Sri Lanka - Road Passenger Transport Project

Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Repor No. P-2721-CE REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR A ROAD PASSENGER TRANSPORT PROJECT February 27, 1980 IThis document has a reted distibution and may be usd by recipients only In the perfornee of |their okd duties. Bs cotents may not otherwie be disclosed without World Bank _utorlution.  CURRENCY EQUIVALENTS US$1 = Rs 15.6 Rs 1 = US$0.064 Rs 1 million = US$64,102 WEIGHTS AND MEASURES 1 mile (mi) = 1.609 kilometers (km) 1 square mile (sq mi) = 640 ac (259 ha) 1 foot (ft) = 30.5 centimeters (cm) ABBREVIATIONS AND ACRONYMS CGR - Ceylon Government Railways PPF - Project Preparation Facility RTB - Regional Transport Board SLCTB - Sri Lanka Central Transport Board TTR - Timetable Requirements FISCAL YEAR January I - December 31  FOR OFFICIAL USE ONLY SRI LANKA ROAD PASSENGER TRANSPORT PROJECT Credit and Project Summary Borrower: The Democratic Socialist Republic of Sri Lanka. Beneficiary; Sri Lanka Central Transport Board (SLCTB). Amount: US$53 million equivalent. Terms: Standard. Relending Terms: Except US$0.2 million allocated to the Ministry of Transport for traffic engineering measures, the Gov- ernment of Sri Lanka would relend the proceeds of the credit to SLCTB at 12-1/2% interest per annum for fifteen years, including 3 years' grace period. At the end of the project implementation period, US$44.6 million of the total obligation would be transferred from SLCTB to the Regional Transport Boards on the same terms. Project Description: The Project would: (i) improve the availability and reliability of the public road passenger transportation services throughout the country; (ii) introduce improved maintenance standards, thereby improving fuel efficiency; (iii) improve the financial condition of SLCTB and the Regional Transport Boards (RTBs); and (iv) progressively reduce and by 1983 eliminate government subsidies for public bus operations. The Project includes the follow- ing components: (a) restoration and improvement of SLCTB unit and parts exchange and overhaul facilities; (b) purchase of bus chassis, materials and assembly of buses; (c) improvement of bus maintenance facilities and practices in RTBs; (d) low cost traffic engineering mea- sures designed to improve bus flows on roads; and (e) technical assistance and training for the execution of the project and institution building. The major organi- zational risks have been minimized by satisfactory .arrangements to manage the industrial activities of SLCTB. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contenst may not otherwise be disclosed without World Bank authorization  Estimated Cost: 1/ US$ Million Equivalent Local Foreign Total Restoration of Unit Exchange and Overhaul Facilities 2.5 3.5 6.0 Bus Chassis, Materials and Assembly 11.2 31.1 42.3 Improvement of Depot Maintenance and Operations 7.3 3.3 10.6 Traffic Engineering Measures 0.3 0.1 0.4 Technical Assistance and Training 0.8 1.4 2.2 Subtotal 22.1 39.4 61.5 Physical Contingencies 0.8 0.6 1.4 Price Contingencies 12.0 11.5 23.5 Total Project Cost 34.9 51.5 86.4 Financing Plan: IDA 1.5 51.5 53.0 Government 33.4 - 33.4 Total 34.9 51.5 86.4 Estimated Disbursement: IDA FY 1980 1981 1982 1983 Annual 5.0 21.4 19.0 7.6 Cumulative 5.0 26.4 45.4 53.0 Economic Rate of Return: 20% Staff Appraisal Report: No. 2716-CE, dated February 22, 1980, 1/ Includes taxes and duties of US$7.8 million equivalent.  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA FOR A ROAD PASSENGER TRANSPORT PROJECT 1. I submit the following report and recommendation for a proposed development credit to the Democratic Socialist Republic of Sri Lanka for the equivalent of US$53.0 million on standard IDA terms to help finance a road passenger transport project. Of the proceeds of the credit, US$52.8 mil- lion would be relent to Sri Lanka Central Transport Board (SLCTB) at 12-1/2% interest per annum, with repayment over a period of 15 years, including 3 years grace. PART I - THE ECONOMY 2. The most recent economic report, "Development in Sri Lanka: Issues and Prospects" (Report No. 1939-CE, March 22, 1978) was distributed to the Executive Directors on March 23, 1978. An economic mission visited Sri Lanka in December 1979 to prepare an economic report which is scheduled for distri- bution in May 1980. This section draws on the preliminary findings of that mission. Country Data are provided in Annex I. 3. After several years of relative stagnation, Sri Lanka's economy is experiencing rapid growth and unprecedentedly high levels of savings and investment. This remarkable turnaround is explained by the Central Bank of Ceylon as the "spontaneous reaction of a long repressed economy to its liberalization by the new economic policies initiated in 1977". Until 1977, Sri Lanka's growth performance was below both need and potential. Although GDP growth in the 1960s, at 4.4% per annum, was above the average for low income countries, growth slackened sharply in the 1970-77 period to 2.9% per annum, just below the average for low income countries. Through much of this period, the terms of trade deteriorated steadily, eroding even these modest gains: as a consequence, per capita gross national income rose by a mere 0.9% per annum during the 1960-76 period. The slowdown in economic growth in the 1970-77 period is attributable to a combination of factors, including inadequate investment, poor management of the economy and a policy environ- ment unconducive to growth and investment, which were compounded by bad weather and a sharp rise in the cost of imported food and fuel. 4. The three tree crops - tea, rubber and coconuts - which are still the mainstay of the economy, suffered from low replanting and inadequate in- centives. These problems were exacerbated by a dual exchange rate, introduced in 1968, that discriminated against these crops, and by the uncertainties surrounding a protracted nationalization (1972-75) of the larger estates. After the exceptional output growth of the 1960s, rice yields and cropping intensities declined in the 1970s due to poor institutional support. Invest- ment in manufacturing was low, and the inefficiency of most public and private sector firms nurtured in a highly protected environment resulted in industrial growth of less than 2% per annum. The only bright spots were subsidiary food crops and industrial exports which benefited from good incentives.  5. An inadequate public savings effort, caused by inelastic revenues and an uncontrolled increase in recurrent expenditures, inhibited public investment. Private savings and investment were constrained by an unfavor- able policy environment. The high incremental capital output ratio in the 1970s (5.5 as against 3.5 in the 1960s), reflected the fact that the invest- ment that did take place was both inefficient and highly capital intensive. 6. The poor growth rates and the slow changes in the structure of output matched neither the jobs nor the changes in employment structure that the labor force required. Slow output growth, the excessive capital intensity of investment, the mismatch between the job aspirations of those with post- primary education and the jobs available to them, the post war demographic bulge, and rising female participation rates contributed to a massive increase in open unemployment, estimated at over 1 million, or nearly 20% of the labor force in 1977. 7. In sharp contrast to this poor economic performance, Sri Lanka's social achievements in relation to per capita income have been outstanding. Sri Lanka has about one and one-half times the life expectancy, almost thrice the literacy, one-quarter the infant mortality and half the birth rate that would be expected for a country at its per capita income level. Nutrition levels have been adequate, and in the 1960s there were parallel gains in income distribution. 8. Improvements in the quality of life, in particular the rise in health standards, the spread of education and the availability of subsidized food, have been important factors in the decline in mortality. The increasing age of marriage, the spread of female education and employment, and a vigorous family planning program, have also contributed to a sharp decline in fertility. As a consequence, the growth rate of population has dropped from 2.6% per annum in the 1953-63 intercensal period to 2.0% per annum in the 1963-73 period. Allowing for net migration, population is currently increasing at only 1.7% per annum. 9. The gains in the social field were made possible by favorable initial conditions. Compulsory primary education was introduced as early as 1901. The food ration was introduced in 1942. Thus, at the time of Independence in 1948, Sri Lanka already enjoyed high levels of adult literacy and life expectancy. These initial gains were consolidated and expanded in the post-Independence period through large expenditures on social services and the food subsidy, which accounted for two-fifths to one-half of government revenues in the 1960s and early 1970s. These expenditures were traditionally financed by harnessing the surpluses of Sri Lanka's three major tree crops (tea, rubber, and coconut), which provided the Government with both an easy revenue source and foreign exchange earnings. These surpluses began to disappear in the late 1960s as government policies discriminated against these crops and the terms of trade deteriorated. With growth in other productive sectors in the economy also decelerating in the 1970-77 period, the budgetary resources available for social programs were squeezed by inelastic revenues and rapid inflation. As a consequence, expenditures on social services other than the food subsidy began to decline as a proportion of total current expenditures and GDP, threat- ening the hard-won gains in health and education. In sum, the economy was no  - 3 - longer generating the resources needed to sustain a large program of welfare expenditures. Moreover, the very size of those programs reduced the scope of policy makers to shift resources to development. 10. The policy changes introduced in 1977 following the election of the United National Party, were intended to break this viscious circle. The new Government identified its objectives as the revival and resuscitation of the economy and increased employment through (i) increased capacity utili- zation in the productive sectors, (ii) stimulation of savings and investment, and (iii) efforts to encourage exports and import substitution in foodgrains. A program of policy reforms was developed in close consultation with the IMF. Its principal aim was to dismantle controls over resource allocations and initiate price adjustments with a view to establishing more realistic relative prices. These reforms were supported initially by an IMF standby arrangement covering 1978 for SDR 93 million. On January 26, 1979, the Fund's Executive Board approved an SDR 260 million Extended Arrangement covering the 1979-81 period. 11. The following broad policy reforms have been introduced: Exchange Rate Reform: The exchange rate was unified on November 16, 1977 at a depreciated rate of Rs 16 = US$1.00 and allowed to float. This implied a depreciation of 46% against the official rate prevail- ing prior to unification, 11.2% with respect to the Foreign Exchange Entitlement Certificate rate, and 29.5% with respect to a transactions- weighted average rate of the two markets. 1/ Import Liberalization: The trade and payments regime was liberal- ized. With the exception of foodgrains and petroleum products, public sector import monopolies were terminated. Prior licensing of imports was abolished for all but a handful of commodities. The tariff structure was revised and simplified. Interest Rate Reform: To encourage financial savings and discourage speculative imports, interest rates were raised sharply. Price Controls: These ended for most commodities. Budgetary Policies: The unification and depreciation of the exchange rate caused tree crops export tax revenues and the cost of food, fertilizer and petroleum subsidies to rise sharply. Business Turn- over Tax rates were substantially lowered and rationalized to be consistent with the new import tariff and exchange rate. To limit the increase in cost of food subsidies, rice and sugar rations were initially confined to the poorer half of the population, and the subsidy on imported wheat flour was reduced through a series of 1/ Prior to unification, all exports other than tea, rubber and coconut products and all imports other than food, fertilizers and drugs were channelled through the certificate market. Since November 1972, the FEEC rate was maintained at a 65% premium over the official rate.  -4- adjustments in the domestic price. On September 1, 1979 the Gov- ernment introduced a system of food and kerosene stamps for families with monthly incomes less than Rs 300 to replace specific food sub- sidies and rationing, and to target benefits to the poorest. Ini- tially about seven million persons were issued with food and kero- sene sL-.ps. To offset the adverse impact of these changes on real incomes, public sector wages have twice been adjusted upwards, and in February 1978 an income supplement was introduced at Rs 50 per month to benefit the poorest households in which one or more persons had no gainful employment. Public corporations were asked to pass on cost increases, except in the case of fertilizer, petroleum, milk and public transport, where price increases were initially deferred to cushion the impact on consumers. The Government has subsequently made sizable adjustments in bus fares, and petroleum prices. These changes, taken together with higher aid receipts, have contributed to a sizable step up in capital expenditures. They, however, constitute only a beginning, and the Government anticipates the need for further price adjustments designed to reduce the continuing large burden of subsidies and current transfers (currently at around one-third of government revenues and 7% of GNP). Tax Reform: The tax structure has been rationalized and simplified with a view to increasing the elasticity of revenues. The burden of personal and company taxation has been lowered. Agricultural Pricing Policies: The domestic procurement price for rice was increased by 21%. With the related increase in flour prices, incentives for paddy and other flcur substitutes benefited. Fresh coconut prices have also been increased by 30% and the export duty on coconut products has been appropriately adjusted. While the uni- fication of the exchange rate ended formal discrimination against tree crops, the export duty on tea was initially set at a level which effectively siphoned off most of the benefits to the Government. As tea prices fell and production costs rose in 1978-79, the Government responded to the reduced producer margins by a lowering of taxes on tea. Further adjustments in both the structure and level of tea taxation will be needed to maintain and improve incentives. 12. The economic reforms have been accompanied by a major effort at stepping up public investment. The Government's capital expenditures jumped from 6% of gross national product at market prices in 1977 to an average of 13% in 1978 and 1979, as government departments responded to an improved budgetary resource position by embarking on long overdue replacement invest- ments and new projects that had been shelved earlier for lack of resources. The Government has also embarked on four major new programs which are to be the lead projects in a five-year rolling public investment program. These are: (i) Accelerated implementation of the Mahaweli Ganga Development Program, by far the largest multi-purpose river basin development ever undertaken in Sri Lanka; (ii) a 200 square-mile free trade zone north of Colombo under a newly constituted Greater Colombo Economic Commission which has established the first Investment Promotion Zone near Colombo's international airport, Katunayake, and is planning others, and has approved some 83 proposals involving a total invest- menr of US$150 million by mid-November 1979; (iii) a massive housing and urban  renewal program with its main focus on the Colombo metropolitan region; and (iv) the construction of a new capital complex at Kotte, a suburb of Colombo. 13. These four programs will together cost an estimated Rs 30 billion, or half of the projected Rs 60 billion public investment program over the 1980-84 pe-_d. The Government's tentative macro-economic scenario envisages public investment taking over one-half (55%) of total investment which is expec- ted to average an ambitious 26% of GNP in 1980-84 as against 16% in the early 1970s. To enable this increase to materialize, gross national savings are expected to average 18.5% of GNP, and net external inflows nearly 8%. This implies a substantial increase in external inflows which averaged 2.3% of GNP in the 1970-76 period. These inflows are to finance 54% of public investment. 14. The underlying public investment strategy is to balance the large investment requirements of the Government's high priority programs against the urgent rehabilitation and fresh investment needs in other sectors. The main thrust of the public sector program is to lay the foundation for longer term development, both by improving the efficiency of use of existing infrastructure investments and by expanding the longer term growth capacity of the economy. The strategy thus implicitly relies on the private sector to respond to the economic reforms and the stimulus of the public sector investment program, and provide much of the short-term growth. 15. The initial response of the economy to the policy reforms and the accompanying acceleration in public investment has been encouraging. Economic growth between 1977 and 1980 is estimated at an impressive 6.7% per annum. This growth has been shared by almost all sectors of the economy, with the most dynamic sectors being construction, mining and quarrying, electricity, gas and water and manufacturing. The only major exception has been the tree crop sector. This impressive performance is due to a number of factors including the improved availability of inputs following import liberalization, an increased role for the private sector in distribution, and the removal of price controls. 16. Domestic savings reached 15% and 16% of GNP respectively in 1978 and 1979, well above historical levels. Financial savings, as measured by fixed and savings deposits, have responded dramatically to the change in interest rates. Public and private investment have also risen sharply, bringing total investment to 20% of GNP in 1978 and 25% in 1979. This has been reflected in a four-fold increase in capital goods imports from $84 million in 1977 to an estimated $350 million in 1979. Much of the investment reflected pent up demand for replacement of antiquated equipment in industry and transport. Investment approvals in 1978 and 1979 for manufacturing reached record levels, involving investments totalling $320 million, of which over one-half were outside the new free trade zone. Although there is little data available on employment, the Central Bank estimates a sizable (102,000) increase in the public sector and organized private sector employment in 1978 as against an increase of 40,000 in 1977. This would have contributed to the fall in open unemployment from an estimated one million to 900,000, or 16% of the labor force. 17. The exchange rate adjustment, other policy induced price increases and related wage increases, and the removal of price controls contributed  significantly to inflationary pressures in 1978 and 1979. However, these pressures were moderated in 1978 by a bumper paddy harvest, increased capacity utilization in the economy, increased availability of imports and the benefi- cial effects of competition from imports and in domestic distribution. Thus average annual inflation was held to 9% in 1978. There was a marked deterior- ation in 1979 - inflation rose to 18% due to an acceleration in money supply expansion on account of the continued buildup in gross external assets and the rapid domestic bank credit expansion, and to a sharp increase in construc- tion sector costs, as the increase in investment levels led to shortages of construction materials and skilled labor. 18. Not surprisingly, the current account deficit in the balance of payments rose sharply to $150 million in 1978 and $370 million in 1979. After a strong surge in 1978, merchandise imports rose by a further 43% in 1979 to $1,460 million, or twice 1977 levels, reflecting sizable increases in the cost of petroleum imports, and substantial real increases in non-food consumer goods, intermediate and investment goods imports. Exports rose by a more modest 19% to $1,000 million in 1979. However, as in 1978, the current account deficit was more than offset by non-monetary capital inflows, resulting in an increase in net foreign exchange reserves by a further $33 million. Gross reserves rose by $121 million to $519 million at end 1979, due largely to drawings on the Extended Fund Facility. Reserves are currently equivalent to about four months imports. Preliminary balance of payments projections for 1980 suggest a further marked deterioration in the current account deficit to over $600 million, due in part to the sharp rise in the cost of petroleum imports. Net petroleum imports as a percentage of exports will rise from 16% in 1979 to 25% in 1980. At currently projected aid levels, net reserves are likely to fall by nearly $100 million in 1980. 19. Success in attaining the Government's medium-term development objectives is conditional on a number of factors. The Government will need to carefully review the content of its public investment program. As presently proposed, it will severely strain the domestic availability of skilled manpower and construction materials. To the extent that this forces a greater reliance on imports, it will further strain the balance of payments, which is already under severe pressure on account of the oil price increase and other factors that will result in a deterioration in the terms of trade. Moreover, domestic production and exports will need to increase at a rapid rate to ensure the required level of import substitution and export promotion implicit in the Government's macro-framework. This, in turn, will require further efforts to improve price and export incentives, and the quality of management in the public sector, and particularly in the tree crop sector. A further essential precondition is an adequate level of public savings to generate the required resources for public investment without infringing on the financing needs of the private sector. However, success will ultimately be contingent on larger aid flows which are needed to ensure that an ambitious development program, with a strong rehabilitation component, can be implemented within the framework of a liberalized import regime. Such assistance will also help finance over one-half of the public investment program. In this context, local cost financing will be needed to support this effort, particularly in the early years, as domestic resource mobilization efforts begin to gather momentum.  -7- 20. Aid donors have responded enthusiastically to the new policy environ- ment in Sri Lanka. Aid commitments in 1978 from members of the Sri Lanka Aid Group totalled US$362 million, an increase of 60% over 1977. Aid commitments in 1979 totalled a massive $660 million, including $220 million for the acce- lerated Mahaweli Program. The grant element of aid commitments is currently around 63% and is expected to improve further. The debt service ratio in 1979, excluding Fund repurchases, stood at around 8.0%, declining from 15.0% in 1977 and 10.0% in 1978, due to improved export earnings and the decline in outstand- ing short- and medium-term borrowings. PART II - BANK GROUP OPERATIONS IN SRI LANKA 21. Since the beginning of its operations in Sri Lanka in 1954, the Bank Group has made eight loans totalling US$73.4 million (net of cancellations) and 19 credits totalling US$218.2 million (net of cancellations and exchange adjustments) in support of 27 projects. About 52% of Bank Group assistance has been for agriculture (irrigation, agricultural, and dairy development), 20% for power, and the remainder for development finance company operations, highways, a program credit (mainly involving the import of raw materials for industry), water supply, small and medium industries and technical assistance. The first credit for a Highway Project was approved by the Executive Directors in 1968. It was subsequently cancelled as the Government wanted to change the project approach and scope. A credit of US$16.5 million for a Road Main- tenance Project was approved in June 1979 and declared effective in December, 1979. Eight loans and seven credits have been fully disbursed so far. During FY79, IDA credits for a total of US$68.0 million were approved for a Rural Development Project, a Road Maintenance Project, an Agricultural Extension and Adaptive Research Project, and a Small and Medium Industries Project. Annex II contains a summary statement of Bank Group operations as of December 31, 1979, together with notes on the execution of ongoing projects. 22. An IFC equity investment of about US$100,000 equivalent in the Devel- opment Finance Corporation of Ceylon (DFCC) and an IFC non-revolving line of credit of US$2.0 million to the government-owned Bank of Ceylon for on-lending to private small- and medium-scale industrial enterprises were approved in FY78. IFC also approved an investment of US$2.32 million in a synthetic textile mill, and US$986,000 in a polypropylene bag manufacturing plant in FY79. IFC has very recently approved an increase in equity investment of about US$51,000 equivalent in DFCC. 23. The Bank Group's current strategy is focused on the agricultural sector to support Government efforts to increase food production and reduce its dependence on food imports, and to raise productivity, employment, in- comes and living standards of the rural population in Sri Lanka. Projects to support industry and basic infrastructure are also included. In addition to providing financing for the ongoing Mahaweli Ganga Development Project II, the Bank Group is assisting the Government of Sri Lanka in accelerating the implementation of the Mahaweli Ganga Development Program (para 12) principally through the coordination of external assistance for project preparation and  - 8 - implementation. It is expected that significant investment opportunities for IDA and other Aid Group members will flow from this effort. During FY80, a technical assistance project for US$3.0 million has been approved by the Executive Directors for the Mahaweli Development Program. Projects in water supply and sewerage, rubber rehabilitation, rural development power trans- mission, and telecommunications also are being prepared for p_ :ible IDA financing. 24. The Bank Group presently accounts for 10.3% (IBRD, 3.3%; IDA, 7.0%) of Sri Lanka's total debt outstanding and disbursed, and 6.5% (almost totally IBRD) of debt service. It is projected that the Bank Group's share in total external debt will increase to 19% by 1985 (with the IBRD's share declining to 0.7%). The Bank and IDA shares in the debt service are expected to decline to around 4% by 1985. PART III - THE TRANSPORT SECTOR The Transport System 25. The transport system of Sri Lanka comprises over 40,000 kms of roads of all types, over 1,500 route-kms of railways, one main and two minor ports, and seven airports, of which one handles international traffic. Other modes of transport, including coastal shipping and pipelines, are of relatively minor importance. 26. Freight traffic patterns in Sri Lanka are largely dictated by: (i) the geographical distribution of agricultural surplus areas, including the coconut and rubber-producing southwest coast and the rubber and tea-producing areas in the central part of the country; (ii) the concentration in Colombo of industrial establishments from where manufactured products are sent to the interior; and (iii) the location in Colombo of the country's main port. The pattern of passenger traffic reflects the spatial distribution of a population concentrated in the southwest part of the island and the northern peninsula, with its highest density in the western province, where Colombo is located. 27. The railway system, which plays a relatively minor role in the trans- port sector, is operated by Ceylon Government Railways (CGR), as a government department within the Ministry of Transport. Rail passenger traffic was stagnant for most of 1970-77; in 1978, traffic levels increased significantly, mainly as a result of additional passenger-carrying capacity. In 1978, rail traffic stood at 80 million passengers and 3,711 million passenger-kms. 28. Road transport is the most important mode of transport in the coun- try. It carried 85% of total passenger-kms and 79% of total freight tons-kms in 1977, and this modal split is unlikely to change in the near future. The motor vehicle fleet grew slowly in the period 1970-76, but in 1977 and 1978 liberalized import regulations and greater availability of foreign exchange resulted in faster growth. In mid-1978, there were about 100,COO cars, 40,000 trucks, and 7,500 buses. This growth, however, was tempered by measures adopted by the Government in 1979 affecting mainly the private transport modes. Such measures included a dramatic increase in fuel prices,  closure of gas stations during weekends, and prohibition on car use during part of weekends without a special permit. 29. Intermodal competition between rail and bus is important in the urban areas, and particularly in Greater Colombo. Indeed, though the nation- wide rail ire of public passenger transport is only about 4%, this figure increases to about 10% within the commuting area to Colombo, and reaches the level of 20% during the peak hours. Coordination between rail and bus currently takes place mainly in the form of bus routes connecting railway stations with their adjacent areas. Passenger Transport Policy and Planning 30. The Public Investment Program prepared by the Government forecasts a GDP growth rate of 5.5% per annum. Freight and passenger traffic is estimated to grow at annual rates of 8% and 7.7% respectively. While commenting on the Public Investment Program, the Bank recommended a moderation of proposed in- vestment in rail subsector and adequate provision for maintenance and rehabi- litation in both rail and road subsectors. IDA will continue its dialogue with the Government on investment plans and policy decisions, particularly concerning CGR, having a significant impact on passenger transport. 31. Improved coordination between bus and rail passenger transport is highly desirable in the areas of investment planning and pricing policy. Some improvement in the areas of intermodal coordination is already taking place with the enhancement of the capacity of the Ministry of Finance and Planning to review and coordinate investment plans and operations of public agencies in the transport sector. Bus Passenger Transport Subsector 32. Bus passenger transport services are provided by the nine Regional Transport Boards (RTBs), which operate bus services over the entire island, supported and coordinated by the Sri Lanka Central Transport Board (SLCTB). The Government has very recently allowed private operators to operate buses on selected routes, but with only about 100 private units to date, their impact on public transport services has been small. The system whereby private operators are licensed has a number of shortcomings. An improved and less restrictive licensing system is desirable and justifiable both on grounds of a better service to the travelling public and as an incentive to increase the efficiency of the public bus operation. The Government has established a committee to study the role of private operators in road passenger transport. The Government would, by December 31, 1980, furnish to IDA a policy statement on the participation of the private sector in road passenger transport, together with a timetable for implementing necessary measures (Development Credit Agreement (DCA) Section 3.07). 33. The SLCTB and RTBs, all directly under the Ministry of Transport, were created in 1978 to replace the former Ceylon Transport Board, which for about twenty years had a monopoly for the operation of bus passenger services. The functions of SLCTB include procurement, assembly of buses, reconditioning of units (e.g. engines and gearboxes) and sub-units (e.g. generators), provi- sion of certain centralized services (e.g., training), and coordination of  - 10 - operational matters affecting more than two RTBs. Each RTB operates bus services in a defined area of the country as an independent legal entity subject to the coordination and oversight of SLCTB. The present organiza- tional structure of SLCTB/RTBs was designed to achieve the objectives of decentralizing the central control of bus operations, while retaining benefits of scale for selected activites. 34. Bus passenger traffic carried by the RTBs and their predecessor grew slowly in the early 1970s at a rate of about 4% per annum; growth was not continuous, and in some years traffic figures stagnated or even declined. From 1974 onwards, however, traffic has grown at over 8% per annum. In 1978, and with a fleet of about 7,300 buses, RTBs carried 1,744 million passengers for a total distance of 17,827 million passenger-kms. The impressive bus traffic levels achieved in Sri Lanka despite the deficiencies of the bus operation in terms of unreliability and overcrowding, suggest the existence of a high and inadequately satisfied demand for public passenger transport. 35. The public bus transport industry has not had a clear set of objec- tives on which to base investment and operational decisions. SLCTB would prepare a coordinated Corporate Plan for itself and RTBs on the basis of parameters drawn up by the Government. The Corporate Plan would include a statement of the purpose and objectives of public sector road passenger transportation for the period 1983-85, measures to be taken to achieve them, investment requirements and arrangements for financing. The plan will be prepared by a Task Force to be appointed by September 30, 1981, submitted to the Government by April 30, 1982, and thereafter discussed with IDA (Project Agreement (PA) Section 3.03). 36. The SLCTB, together with RTBs, is the largest employer in Sri Lanka, with a staff of about 61,000 in mid-1979, of which about 10,500 are in SLCTB, and the balance in the RTBs. In general, both the SLCTB and the RTBs are over- staffed and labor productivity is low. The SLCTB has recognized this problem and imposed a freeze on the total staff members for itself and each RTB. A comparison among the RTBs shows significant variations in the ratio of staff to scheduled bus operations. In view of the prevailing situation, SLCTB would carry out a review of staffing levels in SLCTB and RTBs and adopt by September 30, 1980, satisfactory guidelines for appropriate staffing levels (PA Section 3.05). 37. The operating performance of RTBs has been adversely affected by a declining standard of maintenance and erratic replacement of old buses. This combined with the high demand for services has resulted in a vicious circle of inadequate maintenance, a high level of breakdowns, and overcrowding of buses leading to further breakdowns and skipping of routine maintenance. One of the main project benefits will be an improvement in maintenance which will be achieved by improving the availability of spare parts, providing new depots, and relieving pressure on available vehicles by the addition of new buses into the fleet. 38. The manner in which timetable requirements (TTR) are determined is largely responsible for the low reliability of bus services. Services are planned at a level which cannot be met with the available fleet. The effect of this is to spread available buses thinly over all scheduled services. As  - 11 - a result of excessive demand placed on the available fleet, preventive main- tenance is deferred, thus increasing the failure rates. SLCTB would place limitations on the services provided by the RTBs to reflect the availability of properly maintained buses (PA 3.04). This will encourage compliance with preventive maintenance requirements of the entire fleet and particularly, for buses to be procured under the project. 39. The SLCTB operates facilities for the reconditioning of units and subunits at the Central Workshop and five Provincial Workshops. The facili- ties are poorly managed and there is lack of coordination between departments. Manufacturing procedures, particularly quality control, are almost non-existent. As a condition of effectiveness, the Government would ensure that satisfactory arrangements to manage the industrial activities of SLCTB are in operation (DCA Section 5.01(d)). 40. The financial framework of SLCTB, RTBs and their predecessor has been marked by reliance on the Government for capital grants and operating subsidies. In recent years, operating subsidies have increased, mainly as a result of high operating costs (including fuel and labor), inadequately offset by small authorized fare increases. The Government has already decided to increase bus fares by 40% to be effective not later than March 8, 1980. An objective of the project is to ensure that the revenues of the RTBs will, from FY83 onwards, be sufficient without a Government subsidy to cover costs of operation, adminis- tration, adequate maintenance, taxes, interest, and depreciation of fixed assets. PART IV - THE PROJECT 41. The project is designed to provide assistance to SLCTB and RTBs with a view to improving bus service in the country. It was identified by the Gov- ernment in December 1977 with IDA assistance. The Bank Group's Project Prep- aration Facility was used to finance consultancy assignments required for preparation of this project. Appraisal took place in July/August 1979. A staff appraisal report entitled "Road Passenger Transport Project". (No. 2716-CE dated February 22,1980) is being distributed separately to the Exe- cutive Directors. Negotiations were held in Washington in January 1980. The Borrower's delegation was led by Mr. M. Elayaperuma, Secretary, Ministry of Transport. A timetable of key events relating to the project and special conditions of the credit are given in Annex III. Project Objectives 42. The main project objectives are to provide a more reliable and efficient bus service to meet the growing demand for passenger transport, and offer an acceptable alternative to the use of private cars, thereby restraining the growth of oil imports. To meet these objectives the project would seek to: (i) improve the fuel efficiency of the bus fleet by the pur- chase of new vehicles and improvement in maintenance standards; (ii) obtain a higher utilization of existing buses and a longer life; (iii) pave the way for a change in the present system of financing capital development through  - 12 - 100% grants, so that the RTBs will provide part of the new capital needs from internal cash generation and borrowings; and (iv) end government subsidies for bus operations. Project Description 43. The project consists of: (i) restoration of the capacity of the SLCTB to operate an efficient unit exchange and overhaul service; (ii) purchase of chassis and materials, and assembly of about 2,100 new buses for use by the RTBs; (iii) improvement of bus maintenance facilities, practices and bus operations; (iv) low-cost traffic engineering measures designed to improve bus flows; and (v) technical assistance for the execution of the project and institution building. 44. Restoration of the Unit Exchange and Overhaul Facilities. This com- ponent is designed to improve the output and quality of reconditioned units, e.g., engines and gearboxes, sub-units e.g., generators and spare parts and provide adequate facilities for bus overhauls in the Central Workshops near Colombo and in the five Provincial Workshops. The Central Workshops will cater for vehicles in the Colombo area and small numbers of vehicles of diverse makes which are still in service elsewhere; they will also provide some specialized facilities for the whole island. On completion of the project, each Provincial Workshop will be equipped to recondition units and sub-units for selected depots of neighboring RTBs and carry out complete bus overhaul. By increasing output and raising the quality of reconditioned units and parts, the SLCTB would be able to supply RTBs with reconditioned units "off-the-shelf." This will reduce temporary and emergency repairs at depots, thus releasing staff and equipment for routine maintenance, which will, in turn, result in higher fleet availability. 45. The unit exchange service needs an immediate supply of new units to enable it to catch up on arrears of overhauls. This would be achieved by the purchase of complete units, such as engines and major components (e.g., cylinder blocks) from the manufacturers or original equipment suppliers. SLCTB is proceeding with bidding to obtain early delivery of these items. 46. Procurement of New Buses. This component provides for the purchase of bus chassis, body building materials and the assembly of about 2,100 new buses. The chassis are to be imported, as are most body materials, and assembled by SLCTB. About 2,000 of the chassis will be similar to the types already in service, with some small enhancements, and meet the requirements of new buses (including replacement) till 1982. The remaining 100 will be specified with additional features which are to be tried out in service. These test vehicles are of a larger carrying capacity and similar to ones already being tried in service in India under Bank-financed projects. Changes in spe- cifications for purchases to be made in 1983 onwards will be determined on the basis of road test and economic evaluation of test buses purchased under the project; vehicle cost operating data will be collected during the project for this purpose. The bus bodies will be fabricated and assembled onto chassis at the SLCTB plant at Ekala to its standard specifications. The plant has satisfactorily assembled similar bodies for over 15 years at prices which are  - 13 - competitive with local or Indian manufacturers. The quality of work is satis- factory. The project calls for an annual output of 900 buses (average of 75 per month), which is attainable. 47. Improvements in Bus Maintenance and Operations. This component involves: ) the construction and equipping of 22 bus depots; (ii) the purchase of equipment for existing depots; and (iii) the purchase of equip- ment for bus operations, including 2,500 new ticket machines. This component will result in a higher standard of preventive maintenance in existing and new depots, reduced congestion and dead mileage at existing locations, and improved fare collection. 48. Traffic Engineering Measures. This component is designed to improve the flow of buses mainly in urban areas through the implementation of low-cost traffic engineering measures such as the installation of traffic signals, the provision of bus lanes, the relocation of bus stops, the channelization of congested intersections, and minor improvements to pavements and curbs. Such measures are widely recognized to yield quick and large benefits. A set of measures for Colombo has already been identified, and further ones will be identified in other parts of the island during project implementation. 49. Technical Assistance. This component will provide consultancy services and training. The consultants would assist SLCTB in the following major areas: production, engineering, procurement; accounting, traffic opera- tions, management reorganization, and supervision of construction. Consultancy assignments will include 77 man-months of local consultants at an estimated man-month rate of US$2,000 equivalent and a man-month cost of US$2,100 equiv- alent. Provision has been made for local architectural services for the con- struction of new depots at a cost of US$314,000 calculated on a fee basis of 8% of the estimated costs. A total of 143 man-months of expatriate services is provided at an average estimated man-month rate of US$7,500 and a man-month cost of US$9,600 which includes salary, costs, fees, international travel and local subsistence. Expatriate consultants will assist in the reorganization and management of the industial activities of SLCTB and in other specialized fields such as route planning. As a condition of effectiveness, the SLCTB would appoint consultants in the fields of procurement, accounting and indus- trial engineering (DCA Section 5.01(e)). Organization and Implementation 50. The project, except the traffic engineering measures, would be implemented by SLCTB which will be assisted by consultants. Traffic engineer- ing measures would be under the responsibility of the Ministry of Transport, which will coordinate the appropriate executing authorities; these agencies are deemed capable of executing the project. The project is expected to be completed by December 31, 1982. 51. The project's physical components are similar to previous works executed by SLCTB and should present no particular problems. The assembly of buses as proposed is within the capacity of the assembly plant of SLCTB. The construction program for new depots and Provincial Workshops is larger than anything attempted by SICTB in the past; however, the project includes funds for the employment of local architects and surveyors, who would supervise  - 14 - about half this work, to supplement the civil engineering department of SLCTB. The local private construction industry is not yet very active, but the small size of each contract and the repetitive nature of the bus depots are thought suitable for existing contractors and others wishing to enter the business. 52. The accounting system of SLCTB and the RTBs is outmoded and records seriously in arrears. This situation concealed a growing operating loss until the position was revealed by a consultant report in August 1979. Consultants have been engaged to assist with the work of updating the accounting records and systems. 53. The current bus fares are not sufficient to cover operating expenses of RTBs and Government subsidies meet the shortfall. The Government intends to end operating losses of RTBs by 1983. Towards achieving this end, it has decided to raise fares by 40%, effective not later than March 8, 1980. The Government will take all necessary measures to progressively reduce those operating losses in the intervening years towards meeting the aforementioned objective (DCA Section 3.08). 54. At present, there exists a number of anomalies in fare structures between different routes. These date back to the pre-1958 period, when fares were set by private bus owner-operators operating on different routes. In order to rationalize RTB fare structure, the Government would, commencing January 1, 1981, arrange that these fare structures are adjusted in accordance with guidelines issued by SLCTB (DCA Section 3.09). 55. Monitoring will be carried out by a team to be created within SLCTB. Monitoring will concentrate on (i) the performance of SLCTB's reconditioning and overhaul facilities in terms of output quality and quantity; (ii) the evolution of RTBs' operational indicators depicting the fleet position and the quality and quantity of bus services; and (iii) progress in the management and finances of SLCTB/RTBs. Monitoring will be conducted through quarterly progress reports by SLCTB whose general format was agreed during negotiations. The Government and SLCTB would prepare a project completion report not later than six months after the closing date of the credit. Cost and Financing 56. The total project cost is estimated at US$86.4 million (including taxes and duties of US$7.8 million equivalent) with a foreign exchange cost of US$51.5 million. The estimates are based on prices of January 1979 except bus chassis and materials which are based on mid-1979 prices. The proposed credit would finance the full foreign exchange cost and contribute $1.5 million to local costs, or about 67% of total project costs, net of taxes and duties. The remaining local costs, amounting to about $33.4 million (inclusive of taxes and duties) would be met by the Government. Physical contingencies are calculated at 7-1/2% for machinery, equipment, construction, and technical assistance. Price contingencies have been estimated assuming annual inflation of 18% for 1979, 21% for 1980, 15% for 1981, 12% for 1982 and 10% thereafter for domestic costs; and 12% for 1979, 10.5% for 1980, 9% for 1981, and 8% thereafter for foreign costs.  - 15 - 57. Funds from the Credit (except an amount of US$0.2 million for traffic engineering measures which would be channeled through the Ministry of Transport), would be onlent to SLCTB through a subsidiary loan agreement at an interest rate of 12-1/2% per annum over a period of fifteen years, including a three-year grace period. Execution of the subsidiary loan agree- ment between the Government and the SLCTB satisfactory to IDA would be a condition of effectiveness (DCA Section 5.01(b)). The SLCTB would maintain separate accounts for itself and for each RTB for the value of the benefits received from the Credit. At the end of the project implementation period, about US$44.6 million (estimated credit amount for bus chassis, body mate- rials and improvements in bus maintenance and operation) of the total obliga- tion of SLCTB would be transferred to RTBs in relation to the benefits received by them under the Credit, on the same terms as the subsidiary loan agreement. As a condition of effectiveness, the form and substance of agreements between the Government, SLCTB and RTBs satisfactory to the Association indicating acceptance by RTBs of these financial and other arrangements for project execution would be furnished to the Association (DCA Section 5.01(c)). The conclusion of such an agreement by an RTB would be required before goods and facilities provided under the project are transferred to it by SLCTB (PA Section 2.04(b)). 58. Although the average annual rate of inflation has risen sharply since 1978, reaching 18% in 1979, it is expected to peak in 1980, and decline to about 12% by 1982. The current inflation is largely a result of policy- induced price adjustments in administered prices and short-term demand-supply imbalances in certain sectors, most notably construction. The Sri Lankan authorities expect production to respond positively to the price changes and the liberalization of the economy, and together with a tight rein over gov- ernment budgetary deficits and credit expansion, to cause a slowdown in the rate of inflation by 1981. Therefore, the onlending rate should be positive over the lifetime of the debt obligation. Procurement and Disbursement 59. Equipment, machinery, materials, and bus chassis would be procured on the basis of international competitive bidding following IDA guidelines with a preference of 15%, or the cost of the import tariff, whichever is less, allowed to local manufacturers. Procurement would be made through more than one tender. Items costing under US$200,000 equivalent and not exceeding a cumulative total of US$1 million would be procured under the Government's normal competitive bidding procedures after bids have been received from at least three suppliers. IDA will review all contracts valued at US$200,000 equivalent or more before an award is made. The civil works contracts are small in size and unlikely to attract foreign firms. These works will be either carried out through force account or awarded on the basis of local competitive bidding according to procedures acceptable to IDA. 60. Disbursements from the Credit account will be made as follows: (i) 100% of foreign expenditures on directly imported or 100% of local ex- penditures (ex-factory) on locally manufactured or 60% of local expenditures on locally procured equipment, machinery, tools, bus chassis, body materials, and spare parts; (ii) 100% of expenditures on technical assistance; (iii) 90%  - 16 - of local expenditures on civil works for traffic engineering measures. It is proposed to retroactively finance expenditures for a float of units (e.g., gearboxes and engines) and subunits (e.g., generators) urgently required to repair some idle buses, incurred after February 1, 1980. Such expenditures would amount to a maximum of US$1.4 million; this amount would increase if signing of .- credit agreement is delayed due to lack of IDA commitment authority. Advances drawn from the Project Preparation Facility (PPF060), with service charge accrued thereon, will be repaid out of the proceeds of the proposed Credit as soon as it is declared effective. Project Benefits and Risks 61. The proposed project will add to the bus fleet of the RTBs, thus enabling them to meet the growing demand for travel. Through improved mainte- nance procedures and steady supply of spares, the project will reduce average vehicle maintenance and operating costs, stop and reverse the deterioration of the fleet, and reduce the load factor of available vehicles. The traffic engineering measures will relieve congestion and facilitate service delivery along major bus corridors and routes, and result in vehicle cost and time savings. It is characteristic of the population of Sri Lanka that all classes are highly mobile and the dominant mode of passenger transport is by road. For the general riding public, the important effect of the project will be an overall improvement in the quality of bus services, as measured by greater availability and higher reliability of services. 62. The overall economic rate of return of the project is conservatively estimated to be 20% on the basis of operating and maintenance cost savings and economic benefits resulting from trips made possible as a result of the pro- ject. Under less conservative but still realistic assumptions, the economic rate of return would be about 30%. Alternatively, more conservative assump- tions of a 15% cost increase and 15% benefit decrease would result in an economic rate of return of about 18%. 63. The technical risks of the project are no greater than would normal- ly be associated with operations of this type. The performance of SLCTB and RTBs can be considered satisfactory in view of the constraints under which they have operated so far. Technical assistance will be provided under the project to strengthen the institutional capability of SLCTB and RTBs, parti- cularly to implement the proposed project. The organizational and managerial structure of the Boards, as strengthened under the project, will be adequate for project implementation. The financial risks of the project arise out of the possibility that it may fail to achieve the objective of terminating Government subsidies by 1983. The recent decision to increase fare by 40% is a positive step in this direction. The scale of fare increases required in subsequent years have also been discussed with the Government, and the progress towards achieving the intermediate steps will be monitored during the project.  - 17 - PART V - LEGAL INSTRUMENTS AND AUTHORITY 64. The draft Development Credit Agreement between the Democratic Socialist Republic of Sri Lanka and the Association, the draft Project Agreement -_ween the Association and the Sri Lanka Central Transport Board, and the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement are being distributed to the Executive Directors separately. 65. Special Conditions of the credit are listed in Section III of Annex III. Special conditions of effectiveness are the appointment of consultants in the fields of procurement, accounting and industrial engineering, a satis- factory arrangement for the management of industrial activities of SLCTB and furnishing to IDA the form and substance of agreements, satisfactory to the Association, between the Government, SLCTB and RTBs for the implementation of the project and the provision of funds thereunder. 66. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association. PART VI - RECOMMENDATION 67. I recommend that the Executive Directors approve the proposed credit. Robert S. McNamara President Attachments February 27, 1980  -18- Annex I Page 1 of 6 pages TABLE 3A SRI LUNA - SOCIAL INDICATORS DATA SAEET LS -NZRU C GROUPS (ADJUSTED AMAGES L4NMD AREA (INOUSAMtD SO. I. ) S^ LANA - MOST RECENT ESTIMTE) ' TOTAL 65.6 sAm SmE NE HaIHE AGRICULTURAL 24.2 MOT RECZNW COCGRLIC INCOm INCME 1960 lA 1970 Lk ESTIMATE LD EGION /e GROUP L GROUP L GYP PER CAPITA (US$) 60.0 100.0 190.0 191.1 209.6 467.5 NERGY CONsUkrIoN PER CAPITA (EILOGRAMS OF COAL IQIVALUNT) 107.0 153.0 106.0 69.1 83.9 262.1 POPULATION AND VITAL STATISTICS POPULATION, MID-YEAR (MILLIONS) 9.9 12.5 14.1 U lN POULATION (PERCENT OP TOTL) 17.9 21.9 24.3- 13. 16.2 24.6 POPULATION PROjwToNs POPULATION IN YEAR 2000 (MILLIONS) 21.0 STATIONARY POPULATION (MILLIONS) 30.0 YEUR STATIONARY POPULATION IS EEACU 2070 POPULATION DENSrIT PER SQ. Em. 131.0 191.0 215.0 86.6 49.4 45.3 PER SQ. DI. AGRICULTURAL LAND 507.0 518.0 583.0 330.2 252.0 149.0 POPULATION AGE STRUCTM (PUCENT) 0-14 YES. 42.1 41.9 38.0 44.3 43.1 45.2 15-64 TRS. 54.3 54.5 58.0 52.4 53.2 51.9 65 YRS. AND ABOVE 3.6 3.6 4.0 3.1 3.0 2.8 POPULATION GROVM RATE (PUCENT) TOTAL 2.5 2.4 1.7 2.4 2.4 2.7 IRBAS 4.8 4.3 3.7 4.1 4.6 4.3 CRUDE BIRTEH RATE (PER THOUSAND) 36.0 30.0 26.0 44.4 42.4 39.4 CRUDE DEATH RATE (PER TSOUSAD) 9.0 7.0 6.0 16.4 15.9 11.7 GROSS REPRODUCTION RATE 2.5 2.3 1.8 3.2 2.9 2.7 FAMILY PLANNINC ACCEPTORS. ANNUAL (THOUSANDS) .. 55.3 113.0 USERS (PERCENT OP MARRIED OM) .. 8.0 44.0 7.9 12.2 13.2 FOOD AND UTRITION INDEX OF FOOD PRODUCTION PER CAPITA (1969-71-100) 89.2 103.0 120.0 99-4 98.2 n.6 PER CAPITA SUPPLY OF CALORIES (PERCENT OP REQUIREMENTS) 98.0 94.0 91.0 93.0 93.3 94.7 PROTEINS (GRAMS PER DAY) 46.0 43.1 42.6 56.1 52.L 54.3 OF WHICH ANIMAL AND PULSE 13.7 11.8 8.9 10.4 13.6 17.4 CHILD (ACES 1-4) MORTALITY RATE 7.0 3.0 2.0 19.2 18.5 11.4 REALTI LIFE EXPECTANCY AT BIRTH ( )EARS) 62.0 67.0 69.0 49.1 49.3 54.7 INFANT MORTALITY RATE (PER THOUSAND) 63.0 51.0 47.DL -. 105.4 68.1 ACCESS TO SAFE WATER (PERCENT OP POPULATION) TOTAL *- 21.0 20.0 3L.5 26.3 34.4 URBAN *- 46.0 45.0 63.9 58.5 57.9 RURAL .. 14.0 L3.0 20.1 15.8 21.2 ACCESS TO EYCRETA DISPOSAL (PERCENT oF POPULATION) TOTAL .. 64.0 59.0 15.7 16.0 40.8 URsAN .. 76.0 68.0 66.8 65.1 71.3 RURAL .. 61.0 55.0 2.5 3.5 27.7 POPULATION PER PHYSICIAN 4500.0 .. 6230.0LR 7107.9 11396.4 6799.4 POPULATION ?ER NURSING PERSON 4150.0 2730.0 2240.0 12064.0 5552.4 1522.1 POPULATION PER HOSPITAL BED TOTAL 330.0 330.0 330.0 2738.4 1417.1 726.5 URBAN *- 130.0 140.0 .. 197.3 272.7 RURAL .. 570.0 600.0 .. 2445.9 1404.4 ADMISSIONS PER ROSPITAL RED .. 54.0 51.3 *- 24.8 27.5 HOUSING AVERAGE SIZE OP HOUSEHOLD TOTAL 5.4Lf 5.8 .. .. 5.3 5.4 UaRBAN 6.3Lf 6.3 .. .. 4.9 5.1 RURAL 5.2LL 5.5 .. .. 5.4 5.5 AVERAGE NUMBER OF PERSONS PER ROOM MTAL 2. Of 2.5 .. URBAN 2./ 2.7 .. RURAL 2.0/f 2.5 .. ACCESS TO LECTRICITYT (PERCENT OF DWELLINGS) TOTAL 7.5Zf 9.0 .. .. 2.5 18.1 JRBAN 35.97 34.; . .. 17.8 .5.1 RURAL 2.37F 2.3 .. .. .. 9.9  -19- Annex I Page 2 of 6 pages TABLE 3A SRI LANWA - SOCIAL INDICATORS DATA SHEET SRI LANMA REIfRENCE GRtOUPS (ADJUSTED AYERAGES T- nos RECENT ESTIMATE) a SAKH SAME HEXS HIGHER MOST RECENT GIOGAMUC INCOKE INCOME 1960 /b 1970 /b ESTIMATE /b REGION /c GROUP /d GROUP /a EDUCATION ADJUSTED ENROLLMENT RATIOS PRIMARY: TOTAL 95.0 99.0 77 .O1 59.5 63.3 82.7 MKLE 100.0 104.0 60.0 1 74.9 79.1 87.3 FEMALE 90.0 94.0 73.O#L 43.7 48.4 75.8 SECONDARY: TOTAL 27.0 51.0 55.0 19.5 16.7 21.4 IALE 38.0 50.0 54.0 27.8 22.1 33.0 FEMAUE 16.0 51.0 56.0 10.0 10.2 15.5 VOCATIONAL ENROL. (1 OF SECONDARY) .. 1.0 1.0 1.3 5.6 9.8 PUPIL-TEACHER RATIO pRiMaY 31.0 .. 29.0 42.2 41.0 34.1 SECONDARY .. .. .. .. 21.7 23.4 ADULT LITERUCY RATE (PERCENT) 75.0/h 77.6 78.1 25.5 31.2 54.0 CONSUMPT ION PASSENGER CARS PER THOUSAND POPULATION 8.0 7.0 6.8 2.3 2.8 9.3 RADIO RECEIVERS PER THOUSAND POPULATION 36.0 .. 38.0 15.5 27.2 76.9 TV RECEIVERS PER THOUSAND POPULATION .. .. .. .. 2.4 13.5 NEWSPAPER ("DAILY GENERAL INTEREST") CIRCMATION PER THOUSAND POPULATION 36.0 49.0 *- 6.2 5.3 18.3 CINEMA ANNUAL ATTENDANCE PER CAPITA 3.0 .. 4.0 *- 1.1 2.5 LABOR FORCE TOTAL LABOR FORCE (THOUSANDS) 3391.0 4188.0 4707.0 FEMALE (PERCENT) 22.6 23.7 28.5 21.4 24.8 29.2 AGRICULTURE (PERCENT) 56.3 55.1 54.0 66.3 69.4 62.7 INDUSTRY (PERCENT) 13.5 14.4 15.0 9.6 10.0 11.9 PARTICIPATION RATE (PERCENT) TOTAL 34.3 33.5 34.6 35.8 36.9 37.1 MALE 50.8 49.2 48.2 52.3 52.4 48.8 FEMALE 16.2 16.5 20.3 15.7 18.0 20.4 ECONOMIC DEPENDENCY RATIO 1.3 1.4 1.2 1.3 1.2 1.4 INCOtE DISTRIBUTION PERCENT OF PRIVATE INCOME RECEIVED BY HIGHEST 5 PERCENT OF HOUSEHOLDS 26.4 .. 18.6 .. .. 15.2 HIGHEST 20 PERCENT OF HOUSEHOLDS 52.1 43.4 42.8 .. .. 48.2 LOWEST 20 PERCENT OF HOUSEHOLDS 4.5 7.5 7.3 .. .. 6.3 LOWEST 40 PERCENT OF HOUSEHOLDS 13.7 19.2 19.3 .. .. 16.3 POVERTY TARGET GROUPS ESTIMATED ABSOLUTE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. 86.5 99.2 241.3 RURAL .. .. .. 74.2 78.9 136.6 ESTIMATED RELATIVE POVERTY INCOME LEVEL (USS PER CAPITA) URBAN .. .. .. .. 91.9 179.7 RURAL .. .. .. 50.4 54.8 103.7 ESTIMAIt-D POPULATION BELOW POVERTY LNCOME ! EVEL (PERCENT) URBAN .. .. .. 44. 3 44.1 24.8 RURAL .. .. .. 52.4 53.9 37.5 Not available Not applicable. NOTES /s The adjusted group averages for each indicator are population-weighted geometric means, excluding the extreme values of the indicator and the most populated country in each group. Coverage of countries among the indicators depends on availability of data and is not uniform. Ib Unless otherwise noted, data for 1960 refer to any year between 1959 and 1961; for 1970. between 1969 and 1971; and for Most Recent Estimate, between 1974 and 1977. /c South Asia; /d Low Income ($280 or less per capita 1976); /e Lower Middle Incole (5281-550 per capita, 1976); /f 1963; A Registered; ih 1962; ii 1973; L public education only. Moat Recent Estimate of GNP per capita is for 1978. August, 1979  -20- ~~~~~~Annex I DU== O S rL eIAT Page 3 of 6 pagea Note. Althoug the data ar draw fromsre generally judged the mast snthoitatie end reliable, it should alo be stied that they May not he inten- thona.lly coparble becaue of the lack of standardized definition nd concpts used by differet coutries in collectign the data, The data r etees ose fol to describe orders of mantud, indicate trends, and oharterine oertain ajor differesses beteeen ocutries, The adiusted grop averges for eah indio-tor - ppoition-eeighted geometeo mean, enludig the etrem values of the indiomtor and the mast popuated ocotry in each grop. Dose to ka of duta, grop avrages of .11 indicators f-o Capital Burpluss Oil P,porters end of indicators of Access no Water An Eareta Disposal, Honing, Inc- Distribution and Poverty for other costis groups cpopulation-wighted geintric --ma witht e-clsuion of the -atrem vauesad tie scat poPAited cooty Since the covrage of ontisagthidctrsdependson a- aibiliy fdtasdis sot s.if--m. cation mat be enerised in relating aveage ofoe indicator to another. Ths vrgsaesti usfL usapoiain of "epeted" valewhncmaigteae.ooe indicator at a time sng tecutry and -refrnc- ross IAND AREA (th-osnd sq.km.) Acest xreaDa n (preto ioua-tion) - total, orban ed rurl Ttl-Total -eorfe s-ec-pricing lan oaadiln aesFoe fpol htni -hn o rrl eved by encret ipoa jTutri- lact --trn estimate of agricultur`al area usd temprarily per entages of their repective popsitions. Exereta disposal may include Pr perunrtly fcr crpo,poture whet and kitoben gardens or to the colletion nod disposal1, with or without tretmet, of han sovret lie fil-o and w-te-wter by eater-horse syntm or the use of pit privies sad n,.alar GaP PER CAPITA (US$) -GNP5 per capita e-tinato at c-rret maket prices Pcai" pe wioian -IPoplation divided by outer of practicing physician calvolated by zaenovroie aethod ac World Bunk Ata 17-8hus; quaifiedpfrom a dmedl nhnnl at university leve. 960o, 1970,-ad 1978 data. Popultion pe Nursing Perso - Population divided by nomber of praticing male PEtistY C09UPrPd4fION PER CAPITAd - Annua c--uptios of c-aeial enmyad fe.sle gradsste nrs,putioal 'nurses, and assistantnus. (coa an llnit, ptroieu, natural gao and hydro-, nuclea an g Pnsu..atifis per ONs..itaBe- totl ra.ed rua ouain(ca,ubn t'hermal elvotrityp), inkilugr- of ccal vquinlent per capita; 1960, and rura) divided by their epcien e of hospital beds availble in 1970, and 1976 data. public and prints general and specialized bstpit.l and rehabilitation centers. H-pitals are establiso-tat permaently staffed by at leantione physician POPLqATION AND VITAL STATISTICS tEtablishmests providing principally custodial cae 5cnt inluded. aR-1 Total Popitis 11dter(ico)- A. of July 1; 1960, 1970, and honpitals, howevr, isslude health and medical centers not permaently stafe 1977 data,t" by_a physicien (hat by a edlz-l -nistent, nremidwife, etc.) which offer UrbanPplto n perce.t of total) - ptio of urbn ho total population; in-patient -ucadation and proide a limited rage of medical facilities, dfeetdefialton I of ra ar-n ey affect comparbility of data Adasiono- pee Hospital bed - Total nuber of udalsio.s tz or discharges fine sang c-utriro; 190, 1970, and 1975 data hospitals divided by the nuber of hyde. PoplatIon Projections Population in year 200-Current population projections are basd on OUlSINGd 1970 total pouainy vad Sen and theiJr ectality and fertility Averae Sine of Household (pees on- per houshold) - total, hen, and rura - rates.PrjctIon Parantr for oteli ty eases comprise of three A ho..eehold oc..sists of a grop of individoaa who share living quarters and levels =onu inlfv opeot-ny at birth Inra ing th country's their main meala. A boader or lodge may or may not he included in the per capit. icme_lecel,od frenle life e-p-etncy stbilining at household foe tatiati-1 PurPoses. 70.5 years. Thc par-mters for fert ility rate also hav thrve levels Average number of peraun per rom- toa, urban, and rura - Average sober -uonln decIne in fertility accrding to incm level and pant of _rsooprro nalubn n ualoope ovninldelno famil danin perforane tach coutry is tbez assigned one o,f these respectIvely. D-eliNga enclde non-permanet strutures and unoccpiedp prs. sine cobination, of ecetlity and fertility trends for pe-jctis Accs to Electricity j reto ulns oa,ubn n ua n purposes. cea~~~~~~~~tiona Awellinga ieetiiyi iig ureea ecnaeo Stationar cpulation - In stationary population there is no groth total -uban, and rura darllings repectively. sincetlhe birthrn~tcinIequal to tic deathrae;,t,Y andals thieage strucu_ reein contant. This~ is _cic-e olafte fertility rates EDCXATION dv-Ii-eto the rcplncrnent level of unit set reproduction rate, h-r Adjusted Eoro1lent Patios eah pe-rtion of _ne r-plc_ itself --atly. The stationary popo- PrimaY echool -tota sal and female-..en total, male and fesale -.11- latiosiseaorsiwotd on tic basis of toe projected hiarmteiatics sent of all age at the primr levl a p-eretages of respmrti-e primary of the pultion in tb per- 2003, and tie rnte of decline of fertility snhocl-nge popul.tos o i-yinludes childre aged 6-11 year but rate to replacemet level adjusted for diffe-et lengths of primary eduratino; for -outri-aith Yasttorypopulation in -eahcd -The p-ra wen etati-oay populatios unvra"euain nost "ap oed 100percent ai- som pupils sine :hasbe- eoe.ae be or -abvethe official1 scolae. 0 Population Density lecondary~~S -hoo1 - total, male and fPale - Computed a b r eo r PU Od-yea popuinti-o Pr sqar iloater (100 b-etres) of edusatios rqies t least four year of approve.d Primary Instrution; tntal area provdes genreal voctional, or teacher training bst-uti-s for pupils Per 1u* ion. ugricuitura1 land - Computed aabc for agricultural land usually of I2 is 17 years of nge;c-r-epo-des.c.c.u.aeor- gpnera.lly only. e-cudd Popultion Ag St-utur (p-r-et) - ChildAce (0-14 year), -nking-ge Pocati=na eoolmet pecet of aendr)- Vocational institutions inolode (15-hi yer) an vie (5pasad -vcr as perces-tages of mid-year t-chalol * industrial, or othe pen ia hi operate independentlyora poplation 1960, 1970,nod"1977 dsta. depar-tmet of -aedsry institutions. PopulationG i hw latc (percet) - total - Ansual -th rates of total aid- Npltaheai rmr,ad secondary - Potal students e-1nind.is pr -ouain for 1950-o 1960-70, an 1907primary andscndr leel d ivded byaube-a of teasere ho the crer- Poultion Ir_th Ontc (percet) - ra nulgrowth eaten of urban speding levels pplations for 1950-60, 19b1-70, and 1970-75. Adult literary rat (percent) -literte adolts (able to read and eite) o Crude Birth zate (per th-usad) - Annua lice irtbo per thousad of mid- apercentage of total adlt population aged 15 years and ove r. year popuition; 10, 1970 -an 1977 data.- Crude Det pae er thousan) - An-ca d-atbo Per tihuand c'i d-year C50g5D10I poultin;1 , 1970, ond 1977 data Pasn er Cr (per thousnd poplation) - Passenger car coprise etor oars Gene -erd..tion nate - Aveae, a of' daughters acoma sill bear ...ting lens then eight pere.s.s; macloden saboncv, he.-.es end military in her no-al reproductive pvrioc if shre-peri-oepeetage- -ehiole.. specific fr.t ility rates; usullyin-ye-n averges ending isk 1960, izdi. pecciver (pee thousad poplahtion.) - All types of recivers for radio 1970, and 195 bjd-ts to general. pbic pe oad ofppltion ; cloe n unlcened F-aily P lnnig - Acceptors Accul (tio-sads) A- Anua tuber of reciesi outisadInyasee regitnIon frndio acni aceptors of birth-cotrol d--ce under aupice f ontio...l family effet; data for recet years may not be -opara ble since -.t countries plesi,ng program. a'bolibd licening- Pa_il Planin - User (pren f weird nes Percentge of wreid TV ecies(pee' thuad poultion) - TV receivers for b-od-nt to genreal comes f obild-heearingage lt5-Oh yer) b usbirth--otrci devire. publi per thousnd ppoplation; e-cld-s unicensed TV -ecicernincoutri-o toal mried -ce in -s age grop. and in year when registration of TV neon weIeffect. FOOD AlSO NUfViTi0i5 iSouscaper Circulatiza (per thounand ojlti)-Shown the averge nircultins FOOD AND WM __T___ of 'daily geea neetaappr,dfined aaperiodical public-tice Toum of Food i'rodiotion per Capita (1969-71-i00) - Codes of per capits devoted pr~imaily to rec-ding general -e. It in coniderd to be "daily' anulprdcin of 1 al odcnite.Poutonrue .ed and if it appenen at least four times aceek. fedadin on -1-dn- yea bais. Comoditie- coer prie-Y pondS Cinem Annual Attednc e aita see Year - Bued on thenubro tickets (en "uaran ioseo of nua)aih are edible an drotats oteieatn sold during the Year inclding ad.i..io. to driv-i biea n mble (e.g. coffer nsd ten ore rociuded). Aggregate production of sac -tamy units.. i- based on nainlaerage produ-r pricewe 'pihts. Per cacit sunpir of oiro (pret of requirements) - Cmputed from IAB FORfCE vaepyvovlcrfstfodsple,vial,i onr e apt Total Labor Forc (thousads) - Eoonoically active perons, including armed pedey. Aeallabl supplies coprine doetic prsdictn import les foresad unemloyed but e-clding hosnv tudents, c. Deiniti... esorts, and changes in otock. wet opplie- e-lode animal feed, sends, in variou -sutries are not coparble. quanotities usd I fo proesig and looses- in distrihutia. Pequire- female _centr t) - .fem leb lbr fore as percentage of total labor force. nests se- estiuntd by PAO basd on physiiogi-al reds for onmal A riva tore c at)- laborforce in faring, foretry, hunting and ctioitp and hvath conidering rirscaitemperatur, body nelgists, fishing as persea.tage of total labor foeze. agetand hs ,t istnbutio.. Cf population, and a11aig 10 percent foe Industry (p-eret) - Labc foror- in aiang, nourci,mnfacturing and unta oshold I ... electricity,ete.tr and gn sperentage of total labor force. Pee onpits suppl f proei (gn per Any)- Pfeotin con tent of pee atopainnt (percet) ~-_total ae n fel - Participation or capita set supply of food pc- Any. Ne sply offod in dofe asaticity rates are optdu oa,ml, and fmle- labr force us per- above. ihequ irvaroto for all coutries entnblihed by USDA provide for a -tsigee of total, male and femleppulati on of' all ages respectively; adoimu allnane of60 penn of total protein pee day and 20 gesa of 1960, 1970, and 1975 data. Thes ILOs Pit atinipation rates reflecting annel and pulse protein, of such 10 pre- nid be anima protein, age-sea struture of the population, and long time tread. A few etimates These standard areiner than thos eo.f75 g= f total protein and ar eautinsi sucs PSgraso aia protein onanavrge for the eceld, proposed by PAP WznnsDntas ai aio of population onde 15 and 65 end over to in the Third Wo.rld rood tuhy.bslbo os ~in g ru of 15-k eas Per capita protein supply fromanima and pulse - Protric supply of food derived frcm anml adplssi gs erdy 12 DISTRIUMITIC Child (ages 1-u) yaeat Oas(r _tosn)- Annual doathss pee thouoan.d Pecnae" rvt na)obi ah and kind) - Received by rishest inaegoP 1 er,t hlrni thin g ru;fo ctdvl 5 P- 'se, richest W0pret, -ert 2 percen, and posest hO percent opiag -rutrion data derivd from life tables of households. HEAiTH POVEWY TARGET GRPOUPS lfe Enotnya it yas vrg uhro er f life Estimated Absolute Poverty Incom level (USP per capita) - urban end rurlI reminig t birth 190 90 n 977. data. Absolute poverty incoe leve is that issa 1e-1 heln whisk a minimal infant IgrtlI ty Pate (per th-uond) - Annual deaths of infants under onntritionally sdsqute diet plus essen.tia no-food requir-ests is Not yaof ag pr th-ouad live hiths. afrdahIit. ryL Access to Oafs Watr(ecnsfpouain -ttl uban an ual- Etimatedb -eetv Pery nc = .levl per .,pits) - when mad rura- Dote.r of prople tota, urban, In rora with resoabe1 ccs to PsRa reaiepsrylo ee soethird of average per .apit. safe enter supply (includes treated surface nater or untreated but personal inom f the oc-try. Urban leve is dsrisd fro the rura leve ucotaminated water ech as tint fro prctected rhobles, springs, with adjustmet fur higher cos t of livin is urbn a-ne ad santar sells) as percentages of iheir repective populatioss. In, Estimated POplaio Bel-w Absolute POvety lasne Levl (retes). - uba MAn anubenae pubic fo,untals or standpst Imeted set mar thenrrl- ecn of ppopulato (urban en rura) who.r bslt puce'. 200 mter ftom a hous may be coniderd as being ithin reasonable aresof that bone. In rura nosna reuonble me-s moul imply that the h-.se.ife or meter of the household do not hav to spend a tem is s.d Bcial Pain Piviso disproportiona.te part of the day in fetching the family, mater ... ds Po-oic Analysts sad Prajetion Dlpartat Angust 19I9  Annex I - 21 - Page 4 of 6 pages SRI LANKA ECONOMIC DEVELOPMENT DATA SHEETS ACTUAL EST 1965 1970 1976 1977 1978 1979 NATIOI ACCOUNTS 1/ (MILLIONS OF US$ AT 1975 PRICES) Gross Domestic Product 1783.0 2354.0 2747.3 2811.4 3020.7 3145.4 Gains from Terms of Trade 539.7 242.2 185.1 413.4 362.6 9.5 Gross Domestic Income 2322.7 2596.2 2932.4 3224.8 3383.3 3154.9 Imports 1189.8 1017.3 913.5 999.3 1272.8 1490.5 Exports - Volume -670.2 -662.9 -660.5 -694.5 -754.8 -1097.2 Exports - TT. Adjusted -1209.9 -905.1 -845.6 -1107.9 -1117.4 -1106.7 Resource Gap - TT. Adjusted -20.1 112.1 67.9 -108.6 155.4 383.8 Total Consumption 2055.9 2239.0 2563.6 2648.2 2891.1 2739.9 Investment 246.8 469.4 436.8 468.0 647.6 798.7 National Savings 244.3 297.9 350.7 570.6 511.1 569.6 Domestic Savings 266.9 357.3 368.9 576.6 492.3 415.0 GDP at Current US$ 1686.6 1870.6 2424.2 2821.3 2546.3 3286.7 SECTOR OUTPUT (SHARE OF GDP AT 1975 PRICES) Agriculture 0.444 0.422 0.376 0.387 0.322 0.306 Industry 0.171 0.211 0.217 0.201 0.260 0.269 Services 0.385 0.367 0.407 0.412 0.418 0.425 PRICES (1975 = 100) Export Price Index 65.65 56.86 95.16 119.13 125.63 91.60 Import Price Index 36.37 41.64 74.33 74.67 84.86 134.20 Terms of Trade Index 180.52 136.55 128.02 159.53 148.05 68.30 GDP Deflator (US$) 94.59 79.47 88.24 100.35 84.30 104.50 Annual Average Exchange Rate 4.76 6.85 10.88 11.06 15.61 15.61 Growth Rates 1978 Share 1965-77 of GDP NATIONAL ACCOUNTS 1/ (MILLIONS OF US$ AT 1975 PRICES) Gross Domestic Product 3.9 100.0 Gains from Terms of Trade 0.3 Gross Domestic Income 2.8 100.3 Imports -1.4 47.4 Exports - Volume 0.3 34.9 Exports - TT. Adjusted -0.7 35.2 Resource Gap - TT. Adjusted 12.2 Total Consumption 2.1 87.1 Investment 5.5 25.4 National Savings 7.3 18.1 Domestic Savings 6.6 13.2 GDP at Current US$ 4.4 PRICES (1975 = 100) Export Price Index 5.1 Import Price Index 6.2 Terms of Trade Index -1.0 GDP Deflator (US$) 0.5 SELECTED INDICATORS 1965-77 ICOR 4.37 Import Elasticity -0.39 Average National Savings Rate 0.11 Marginal National Savings Rate 0.32 Imports/GDP 0.44 Investment GDP 0.16 Resource Gap/GDP 0.04 1/ Components may not add up because of rounding.  - 22 - SRI LANKA Annex I Page 5 of 6 pages BALANCE OF PAYMENTS AND EXTERNAL ASSISTANCE 1973 1974 1975 1976 1977 1978 1979 A C T U A L EST. SUMMARY OF BALANCE OF PAYMENTS (US$ Million) 1. Exports (incl. NFS) 424.3 570.4 628.2 628.5 827.3 948.0 1146.0 2. Imports (incl. NFS) 445.3 731.7 798.8 679.0 746.2 1106.0 1548.0 3. Resource Balance -21.0 -161.3 -170.6 -50.5 81.1 -158.0 -402.0 4. Net Factor Service Income -17.3 -16.6 -18.4 -20.1 -15.0 -15.0 -16.0 .1 Net Interest Payments -14.7 -14.7 -15.9 -18.6 -14.0 of which on PUB M&LT Loans-15.5 -16.5 -20.6 -23.1 -22.1 .2 Direct Investment Income -2.7 -2.0 -2.4 -1.5 -1.1 .3 Workers Remittances (net) .0 .0 .0 .0 .0 5. Current Transfers (net) .2 -.2 2.8 6.6 10.5 22.0 45.0 6. Balance on current account -38.1 -178.1 -186.2 -64.0 76.6 -151.0 -373.0 7. Private Direct Investment .5 1.3 -.2 .0 -.3 8. Grants & Grant-like Flows 13.0 42.0 77.0 58.0 60.8 57.0 134.0 PUBLIC M&LT LOANS 9. Disbursements 83.8 146.3 157.4 210.4 150.1 222.0 270.5 l0.Amortization -39.1 -52.4 -117.7 -103.8 -101.9 -46.5 -51.7 1l.Net Disbursements 44.7 93.8 39.7 106.7 48.2 175.5 218.8 OTHER M&LT LOANS 12.Disbursements .0 .0 .0 .0 .0 .0 .0 13.Amortization .0 .0 .0 .0 .0 .0 .0 14.Net Disbursements .0 .0 .0 .0 .0 .0 .0 15.Use of IMF Resources -1.4 33.3 27.9 11.1 46.9 36.0 67.0 16.Short-term Capital Transactions -9.8 13.2 -2.8 -22.6 6.5 .0 .0 17.Capital Transactions NEI 28.2 62.3 -12.0 -31.8 -56.9 -36.0 -13.8 18.Change in Reserves (- Increase) 1/ -37.1 56.8 56.6 -57.4 -183.0 -81.0 -33.0 19.Net Foreign Exchange- Reserves (end of period) -11.0 -67.8 -124.4 -67.0 116.0 151.8 184.8 GRANT AND LOANS COMMITMENTS (US$ Million) 1. Official Grants 21.1 37.0 76.0 53.1 104.3 123.7 472.5 2. Total Public M&LT Loans 92.1 233.1 285.8 221.8 167.6 324.9 728.5 .1 IBRD .0 .0 .0 .0 .0 .0 .0 .2 IDA 6.0 24.0 29.5 .0 41.2 25.5 68.0 .3 Other Multilateral 2.8 2.5 30.0 8.1 49.7 83.2 .4 Governments 58.4 72.9 196.6 140.9 69.7 192.8 .5 of which Centrally Planned Economies 2/ 2.6 21.4 56.1 4.2 1.7 10.0 .6 Suppliers 25.0 133.6 29.7 72.7 7.0 23.4 .7 Financial Institutions .0 .0 .0 .0 .0 .0 .0 .8 Bonds .0 .0 .0 .0 .0 .0 .0 .9 Public Loans NEI .0 .0 .0 .0 .0 .0 .0 3. Other M&LT Loans (where available) .0 .0 .0 .0 .0 .0 .0 MEMORANDUM ITEMS 1. Grant Element of Total Commitments 45.000 27.100 55.700 39.800 64.400 62.686 60.597 2. Average Interest Rate .037 .051 .029 .040 .021 .024 .020 3. Average Maturity (years) 23.700 13.600 28.800 20.500 35.400 29.529 39.715 1/ Net Foreign Assets: US$ Equivalent of Line 31, IFS. 2/ Includes CMEA Countries, Peoples Republic of China, North Korea, North Vietnam. February 27, 1980 .. figures not available  - 23 - Annex I Page 6 of 6 pages SRI LANKA DEBT AND CREDITWORTHINESS ACTUAL __- __197 EST. 1973 1974 1975 1976 1i,-- 1978 1979 MEDIUM AND LONG TERM DEBT (DISBURSED ONLY) Total Debt Outstanding (DOD End of Period) 484.8 587.3 598.0 702.3 787.0 974.5 1,179.5 Including Undisbursed 680.1 875.7 997.0 1,103.8 1,217.9 1,428.1 2,193.2 Public Debt Service -54.6 -68.9 -138.4 -126.8 -124.0 -94.9 Interest -15.5 -16.5 -20.6 -23.1 -22.1 -22.8 Other M&LT Debt Service .0 .0 .0 .0 .0 .0 Total Debt Service -54.6 -68.9 -138.4 -126.8 -124.0 -94.9 -90.5 DEBT BURDEN Debt Service Ratio 12.9 12.1 22.0 20.2 15.0 10.0 7.7 Debt Service Ratio 1/ 13.5 12.4 22.4 20.4 15.1 10.1 Debt Service/GDP 2.7 2.7 5.2 5.2 4.4 3.7 2.8 Public Debt Service/Government Revenue 15.7 10.0 19.0 20.0 23.5 14.7 10.0 TERMS Interest on Total DOD/Total DOD 3.2 2.8 3.4 3.3 2.8 2.3 2.4 Total Debt Service/Total DOD 11.3 11.7 23.1 18.1 15.8 9.7 7.7 DEPENDENCY RATIOS FOR M&LT DEBT Gross Disb./Imports (Incl. NFS) 18.8 20.0 19.7 31.0 20.1 Z4.1 14.8 Net Transfer/Imports (Incl. NFS) 6.6 10.6 2.4 12.3 3.5 15.4 10.7 Net Transfer/Gross Disb. 34.9 52.9 12.1 39.7 17.4 63.6 72.6 EXPOSURE IBRD Disb./Gross Total Disb. 6.5 3.4 3.6 1.6 1.3 .7 .7 Bank Group Disb./Gross Total Disbursements 12.4 10.9 12.2 4.0 8.7 5.6 7.8 IBRD DOD/Total DOD 6.6 5.8 6.1 5.1 4.4 3.3 2.7 Bank Group DOD/Total DOD 9.5 10.0 12.5 11.3 11.3 10.3 9.7 IBRD Debt Service/Total Debt Service 8.0 7.4 4.0 4.7 4.9 6.1 5.9 Bank Group Debt Service/Total Debt Service 8.1 7.5 4.2 5.0 5.2 6.5 6.5 OUTSTANDING DECEMBER 31, 1977 EXTERNAL DEBT (DISBURSED ONLY) AMOUNT PERCENT IBRD 34.3 4.4 Bank Group 89.0 11.3 Other Multilateral 43.8 5.6 Governments 574.9 73.0 Of Which Centrally Planned Economies 2/ 52.8 6.7 Suppliers 79.2 10.1 Financial Institutions .1 .0 Bonds .0 .0 Public Debt NEI .0 .0 Total Public M&LT Debt 787.0 100.0 Other Public M&LT Debt .0 .0 Other M&LT Debt .0 .0 Total Public Debt (Including Undisbursed) 1,217.9 154.8 Total M&LT Debt (Including Undisbursed) 1,217.9 154.8 DEBT PROFILE Total Debt Service 1978-82/Total DOD End of 1977 63.5 1/ Including Net Direct Investment Income 2/ Includes CMEA Countries, People's Republic of China, North Korea, North Vietnam .. Figures not available February 27, 1980  - 24 - ANNEX II Page 1 THE STATUS OF BANK GROUP OPERATIONS IN SRI LANKA A. STATEMENT OF BANK LOANS AND IDA CREDITS (as of December 31, 1979) US$ Million Loan or Amount (net of Credit cancellations) No. Year Borrower Purpose - Bank IDA Undisbursed Eight loans and seven credits fully disbursed 73.4 71.5 504 1974 Sri Lanka Dairy Development 9.0 7.1 666 1976 Sri Lanka Tank Irrigation 5.0 4.4 701 1977 Sri Lanka Mahaweli Ganga Development II 19.0 18.8 709 1977 Sri Lanka Water Supply 9.2 5.6 742 1977 Sri Lanka DFC - Industrial IV 8.0 4.3 818 1978 Sri Lanka Tree Crop Reha- bilitation (Tea) 21.0 20.5 819 1978 Sri Lanka Tree Crop Diver- sification (Tea) 4.5 3.1 891 1979 Sri Lanka Kurunegala Rural Development 20.0 20.0 900 1979 Sri Lanka Road Maintenance 16.5 16.5 931 1979 Sri Lanka Agricultural Extension and Adaptive Research 15.5 15.5 942 1979 Sri Lanka Small and Medium Industries 16.0 16.0 979 1980 Sri Lanka Mahaweli Ganga Technical Assistance 3.0 3.0 Total, 73.4 218.2 134.8 of which has been repaid 39.2 - Total now outstanding 34.2 218.2 Amount sold, 3.6 of which has been repaid 3.6 - Total now held by Bank and IDA /a 34.2 218.2 Total undisbursed N7i 134.8 134.8 /a Prior to exchange adjustments. B. STATEMENT OF IFC INVESTMENT (as of December 31, 1979) Amount of US$ Million Year Obligor Type of Business Loan Equity Total 1977 The Development Finance Development Banking Corporation of Ceylon - 0.1 0.1 1978 Bank of Ceylon Development Banking 2.0 - 2.0 1979 Cyntex Textiles 1.9 .4 2.3 1979 Mikechris Industries Polypropylene Bag .9 .1 1.0 1980 Development Finance Corporation of Ceylon Development Banking - .05 .05 Total Commitment now held by IFC 4.8 .65 5.45  - 25 - ANNEX II Page 2 C. PROJECTS IN EXECUTION l/ Cr. No. 504 - Dairy Development Project; US$9.0 million of August 9, 1974; Effective Date: February 10, 1975; Closing Date: December 31, 1980 The original project, as appraised in 1973, was designed to increase milk production on about 2,400 dairy farms covering 42,000 acres in the Coconut Triangle and Mid Country of Sri Lanka by providing credit, technical assistance and a strengthened milk collection, transport and marketing system. Complementary objectives were to establish pilot units for commercial calf rearing and pasture management systems and to provide processing equipment to the National Milk Board. However, progress was severely constrained by the poor supply of cattle available for supplying to project borrowers. The poor supply of cattle was due to import problems and an over-estimation of the national herd at appraisal stemming from unreliable Government statistics. Moreover, unrestricted slaughter of cattle was stimulated by a rapid increase in concentrate feed prices which made milk production unattractive plus the relatively high consumer price of fish and poultry meat. It, therefore, became necessary to reformulate the project. Before proceeding with refor- mulation, the Government was requested to provide appropriate incentives to the dairy sector by raising the producer price of milk and stabilizing feed prices. Appropriate action was taken in November, 1978, and the climate for dairying has improved accordingly. The revised project would focus on what was a small component of the original project -- support to dairy co- operatives. Under this component, dairy farmers would be organized in a manner similar to the successful Anand pattern of Dairy Cooperatives in India. The National Dairy Development Board (India) helped in the prepa- ration of the reformulated project. Under this reformulation, the supply of inputs and services would become key activities which would include pro- vision of technical assistance and credit to farmers and support for milk collection, transport and marketing. The successful ongoing pilot calf/heifer rearing and pasture programs have been expanded. The number of beneficiary farm families would be substantially increased (current estimate approximately 10,000 vs. 2,400 in the original project) and the project would contribute to a considerable increase in income of existing landless and small farmer dairy producers. A review mission visited Sri Lanka in July, 1979, and reported good progress. 1/ These notes are designed to inform the Executive Directors regarding the progress of projects in execution and, in particular, to report any problems which are being encountered and the action being taken to remedy them. They should be read in this sense and with the under- standing that they do not purport to present a balanced evaluation of strengths and weaknesses in project execution.  - 26 - ANNEX II Page 3 Cr. No. 666 - Tank Irrigation Modernization Project; US$5.0 million of January 12, 1977; Effective Date: April 12, 1977; Closing Date: June 30, 1981 The project covers five tank areas, serving a total cultivated area of 31,500 acres. The project includes: (a) construction works for improving irrigation and drainage facilities; (b) improvement of farm roads, (c) provi- sion of farm equipment for land preparation and plant protection; (d) strength- ening of agricultural supporting services, particularly extension; and (e) technical assistance for improving the operation and maintenance of the irrigation systems. The construction program is behind schedule by about one year due to delays in procurement of construction equipment, civil dis- turbances in 1977, and shortage of experienced staff for surveys, designs and supervision. Practically all construction equipment has now been procured and construction progress has begun to pick up significantly. However, in order to complete the project within the revised time schedule, additional equipment will be required and tendering for this equipment has just recently been started. Unfortunately, quality control has been neglected (either through lack of training and experience or through negligence) and some of the completed works are extremely poorly constructed. Some of these works will have to be reconstructed or water losses and O&M costs will be unaccept- ably high. The Government has agreed to take action to improve quality con- trol and closely monitor future work and will reconstruct those facilities which do not function properly after operation commences. In this regard, a quality control training program was provided by the U.S. Bureau of Reclamation in the USA for three Irrigation Department engineers during November-December 1978 and it is hoped that construction quality will improve to the levels required. A well-qualified Water Management Specialist has been appointed (part-time) to set up a water management training program for Irrigation Department staff and farmers and much improvement is expected in this area. A full-time resident Project Manager has been appointed, but his initial input to the project has been disappointing. Project completion is expected to be delayed about one year. Cr. No. 701 - Mahaweli Ganga Development II Project; US$19.0 million of June 27, 1977; Effective Date: December 29, 1977; Closing Date: June 30, 1983 The Credit will help finance construction of irrigation and drainage schemes on 40,000 acres of new land in the Mahaweli Ganga dry zone, together with providing O&M facilities and equipment, production support in the form of necessary tilling power and implements, marketing, transport and processing facilities for 71,000 acres and improved agricultural extension services for 106,000 acres. Cofinancing arrangements have been made with Canada, the Netherlands, the United Kingdom, the United States and the EEC. The Govern- ment has undertaken development of the project on an accelerated basis and will probably complete the project by end 1980. Unfortunately, in its haste to meet unrealistic target dates, the Mahaweli Development Board (MDB) pro- ceeded to implement the project without proper planning and coordination and without regard to quality standards and acceptable work practices, resulting  - 27 - ANNEX II Page 4 in poorly constructed and only partially completed project works. The MDB has since improved its quality control and planning and coordination capability and a significant improvement in project implementation has occured. The work is continuing to improve due to the greater awareness and effort on the part of MDB staff and no major problems currently affect progress other than disbursements for civil works. It is expected that the project will be cora- pleted about 1-1/2 years earlier than estimated at appraisal. Cr. No. 709 - Water Supply Project; US$9.2 million of May 10, 1977; Effective Date: February 9, 1978; Closing Date: March 31, 1982 This credit will help finance improvement of existing piped water supplies to Colombo and five adjacent towns south of Colombo. In addition, the project will provide piped water to five adjacent towns north of Colombo and Ambalangoda and Kalutara on the southwest coast of Sri Lanka. It also includes provision for expenditures on spare parts and equipment, technical assistance and training. An additional credit of Canadian $5.0 million from Canadian funds administered by IDA is assisting in financing this project. Recently, an EEC Special Action Credit Agreement of US$7.0 million has been signed. Actions were taken in implementing some institutional changes, intro- ducing a new bulk water tariff, and establishing new accounting procedures both in the National Water Supply and Drainage Board and in local authorities. A tariff study has been completed and is under review by the Government. Despite initial delays, the WDB has made good progress during the past year, particularly in procurement. Thirty three contracts have been awarded, resulting in a commitment of about US$13 million out of the credits. Cr. No. 742 - Fourth Development Finance Corporation of Ceylon Project; US$8.0 million of September 30, 1977; Effective Date: December 16, 1977; Closing Date: December 31, 1981 This credit will meet a substantial portion of DFCC's estimated foreign exchange requirements for lending to private sector industrial projects and tourism. Subprojects for US$5.7 million have been authorized. DFCC remains a competent institution, with a rapidly increasing level of activity, which could increase further provided that DFCC's staffing problems are overcome as well as the constraint caused by the low equity base. Cr. No. 818 - Tree Crop Rehabilitation (Tea) Project; US$21.0 million of July 12, 1978; Effective Date: December 28, 1978; Closing Date: December 31, 1984 The credit would assist the Government in improving the economic efficiency of the tea industry by lowering production costs and improving tea quality in the project area, as well as in stemming the decline in tea output. Project progress is satisfactory. Procurement is under way; all tender documents have been issued. In the case of housing, awards have been  - 28 - ANNEX II Page 5 made and construction started. Field works, replanting and infilling, are on schedule. All other project components, namely health component, training component and tea area measurement, are progressing satisfactorily. Cr. No. 819 - Tree Crop Diversification (Tea) Project; US$4. mnillion of July 12, 1978; Effective Date: December 15, 1978; Closing Date: June 30, 1983. This credit would help the Government in its initial effort in a long-term program to rehabilitate, diversify and settle degraded mid-country lands, mainly nationalized tea estates. The National Agricultural Development and Settlement Authority, the project executing agency, has developed into a mature development organization which is operating efficiently under capable management. Despite some delay in procurement of equipment, progress in field work is impressive. Cluster selection and homestead and farm demarca- tion are nearly complete and soil conservation work (bench terraces, lock and spill drains, graded stone terraces) well under way and accelerating. Founda- tions for about 500 houses have been laid and these houses are at various stages of construction. The project has now reached a stage where the more difficult social part of the project, namely transport of non-citizen labor to other estates, settler selection, and land allocation will have to be tackled. Cr. No. 891 - Kurunegala Rural Development Project; US$20.0 million of April 26, 1979; Effective Date: August 27, 1979; Closing Date: June 30, 1984. The project aims to assist the development of the District of Kurunegala in an integrated manner for purposes of raising productivity, employment, incomes and living standards and to develop a replicable model for rural development for other districts in Sri Lanka. The project will provide for rehabilitation of existing irrigation schemes accompanied by improved water management practices to fully exploit the irrigation potential, and for programs for replanting/underplanting, intercropping and fertilizing of smallholder coconut plantations. The project will also strengthen agri- cultural extension services, improve the supply of input services such as fertilizer distribution and seeds supplies, and lay the foundation for a viable agriculture credit system. These directly productive investments will be complemented by investments in transportation, health, education, water supply and rural electrification. Subsidiary loan agreements with participating banks have been signed and the project unit set up. A super- vision mission reviewed the project in August and reported good progress. Cr. No. 900 - Road Maintenance Project; US$16.5 million of June 22, 1979; Effective Date: December 19, 1979; Closing Date: June 30, 1984 The project aims to improve the highway system of Sri Lanka by a program of enhanced periodic and routine maintenance. It would assist the  - 29 - ANNEX II Page 6 Government in the rehabilitation of 112 miles of road, resurfacing of 150 additional miles and strengthening, repairing or replacement of 30 bridges. The project iuld also provide plant and equipment for workshops and strengthen the road maintenance services of the Department of Highways. Consultants have recently been appointed and started their work. Cr. No. 931 - Agricultural Extension and Adaptive Research Project; US$15.5 million of July 24, 1979; Effective Date: October 4, 1979; Closing Date: June 30, 1985 The project would help Sri Lanka to (a) introduce a Training and Visit (T&V) extension system throughout the entire country, (b) strengthen adaptive research, and (c) improve and expand training of extension officers. The project would establish a link between research and extension and enhance the intensity, coverage and the content of agricultural extension services. A unified extension system would be developed, under which extension workers would receive biweekly training, visit farmers according to planned schedules, and transmit extension messages. Cr. No. 942 - Small and Medium Industries Project; US$16.0 million of July 24, 1979; Effective Date: October 23, 1979; Closing Date: June 30, 1984 The principal objectives of the project would be to encourage and assist growth and productivity improvement of small and medium firms, defined as enterprises having plant and equipment valued at less than Rs 1 million, so as to increase their contribution to efficient low cost employment creation, export expansion, regional development and economic growth. The project would have two main components - credit and technical, management and marketing services. Under the credit component, it is proposed to establish a fund in the National Development Bank (NDB) to provide refinancing of subloans made to small and medium industries by commercial banks and the Development Finance Corporation. The technical services component would be implemented by the Industrial Development Board, Department of Small Industry, Department of Textile Industries, and the National Institute of Management, and directed at specific subsectors - rubber products, light engineering, subcontracting exchanges, handlooms, coir products, and rice milling. Cr. No. 979 - Mahaweli Ganga Technical Assistance Project; US3.0 million; not yet effective The proposed project would provide technical assistance for: (i),pre- paration of a reconnaissance-level study of plans for conveying and utilizing surplus Mahaweli Ganga water to develop land in three alternative areas in order to select the best plan for a transbasin diversion project; (ii) ongoing review of designs and tender documents for the Right Bank Canal, and preparation of final designs and tender documents for construction of civil works and social infrastructure for part of System C in the Mahaweli Basin; and (iii) support for other studies and designs of project's in the Mahaweli Ganga Devel- opment Program. Training of local staff is included throughout the project.  - 30 - ANNEX II Page 7 An EEC Special Action Credit of aboutUS$2.0 million equivalent was also approved in January 1980 to assist in financing consultant's services for the ongoing review of the designs and tender documents for the Right Bank Canal and the preparation of final design and tender documents for System C.  - 31 - ANNEX III Page I SRI LANKA ROAD PASSENGER TRANSPORT PROJECT Supplementary Project Data Sheet Section I: Timetable of Key Events (a) Time taken by the Country to prepare the project 1 year (b) The agency which has prepared the project SLCTB with assistance from consultants recruited under Project Preparation Facility. (c) Date of first presentation to the Association and date of the first mission to consider the project May 1978 - September 1978 (d) Date of departure of appraisal mission July 16, 1979 (e) Date of completion of negotiations January 29, 1980 (f) Planned date of effectiveness July 14, 1980 Section II: Special IDA Implementation Actions None.  - 32 - ANNEX III Page 2 Section III: Special Conditions (a) Government would by December 31, 1980, furnish to IDA its policy statement on the participation of the private sector in road passenger transport with a timetable for implementation of necessary measures (para 32); (b) SLCTB would prepare a Corporate Plan for itself and RTBs for 1983-85 by April 30, 1982 and discuss the same with IDA (para 35); (c) SLCTB would adopt guidelines for satisfactory staffing levels for itself and RTBs by September 30, 1980 (para 36); (d) SLCTB would restrict RTB services to reflect the avail- ability of properly maintained buses (para 38); (e) Government would take necessary measures, to end operating losses to RTBs by 1983 (para 53); (f) in order to rationalize RTB fare structure, Govern- ment would, commencing January 1, 1981 arrange for adjustment of RTB fares (para 54); and (g) Conditions of credit effectiveness: (i) a satisfactory arrangement for the management of industrial activities of SLCTB had been in operation (para 39); (ii) consultants in the fields of procurement, accounting and industrial engineering had been appointed (para 49); and (iii) the form and substance of agreements between the Government, SLCTB and RTBs satisfactory to IDA had been furnished to the Association (para 57).  IBRD 14654R eo00 oo8o3 SXo l30' JANUARY 19J . - ? X 5~~~~~~~RI LANKA te < ~~ROAD PASSENGER TRANSPORT PROJECT ~~~~~~~~~~~~~~~~~~~~~~~~lca-s' tion of Regional Transport 9'30 )< w< + Board (RTS) Heodquorters 9-30'- ~~~~~~~