Countries and Regions

	Table of Contents
p. 7 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Sri Lanka

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II. Country Operational Strategy

A. The Country Operational Strategy

45. The current Country Operational Strategy (COS)¹⁰ for Sri Lanka was finalized in 1999. The strategy aims to assist Sri Lanka reduce poverty and achieve a sustainably higher level of economic growth by supporting: (i) policy and institutional reforms to promote private sector development and improved public sector management; (ii) human development to address the gap in marketable skills and thereby improve employment and income levels targeting especially the poor concentrated areas; (iii) enhancement of the country’s infrastructure endowment through public and private investment and improvement of sector policy and regulatory environment; (iv) preservation of the country’s natural resource base; and (v) measures to mitigate the social and environmental impact of the transition to a higher growth path. The strategy assumes that ADB operations will be geographically located away from areas directly affected by the civil conflict. However, flexibility will be allowed to enable rapid extension of ADB activities to those areas, if peace is achieved.

B. Progress in Implementation

46. ADB’s operational programs in 1999 and 2000 have been full operationalization of the COS in that all projects were selected to improve economic efficiency, reduce poverty, improve environmental management and enhance the enabling environment for the development of the private sector. Expansion of the role of the private sector in the economy is a fundamental concern. ADB’s dialogue with the Government across all sectors has consistently emphasized the need to harness the resources and potential efficiency gains by opening up the economy to greater private participation. As noted in Chapter I, the public sector does not currently have the necessary resources or capacity to address the major development challenges facing the country. The Government has recognized this situation and constructive measures have been taken in recent years to increase the scope and depth of private participation in the economy. In the area of privatization, significant progress has been achieved in several sectors, including agriculture (plantation privatization), telecommunications (partial privatization of Sri Lanka Telecom) and aviation (partial privatization of Air Lanka) and energy (privatization of Lanka Gas Company). A private build-operate-transfer (BOT) operation, in which ADB is participating, has been introduced in the Colombo Port, as a first step in the future expansion of private sector operations in the sector. In addition, build-own-operate (BOO) operations have already been undertaken (Asia Power) and BOT operations are currently being developed (Kelantissa) in the power sector. These changes have occurred with the encouragement and support of the donor community, including ADB.

47. Another area of policy dialogue concerns public sector efficiency and performance to overcome weaknesses in the public administration system and to take the actions required to increase its effectiveness. ADB’s policy discussions with the Government have emphasized the importance of improving public sector management. Some progress has been made at the sectoral level, particularly in the road, energy, environment and natural resources management, and water and urban development sectors.

48. The Government has established several Presidential Task Forces and special commissions to identify the scope and direction of reforms in priority sectors, such as urban development and housing, local government, education and health. Sector analysis has also been undertaken by the National Development Council Secretariat, covering areas such as agricultural reform, rail and road transportation policies. As a result of these measures, program of reform in key sectors has been identified. ADB’s technical assistance program has also been an important source of policy and planning advisory services, and will be expanded in the future to strengthen the orientation of the public investment program and the overall reform process.

C. Poverty Reduction Partnership Agreement

49. The recently completed Framework for Poverty Reduction in Sri Lanka by the Government will form the basis of the poverty analysis, the country-specific poverty reduction strategy and the poverty reduction partnership agreement by ADB to be completed by early 2001. The partnership agreement will outline specific operational targets and measures to optimize the poverty impact of ADB operations in the country and the Government’s own commitments to this objective.

50. A proposal was recently approved by ADB to fund consultations with the poor under RETA 5894 (Facility for Capacity Building and Participatory Activities II) in three districts of Sri Lanka in July to September 2000. The consultation will add input from the poor to the poverty analysis and, in turn, to the country-specific poverty reduction strategy, the high level forum and the poverty reduction partnership agreement. The results of the consultation will be integrated into the poverty analysis and also presented at the high level forum. The first draft of the poverty analysis is expected to be completed by the end of October 2000. The high level forum will be held in late November 2000, after adequate review of the poverty analysis and the country-specific poverty reduction strategy by major stakeholders, and the poverty reduction partnership agreement will be signed in early 2001.

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