AFD AND SRI LANKA

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eco-friendly growth

SRI LANKA, A RAPIDLY GROWING ECONOMYSri Lanka is an independent island located south of India with an area of 65,610 km2 and a population of 20.3 million inhabitants. A 26-year civil war between Tamil separatists and the legal govern-ment ended in May 2009 with the victory of the latter. The war left trauma in the northern and eastern population and damaged infrastructures. Today, the country is returning gradually to peace but is still marked by years of difficulties.

Agriculture, the garment industry and tourism are propelling the Sri Lankan economy, which still mainly relies on household expenditure and is strongly supported by the development of access to credit and by public indebtedness to finance new infra-structures. Economic growth was estimated at 6.4% in 2012 by the Central Bank and is expected to stabilise at over 6% in the upcoming years. International social indicators are improving and Sri Lanka now ranks 92nd in the world in terms of Human Development Index, ahead of Thailand and China.

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Market in Pettah

Today, AFD aims to provide its support to green and socially inclusive growth in Sri Lanka in the following main sectors of intervention:

Drinking water and wastewater

Renewable energies and energy efficiency

Environment

Integrated Urban development.

2005-2013 Portfolio Breakdown (EUR M)

Road

Water

Electrification

Community Development

Central Bank Credit line for reconstruction through SMEs

80

70

60

50

40

30

20

10

0

58.16 35.00

10.35 2.13 8.36 10.00

After a rapid reconstruction phase, Sri Lanka has to consolidate its position. Despite strong growth over the last years, social disparities are increasing and economic gains should now be better shared among people and regions. While economic growth has been the main focus, environmental sustainability is increasingly considered. Sri Lanka aims to promote socially inclusive growth and investment in green infrastructure. In this respect, Sri Lanka welcomes AFD’s support for sustainable and equitable development.

AFD JOINS FORCES WITH SRI LANKA FOR GREEN AND INCLUSIVE GROWTHIn 2005, the French Government urged Agence Française de Développement (AFD) to start operations in Colombo in the after math of the Tsunami and to contribute to Sri Lanka’s recons truction.

In 2009, AFD’s mandate in Sri Lanka was confirmed and extended by focusing on the promotion of green and inclusive growth.

At the end of 2012, AFD’s loan portfolio stood at EUR 124m, dedicated to public infrastructures and the private sector.

PARTNERING WITH AN NGO TO STRUCTURE CHILDHOOD EDUCATIONIn 2009, AFD was entrusted with a new mission by the French Government to finance projects initiated by civil society organiza-tions. This program, formerly managed by the French Ministry of Foreign Affairs, is now handled by AFD NGO Partnerships Division (DPO) in charge of non-governmental project financing and monitoring. Housed at AFD’s headquarters in Paris, this desk is now mainly dedicated to French NGOs operating in developing countries.

Despite the fact that the Sri Lankan Government has devoted special attention to promoting education, the system is still facing many challenges, specifically in the eastern province affected by years of conflict. The lack of human resources, educational material and infrastructures, and the successive displacements of communi-ties during the war, prevented regular school attendance and disturbed the structuring of an early childhood education sector.

AFD renewed its support to Solidarity Laïque in 2012 through a EUR 430 000 program. This second phase of the grant has been allocated for the implementation of the project contribution to the “Education for All initiative” in Eastern Province by improving civil society coordination with public authorities in charge of delivering Educational services.

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Kinniya tower, the highest water tower in Sri lanka

A WIDE RANGE OF TOOLSAFD is able to offer a wide range of financial tools in Sri Lanka, tailored to the diversity of its partners and their specific needs. AFD in Sri Lanka can provide financial assistance, mainly in the form of long-term loans with an important grace period, to various entities:

− The Government of Sri Lanka and state-owned organisations

− Direct loans without the Government guarantee to public utili-ties, state-owned banks and financial institutions priced accord-ing to their credit worthiness

− Training and capacity building (diploma courses, specialized seminars).

On a case by case basis, AFD can mobilize external grants to launch feasibility studies or design technical assistance for projects with a high “green” impact.

PROVIDING DRINKING WATER TO THE WAR AFFECTED

POPULATION OF JAFFNAIn Sri Lanka, although more than 80% of the population has access to water, there are large disparities across the country. In the northern and eastern parts of the country that were affected by the war, only 46% of the population has access to a safe source of drinking water.

To provide people in the Jaffna peninsula with an equitable access to drinkable water and a good sanitary system, AFD and the Asian Development Bank joined forces finance a long-term loan to finance the Jaffna Kilinochchi Water Supply & Sanitation Project.

EUR 35 million for main water infrastructures will be financed by AFD. It will concern the raw water intake and main pipelines, a brand new water treatment plant (with a capacity of 27 000 m3/day), a pumping station and treated water mains. The project is co-financed with the Asian Development Bank ($90M), which will fund 17 water towers, the network to distribute drinking water throughout the city of Jaffna and the sanitation system.

On completion, 300 000 people will have access to water and 100 000 m3 of wastewater will be treated through sewerage infrastructures, thus improving health, human and economic development. The project will also strengthen the capacity of local structures to protect and manage water resources.

REHABILITATING INFRASTRUCTURE IN THE DISASTER

AREA OF TRINCOMALEEThe tsunami disaster of 26 December 2004 caused cata-strophic losses on two-thirds of the coast of Sri Lanka. 31,000 victims were recorded at national level, and damages were estimated at USD 2 billion.

Soon after, AFD confirmed its support to the Government of Sri Lanka and participated in the country’s efforts to rebuild and expand infrastructures in the Eastern province through a major development project.

This project, called Trincomalee Integrated Infrastructure Project, focused on the construction and rehabilitation of key public infrastructures in the district of Trincomalee, such as roads and bridges. It also financed the overhaul and extension of the water supply network and the distribu-tion of electricity. The last component focused on com-munity development infrastructures such, as schools, libraries, medical centres… Overall, AFD granted the Government of Sri Lanka a highly concessional loan of EUR 79 million.

The A15 road between Trincomalee and Thirukkodi-yamadu, B10 road between Kantale and the seashore and the C-Class coastal road in Trincomalee district have been completely renovated.

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PROPARCOPROPARCO is AFD’s subsidiary specialising in private-sector financing. It is a development finance institution whose aim is to finance operations that are socially equitable, environmentally sustainable and financially profitable. It extends medium and long-term loans at market conditions, in euros, dollars or local currencies and financing through equity participation or guarantees.

PROPARCO has been authorised to operate in Sri Lanka since 2005. It has a broad mandate enabling it to finance projects that support sustainable growth and poverty reduction.

It applies high level requirements in terms of environmental and social responsibility, and encourages the development of sustain-able businesses. For the 2012 fiscal year, the total amount of commitments for Proparco reached €740m while the portfolio was worth €3.1 bn at 31 December 2012 – up 20% on 2011.

In Sri Lanka, Proparco focuses its investments on the develop-ment of renewable energies (wind, solar, hydro, biomass, etc.) and energy efficiency, along with agribusiness, microfinance, health, education and sustainable tourism. With operations since 2005, Proparco’s portfolio has more than doubled over the last year and now stands at close to $50m. Proparco’s financing ranges from micro leasing to on-lending for renewable energies, as well as developing access to finance to the areas of the country that are less developed.

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AFD IS SCALING UP ITS OPERATIONS IN VARIOUS SECTORSIn the coming years, AFD will focus on a few sectors in line with the Mahinda Chintana objectives and more specifically on water and sanitation, energy, environment and urban development. Mahinda Chintana sets out Sri Lanka’s development vision for the 10-year period 2006-2016. Based on an extensive consulta-tion process, the plan sets out a broad macroeconomic frame-work, and within these parameters sets out 10-year policy frameworks for various sectors of the economy, including a broad vision, situation analysis and strategy.

Several projects are under appraisal and could be presented to AFD board for approval in the coming years before new agree-ments with the Government of Sri Lanka can be considered.

Access to safe drinking water in Sri Lanka has increased signifi-cantly over the past 20 years, from 67% in 1990 to 91% in 2010. To reach the Millennium Development Goals, the Mahinda Chintana aims to ensure that 100% of people will have access to a source of drinking water by 2020 and at least 60% of the popula-tion will be connected to the network. To support it, AFD aims to finance several water supply projects, with a special focus on urban areas.

Today, only 2.3% of the population is connected to a sewerage system. The ambitious goal of both the Government and National Water Supply and Drainage Board (NWSDB) is to reach 7% of the population by 2020. In order to meet this target and at the request of the Government of Sri Lanka, AFD is willing to expand funding into the wastewater sector and to promote sustainable solutions to treat wastewater in Sri Lanka and avoid the pollution of groundwater and rivers.

The Government of Sri Lanka has been engaged in an extensive electrification program which helped to increase the rate of people connected to the grid from 29% in 1990 to 91% in 2011. The share of renewable resources in the energy mix of the coun-try is now down up to 40%, (mainly hydropower) and the country remains highly dependent on external energy sources, including thermal energy (representing 59% of the total production in 2011). This resource, which is expensive and highly polluting, endangers the trade balance of the country.

Providing equal and sustainable access to water to the population

Developing the wastewater sector

Modernizing the energy sector

This publication was printed in an environmentally responsible manner using vegetable-based ink and PEFC™ paper,

chain of custody n° 10-31-945 (sustainable forest management).

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AGENCE FRANÇAISE DE DÉVELOPPEMENT (AFD)

5 rue Roland Barthes 75598 Paris Cedex 12 – France

Tél. : +33 1 53 44 31 31 Fax : +33 1 44 87 99 39

www.afd.fr

AFD COLOMBO

33 – 1/3 West Tower World Trade Center - Echelon Square

Colombo - Sri Lanka Tél.: 11 529 9780

Email : afdcolombo@afd.fr http://srilanka.afd.fr

Agence Française de Développement (AFD) is a public development finance institution that has been working to fight poverty and foster economic growth in developing countries and the French Overseas Communities for seventy years. It executes the policy defined by the French Government.

AFD is present on four continents where it has an international network of seventy agencies and representation offices, including one in Brussels. It finances and supports projects that improve people’s living conditions, promote economic growth and protect Earth, such as schooling for children, maternal health, support for farmers and small businesses, water supply, tropical forest preservation, and the fight against climate change.

In 2012, AFD approved Euros 7 billion to finance activities in developing countries and the French Overseas Communities. Main outcomes of AFD’s funding are monitored every year. For instance, money delivered will help get 10 million children into primary school and 3 million into secondary school; they will also improve drinking water supply for 1.79 million people. Energy efficiency projects financed by AFD in 2012 will save nearly 3.6 million tons of carbon dioxide emissions annually.

Child walking by a wind farm © Stéphane Tromilin

www.proparco.fr

PROPARCO, AFD’s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.

FFEM www.ffem.fr

FFEM is a bilateral public facility set up by the French Government in 1994 following the Rio Summit. It aims at promoting global environmental protection via sustainable development projects in developing or transition countries. The French Global Environment Facility supports physical projects in recipient countries. Its operations are learning-based and support experimental, innovative or exemplary approaches.