Announcement of IDA to Assist Small and Medium Industries in Sri Lanka on June 28, 1979

M FOR 1MMED1ATE RELEASE ,) () 0 .. , r-• World Bank 1' 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 IDA NEWS RELEASE NO. 79/106 June 28, 1979 IDA TO ASSIST SMALL AND MEDIUM INDUSTRIES IN SRI LANKA The International Development Association (IDA), the World Bank's soft-loan affiliate, has approved a $16 million credit to Sri Lanka for a project that will provide access to credit and to technical, marketing, and management services for small and medium industries. The project will also encourage changes in areas which affect the expansion, export pro~pects, and efficiency of these industries, focussing particularly on product groups with significant local or export market potential. Under the $27.9 mill ion project, the National Development Bank, through the small and medium industries fund, will refinance loans made by participating credit institutions to small and medium industries. Credit will be made available on the basis of project evaluation rather than col- lateral, thereby assisting some 1,000 economically and financially promising • projects . Provision of staff, training, equipment, and facilities for major technical service agencies will help improve managerial, technical, market- ing, and other services for small and medium industries. The Industrial Development Board, the chief technical service agency, will be reorganized, and will increase and upgrade its staff so that it can better focus on and expand its promotional activities and extension services. Multi-purpose service centers will be established for rubber and metal products, building materials, and selected agro-industries to provide backup, testing, develop- ment1 and service facilities for specialized extension programs. A sub- contracting exchange will be established to help small and medium industries become suppliers to larger industries, government agencies, and export houses. The Department of Small Industries will strengthen its support for cottage and rural industries, particularly for manufacturers of coconut fiber products. A garment training center will be established by the Department of Textile Industries to provide training and technical assistance to gar- ment units for cutting and pattern making, production supervision, and quality control. A new company to organize the production and marketing of export quality handloom products will also be established. The project also provides for th~ training of staff and the . improvement of operating procedures and systems of the National Development Bank and participating credit institutions. NOTE: Money figures are expressed in U.S. dollar equivalents. . . ./  - 2 - Finally, studies will be carried out to assist the development of appropriate policies for fiscal incentives and tariff structures for the efficient expansion of the small and medium industries sector. ' Increased access to credit for Jaber-intensive small and medium industries is expected to result in the creation of some 20,000 jobs. Technical, marketing, and management service components will have a sig- nificant impact on industry growth and productivity. Some 600 to 1,000 rubber, engineering, and building materials firms will benefit from specialized services, and an additional J ,000 to 1,500 firms will benefit from improved production, technical advice, and the extension service. Earnings of about 2,000 handloom weavers will increase significantly, and the garment training center will train over 900 supervisors, cutters, and pattern makers in three years. In addition, the project will improve the capability of five major credit institutions to promote and assist viable industrial ventures. The Government of Sri Lanka is providing $2.45 million for the project through its contribution to the National Development Bank and through the technical service agencies. Credit institutions are contri- buting $3 mill ion, and a further $6.45 million will come from project beneficiaries. The IDA credit is for 50 years, including 10 years of grace. The credit carries no interest, but bears a service charge of 3/4 of 1% per annum to cover administrative costs. • - 0 - • FOAM NO. 1121 j. (5-76) T ECHN I CAL D A T A PROJECT: Small and Medium Industries COUNTRY: Democratic Socialist Republic of Sri Lanka TOTAL COST: $27.9 million IDA FINANCING: $16 million, standard IDA terms OTHER FINANCING: Government of Sri Lanka ) $2.45 million National Development Bank) Credit Institutions, $3 million Project beneficiaries, $6.45 million IMPLEMENTING ORGANIZATIONS: National Development Bank (NDB) c/o Ministry of Finance & Planning Colombo 1, Sri Lanka Industrial Development Board c/o Ministry of Industries and Sctemtific Affairs Colombo, Sri Lanka PROJECT DESCRIPTION: It consists of: (a) a program by the National Development • Bank, through the Small and Medium Industries (SMI) Fund, to refinance loans by participating credit institutions to small and medium industries; (b) improving managerial, technical, marketing, and other general and specific subsector services, principally for small and medium industries, by providing staff, training, equip- ment, and facilities for the major technical service agencies; (c) improving staff and op- erational systems of the National Development Bank and participating credit institutions by training staff and developing operating procedures and systems; and (d) undertaking studies to assist the development of appropriate fiscal incentives and tariff structures. PROCUREMENT: The National Development Bank will require that procedures are established bv the credit institutions to ensure that: the goods procured locally for the projects to be refinanced under the SMI Fund will be purchased at reasonable and competitive prices, and that contracts for goods procured outside Sri Lanka costing $10,000 or more will be let through international shopping pro- cedures on the basis of at least three price quotations. The SMI Fund, in its review of loans above $48,000, will also review this aspect of procurement. SMI Fund staff and IDA missions will review these procedures as part of the regular supervision of this project. Procurement of equipment, vehicles, materials, consultants, and technical services for the technical services components will be provided in accordance with government proce- dures satisfactory to the Association. CONSULTANTS: Consultant services will be provided to: (a) assist in the development of appropriate fiscal and tariff policies of relevance to the efficient expansion of the SMI sector; (b) improve the general operations • of the NOB, SMI Fund, and participating credit institutions; and (c) assist in the develop- ment and implementation of sub-sector specific technical services support and extension programs. tSTIMATED COMPLETION DATE: 1983 - 0 -