Countries and Regions

	Table of Contents
p. 14 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Operations 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 : III. Sector Strategies

---

F. Private Sector Operations

83. ADB’s strategy to enhance private sector development to contribute to enhanced growth and poverty reduction has a two-pronged approach: (i) the promotion of an enabling environment for private sector activities through ADB’s public sector operations, and (ii) direct investment in private sector companies in the form of loan and equity through operations of ADB’s Private Sector Group. Consistent with this approach, ADB places strong emphasis on creating a suitable environment for the expansion of private participation in the economy and to identify specific opportunities for private investment. Noteworthy examples include support for the plantation privatization programs and private sector participation in fishery harbor management and service, private sector provision of advisory services for perennial crops, development of the private construction industry, establishment of a regulatory framework for private sector participation in urban water supply. In the port subsector, ADB is assisting the Government to undertake a feasibility study to determine the viability of developing the south harbor at Colombo Port, through the building of a breakwater and the construction of additional container terminals which are being built and operated by the private sector²⁸. In natural resources, the Government with ADB assistance is undertaking a set of legal and institutional reforms to improve the investment environment for private sector participation, the access of the poor to productive natural resources, and natural resources and environmental management. The proposed support for Private Sector Development Program in 2000 will further assist the creation of an enabling policy, legal and regulatory environment to promote private sector growth and improved public sector management in major sectors on the economy (paragraphs 68-69).

84. In 1997 and 1998, ADB assisted the private sector to borrow from the international capital market to onlend to domestic industries. These assistance included Small and Medium Enterprise Assistance Project and Credit Enhancement Facility for Private Enterprises²⁹. Both initiatives played an important catalytic role in attracting private capital inflows under difficult financial market conditions to support private sector growth, and more importantly, a role in creating employment opportunities for the poor and reduce poverty in the rural and semi-rural areas. A PPTA for Small-Medium Enterprise (SME) Support for Employment Generation and Poverty Reduction is included in 2000, to prepare a project in 2001 and also look into the nature and means of financing of SMEs and ways of ADB support particularly in the provision of credit guarantees. It is envisaged that the scope of future support to SMEs will be broadened to include support to improve the policy framework within which the SMEs operate, ensure appropriate technology transfer, provide adequate research and extension services, introduce modern management system and adequate forward and backward linkages with manufacturing sectors.

85. ADB is monitoring the project proposals that are emerging to ascertain whether there is a catalytic role for ADB. Specific cases of ADB’s public sector operations that assist the Government in preparing the way for the emergence of BOO/BOT projects include: (i) the Colombo Port South Harbor Development Project where ADB is assisting the Government to prepare a feasibility study, and (ii) the Power Sector Development Program³⁰, that may lead to disaggregated utility companies emerging with possible private sector management or equity participation. ADB’s ongoing analysis of the road sector³¹ may also lead to future private participation in the construction and management of selected highways. Similarly, the feasibility of private sector involvement in the water sector is being examined under an ongoing ADB project³².

86. ADB's direct private sector operations in Sri Lanka have so far included three loans totaling $46.1 million and six equity investments totaling $10.9 million for nine projects. The most recent loan and equity investment was provided for the private sector development of the Queen Elizabeth Quay in Colombo Port³³. ADB's private sector groups operations will continue to focus mainly on infrastructure projects where large funding is required and where ADB can play a catalytic role in attracting co-financing. ADB may consider assistance to the Colombo-Kandy Expressway project and the Greater Negombo Water Supply project. Both projects are still under study. As mandated by ADB's overarching policy of poverty alleviation, ADB will consider health and education sector projects on a case-by-case basis for its future private sector operations.

___________________

Back E. Gender Dimensions of ADB Operations	Next IV. Regional Cooperation