Sri Lanka : Capital Market Development Program
The specific objective of the proposed Capital Market Development Program (CMDP) is the enhanced capacity and size of the capital market that is grounded on a strong legal and regulatory framework.
Project Details
-
Project Officer
Hoshino, Takuya
South Asia Department
Request for information -
Country/Economy
Sri Lanka -
Modality
-
Sector
- Finance
Related Projects
Project Name | Capital Market Development Program | ||||||||||||||||
Project Number | 49365-002 | ||||||||||||||||
Country / Economy | Sri Lanka |
||||||||||||||||
Project Status | Closed | ||||||||||||||||
Project Type / Modality of Assistance | Loan Technical Assistance |
||||||||||||||||
Source of Funding / Amount |
|
||||||||||||||||
Strategic Agendas | Inclusive economic growth |
||||||||||||||||
Drivers of Change | Governance and capacity development Knowledge solutions Partnerships Private sector development |
||||||||||||||||
Sector / Subsector | Finance / Money and capital markets |
||||||||||||||||
Gender | No gender elements | ||||||||||||||||
Description | The specific objective of the proposed Capital Market Development Program (CMDP) is the enhanced capacity and size of the capital market that is grounded on a strong legal and regulatory framework. | ||||||||||||||||
Project Rationale and Linkage to Country/Regional Strategy | The capital market in Sri Lanka has been ineffective in channeling the country's savings to support investment in the economy. From 2006 to 2015, government policy support for capital market development was limited. The government recognized what needed to be done to strengthen the capital markets, but reforms were piecemeal and the appetite for designing and implementing comprehensive change was lacking. This resulted in weak investor confidence. The market capitalization of the Colombo Stock Exchange (CSE) stagnated as a percentage of gross domestic product (GDP) at about 30% during 20062015. The CSE price index dropped by 9% between January 2016 and June 2016, a significantly weaker performance than those experienced during the same period by other middle-income countries in the region. Sri Lanka's underdeveloped capital market narrows the viable financing options for companies seeking to grow. It also places undue pressure on the banking sector. Bank assets account for almost 60% of the country's overall financial assets, and the sector is not the most appropriate nor does it have the capacity to offer the long-term financing essential for private sector capital investments and infrastructure projects. The corporate bond market is still in the nascent stage. The ratio of outstanding corporate bonds to GDP is only 2% and significantly lower than those of other middle-income countries in Asia. Against this backdrop, the program seeks to deepen and broaden Sri Lanka's capital market by (i) extending the government yield curve and thereby promoting a more liquid government bond market, and eventually a more developed corporate bond market; (ii) catalyzing institutional investor demand by broadening, deepening, and diversifying the investor base; (iii) strengthening the institutional and regulatory capacity of the Securities and Exchange Commission (SEC), the Insurance Regulatory Commission of Sri Lanka (IRCSL), the Employment Provident Fund (EPF), and Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB); (iv) developing important market infrastructure such as a surveillance systems, trading system, and information and communication technology systems; (v) enhancing capacity development through training and promoting financial literacy; and (vi) enhancing the supply of alternative financial instruments such as derivatives to include for commodities and securitized bonds. The program will also support financial inclusion by promoting financial literacy among retail investors, expanding mutual funds, and developing consumer protection in the insurance sector through its adoption of grievance mechanisms. ADB has worked to closely coordinate its capital market development activities with those of other development partners and to complement their efforts. ADB's program is part of an umbrella operation to support economic recovery led by the International Monetary Fund (IMF). In June 2016, the IMF approved an extended fund facility of $1.5 billion for Sri Lanka that aims to restore macroeconomic stability. The World Bank approved a $100 million development policy loan in July 2016, with the Japan International Cooperation Agency providing another $100 million of parallel financing. ADB has been closely coordinating with these organizations. ADB's finance sector strategy for Sri Lanka, which is part of its country partnership strategy and country operations business plan, is based on the governments emphasis on private sector development, lessons from ADB's previous finance sector interventions, and coordination with other development partners. |
||||||||||||||||
Impact | Basic capital and investment needs, as well as Sri Lanka's longer-term economic objectives supported. |
Project Outcome | |
---|---|
Description of Outcome | The size, depth, and capacity of the capital market enhanced. |
Progress Toward Outcome | The government is working towards the completion of Tranche 2 (T2) policy conditions for the release of $125 million. Despite gradual progress, there are several policy actions that have not been completed. The loan closing date is on 31 December 2021. The TA closing date will be on 25 October 2022. Market capitalization of CSE has increased in 2020-2021 and the secondary market trade is active. |
Implementation Progress | |
Description of Project Outputs | 1. Enhanced market facilitation. 2. Enhanced demand measures. 3. Enhanced supply measures. |
Status of Implementation Progress (Outputs, Activities, and Issues) | Despite the continued effort by implementing agencies with the attached technical assistance (TA) support, the T2 policy action compliance has been delayed. A number of non-TA dependent policy actions are delayed partly due to some external factors, such as political interference in late 2018 and the terrorist attacks in April 2019. The enactment of a new SEC bill was finally made in September 2021. Demutualization bill is still pending. State-owned enterprise (SOE) reforms, such as partial listings of three SOEs and the legal segregation of Sri Lanka Insurance Corporation continue to be delayed. ICT related initiatives by SEC and CBSL are also being delayed partly due to COVID-19 pandemic. The TA implementation is generally on track to support SEC in demutualization, collective investment schemes, educations, derivatives, and securitization; SLASSMB in a new accounting and auditing act; IRCSL in independent resolution panel and financial inclusion. and EPF in fund management and ICT reform. |
Geographical Location | Nation-wide |
Safeguard Categories | |
---|---|
Environment | C |
Involuntary Resettlement | C |
Indigenous Peoples | C |
Summary of Environmental and Social Aspects | |
---|---|
Environmental Aspects | Minimal or no adverse environmental impact. |
Involuntary Resettlement | Not applicable. |
Indigenous Peoples | Not applicable. |
Stakeholder Communication, Participation, and Consultation | |
During Project Design | ADB held a stakeholder seminar on 28 June 2016 in Colombo where there were over 100 attendees. |
During Project Implementation | During regular program review missions. |
Business Opportunities | |
---|---|
Consulting Services | Consultants have been recruited using the quality- and cost-based selection method with a standard quality-cost ratio of 90:10 due to the highly specialized expertise needed. The consultants have been engaged by ADB in accordance with the Guidelines on the Use of Consultants (2013, as amended from time to time). All the disbursements under the TA will be made in accordance with ADBs Technical Assistance Disbursement Handbook (2010, as amended from time to time). |
Procurement | No major conventional procurement is envisaged under the project. |
Responsible ADB Officer | Hoshino, Takuya |
Responsible ADB Department | South Asia Department |
Responsible ADB Division | Public Management, Financial Sector and Trade Division, SARD |
Executing Agencies |
Ministry of Finance, Economic Stabilization and National Policies |
Timetable | |
---|---|
Concept Clearance | 29 Apr 2016 |
Fact Finding | 06 Jun 2016 to 30 Jun 2016 |
MRM | 11 Aug 2016 |
Approval | 26 Oct 2016 |
Last Review Mission | - |
Last PDS Update | 13 Dec 2022 |
Loan 3446-SRI
Milestones | |||||
---|---|---|---|---|---|
Approval | Signing Date | Effectivity Date | Closing | ||
Original | Revised | Actual | |||
26 Oct 2016 | 24 Nov 2016 | 22 Feb 2018 | 31 Aug 2018 | 31 Dec 2021 | 03 Mar 2022 |
Financing Plan | Loan Utilization | ||||
---|---|---|---|---|---|
Total (Amount in US$ million) | Date | ADB | Others | Net Percentage | |
Project Cost | 250.00 | Cumulative Contract Awards | |||
ADB | 250.00 | 07 Feb 2023 | 125.00 | 0.00 | 100% |
Counterpart | 0.00 | Cumulative Disbursements | |||
Cofinancing | 0.00 | 07 Feb 2023 | 125.00 | 0.00 | 100% |
TA 9213-SRI
Milestones | |||||
---|---|---|---|---|---|
Approval | Signing Date | Effectivity Date | Closing | ||
Original | Revised | Actual | |||
26 Oct 2016 | 14 Dec 2016 | 14 Dec 2016 | 30 Jun 2019 | 25 Oct 2022 | 12 Jan 2023 |
Financing Plan/TA Utilization | Cumulative Disbursements | |||||||
---|---|---|---|---|---|---|---|---|
ADB | Cofinancing | Counterpart | Total | Date | Amount | |||
Gov | Beneficiaries | Project Sponsor | Others | |||||
1,700,000.00 | 500,000.00 | 0.00 | 0.00 | 0.00 | 0.00 | 2,200,000.00 | 07 Feb 2023 | 1,998,855.14 |
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.
The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.
In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.
None currently available.
Evaluation Documents See also: Independent Evaluation
None currently available.
Related Publications
None currently available.
The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.
Requests for information may also be directed to the InfoUnit.
Tenders
Tender Title | Type | Status | Posting Date | Deadline |
---|---|---|---|---|
Capital Market Policy Expert (National) | Individual - Consulting | Closed | ||
Capital Market Reassessment Team (National) | Firm - Consulting | Closed | ||
Senior Capital Market Policy Advisor and Team Leader (International) | Individual - Consulting | Closed | ||
Business Process Review (national) | Firm - Consulting | Closed | ||
Business Process Review (international) | Individual - Consulting | Closed | ||
Senior Securities Listing Expert | Individual - Consulting | Closed | ||
Tax Policy Expert | Individual - Consulting | Closed | ||
Capital Market Qualification Framework Expert | Individual - Consulting | Closed | ||
Chief Economist | Individual - Consulting | Closed |
Contracts Awarded
Contract Title | Approval Number | Contract Date | Contractor | Address | Executing Agency | Total Contract Amount (US$) | Contract Amount Financed by ADB (US$) |
---|---|---|---|---|---|---|
Capacity Development | Technical Assistance 9213 | 28 Apr 2017 | Aries Group, Ltd. (United States) | 1745 Jefferson Davis Highway #507 Arlington, Virginia 22202 U.S.A. | Ministry of Finance | 350,718.00 | — |
Capacity Development | Technical Assistance 9213 | 28 Apr 2017 | Aries Group, Ltd. (United States) | 1745 Jefferson Davis Highway #507 Arlington, Virginia 22202 U.S.A. | Ministry of Finance | 350,718.00 | — |
Capacity Development | Technical Assistance 9213 | 13 Mar 2017 | International. Securities Consultancy Ltd. (Hong Kong, China) | 9A Carfield Commercial Bldg. 75-77 Wyndham Street, Central Hk, China | Ministry of Finance | 748,100.00 | — |
Procurement Plan
None currently available.