Audited accounts of the project were substantially delayed. The project was timely and consistent with the Bank's and GOSL's strategy for development of the sector. During the course of BANK the project, Bank staff addressed an initial deficiency by establishing a unit to coordinate the TA and industrial policy reform PERFORMANCE components. A mid-course request that the DFIs develop annual training plans to enable better judgment as to the relevance of individual training requests provided the impetus for comprehensive human resource development plans in the DFIs. Special conditions required the appointment of consultants to develop an industrial policy reform program, completion of five COVENANT public sector improvement reviews, and implementation of the industrial policy reform program. GOSL complied with these SATISFACTORY covenants although as discussed above, a range of difficulties has prevented a more complete implementation of the broad policy reform agenda. In addition, reporting for the TA component was weak and audited accounts of the project were substantially delayed. Note: These ratings agree with the performance ratings provided in the PCR of the project prepared by the South Asia Region 13 1. Background 1.1 Sri Lanka has been moving from an inward-looking, centrally-planned, and public-sector dominated economy toward an outward-looking, market-driven economy since 1977. Major government policy shifts over this period have included the removal of price controls and trade and investment restrictions; rationalization of the foreign exchange and tariff regimes; the restructuring and privatization of public enterprises; introduction of special incentives and institutional support to exporters; and development of a regime to attract direct foreign investment. GDP growth rose from an average of 3.1 percent between 1970 and 1977 to 5.6 percent between 1978 and 1986. It subsequently slowed to an average of 2.2 percent per annum between 1987 and 1990, but following a further round of adjustment measures that enhanced the market-oriented incentive framework and the end of a violent revolutionary movement in 1989, growth picked up again to over 5.5 percent per year between 1990 and 1994. 1.2 This economic growth has been associated with increasingly healthy private industrial activity, and industrial export production in particular. Between 1981 and 1991, the private sector's share of manufacturing increased from 41 percent to 89 percent while the contribution of manufacturing to GDP rose from 14.4 percent to 18.5 percent. The private sector share of manufacturing assets rose from 34 percent to 69 percent and in 1992 private firms accounted for 99 percent of total employment in manufacturing. Industrial exports rose from 34 percent of total exports in 1984 to 69 percent in 1992 while the private sector's share of exports increased from 46 percent of the total in 1978 to 96 percent in 1992. Growth in the manufacturing sector has been led by the textile and wearing apparel industry which grew from 25 percent of total manufacturing in 1986 to 41 percent in 1994. Prior Bank Assistance 1.3 The World Bank has a long history of support for the Government of Sri Lanka's (GOSL's) industrial development efforts. A 1952 World Bank miss on to Sri Lanka recommended the creation of a development finance institution (DFI) and the Development Finance Corporation of Ceylon (DFCC) was created in 1955 to promote private industrial development. Since 1967, a total of twelve Bank loans amounting to US$274 million have been made to Sri Lanka to support industrial development. Early operations were confined to meetiig the foreign exchange requirements of private manufacturers through a series of financial intermediary loans through DFCC. Since 1979, Bank assistance has broadened to include institutional development in the industrial sector, analysis of the industrial policy framework, and the promotion of macro- and sector-level policy reforms that influence the environment for industrial activity. 1.4 The Operations Evaluation Department (OED) of the World bank has evaluated six industrial sector operations in Sri Lanka. Three financial intermediary loans for private industrial finance between 1969 and 1977 successfully supported DFCC as the only source of foreign exchange for private firms and contributed to private industrial development to the degree possible in the prevailing public sector-oriented environment. Two subsequent intermediary loans to support the small and medium industry sector, approved between 1979 and 14 1981, introduced sector policy reform as an element of the financial intermediary loans and helped develop the National Development Bank (NDB) which was established in 1979 as a competitor of DFCC. These loans were found to have unsatisfactory outcomes, however, due to the predominance of traditional industries with limited growth potential among subprojects financed and the limited capacity development achieved among the participating commercial banks. 1.5 The immediate predecessor of the Second Industrial Development Project (IDP II), the Industrial Development Project (IDP I), was approved in July 1983, became effective in January 1984 and closed in September 1988. Its objectives were to meet the demand for long-term credit among private industrial enterprises and build the institutional capacity of the intermediary institutions (NDB and DFCC) through training and expert advice. It also proposed to support GOSL's industrial policy reform through a series of studies and advisory services on key areas including tariff reform, industrial incentives, and the restructuring of public manufacturing enterprises. OED's evaluation found the project's financing component satisfactory and that substantial institutional capacity was created among the participating DFIs. The project had more difficulties, however, in its industrial policy reform components. Progress on public enterprise reform was constrained by a perceived half-hearted government commitment to this effort and it was also concluded that the Bank had focused too narrowly on promoting trade policy reform to the exclusion of competing macroeconomic priorities and a more integrated policy reform approach. 15 2. Project Objectives and Design Constraints in the Industrial Sector 2.1 Despite GOSL's progress in fostering private industrial development since 1977 and the past growth in private industrial investment, a number of conditions existed in 1985 that constrained further growth and efficiency in the sector. According to the Staff Appraisal Report (SAR) for IDP II (and a 1987 OED study I) they included: * The lack of a comprehensive framework of industrial and trade policies that ensured consistent application of government policy instruments. * Uncertain policy signals to private investors, illustrated by the Government's failure to repeal some of the clauses of the 1970 Business Acquisition Act and the conflicting attitudes toward dismantling public manufacturing enterprises among government ministries. * The lack of long-term finance and technical support available to private industrial investors. * The real appreciation of the rupee by some 20 percent, adversely affecting the production of export goods * Continued existence of a high and uneven tariff regime. * Biases in the application of special incentives to manufacturers * High interest rates acting as a deterrent to industrial investment. * An uncertain investment climate due to ethnic violence in the country. Project Objectives 2.2 Following the strong demand for long-term financing displayed under the credit component of IDP I, in late 1984 GOSL requested a second line of credit for on-lending to the private industrial sector. The Second Industrial Development project (IDP II) was approved on May 8, 1986 for US$20 million. Its objectives were to further stimulate growth and efficiency in the industrial sector. Following closely on its heels, IDP II essentially replicated the objectives and design of IDP I. A credit component was to meet the existing demand for term financing of industrial projects established under IDP I while technical assistance was to be provided to develop the institutional capacity of DFCC and the National Development Bank (NDB), the participating DFIs. A further technical assistance component was to help develop and World Bank, Sri Lanka and the World Bank: A Review of a Relationship, Operations Evaluation Department, 1987. 16 implement an integrated industrial development strategy encompassing tariff structure, industrial incentives, and public manufacturing enterprises. Project Design i) The Financing Component (US$18 million) 2.3 The credit line of US$18 million was to be channeled through the two DFIs, DFCC and the National Development Bank of Sri Lanka (NDB), for on-lending to private and select public sector industrial enterprises, with emphasis on agro-industries, light engineering, chemicals, garments, rubber products, construction-related activities, and industrial services. IDA funds were to be supplemented by funds from GOSL and the DFIs to meet local currency costs for training, consultancies, and facilities. An Asian Development Bank (ADB) loan of US$20 million with similar terms and conditions was to be implemented concurrently. 2.4 Initial on-lending rates were set at 14 percent, subject to revision following an ongoing IMF financial sector review and subsequent annual reviews. To ensure proper adjustment of interest rates during the project, disbursement was divided into two tranches of US$10 million each, with the release of the second tranche subject to review of the appropriate interest rate by IDA and GOSL. Subloan eligibility was restricted to projects too large to qualify for financing under the ongoing Small and Medium Industry project (which was US$160,000, excluding permanent working capital), with the maximum subloan size set at US$1.5 million. All public sector proposals and those above US$400,000 (US$300,000 for DFCC) were to obtain prior IDA approval. Proposals submitted to IDA were to include domestic resource cost ratios and internal financial and economic rates of return, with a cut-off ERR set at 15 percent. ii) Institutional Upgrading of the DFIs (US$1 million) 2.5 NDB and DFCC, the two financial intermediaries, had a satisfactory performance under IDP 1. NDB was wholly owned by the Government and DFCC was under significant government control through a 39 percent equity holding. During preparation, both DFIs submitted strategy statements and financial projections for the following two years and agreed to maintain adequate policies on rescheduling, write-offs, and sectoral analyses for problem projects. GOSL also agreed to not change the operating statutes, Chief Executive Officers, or General Managers of the DFIs during the course of the project without consultation with IDA. The main problem areas identified among the DFIs were (i) their lack of definition of future priorities and (ii) the limited diversity in their activities which hindered their ability to compete with other institutions. 2.6 Training and expert consultants were to be employed with project financing to strengthen the capacity of both DFIs. At DFCC, the objective was to develop its operational procedures, management and accounting systems, strategic implementation capacity, and diversification plans. At NDB, it was planned to introduce general banking and corporate restructuring activities, develop project promotion, and prepare strategic action programs. Performance targets including collections ratios, financial performance, and the implementation of strategic plans and training programs were established as conditions for loan effectiveness and the continued access of the DFIs to project funds. 17 iii) Technical Assistance for Industrial Policy Reform (US$1 million) 2.7 To support reform in the public manufacturing sector, US$550,000 was allocated for studies to assess the state of a number of public enterprises and recommend measures for their restructuring. Additional measures were to support implementation of a public enterprise monitoring/signaling system and to upgrade NDB's ability to develop productivity programs for public corporations and finance rehabilitation of enterprises prior to their privatization. Timetables for the completion of corporation-level studies were agreed upon and performance was to be measured by increased autonomy, improved monitoring, and effective rationalization programs in selected corporations. 2.8 The project was also to support implementation of industrial policy reforms through the Ministry of Finance and Planning. An allocation of US$250,000 was made to the Permanent Tariff Commission to develop a five-year action program for further tariff reform. The Industrial Policy Committee was to use US$200,000 to develop a program addressing the tariff regime, incentive structure, fiscal and monetary policies, and public enterprise efficiency and develop an integrated industrial development strategy. A phased program of implementation was to commence by June 30, 1987. Progress would be monitored by supervision missions and measured by reduction in tariff levels, adoption of proper industrial incentives, and progress on interest rate and other financial sector reform. Quality at Entry 2.9 At the time of appraisal, a major risk to the project was expected to be the impact of the ethnic disturbances on the investment climate and profitability of industrial projects. The dependence of project success on continued government commitment to the policy reform process was also recognized. Nevertheless, a number of conditions existed that weighed in favor of the successful implementation of the project. They included: * The rapid commitment of IDP I's credit component which provided a strong indication of the existing demand for long-term finance among private investors under existing conditions. * A long history of association with the two participating DFIs and their performance under the recently implemented IDP I which provided a good measure of their likely performance under the project. * Since 1977, the Government had displayed a sustained underlying commitment to market-oriented reforms. Although incomplete, a set of policy measures had been implemented to remove constraints to private industrial investment as well as encourage market-driven resource allocation. * An impending IMF financial rationalization study was to provide the basis for financial sector reforms and the establishment of positive real interest rates. 19 3. Implementation and Evaluation of Results 3.1 The project became effective in October 1986 and its financing component was fully committed by October 1988, seventeen months ahead of schedule. An amount totaling US$1 million of the credit component became re-available due to canceled subprojects and US$700,000 of this was transferred to the TA component. The remainder plus 10 percent of the TA component which was eventually not utilized, totaling US$500,000, was canceled at completion. Delays in implementing the TA component caused the project to close on June 30, 1994, six months behind schedule. 3.2 While the financing component was implemented without procedural difficulties, implementation of the TA component was hampered by a lack of monitoring and coordination. In 1988, an IDP Monitoring Unit (IMU) was established to coordinate the flow of information between the Bank and the various TA beneficiaries of the successor IDP III project and to undertake the coordination function under IDP II as well. The unit was first established at the National Planning Department (NPD) of the Ministry of Finance and Planning, then transferred to the External Resources Department (ERD) in April 1989, relocated again to the NPD in 1991 and then at the request of Bank supervision staff, moved back to the ERD in 1993. Its limited staff resources hampered its effective contribution to IDP II, however, and as a result, audited reports of the account were substantially delayed and the various disbursements under the TA component were not reconciled until 1993. 3.3 The additional funds transferred from the credit component, were used for a number of studies to support the ongoing financial sector reform program. They were: (a) an operational review of the government-owned People's Bank; (b) a similar review of the also government- owned Bank of Ceylon; (c) 1993 international financial audits of People's Bank and the Bank of Ceylon; (d) a consultancy and computer for the IDP Monitoring Unit; (e) a consultancy to the Institute of Chartered Accountants of Sri Lanka (ICASL); (f) a study for the Finance and Banking Commission; and (g) training for the Central Bank and commercial banks. The Financing Component Project Results 3.4 In April 1987, the mechanism for determining lending rates under the project was established, subject to twice-yearly review. Following results of the IMF financial sector study, GOSL agreed to rationalize its interest rate structure and ensure that interest rates remained positive in real terms. Under IDP II, GOSL would lend to the DFIs at the Central Bank's Average Weighted Prime Rate (AWPR) over the past six months, less a five percent spread for the DFIs. The DFIs could in turn on-lend these funds at any rate above this amount sufficient to cover their costs. During the project, final on-lending interest rates ranged between 14 percent and 19 percent while inflation during the bulk of the subproject commitment period (1985-1988) ranged between 8 percent and 12 percent. The exception to positive real interest rates at the time of commitment was a Rs. 68 million loan to the Ceylon Petroleum Corporation with funds made 20 re-available under the credit component in August 1990 at 17.5 percent interest when inflation in 1990 was 21 percent . 3.5 The financing component achieved its objective of meeting a portion of the demand for term financing for industrial projects. DFCC provided 23 loans to 20 borrowers under the project, valued at Rs. 271.62 million, 88 percent of which consisted of IDA funds. NDB financed 54 projects for a total amount of Rs. 575 million, 67 percent of which was IDA funds. Both DFIs reported a negligible percentage of non-performing subprojects, as measured by satisfactory repayment of the subloans. Two of the projects NDB approved were closed, while all the others are reported to be profitable and maintaining repayment schedules. All DFCC sub- borrowers are reported to be profitable and current in their repayment schedules with the exception of Translanka Investments which, following financial mismanagement and the closure of their operations, was taken over by the Central Bank and prepared for resale. 3.6 The average size of the IDA component of subloans made was US$282,000. DFCC subloans averaged Rs. 11.81 million, with large loans of above Rs. 20 million comprising 64 percent of the total amount. NDB subloans averaged Rs. 7.14 million, with large loans above Rs. 20 million accounting for 39 percent of IDA funds committed. Both DFCC and NDB projects were concentrated in the greater Colombo area. Limited infrastructure outside Colombo, particularly power, communications, and transport were reasons given by industrialists for the concentration of investments in and around Colombo. 3.7 By sector, DFCC-financed projects were concentrated among food, beverage, and tobacco industries (55 percent), fabricated metals (17 percent), and chemical industries (10 percent). A single loan of Rs. 67.3 million to the Ceylon Tobacco Company for a new line of machinery accounted for 25 percent of total DFCC subproject financing. Seventy-two percent of DFCC funds went to private sector firms. Three export projects that were financed were a tea bag manufacturing line, a garment factory, and a granite tile processing plant and these accounted for 10 percent of the lending amount at an average of Rs. 4 million per loan. NDB- financed projects were concentrated in fabricated metals and chemicals (30 percent), textiles and wearing apparel (24 percent), and food, beverage and tobacco (22 percent). The large share of the metal and chemicals sector included the single loan to the Ceylon Petroleum Corporation which accounted for 20 percent of IDA funds NDB lent under the project. The Ceylon Tobacco Company received a Rs. 50 million loan, raising its share of total IDP II funds to 20 percent . Nearly 80 percent of funds lent by NDB were for expansion or modernization projects, while 8 percent were for new projects, including a textile weaving mill, a packaging plant, and a rope manufacturing operation. 3.8 The sectoral distribution of subprojects is consistent with the pattern of industrial growth and value added as measured by the Central Bank's data. The food, beverage, and tobacco industry grew by an average of 18 percent a year between 1986 and 1994 with an average annual value added content of 55 percent of total output in the sector. Basic metal production grew by 40 percent per year with an average value added content of 62 percent The textile and wearing apparel sector which grew by 27 percent per year had a lower value added content of 26 percent, while value addition in the chemical, petroleum, and plastic sector averaged 19 percent of output. At the same time, however, these industries operated under high protective barriers. The effective rate of protection for the textiles and wearing apparel sector in 1991 was estimated at 127 percent; 129 percent for the fabricated metal industry; and 62 percent for the food, beverage and tobacco industry. 21 3.9 It is not possible to isolate the extent to which alleviating the financing constraint to the degree this project did, contributed to growth in the sector. Nevertheless, as discussed above, it is apparent that the private industrial sector has significantly expanded its role in the economy. Total manufacturing has grown by 20 percent per annum since 1984 and in 1992, it accounted for 18 percent of GDP, up from 14 percent in 1984. The private sector's share of gross domestic investment has risen from 10 percent of GDP in 1985 to 18 percent in 1993 and its contribution to gross capital formation from 9.6 percent of GDP to 19.9 percent . Exports as a percentage of GDP grew from 22 percent in 1985 to 28 percent in 1993 and among exports, industrial products increased their share from 34 percent of the total in 1984 to 69 percent in 1992. The private sector's share of exports, meanwhile increased from 46 percent in 1978 to 96 percent of total exports in 1992. 3.10 While the credit contributed to the growth of long-term lending to the industrial sector (which grew by an average of 29 percent per year between 1987 and 1994), the sources of finance for long-term private investment in Sri Lanka remain limited. In 1992, an estimated 80 percent of private investment was financed from retained corporate earnings. The stock market remains relatively small, with a low turnover rate, poor liquidity, and concentrated trading activity preventing it from being a major source of investment capital. Long-term debt instruments such as corporate bonds and debentures have not developed and commercial banks confine themselves to short-term lending (other than the housing and tourism sectors). NDB and DFCC have remained the only providers of long-term lending to industry (averaging 52 percent and 48 percent of the market share respectively over the past seven years). 3.11 The project thus did not address the causes of the lack of term financing for industry and NDB and DFCC have continued to depend on the government and international donor credit lines for their sources of funds. The availability of sources of long-term finance has been constrained by a low level of savings in Sri Lanka, which averaged 12.8 percent of GDP between 1985 and 1992 (compared to 35.8 percent in Korea, 33.9 percent in Malaysia, and 33.5 percent in Indonesia). The bulk of domestic savings, moreover, is held by a handful of government-owned institutions (namely, the Employees Provident Fund, the Employees Trust Fund, the National Savings Bank, and the Insurance Corporation of Sri Lanka) who invest in long-term government securities at managed rates or in short-term securities where there is little secondary activity. As a result, the dependence of the DFIs on external sources of finance has continued and development of a range of debt and equity sources of capital for industrial investment has been limited. Sustainability 3.12 Continued growth and efficiency in the industrial sector in Sri Lanka is dependent on a conducive macroeconomic and industrial sector policy environment. Sri Lanka has achieved considerable progress in this area since 1977 and successive governments have reaffirmed their commitment to building the private industrial sector as the engine of the country's growth. While further timely and relevant reforms remain to be implemented by GOSL, it is unlikely that the progress achieved to date will be reversed in the medium term. 3.13 In terms of the contribution of the subprojects financed under the project, there has been only limited effort to collect expost information by the DFIs, partly because the subprojects financed did not experience repayment difficulties. While both DFIs report a high percentage of performing subprojects, it is apparent that a large percentage of the industries financed were 22 local-market oriented and that they were operating under high effective rates of protection. The limited subproject data prevents a closer examination of their potential viability in an undistorted environment and conformity with Sri Lanka's comparative advantage and thus contribution to sustainable economic growth. 3.14 In addition, while the project enabled the DFIs to meet long-term lending requirements, it did not address the underlying obstacles to increased availability of long-term finance for industrial projects. The DFIs remain dependent on government credit lines for their sources of finance even after privatization and the debt and equity markets are inadequately developed to be substantial sources of project finance. GOSL has recognized this constraint and policy directions include mobilizing the large assets of the public savings institutions, permitting private firms and the DFIs to borrow in private overseas markets, and reducing corporate taxes to increase retained earnings. A recent IDA project (Private Finance Development Project) approved in 1993, also addresses some of these issues. The Institutional Upgrading Component Institutional Performance 3.15 Both DFCC and NDB have emerged as well-managed and financially sound institutions. Financial performance ratios for both institutions continue to be substantially above the covenanted standards of the project and the two DFIs are among the most profitable companies in Sri Lanka. The Government has minimized its influence over their operations, reducing holding in DFCC to 30 percent in 1991/92 and privatizing NDB in 1993. Both DFIs have experienced and effective Chief Executive Officers and are able to attract high quality professional staff. In 1995, DFCC was identified by an AsiaMoney magazine survey of institutional investors as the best managed company in Sri Lanka. 3.16 Along with a large increase in total approvals (which grew from Rs. 551 million to Rs. 4,246 million between 1986 and 1994, at average rate of 32 percent per year), NDB has reduced its interest margins, offered variable interest rates to long-term borrowers, diversified its activities (into leasing, refinance, performance guarantees), and administers the Small and Medium Industry Loan Scheme. Its direct lending portfolio has seen an increase in private sector clients, which accounted for 93 percent of approvals between 1991 and 1994, up from 88 percent between 1986 and 1990. NDB has also tended toward larger loans. Average loan size increased from Rs. 6 million in 1986 to Rs. 14 million in 1994, while the percentage of large loans above Rs. 25 million increased from 17 percent in 1986 to 64 percent in 1994. Small loans of Rs. 10 million and below now account for 12 percent of NDB's total annual approvals, down from 40 percent in 1986. 3.17 NDB's portfolio has also seen an increase in the service sector (primarily housing and commercial building) which accounted for 30 percent of NDB's total approvals between 1991 and 1994, up from 19.8 percent between 1986 and 1990. Among the major manufacturing subsectors, the food, beverage and tobacco sector has seen a decreased share of NDB's approvals, reduced from an average of 17.2 percent of the portfolio between 1986 and 1990 to 13.6 between 1991 and 1994. Textiles and wearing apparel increased from 10.3 percent between 1986 and 1990 to 17.7 between 1991 and 1994, while metals and chemicals decreased from 21.7 percent to 16.7 percent. Among the industries with the highest level of percentage growth were 23 wood and paper products which grew by 230 percent per year between 1986 and 1990, agriculture and agro-business which grew by 60.5 percent per year, and hotels which grew by 40 percent per year. 3.18 At one point during the project, in April 1989 NDB's collection ratio dropped below 75 percent and IDA requested suspension of further subproject processing until remedial action could be taken. NDB addressed this concern by reviewing its top 58 defaulters, finding that 35 of them were potentially viable and rescheduling repayments of nineteen defaulting hotel operations. NDB's collection ratio has subsequently increased reaching 93 percent in 1994, reflecting an improvement in the quality of appraisals and follow-up procedures. The ratio of bad debts to total performing portfolio also decreased substantially in recent years due to NDB's maintenance of a high provision for bad debts (i.e., higher than IDA and Central Bank of Sri Lanka recommended minimums). With the accumulation of substantial provision for bad debts, NDB has decided to relax these standards and include consideration of the value of the security on loans as well as the current market value of equity investments in determining the level of provisions for bad debts. 3.19 As with NDB, DFCC maintained high (and above standard) provisions for bad debts in recent years and has attained comfortable accumulated provisions. Its collection ratio has also improved steadily, reaching 92.3 percent in 1994. Return on total assets increased from an average of 3.1 percent between 1986 and 1990 to an average of 6 percent between 1991 and 1995. The ratio of net profit to average equity has also been at comfortable levels, although it was recently reduced due to a large injection of equity in 1993. DFCC has also diversified into leasing, working capital loans, refinance beyond import content-only, operates a unit trust and a venture capital company, and underwrites public share issues. It is presently contemplating establishing a customer deposit base to increase its financial resources. 3.20 DFCC's direct lending increased six-fold between 1987 and 1994, from Rs. 1,834 million to Rs.10,745 million. By sector, 1994 approvals showed a decline in food, beverage, and tobacco which accounted for 11.5 percent of approvals compared to an average of 16.7 percent between 1984 and 1989; textiles and wearing apparel which accounted for 6 percent of approvals as opposed to an average of 10.8 percent between 1984 and 1988; financing insurance, real estate and business services, with a 6.6 percent share in 1994 as opposed to a 12.6 percent share between 1984 and 1989; and chemicals and chemical products which declined from a 11.8 percent share between 1984 and 1989 to 3 percent in 1994. Sectors with an increased share include hotels, restaurants and trade which accounted for 18.2 percent of approvals in 1994 compared to 1.5 percent between 1984 and 1989; and transport, storage and communications which increased from 4 percent between 1986 and 1990 to 8 percent in 1994. Contribution of the Training Component 3.21 DFCC utilized US$534,000 and NDB US$360,000 provided under IDP II, on a grant basis, to finance several consultancies and a large number of overseas training programs for their staffs. Implementation of the component was initially hampered by delays, poor coordination, and a lack of human resource development plans among the beneficiary institutions. Ad hoc requests from the Ministries and the DFIs prevented proper direction for the programs and made Bank staff assessment of whether training requests were benefiting capacity development or not difficult and ineffective. A Bank supervision mission in November 1993 recommended that each 24 beneficiary prepare an annual training program which specified training needs, participants, and selected training programs. 3.22 As a result, both NDB and DFCC have established comprehensive human resource development programs. With privatization, NDB has also been able to provide its senior management with attractive remuneration packages, enhancing its ability to recruit and retain high caliber individuals. The training plan is focused on improving appraisal and technical skills and overseas training is used to improve appraisal skills among junior officers and enable senior managers to deepen their skills and assimilate relevant new ideas and products. DFCC has also been able to attract and retain high quality staff. Its training program allocates 60 percent of its budget to technical skill development (mainly in supervisory and appraisal capacity development) and the balance 40 percent on management development. In-house training focuses on information technology, client exposure, business communication, and technical skills. 3.23 There is a degree of uncertainty among both DFIs as to how best ensure that both the individual and the institution benefit optimally from training programs. Along with the need for measurable indicators of the benefits of individual training programs, a need is felt for work- exchange programs which are considered more beneficial than classroom training as well as long-term programs versus the short-term programs that currently predominate. Mid-career training is a further area identified for increased focus. In addition, basic appraisal and technical skills that are transferred in a class room setting are considered as likely to be effective in local or in-house training. Opportunities to network, advance managerial skills, and develop new products and methods are more likely to be gained from overseas training and work-exchange programs. Overall, both DFIs express the sentiment that IDA funding for training provides a significant opportunity for organizational development that it may be lost if it is not ensured that the process is provides maximum institutional returns. 3.24 While the IDA training component strengthened the appraisal and managerial capacity of the DFIs, it did not address the need for the training of trainers or the development of local training capacity in the financial and industrial sector. Moreover, the approval of individual overseas training programs is a cumbersome and ineffective process. The project showed that matching training programs with the HRD plans was essential for effective implementation of the component. It was also observed that the fact that the training component was attached to the financing component may have constrained its effectiveness. As the closing date approached, training requests were rushed through, allowing for a possible decline in quality. Sustainability 3.25 The DFIs are both in sound positions and their strong financial and operational performance is likely to continue in the current liberalized financial sector. Maintenance of sound appraisal, managerial, and technical skills is also likely given good HRD plans and a culture favoring continuous training in the DFIs. IDP II, however, encouraged the use of overseas training over local training and it is apparent that local training capacity in the financial and industrial sector is lacking. To ensure the sustainability of effective and up-to-date skills among the staff of the DFIs, this is an area that needs development. The lack of local training capacity also constrains the opportunities for financial sector skills to be transferred to private firms, commercial banks, as well as the Government. 25 Technical Assistance for Industrial Policy Reform Components Contribution of the Industrial Policy Reform Component 3.26 The project funded a number of studies on public enterprises that evaluated their commercial viability and recommended measures to improve their operational efficiency. A Public Manufacturing Enterprises Sensitivity Study was prepared to standardize the accounts of a number of corporations and evaluate their commercial viability. At the time of appraisal, such a study was considered an essential phase of the restructuring and privatization process. The Ceylon Plywood Corporation Performance Improvement Study and the Ceramics Corporation Study recommended measures to restructure the respective corporations in order to improve their efficiency and diversify their activities. At the time of project appraisal, such studies were considered essential to support the restructuring of these corporations prior to their privatization. However, under the new Premadasa government which arrived in December, 1988, the privatization process was accelerated and GOSL began a program of privatization without restructuring. The relevance of the completed studies was therefore reduced, although they were subsequently used in the preparation of the Public Enterprises Adjustment Credit (C2185). 3.27 The additional funds allocated to the TA component funded a number of useful studies to support the ongoing financial sector reform efforts. A consultancy to the Banking and Finance Commission produced recommendations for a strategic action plan in the Central Bank; the study for the Institute of Chartered Accountants of Sri Lanka (ICASL) by Coopers and Lybrand and a subsequent series of seminars enabled new accounting standards to be adopted and disseminated by ICASL; and the external audit of the two government-owned commercial banks (People's Bank and the Bank of Ceylon) in 1991 revealed that they were both technically bankrupt. Also funded was an assessment of the industrial statistics collection procedures which led to a common reporting format for industrial statistics for both the Central Bank and the Department of Industrial Statistics. An updating of a 1983 compilation of Industrial Statistics was also funded, although the publication of this document has been delayed by a backlog in the government printing unit. 3.28 An issue arising out of the implementation of this component concerns the lack of transparency and participation in the system of identifying and commissioning such studies and their lack of circulation and openness for in-house discussion. A central depository for such studies from which a wider audience could access the reports would allow broader feedback and enable better ex post assessment of the relevance and effectiveness of different studies and consultancies. Overall, the impact of the project's TA for industrial policy reform was limited in relation its broad original objectives. As discussed below, while GOSL adopted a comprehensive reform program in 1989 which was supported by other Bank operations, obstacles to the implementation of reforms has prevented the emergence of an integrated industrial development strategy. Developments in the Industrial Policy Framework 3.29 In 1989, Sri Lanka received a Structural Adjustment Facility from the IMF, in 1990 an IDA Economic Recovery Credit (ERC), and in 1991, an IDA Public Manufacturing Enterprise Adjustment Credit (PMEAC) which together aimed at improving macroeconomic stability, reducing policy-based market distortions, and removing structural impediments to market- 26 oriented growth. In 1989, GOSL also introduced a comprehensive industrial development strategy aimed at improving the environment for private industrial development and encouraging market-driven resource allocation. Main elements of the announced policy were: (i) prudent macro-economic policies to stabilize the economy; (ii) special incentives to encourage investment in exports; (iii) mobilization of greater domestic and foreign savings; (iv) encouragement of foreign investment as a means of increasing capital inflows, technology and access to markets; (v) reform of public enterprises and neutrality between public and private enterprises; (vi) efforts to promote small industrial activity; (vii) training of human resources to improve the productivity of labor; (viii) removal of administrative barriers such as import licensing; and (ix) development of financial instruments and institutions to develop the capital market and facilitate long-term investments. 3.30 Specific measures that followed the policy decisions included the reduction of subsidies on a number of commodities such as wheat flour, petroleum, electricity and passenger transport. Government revenue was increased by a defense levy and special excise taxes and the budget deficit was reduced from 16 percent of GDP in 1988 to 8 percent in 1992 and the current account deficit fell to 5 percent of GDP in 1992. Incentive reforms included the simplification of the tariff regime, reduction of export taxes from 3 percent of total government revenue to 0 percent in 1993, removal of foreign exchange controls, and rationalization of the income tax regime. An effort was also made to remove bureaucratic hindrances of private sector activity and removal of investment licensing procedures has been a particularly effective measure. 3.31 Despite this progress, a clearly defined and comprehensive strategy to develop the industrial sector has not emerged. As a result, continued bottlenecks exist that hamper the opportunity for private industry in Sri Lanka to further its contribution to sustainable growth. A consistently high rate of inflation which has averaged 13 percent a year since 1978 along with an inefficient banking sector dominated by the two state commercial banks has resulted in a high cost of finance which is identified as the single most important constraint to operations by industrialists. Since 1989, the real exchange rate index has appreciated by 11 percent despite a nominal depreciation of 28 percent. The overvaluation of the rupee is considered a significant obstacle by exporters. Other difficulties facing the industrial sector include outdated labor laws (especially those on labor reductions), cumbersome custom procedures, and poorly administered and uneven incentive programs. 3.32 Further policy-induced disincentives to industrial production include the high level of corporate taxation, the continued existence of significant tariff barriers that bias against exports, and the uneven treatment of duty exemptions for importers. At present, a 20 percent business turnover tax, a 4.5 percent defense levy, and a 35 percent corporate tax reduce retained earnings in companies. Enterprises that manufacture for the local market are at a particular disadvantage as they do not benefit from the exemptions and incentives offered to exporters. Moreover, enterprises manufacturing for the local market are effectively discouraged from switching from the local market to the export market as only start-up operations qualify for special incentives for exporters. The inability of GOSL to address poor telecommunications, roads, and power supply outside Colombo continues to deter a more dispersed location of industries. The limited pool of managerial talent available to private industrialists, stemming from the public education system's production of non-English speaking liberal arts graduates (contrary to the demands of the private sector) is a constraint to development. 27 3.33 Overall, GOSL's industrial policy reform effort has lacked the comprehensive and strategic nature envisioned in the project's design which is what is required to consolidate the role of private industry as the engine of growth. It is apparent that political and social ramifications, wider macroeconomic implications, and established interest groups all mitigated against the smooth implementation of the project's broad industrial policy reforms components. Given the anticipated obstacles to implementation of reform measures as well as a widespread view in the private sector that insufficient transparency exists in the Government's formulation and implementation of policy reforms, GOSL's reform effort could benefit from greater public awareness and debate on the costs and benefits of various policy reform measures required. 29 4. Conclusions and Lessons Financial Intermediation for Industrial Development 4.1 The project achieved its objective of meeting a portion of the demand for long-term finance among private industry. It also contributed to financial sector reform by furthering the policy dialogue with the Government and maintaining positive real interest rates to sub- borrowers. However, the project did not alleviate the longer-term constraint faced by the DFIs in accessing sources of funding for long-term finance, which is derived from a low level of domestic savings, an inefficient banking sector, and the investment of local savings in government treasury bills with little secondary activity. The contribution of the subprojects financed to sustainable growth is difficult to assess given limited information on their comparative advantage or their dependence on policy-induced distortions to maintain profitability. Some lessons of this experience include: * This financial intermediary operation benefited from an environment conducive to private industrial investment, sound intermediary financial institutions, concurrent implementation of a broad financial sector reform program, and sustained government commitment to the removal of macroeconomic and sector distortions and to elevating the position of private industry as the "engine of growth." * While a successful financial intermediary loan can meet an immediate shortage in the supply of resources for long-term investment, to have a sustainable impact it must be accompanied by measures to develop the long-term capital market. * Assessment a financial intermediary loan's contribution to sustainable growth in a real sector is difficult in the absence of expost analysis of the economic efficiency of resource allocation in the subprojects. Such data collection and analysis might be required of participating DFIs in order to enable such as assessment, provide a bottom- up indication of the level of distortions still present in the economy, and identify the degree to which the intermediary's ex ante economic appraisal skills are adequate. Institutional Upgrading of Financial Intermediaries 4.2 The project contributed to the development of the long-term lending market by consolidating the presence of the two DFIs and enhancing their appraisal, technical, and managerial skills. It significantly contributed to the development of comprehensive Human Resource Development plans in the DFIs and thus to the likelihood of continued development of relevant skills in these institutions. At the same time, the project encouraged external training for the transfer of both basic and advanced skills but did not address the need for the development of local trainers and training capacity in the financial and industrial sector which can lead to a more sustainable ability to gain and maintain advanced skill levels in Sri Lanka. 30 * The good performance of the two DFIs was facilitated by a supportive private investment climate, minimal government interference in their activities, and competent chief executive officers. * To ensure the relevance and effectiveness of individual training programs, it is essential that training programs be matched against comprehensive Human Resource Development programs and training plans in the beneficiary institutions. * Activities such as subsector research, systematic follow-up of subprojects (whether performing or not), technical assistance for sub-borrowers, and assessment of subproject comparative advantage are activities with apparently less immediate returns for the profit-oriented DFIs and of lesser priority. If such activities are considered in the longer- term development interest, then special measures may be needed to induce their undertaking. * Bank-funded training programs without cost-sharing components on the part of the beneficiary do not promote the development of local training capacity, although development of local trainers and training capacity enhances the long-term sustainability of gaining and maintaining advanced financial and industrial sector skills in the country. Industrial Policy Reform 4.3 The Government's market-oriented industrial policy framework, begun in 1977 and reinforced from 1989 onward with financial sector reform and stabilization measures has significantly altered the environment in favor of private investment in industry and market- driven resource allocation. The IDP II project endeavored to further policy reforms achieved under previous Bank operations and catalyze the emergence of a comprehensive industrial development strategy. The project funded a number of studies that contributed to ongoing financial sector reforms, although difficulties in implementing additional reforms limited the ability of the project to reach its broader objective. * Ex post assessment of the relevance, effectiveness, and efficiency of various policy studies and consultancies under a project can be improved if a broader range of participants and interested parties are encouraged to access and provide feedback on the end products. * A financial intermediary loan with a technical assistance component focused on a few ministries is not a sufficient instrument to catalyze broad industrial policy reforms when wider political, social, and economic ramifications are expected to result from the implementation of the specific reform measures. * In circumstances where the Government accepts and adopts reform policies in principal but faces implementation obstacles, effective Bank interventions must consider the need to support increased public participation and consensus building on policy reforms decisions. For example, support for identifying and disseminating the costs and benefits of various reform measures with evidence from cross-country experiences contributes to this end. SUMMARY OF ASSESSMENTS: SRI LANKA SECOND INDUSTRIAL DEVELOPMENT PROJECT (C-1692) RATING TYPE RATING ASSESSMENT The project's objectives were relevant to the needs of the country at the time. The project responded to the immediate needs of the industrial sector for long-term finance and to the longer-term needs for policy reform and institutional development. The credit component achieved its objective of meeting part of the demand for long-term industrial finance by financing a number of viable OUTCOME SATISFACTORY industrial projects. The institutional capacity upgrading component achieved its objective by enhancing the technical and managerial capacity of the privatized DFIs. The project was unable to achieve industrial and trade policy reforms to the extent originally planned, although mid-course TA re-allocations contributed a number of useful studies to support ongoing financial reforms. The project also contributed to wider financial sector development by furthering the policy dialogue with the government and maintaining positive on-lending interest rates. The project was one of a series of lending and non-lending services provided by the Bank that together have significantly developed the local institutional capacity to support industrial development. Bank assistance helped establish the DFIs, open the INSTITUTIONAL SUBSTANTIAL long-term lending market to the private sector, introduce sector policy reforms, achieve high financial and operational DEVELOPMENT performance levels among the DFIs, arid has more recently turned to developing the capital market and removing additional constraints to private sector development. IDP II helped the DFIs consolidate their presence in the long-term lending market, establish human resource development plans, and allowed continuity in upgrading technical and managerial skills. The project's contribution to industrial development is considered sustainable given the commitment of successive governments to developing the role of the private sector and market resource allocation in the economy and sufficient depth in policy reforms achieved since 1977 to enable reversal in the medium term unlikely. The DFIs have been privatized and are in sound financial and operational positions and poised to lead further development in the provision of financial services to the industrial sector. The SUSTAIM4BILITY LIKELY project's contribution to sustainable growth through the sub-project's financed is less certain given high effective levels of protection in the sub-sectors of the industries financed along with limited efforts to assess the economic efficiency of subproject resource allocation. The project in itself did not address the deficiencies in the capital market, although subsequent Bank projects and government efforts have addressed this concern. There was also limited effort to develop local training capacity in the industrial and financial sector which would allow for a more sustainable ability to gain and maintain high skill levels in the country. During the course of the project, GOSL implemented industrial, financial and macro policy reforms that were essential to the success of the project as well as to sustainable growth in the industrial sector. However, difficulties in following through on a BORROWER number of reforms with perceived negative wider social, political, or economic effects, however, has resulted in an incomplete PERFORMANCE reform program and has prevented the emergence of a comprehensive and timely industrial development strategy. During the project, GOSL also had difficulty in properly monitoring and supervising disbursements under the TA components due to weaknesses in the IDP monitoring unit. Audited accounts of the project were substantially delayed. The project was timely arid consistent with the Bank's and GOSL's strategy for development of the sector. During the course of BANK the project, Bank staff addressed an initial deficiency by establishing a unit to coordinate the TA and industrial policy reform PERFORMANCE components. A mid-course request that the DFIs develop annual training plans to enable better judgment as to the relevance of individual training requests provided the impetus for comprehensive human resource development plans in the DFIs. Special conditions required the appointment of consultants to develop an industrial policy reform program, completion of five COVENANT public sector improvement reviews. arid implementation of the industrial policy reform program. GOSL complied with these COMPLIANCE SATISFACTORY covenants although as discussed above, a range of difficulties has prevented a more complete implementation of the broad policy reform agenda. In addition, reporting for the TA component was weak and audited accounts of the project were substantially delayed. Note: These ratings agr, with the performance ratings provided in the PCR of the project prepared by the South Asia Region 33 ANNEXES 35 WORLD BANK LENDING TO SRI LANKA Annex I 1955-1985 1986-1995 Total 1955-1995 Number of Loans 47 27 74 Original Value (US$ million) 994 1097 2091 Revised Value (US$ million) 767 1039 1805 By Sector (% of Revised Value) Agriculture 45% 10% 24% Education 0% 6% 3% Financial 2% 24% 15% Industrial/IDF 9% 6% 7% Multi Sector 2% 10% 7% Pop. Health & Nutrition 0% 7% 4% Power 19% 11% 14% Telecommunications 4% 5% 5% Transportation 14% 6% 9% Urban 0% 10% 5% Water Supply & Sanitation 5% 6% 6% By Lending Instrument (% of Revised Value) Emergency Reconstruction Loan 0% 5% 3% Sectoral Adjustment Loan 0% 12% 5% Financial Intermediary Loan 12% 0% 7% Specific Investment & Maintenance 16% 8% 12% Specific Investment Loan 68% 64% 66% Structural Adjustment Loan 2% 10% 7% Technical Assistance Loan 2% 1% 2% RELATED WORLD BANK LOANS TO SRI LANKA Original Revised Revised/ n u a L/C Approval Closing Outcome Institutional Rated FY Project Name Amout Amount Original Sustainability Task Manager No. Date Date (sat/unsat) development By $m I$m Amountst Ssaiailt L0520 1968 DFCC I 16-Nov-67 30-Jun-72 4.0 2.2 55% LO634_1970 DFCC II 15-Jul-69 30-Apr-76 8.0 2.9 36% Satisfactory PAR C0566 1975 DFCC III 26-Jun-75 30-Sep-79 4.5 4.2 92% Satisfactory PAR C0742 1978 DFCC IV-- 13-Sep-77 31-Dec-81 8.0 7.5 94% Satisfactory _rUncetai PAR C0942 1979 SMI I 26-Jun-79 30-Jun-85 16.0 15.1 94% Unsatisfactory Uncertain Negligible PAR C1182 1982 SMI II 13-Oct-81 31-Dec-87 30.0 29.8 99% Unsatisfactory Uncertain Negligible PAR B. CU KOK C1401 1984 IDP I 12-Jul-83 30-Sep-88 25.0 25.0 100% Satisfactory Likely Substantial PAR SEGERLUND C1692 1986 IDP II 8-May-86 30-Jun-94 20.0 19.6 98% Satisfactory Likely Substantial PAR HADIAN C1860 1988 SMI III 15-Dec-87 30-Jun-93 20.0 19.2 96% Satisfactory Uncertain Substantial PCR QURESHI C1948 1989 IDP IHl 26-Jul-88 30-Jun-95 43.8 43.8 100% Satisfactory Likely Modest ICR HADIAN C2128 1990 ECONOMIC RESTRUCTURING 1-May-90 i 31-Dec-94 106.6 105.3 99% Satisfactory Likely Modest ICR ALBA C2185 1991 PUBLIC MANUF. ENT AD 27-Nov-90 30-May-96 125.8 125.8 100% Satisfactory Likely Substantial ICR PRYWES C2250 1991 SMI IV 28-May-91 30-Jun-97 45.0 45.0 100% HADIAN C2484 1993 PRIVATE FIN. DEVELOPMENT 20-Apr-93 30-Jun-99 60.0 60.0 100% NANGIA SRI LANKA: ECONOMIC INDICATORS (Page 1) 199 191 992 193 194 Average Average Average 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 989 1991994 1985-14 GDP Real GDP Growth 5.0% 4.3% 1.5% 2.7% 2.3% 6.2% 4.8% 4.3% 6.9% 5.6% 3.2% 1 5.6% 4.4% g-0%-! 10% 10%10 1fo0% 10 --%-0 Government Consumption (% of GDP) 0%1% 9% 10% 10% 10% 10% Private Consumption (% of GDP) 78% 78 7% 78% 77% 76% 77% 75% 75% 1 75% 78% 76% 77% Gross Domestic Capital Formation (% of GDP) 24% 24% 23% 23% 22% 22% 23% 24% 25% % 23% 24% 23% Gross Domestic Savings (% of GDP) 12% 12% 13% 12% 12% 14% 13% 15% 16% 15% 12% 15% 13% Exchange Rates (Rupees) Market Rate: Per US$, Period Average 27.2 28.0 29.4 31.8 36.0 40.1 41.4 43.8 48.3 49.4 30.5 44.6 37.5 Market Exchange Rate Index (1990=100) 148 143 136 I26 112 100 97 91 83 81 133 90 112 Interest Rates (Percent Per Annum) Treasury Bill Rate 13% 10% 7% 14% 15% 14% 14% 16% 17% -1 12% 12% 12% Deposit Rate (National Savings Bank) 12% 12% i12% 2% 14% 16% 14% 14% 14% 14% 12%1 14% IUnding Rate (DFCC) 14-21 14-18 14-19 14 -19 14-19 14-19 16-22 17.5-23.5 18-24 18-22 Lending Rate (NDB) 7.0-14 7.0-14 7.0-14 8.2-15 10.3-17.5 11-18.5 11.3-18.5 13.9-20.5 13.7-20.5 13.6-22.0 Prices: Period Averages (1990=100) Inflation Rate (change in CPI) 1.5% 8.0% 7.7% 14.0% 11.6% 21.5% 12.2% 11.4% i 11.7% 8.4% 8.5% 13.1% 10.8% d Inflation Rate (change in WPI) -15.2% -3.0% 13.4% 17.8% 9.1% 22.2% 9.2% 8.7% 7.6% 5.0% 4.4% 10.5% 7.5% Change in Industrial Wage Rate Index 9.3% 5 4 5.1% . 152% 18 % .7% 14.9% . 12.0% 13 12.8% TiJde Balance - - i- _ ~ -_ rts as % of GD ¯ 99 __21% 21% 23 [ 24% 22% 25% 28% 27% 21% 25% 23% Tea Exports as a % of Total Exports 33% 27% 26% 26% 24% 26% 22% 14% 14% 13% 27% 18% 23% Total imports (fob) as a % of GDP 33% 30% 31% 32% 32% 33% 34% 36% 39% 41% 32% 37% 34% Trade Balance (% of GDP) -11.0%' -11.4% -9.9% -109% -9.5% -9.7% - 11.9% -10.7% -11.1% -13.4% -10.5% -11.4% -10.9% Current Account Balance CurrentAccountDeficit (% of GDP) -7.0% 6.7% -5.1% -5.6% -4.4% -3.2% k-5.4% -4.5% -3.8% -6.5% -5.7% -4.7% -5.2% CurrentAccountDefcitbefore grants (% of GDP) -9.9% 9.5% -7 -5.5% -7.6% --5.3% 7. -4.8% -6.5% -5.7% Curren Acout.8% -8.5% -7.1% -.% -6.4% -7.3% Foreign Direct Investment (US$ million) 26.2 29.7 59.5 45.7 19.7 43.4 48.4 122.6 194.5 36.2 81.8 59.0 Foreign Direct Investment (Growth Rate) -20% 14% 100% -23% -57% 120%412% 154% 59% -14% 3% 66% 34% Government Deficit (%of GDP) -16il4I-11.1 il-15.1%I-12 -99 i1% 8.% 83%102 -A1 -%-1.9 SRI LANKA: ECONOMIC INDICATORS (Page 2) 1985 1986 1987 1988 1989 1990 191 92 1993 1 Average Average Average 1985-1989 1990-1994 1985-1994 Percent Financed from Domestic Sources 55% 50% 67% 75% 73% 54% 45% 1 68% 69% 66% 64% 60% 62% Percent Financed from Foreign Sources 45% 50% 33% 25% 27% 46% 55% 32% 31% 35% 36% 40% 38% Net Domestic Borrowing (% of GDP) 5.3% 5.1% 5.8% 9.5% 6.3% 4.2% 4.3% 3.7% | 4.9% 6.5% 6.4% 4.7% 5.5% 4--50- 5.2 -1.7--0 ---4--- M_ _ -9% 3.2% NeForeign Borrowing (% of GDP) 4.4%750% 2.9% 3.2% 2.4% 3.6% 5.2% 1.7%'2.0% 2.0% 3.6% 2.9% 3.2% o--_ 18.7% 17.-4 %'1.9 -- -0% __ 17.5 17.8% 18.0% 17.9 Tax Revenue as a-% of GDP 18 17.9% 16.2% 18.9% 19.0% 18.3% 18.0%T17.5% 17.2% 17.8% 18.0% 17.9% Tax Revenue as a % of Total Revenue 84% 84% 83% 86% 88% 90% 89% 89% 89% 90% 85% 89% 87% Revenue from Corporate Taxes (% of Total) 11% 9% 8% 8% 5% 6% 8% 8% 7% 8% 8% 8% Revenue from Individual Taxes (% of Total) 4% 4% 4% 4% 4 4 5 5% 5% 4% 5% 4% Revenue from Export Duties (% of Total) t8% 54% 5 % 3% 14% 1% 1 0% 5% 2% 3% Revenue from Import Duties (% of Total) 22% 25% 26% 26% 28% 25% 2 24% 21 %cr 25% 24% 25% 0n 39 Annex IV COMPARISON OF KEY ECONOMIC INDICATORS BETWEEN SRI LANKA AND EAST ASIAN COUNTRIES Economic Performance Indicator Period Sri Lanka Korea Malaysia Thailand Indonesia GDP per capita (US Dollars, current prices at 1992 540 6790 2790 1840 670 nominal exchange rate) Average per capita real GDP growth rate (% 1960- 1992 2.5 6.5 4.2 5.2 3.4 p.a.) Average GDP growth rate (% p.a.) 1980 - 1990 4.3 9.7 6 7.6 5.5 Average Gross Domestic Investment (% of GDP 1985- 1992 23 32.9 27.3 27.8 28.3 p.a.) Average Gross Domestic Savings (% of GDP 1985- 1992 12.8 35.8 33.9 296 33.5 p.a.) _____________ _____ _________j_____ Average investment rate (% p.a.) 1980 - 1990 25.4 30.6 30.8 26.8 23.9 Average return on investment (% p.a.) 1980 - 1990 16.7 31.7 19.5 28.4 23 Average Inflation Rate (% p.a.) 1980 - 1991 12.2 6.6 4.2 4.5 9.5 Average fiscal deficit (% of GDP) 1980- 1991 -10.81 -1.05 -6.22 -2.33 -1.55 Average current account deficit (% of GDP) 1980 - 1991 -6.97 0.4 -3 -4.4 -2.5 Average External Debt (% of GDP) 1980 - 1991 72.3 16.2 37.7 36.5 43.6 Average External Debt (% of Exports) 1980- 1991 251.3 47.1 44.9 94.9 231.2 Total Bank Deposits (% of GDP) 1990 21.3 35.9 57.1 78.2 38.2 Private Sector Credit (% of GDP) 1990 19.6 59 72.2 79.3 50.2 Source. Ahmed, Sadiq and Priya Ranjan, Promoting Growth in Sri Lanka: Lessons from East Asia, The World Bank, Policy Research Paper No. 1478, June 1995 40 Annex V INDUSTRIAL PRODUCTION IN SRI LANKA (1985-1994) GROWTH IN MANUFACTURING SECTORS (% CHANGE) Manufacturing Sector 1985 1986 1987 1988 1989 1990 T 1991 1992 1993 1994 Food Beverage and Tobacco 16 7 13 26 19 37 14 16 13 Textiles, Wearing Apparel and Leather Products 27 28 18 22 27 21 30 12 Wood and Wood Products (including furniture) -10 7 -5 4 8 11 2 Paper and Paper Products 9 6 9 -2 18 18 29___- - LT7__ 33 --- - Chemicals, Petroleum, Coal Rubber, and Plastic 2 Products ~-15 22 2 -12 76 -5 1 1 1 Products 1 Non-metallic Mineral Products (except petroleum and 1oI1 5 5 165 26 8 coal) __ _ __ __ _1 j_ __ _ __ _ Basic Metal Products 128 9 59 63 27 26 13 Fabricated Metal Products, Machinery, and Transport 10 Equipment 14 23_2 2 17 -1 20 Manufactured Products (n.e.s.) + ____5 30 14 15 3 12 28 20 TOTAL 7_ 17 ~11 202 34 20 31 33 18 SHARE OF TOTAL MANUFACTURING BY SECTOR (% OF TOTAL) Manufacturing Sector 1985 1986 1987 1988 1989 1990 1 1991 1992 1993 1994 Food, Beverage, and Tobacco 27 29 2 27 28 29 25 24 24 Textiles, Wearing Apparel and Leather Products 25 29 32 34 34 32 33 40 42 41 and Wood Products (including furnture)_8 19 2 1 1 1 1 1 191 1 1 1 Foo, Bverge,andTobcco27 9 2 2 28 2 2 2 2 2 2 Paper and Paper Products 3 3 3 3 2 2 2 2 2 Chemicals, Petroleum, Coal Rubber, and Plastic 32 34 27 28 25 19 24 19 17 17 18 ProductsI Non-metallic Mineral Products (except petroleum and 9 8 8 7 8 coal) Basic Metal Products 0 1 1 1 1 Fabricated Metal Products, Machinery, and Transport Equipment 4 4 4 5 515 5 4 4 4 Manufactured Products (n.e.s.) 0 0 0 0 0 0 2 2 2 2 TOTAL 100 100 100 100 100T100 100 100 100 100 MANUFACTURING VALUE ADDED BY SECTOR (%) Manufacturing Sector 1985 1986 1987 1988 1 1989 1990 1991 1992 1993 1994 Food Beverage and Tobacco 59156 56 56155 55 5 54 Textiles, Wearing Apparel and Leather Products 27 26 29 26 26 26 25 27 27 26 Wood and Wood Products (including furniture) 60 62 60 72 71 67 1 68 1 68 Paper and Paper Products50 50 51 5 54 56 Chemicals, Petroleum, Coal Rubber, and Plastic Products 11 24 25 28 29 11 16 17 16 17 Non-metallic Mineral Products (except petroleum and 59 54 51 58 20 63 60 56 5864 coal) Basic Metal Products 31 13 16 15 10 20 18 19 19 Fabricated Metal Products, Machinery, and Transport 64 Eupet66 64 60 61 62 65 64 61 61 61 EquipmentI 59 5645 4 Manufactured Products (n.e.s.) 71 52 -5 51 51 47 46 45 5 TOTAL 35139 38 3937 36 37 37 36 37 Source: Central Bank of Sri Lanka 41 Annex VI LOANS APPROVED BY LONG-TERM CREDIT INSTITUTIONS (1987-1994) 1987 - 1994 BENEFICIARY SECTOR Ian i Rs. Share of AveIrag mil. Total (%) Ane Change INDUSTRY 25,355 45 +29 of which: Mechanical Processing of Plantation Crops 30 +112 Mechanical Processing of Agricultural Crops 96 0 -14 Engineering and Building Trade 531 1 +57 Mining 115 0 +221 Food, Beverage, and Tobacco 5,022 9 Textiles, Wearing Apparel, and Leather Products 5,437 8 +64 Rubber and Plastic Products 1,895 3 +56 Metal, Chemicals, and Engineering 6,422 13 +116 Other_Manufacturing ___ __ ___ 4,118 6 +64 -AGRICULTURE 1,839 3 +64 TOURISM 2,924 4 +162 COMMERCIAL (SERVICE INDUSTRIES) 2,432 1 3 -29 FINANCIAL 3,492 6 -65 HOUSIN-G _9,250 20 +16 REDEMPTION OF DEBT 160 0 +290 OTHER LOANS 11,870 19 +44 TOTAL LOANS APPROVED 57,320 100 +27 NDB AND DFCC MARKET SHARE OF LOANS APPROVED 1987 -1994 BENEFICIARY SECTOR DFCC NDB Others 41+ INDUSTRY 48 52 0 AGRICULTURE 41 36 +4 TOURISM 36 36 2228 4 COMMERCIAL (SERVICE INDUSTRIES) 12 23 25 FINANCIAL 30 66425 HOUSING -20 4 96 REDEMPTION OF DEBT 10 3 72 OTHER LOANS 15 35 + TOTAL SHARE OF LOANS APPROVED 29 39 +2 Source: Central Bank of Sri Lanka 42 Annex VII SUMMARY INFORMATION OF NDB SUBLOANS UNDER C1692 Loan Amount Percent Average Total Project Percent Average (Rs. million) of Total Loan Size Size (Rs. m) of Total, Project Size By Sector I Agriculture, Agrobusiness, and Fisheries 3 6.1 2 2.0 15.6 2 5.2 Food, Beverage, and Tobacco 9 84.7 22 9.4 147.6 17 16.4 Metals and Chemicals 11 116.9 30 10.6 372.4 42 33.9 Miscellaneous 91 42.1 11 4.7 55.5 6 6.2 Rubber and Leather Products 6 22.0 6 3.7 1 70.8 8 11.8 Service Industries 2 17.1 4 8.6 36.5 4 18.3 Textiles and Wearing Apparel 12 90.7 24 7.6 154.9 18 12.9 Wood and Paper Products 2 5.8 2 2.9 28.4 3 14.2 TOTAL 54 385.4 100 7.1 881.7 100 16.3 By Year of Approval 1986 21 174.2 45 8.3 330.6 37 15.7 1987 26 110.1 29 4.2 185.9 21 7.1 1988 6 26.1 7 4.3 61.9 7 10.3 1990 1 75.0 19 75.0 303.3 34 303.3 TOTAL 54 385.4 100 7.1 881.7 100 16.3 By Purpose Expansion 47 197.5 51 4.2 396.4 45 8.4 Modernization 3 106.5 28 35.5 342.0 39 114.0 New 3 31.6 8 10.5 58.1 7 19.4 Other 1 49.7 13 49.7 85.1 10 85.1 TOTAL 54 385.4 100 7.1 881.7 100 16.3 By Total Project Size Less than Rs. 10 million 32 78.0 20 2.4 116.4 13 3.6 Rs. 10 million to Rs. 20 million 13 97.9 25 7.5 183.5 21 14.1 Above Rs. 20 million 9 209.5 54 23.3 581.8 66 64.6 TOTAL 54 385.4 100 7.1 881.7 100 16.3 By IDA Lending Amount Less than Rs.10 million 45 152.6 40 3.4 338.7 38 7.5 Rs. 10 million to Rs. 20 million 6 80.8 21 13.5 112.1 13 18.7 Above Rs. 20 million 3 152.0 39 50.7 430.9 49 143.6 TOTAL 54 385.4 100 7.1 881.7 100 16.3 43 Annex VIII SUMMARY OF DFCC SUBPROJECT INFORMATION UNDER C-1692 IDA Loan Total Loan Number of Percent of Average IDA Am Percent of Average Loan Contribution Aount (Rs. Projects Total Amount Total Size ________________________(Rs. million) Toa mut million) ___________ By Sector I_ _ _ _ Beverage 4 21.0 8 5.2 20.2 7 5.1 Chemicals 2 30.1 12 15.1 26.4 10 13.2 Fabricated Metal 4 38.7 15 9.7 47.4 17 11.9 Food 4 73.8 29 18.4 64.7 24 16.2 Garments 2 10.5 4 5.2 10.6 4 5.3 Mining 1 2.5 1 2.5 2.5 1 2.5 Non-Metallic Mineral Products 1 3.0 1 3.0 3.0 1 3.0 Packaging 1 12.7 5 12.7 22.6 8 22.6 Paper 1 0.6 0 0.6 0.9 0 0.9 Power 1 2.0 1 2.0 2.0 1 2.0 Printing 1 4.0 2 4.0 4.0 1 4.0 Tobacco 1 52.6 21 52.6 67.3 25 67.3 TOTAL 23 251.4 100 10.9 271.6 100 11.8 By Market Export 7 32.9 13 4.7 27.6 10 3.9 Local 16 218.5 87 13.7 244.0 90 15.3 TOTAL 23 251.4 100 10.9 271.6 100 11.8 By IDA Lending Amount Less than Rs.10 million 16 64.0 25 4.0 58.0 21 3.6 Rs. 10 million to Rs. 20 million 3 44.2 18 14.7 62.5 23 20.8 Above Rs. 20 million 4 143.2 57 35.8 151.2 56 37.8 TOTAL 23 251.4 100 10.9 271.6 100 11.8 By Total Loan Amount Less than Rs. 10 million 16 64.0 25 4.0 58.0 21 3.6 Rs. 10 million to Rs. 20 million 2 31.5 13 15.7 39.9 15 20.0 Above Rs. 20 million 5 155.9 62 31.2 173.8 64o' 34.8 TOTAL 23 251.4 100 10.9 271.6 100 11.8 By Approval Year 1984/85 1 0.2 0 0.2 1985/86 2 65.3 26 32.6 1986/87 6 44.5 18 7.4 1987/88 10 105.6 42 10.6 1988/89 4 -- 35.7 14 8.9 TOTAL 23 251.3 100 10.9 By Ownership Private Sector 182.1 72 Public Sector 69.2 28 251.3 100 44 Annex IX NDB FINANCIAL PERFORMANCE SUMMARY (1985 - 1994) Rupees Million 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 INCOME 259 248 300 387 453 698931 1356 1894 2257 Interest income 255 239 293 374 440 659 860 146 1684 1960 Interest expense (53) (84) (124) (157) (181) (23) (377)t(614) (963) (1126) Net interest income 202 155 169 217 259 42T 8 632 721 834 16 217 25 421 8 3 632 7ll 211 8349 Other income 5 9 8 13 13 38 72 111 211 297 Net income 207 164 176 230 271 460 554 7427 931 1131 LESS OPERATING EXPENSES Personnel Costs 11 11 12 18 20 24 40 40 60 78 Provision for bad and doubtful debts and I fall in value of investments 81 33 70 97 131 165 105 148 117 89 Other administrative and general expenses 9 12 9 11 12 28 30 29 46 58 Total operating expenses 100 55 91 126 162 217 175 216 223 225 Less exceptional item 25 Profit before taxation 106 108 86 104 109 243 379 526 709 881 Provision for taxation (81) (129) (250) (174) (198) PROFIT AFTER TAXATION 106 108 86 104 109 162 250 276 535 683 Annual Percentage Change 2% -21% 22% 5% 49% 154% 10% 94% 28% K_7 ASSETS Cash and short-term funds 484 431 437 374 420 504 303 514 393 572 Investments 51 53 64 94 102 151 218 475 768 1428 Loans and advances 1295 1854 2465 2967 3276 4455 6044 8530 10420 11013 Lease rentals receivable - - -___-_ ---I _7T I -r_28_26_144153366 Investments in Subsidiary & Associate 30 55 85 100 100 100 102 119 214 285 Companies Fixed assets 10 18 47 84 114 129 135 128 124 Other assets 153 154 153 152 154 163 157 19 6 0 31 TOTAL ASSETS 2023 2564 3251 3771 4183 5517 6997 9810 12162 13790 LIABILITIES Borrowings 76 2411 347 4639 7167 8790 Taxation _ 817 g 9 00 10 28 Other liabilities 95 53 8 200 188 319 342 437 995 Dividends payable - - 27 54 27 54 27 27 27 35 61 Total Liabilities 828 1250 1854 2296 2627 3833 5098 7938 9818_10833 SHAREHOLDERS' FUNDS Share capital 600 600 601 600 600 600 600 450 175 175 Convertible-stock 275 275 Reserves 595 715 797 875 956 1084 1289 1422 1894 207 Total shareholders funds 119 1315 1397 1475 1556 1684 1889 187 2957 TOTAL LIABILITIES AND 3251 3771 48 3 5517 987 9810 12162 13790 SHAREHOLDERS' FUNDSI PERFORMANCE INDICATORS I J Earnings per share_(Rs) 2 2 2 2 4 6 6 1 70 Return on average equity (%) 11 10 7 8 8 11 15 15 127 29 a l per Rs 10 share (Rs) 23 2- 2 29 31 3 4 9 42 118 153 Book valuer( 26 28 23 1 Equity/Debt ratio 63:37 54:46 44:56 42:58 39:61 33:67 29:71 21:79 19:81 21:79 Source: NDB 45 DFCC FINANCIAL PERFORMANCE SUMMARY (1985 - 1994) Annex X Rupees Million 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 OPERATING RESULTS Income 111 158 217 260 295 388 535 737 1033 1616 Profit before tax 22 37 56 69 92 145 213 307 419 682 Income tax 5 5 9 10 17 32 59 40 82 128 Profit after tax 17 32 48 59 75 113 153 266 336 554 Annual Percentage Change 88% 50% 23% 27% 51% 35% 74% 26% 65% ASSETS Cash and short-term deposits 43 15 21 52 54 178 177 219 167 401 Receivables 44 524 638 304 330 284 116 163 127 318 Bills of exchange discounted 0 0 0 0 0 1 93 96 135 352 Loans 736 838 1127 1646 1991 2338 2947 3797 5128 6210 Investment securities 72 74 83 89 94 120 183 305 491 675 Finance leases 1 13 37 62 61 73 148 347 667 968 Investment in associate compantes 0 0 0 0 0 0 0 48 145 250 Property and equipment 2 21 29 37 36 32 37 38 42 52 TOTAL ASSETS 898 1485 1935 2190 2566 3026 3701 5013 6902 9226 LIABILITIES Shareholders' funds 160 196 232 276 337 430 549 933 1214 2708 Medium/long-term borrowings & debentures 699 1127 1464 1774 2155 2369 2843 3869 5158 5901 Short-term borrowings 0 39 80 10 0 135 125 50 255 146 Other liabilities 39 123 159 130 74 92 184 161 275 471 TOTAL LIABILITIES 898 1485 1935 2190 2566 3026 3701 5013 6902 9226 PERFORMANCE INDICATORS Return on shareholders' funds, % 10.7 18.0 22.2 23.1 24.6 29.4 31.4 35.9 31.3 28.3 Return on total assets, % 2.0 2.7 2.8 2.8 3.2 4.0 4.6 6.1 5.6 6.9 Earnings per share. Rs 1.1 2.1 3.2 3.9 5.0 7.5 10.2 15.9 17.5 26.7 Market value per share, Rs 7.8 8.1 10.5 12.0 13.5 17.5 62.2 137.5 175.0 550.0 Price earnings ratio 7.0 3.8 3.3 3.3 2.7 2.3 6.1 8.7 10.0 20.6 Rate of dividends 10.0 12.0 12.0 14.0 15.0 20.0 32.5 32.5 32.0 35.0 Dividend cover, times 1.7 2.7 4.0 4.2 5.0 5.6 4.4 4.8 1 6.1 7.0 Source: DFCC Annex XI 46 NDB LENDING PROFILE 1986 - 1994 1986- 1990 1991 -1994 ALL: 1986 -1994 Average Average Average No./Value Annual No./Value Annual No./Value Annual Growth Growth Growth Number of Loans 638 +11.0 771 +8.4 1409 +9.7 Value (Rs million) 4,955 +37.2 13,295 +26.3 18,250 +31.7 Average Pverage Average Percent of Anul% Percent of Anul% Percent of Ana Total Change Total Change Total Change Import/Export Orientation Export-Oriented 27.6 +12.0 27.5 +0.3 27.6 +6.2 Local Market Oriented 72.4 -0.1 72.5 +4.0 72.4 +2.0 By Ownership Public Sector 7.6 +39.3 5.3 -45.5 6.6 -3.1 Mixed 4.3 +5.4 1.9 +1.9 3.2 +9.3 Private Sector 88.0 -1.3 92.8 +1.6 90.2 +0.1 By Sector Food Beverage and Tobacco 17.2 -14.9 13.6 +8.8 15.6 -3.1 Agriculture, Agrobusiness 8.3 +78.0 3.7 +43.0 6.3 +60.5 Textiles, Weaving and Apparel 10.3 +4.5 17.7 +16.1 13.6 +10.3 Wood/Paper Products 2.3 +303.8 1.1 +157.1 1.8 +230.4 Rubber, Leather Goods 8.2 -0.8 5.4 +27.9 7.0 +13.6 Metals and Chemicals 21.7 +39.1 16.7 -16.6 19.5 +11.3 Hotels 0.5 +0.0 6.1 +108.2 3.0 +54.1 Service Industries 19.8 +40.8 30.0 +39.1 24.3 +40.0 Miscellaneous 11.6 -11.5 5.6 -6.4 8.9 -9.0 Source: NDB DFCC SUBPROJECTS UNDER IDP II (C1692) T Loan Amount (Rs IDA Percent of IDA asa%o Borrower Sector Product Location Export/Local million) Percent of Total Contribution (Rs IDA Total Loan Amount Million) Ceylon Tobacco Company Tobacco Cigarettes Colombo Local 67.33 23.7% 52.56 21% 78% Ceylon Biscuits Ltd Food Biscuits Kottawa Local 40.00 14.1% 40.00 16% 100% Lanka Aluminium Fabricated Metal Aluminiumware Ja-Ela Local 19.95 7.0% 15.74 6% 79% Lanka Aluminium Fabricated Metal Aluminiumware Ja-Ela Local 19.95 7.0% 15.74 6% 79% Translanka Investments Food Confectionary Colombo Local 23.30 8.2% 26.55 11% 114% Amico Industries Fabricated Metal Metal Containers Ratmalana Local 2.00 0.7% 1.99 1% 100% Allied Industries Fabricated Metal Steel Blades Mt. Lavinina Local 5.54 1.9% 5.18 2% 94% Acme Aluminium Packaging Flexible Packaging Colombo Local 22.57 7.9% 12.73 5% 56% Lever Brothers Chemicals Soap, Chemicals Colombo Local 26.40 9.3% 24.06 10% 91% Ceylon Brewery Ltd Beverage Beer Nuwara Eliya Local 7.08 2.5% 7.08 3% 100% Quick Tea (Pvt) Ltd Beverage Tea Bags Colombo Export 3.70 1.3% 3.50 1% 95% Quick Tea (Pvt) Ltd Beverage Tea Bags Colombo Export 5.40 1.9% 5.40 2% 100% Unichela (Pvt) Ltd Garments Garments Colombo Export 6.00 2.1% 6.00 2% 100% Unichela (Pvt) Ltd Garments Garments Colombo Export 4.45 1.6% 4.45 2% 100% Uswatta Confectionaries Food Confectionary Ratmalana Local 7.00 2.5% 7.00 3% 100% Beico Link Carbon Chemicals Activated Carbon Kurunegala Export 6.05 2.1% 6.05 2% 100% Non-Metallic Ceylon Glass Company Glass Containers Colombo Local 3.00 1.1% 3.00 1% 100% Power and Sons Pvt Ltd Power Solar Panels Colombo Local 2.00 0.7% 2.00 1% 100% Premadasa Offset Printing Printing Colombo Local 4.00 1.4% 4.00 2% 100% Free Lanka Granite Mining Tiles Colombo Export/Local 2.50 0.9% 2.50 1% 100% James Finlay and Co Beverage Tea Bags Colombo Export 4.97 1.7% 4.97 2% 100% Lanka Colourphoto Paper Photo Prints Colombo Local 0.90 0.3% 0.62 0% 69% Perera and Sons Bakers Food Snacks Colombo Local 0.22 0.1% 0.22 0% 100% TOTAL 284.31 251.34 88% Source: DFCC NDB SUBPROJECTS UNDER IDP II (C-1692) (Page 1) TOTAL Borrower Year Sector Product Purpose PROJECT SIZE TOTAL LOAN Percent of IDA Contribution IDA as a % of AMT (Rs m) Total Lending (Rs m) Project Size S~~~~~~(Rs mn) I____ ___ Thulhiriya Textiles 1986 Textiles and Wearing Apparel Textiles Expansion 30.0 17.5 3.0% 9.8 33% Pugoda Textiles 1986 Textiles and Wearing Apparel Textiles Expansion 40.0 7.0%. 27.3 64% Ceylon Tobacco 1986 Food, Beverage, and Tobacco Tobacco Other 50.6 8.8% 1 58% Sigiri Weaving 1986 Textiles and Wearing Apparel Textiles New 23.0 17.0 3.0%6 72% WM Mendis 1986 Food, Beverage, and Tobacco Distilled Spirits Expansion 16.5 13.0 2.3% 11.9 72% Packwell Lanka 1987 Miscellaneous Packaging Mod 19.5 17.5 3.0% 17.5 90% East West Properties 1987 Service Industries Property _____________________Development Epnin 2. 4325 . 7 Mattegama Textiles 1987 Textiles and Wearing Apparel Textiles Mod 19.2 18.7 3.3% 14.0 73% Ceylon Petroleum 1990 Metals and Chemicals Petroleum Mod 303.3 181.3 75.0 Packaging House 1986 Wood and Paper Products Packaging New 15.1 8.8 1.5% 4.7 31% Naleem Hadjiar 1986 Food, Beverage, and Tobacco Poultry Expansion 2.0 1.8 0.3% 1.1 57% Malba Ropes 1986 RubberandLeatherProducts Ropes New 20.0 13.0 2.3% 0 52% Macson Industries 1986 Metals and Chemicals Wire Mesh Expansion 3.0 3.0 0.5% 6.1 202% Southern Auto 1986 Metals and Chemicals Vehicles Expansion 5.9 5.0 0.9% 57% Lanka Walltiles 1986 Metals and Chemicals Wailtiles Expansion 6.4 5.0 0.9% 5.0 78% Anchor Foods 1986 Food, Beverage, and Tobacco Food Items Expansion 4.0 3.7 0.6% 3.1 77% Lanka Corrupack 1986 WoodandPaperProducts Packaging Expansion 13.3 7.5 134 Li 8% Tanlanka 1986 Rubber and Leather Products Leather Expansion 36.4 4.9 0.9% 2.9 8% SD & CC 1986 Miscellaneous Construction Expansion 10.2 9.0 1:6% 9.0 88% Polypack Industries 1986 Metals and Chemicals Packaging Expansion 3.0 3.0 0.5% D Samson Industries 1986 Rubber and Leather Products Rubber Expansion 1.5 1.3 0.2% 1.1 76% Swastik Textiles 1986 Textiles and Wearing Apparel Textiles Expansion 0.7 0.7 0.6 Thusitha Industries 1986 Textiles and Wearing Apparel Textiles Expansion 5.3 4.8 0.8 4.8 9m% Associated Motorways 1986 Rubber and Leather Products Vehicle Parts Expansion 1.1 1.1 0.2% 0 85% Translanka Investments 1986 Miscellaneous Finance Expansion 5.6 1.7 0.3% 1.7 31% Thusitha Industries 1987 Textiles and Wearing Apparel Textiles Expansion 6.5 3.5 0.6% 3.5 1 54% Central Industries 1987 Metals and Chemicals PVC Pipes Expansion 5.2 2.7 0.5% 0.8 - 16% Lanka Tyre Retread 1987 Rubber and Leather Products Tyres Expansion 10.4 8.5 1.5% 5.5 53% D Samson Industries 1987 Rubber and Leather Products Rubber Expansion 1.4 1.4 0.2% 1.2 Gunaratna Offset 1987 Miscellaneous Printing Expansion 3.8 2.5 0.4% 2.5 66% Colombo Commercial 1987 Metals and Chemicals Machinery Expansion 13.9 12.8 10.4 75% AF Jones Exporters __ 1987 Food, Beverage, and Tobacco Food Items Expansion 6.0 5.0 0.9% 5.0 83% 1.1inasena Ltd 1987 Service Industries Machinery Expansion 16.5 12.0 2.1% 7.7 46% NDB SUBPROJECTS UNDER IDP II (C-1692) (Page 2) TOTAL TOTAL LOAN Percent of IDA Contribution IDA as a % of Borrower Year Sector Product Purpose PROJECT SIZE AMT (Rs m) Total Lending (Rs m) Project Size (Rs m) Agriculture, Agrobusiness, and Andriesz Mariculture 1987 Ficere A Seafoods Expansion 10.0 8.5 1.5% 2.6 26% Fisheries Tootal Thread 1987 Textiles and Wearing Apparel Thread Expansion 6.3 5.0 0.9% 3.9 62% Ceylinco Ltd 1987 Miscellaneous Insurance Expansion 0.2 0.2 0.0% 0.2 88% Aitken Spence 1987 Miscellaneous Printing Expansion 6.0 5.0 0.9% 3.8 64% Christombu Farms 1987 Food, Beverage, and Tobacco Poultry Expansion 1.3 1.0 0.2% 0.9 67% Agriculture, Agrobusiness, and Andriesz and Co. Ltd 1987 Fihere A Seafoods Expansion 4.2 2.6 0.5% 2.6 61% Fisheries Aztec Industries 1987 Metals and Chemicals Asbestos Expansion 2.9 2.3 0.4% 2.3 80% Swastik Textiles 1987 Textiles and Wearing Apparel Textiles Expansion 3.0 2.7 0.5% 1.5 49% Wijeya Offset 1987 Miscellaneous Printing Expansion 3.4 2.6 0.5% 2.2 65% Creations 1987 Textiles and Wearing Apparel Garments Expansion 1.4 1.4 0.2% 1.4 97% Perera Printers 1987 Miscellaneous Printing Expansion 2.0 1.9 0.3% 1.5 77% Aitken Spence 1987 Metals and Chemicals Printing Expansion 3.2 1.3 0.2% 1.2 37% Translanka Investments 1987 Miscellaneous Finance Expansion 4.9 4.7 0.8% 3.7 75% SPI Exports 1987 Textiles and Wearing Apparel Garments Expansion 3.7 3.7 -- 0.6% 3.7 100% Agro Pack Lanka 1987 Metals and Chemicals Poly Bags Expansion 11.0 5.0 0.9% 1.2 11% Agriculture, Agrobusiness, and Andriesz and Co. Ltd 1988 Fihere A Seafoods Expansion 1.4 1.4 0.2% 0.8 61% Fisheries Andriesz and Co. Ltd 1988 Food, Beverage, and Tobacco Seafoods Expansion 3.5 3.3 0.6% 3.0 87% Quest Clothing 1988 Textiles and Wearing Apparel Garments Expansion 13.3 5.0 0.9% 3.7 28% Serendib Asia (Pvt) 1988 Food, Beverage, and Tobacco Restaurants Expansion 21.5 10.9 1.9% 8.4 39% Tess (Pvt) Ltd 1988 Food, Beverage, and Tobacco Ice Plant Expansion 7.7 4.5 0.8% 1.6 21% Tuffline 1988 Metals and Chemicals Foil Expansion 14.6 10.0 1.7% 8.6 59% TOTAL 881.7 [ 575.4 100.0% 385.4 44% IMAGING Report No: 15773 Type: PPAR
Группа Всемирного банка · Project Performance Assessment Report
Sri Lanka - Second Industrial Development Project
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