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Countries and Regions Country Partnership Strategies Document
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Country Strategy and Program 2004-2008: Sri Lanka
VI. Risks and Performance Monitoring and EvaluationA. Risks2397. There are five main risks. First, there is the risk that the Government’s reform program including the public administrative reforms might be diluted or deferred by political opposition groups or vested interests, thereby reducing the effect that reforms might otherwise have on GDP and productivity growth, and hindering a full recovery either in the fiscal situation or in public and private investment. Second, there is always a risk that the civil conflict could restart either as the result of a breakdown in the peace process or lack of progress in the process. In the former case, resumption of hostilities will thwart development efforts by undermining the investment climate, hurting tourism, and raising defense expenditures. In the latter case, public perceptions of failure to promote equitable development opportunities will cause disillusionment and would make economic revival difficult. Third, external shocks could lead to dampened domestic economic conditions, thereby restraining growth, endangering macroeconomic revival, and weakening the impetus for reform. 98. The fourth risk concerns the possibility of failings internal to ADB reducing the impact of ADB’s strategy. In Sri Lanka, the extent and major causes of poverty vary among people, locations, and occupations, as does the extent of social deprivation in areas of equivalent income poverty. The actual poverty situation, therefore, is complex, and it will not necessarily be addressed by a project that is sited in a poor area, or by one that targets a characteristic of poverty that happens not to be crucial in the project area. Judgment and careful design are needed to select the kind of project that benefits the maximum number of people, is located in the most appropriate district, and pinpoints critical local causes of poverty. Inappropriate targeting will dilute the impact of any strategy, as it will lead to overstated expectations with respect to the likely extent of poverty reduction from project interventions. 99. The fifth risk relates to the above four and is linked to the possible social consequences of the Government’s reform package as a whole and those with ADB support. Some of the proposed reforms—labor law, land law, and privatization—can be particularly unsettling in their consequences for the poor. There are risks, for instance, that the protection for the poor and low-paid built into existing laws and traditions will be diluted or eliminated; that growing private provision of social and economic services will reduce rather than expand their accessibility, or price them beyond the reach of the poor or low-paid; that the poor might not have the innate capacity to withstand or adapt to new customs and practices; or, ultimately, that the reform package turns out to be over-ambitious in its growth, efficiency, and “connectivity” expectations. If any of these risks transpire, poverty, exploitation, and vulnerability for those directly affected would worsen, and social stability could deteriorate. B. Monitoring Process and Plan100. Monitoring the impact of the Government’s reforms as well as the performance of ADB’s strategy will be important, especially in a situation where the effects on the poor of radical changes in policy and procedures cannot be foreseen with any certainty. The Government’s Regaining Sri Lanka recognizes current weaknesses in the database and institutional system for the accurate monitoring of poverty and human development, and proposes detailed institutional arrangements (some already established and others to be established). The resulting improvements in the collection and periodicity of appropriate disaggregated data will ensure better poverty monitoring and more timely notice given to the authorities of outcomes or of unwanted consequences of ongoing reform. 101. ADB will continue its partnership with the Government and other stakeholders including other funding agencies to closely monitor and evaluate the poverty reduction partnership agreement and achievements in the Government’s poverty reduction strategy program through the process of an annual CSP update. The CSP update exercise will evaluate: (i) the Government’s reform program and its implications for the poor; (ii) the comparative impact of sector growth on poverty reduction; (iii) sector portfolio performance; (iv) the evolving peace process and its implications for ADB assistance; (v) the lending and nonlending assistance in the following 3 years to ensure the relevance and effectiveness of ADB assistance; (vi) performance-based allocation pf ADF resources based on an assessment of macroeconomic management, structural reforms, and portfolio management; and (vii) the country’s OCR borrowing capacity. Particular efforts will be made to assess—in qualitative terms if quantification is not possible—the local impact of ADB’s poverty-reduction projects because it is recognized that, since project performance audits are undertaken some years after implementation, a closer look would be taken at ongoing projects to ensure that they are actually having positive effects on poverty reduction. ___________________
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