World Bank Sri Lanka Country Assistance Strategy, 6 October 2008

Foreign Aid & Sri Lanka's Military Expenditure

World Bank Sri Lanka Country Assistance Strategy

Dissemination Workshop, Opening Remarks
Naoko Ishii, World Bank Country Director, Colombo, Sri Lanka

October 6 2008

Welcome and thank you so much for joining us today. I appreciate your time. And for many of you here who we consulted during the process of formulating our new Country Assistance Strategy, I thank you for coming back to help us think through how we now move from strategy to action, from thinking to implementation.

Today, we present you the World Bank’s latest CAS for Sri Lanka, the document that will be our route map for the years 2009 to 2012 as we assist the country in tackling its development challenges. The publication will very soon be available in Sinhala and Tamil. You’ll see it is richly illustrated but I hope you appreciate this as more than just good looks. What we have captured here are many faces from all across Sri Lanka who in one way or another have been touched by some of the work supported by the World Bank. It is a reminder to all of us that the abstractions of our strategy talk have direct consequences on the ground. Those consequences have faces and names and sometimes bright smiles. It’s worth holding these pictures in our minds as we talk about the strategy today.

This document arises out of fairly extensive consultations not only with the Government but also with a broad cross-section of Sri Lankan society across many parts of the country. These dialogues helped shape our thinking, about both what our assistance should focus on and how best to deliver that assistance. I take this opportunity to formally thank everyone who participated in the consultation process and gave generously of their time.

The CAS has been discussed and was unanimously supported at the Executive Board of the World Bank in June. Now we are entering the implementation phase. The purpose of today’s workshop is not only to inform stakeholders like yourselves of the key elements of the CAS, but also to receive further insights from you to help us turn strategy into effective and appropriate development results on the ground across Sri Lanka.

The CAS has three key objectives. One is to expand economic opportunities in lagging regions in the interests of inclusive and equitable economic development. The second objective is to improve the investment climate and competitiveness to accelerate economic growth. And the third is to enhance the quality, efficiency and effectiveness of service delivery by accountable officials. These objectives, by the way, are fully aligned with the government’s development strategy.

Before we begin today’s discussion, which is built around these three objectives, I would like to touch upon a few key things which spanned across our thinking when we identified these three main objectives.

First, I would like to share with you how we thought about the ongoing conflict in the context of the work we would like to do. From the outset, our conviction has been that the ongoing conflict is a major obstacle to the longer-term development of Sri Lanka and that the development space can only be truly secured by a political solution. At the same time, the conflict permeates our day to day life. The question then becomes how to insulate development work from the distortions of conflict, while at the same time finding a way for the World Bank to address the needs driven by ongoing conflict. Across the three objectives we have emphasized is the importance of an approach that is sensitive to conflict, an approach that keeps us ever alert to potential distortions and risks. How do we make sure that we minimize the risks of our activities inadvertently fueling ethnic tensions and further straining Sri Lanka’s social fabric?

At the program level, we will not allow resources committed for the North and East to be reprogrammed to other parts of the country, even if a deteriorating situation on the ground makes it impossible to implement activities there. Money unspent due to any deterioration of the conflict will become unavailable to Sri Lanka. At the project level, greater conflict-sensitivity in design, implementation, and monitoring and evaluation will be achieved by subjecting all lending operations to a ‘conflict filter’. The conflict filter will require projects to demonstrate that benefits are transparently distributed based on objective criteria and potential tensions are mitigated through broad-based consultations and credible grievance redress mechanisms. For instance, one of the things we learned from our consultation with communities and CSOs is that the community livelihood projects we support need to incorporate a psycho-social component for people traumatized by violence in the conflict affected areas. We learned that you can’t just show up in a devastated village and start doing development. The social preparation is a considerable challenge and the skills of NGOs will be critical for this work. And to check that we are meeting the conflict filter requirements we have set ourselves we will use third-party monitoring to shed light on any tensions or irregularities around beneficiary selection processes for example.

A conflict-sensitive approach requires not only that we avoid inadvertently fueling conflict but that we proactively identify and seize opportunities to address the causes and consequences of conflict through instruments available to us. The North and East of the country have been most severely affected by the last 25 years of fighting and massive displacement of people. Against this background, we will emphasize efforts to improve access to public services and enhance livelihood opportunities in conflict-affected areas, with a particular focus on rehabilitation of roads, irrigation networks, water supply, housing as well as health and education services. We will seek to enhance inter-ethnic reconciliation by helping to expand the social space for people belonging to different communities. This would be done, for example, in education programs, by supporting English as a link language, working towards mixed Tamil-Sinhala schooling and teachers’ education. It would be done too by encouraging members of different ethnic groups to work together around common goals in community development initiatives. Currently we are working with the government, including the newly elected Eastern Provincial Council, on the devolved subjects. Though the East presents an important opportunity, it is an extremely complex environment requiring rigorous employment of our conflict-sensitive approach and the conflict filter I have described and which you will find in detail on page 70 of your report. Please do have a look. Do we have it right?

The second issue which underpinned our thinking across the three main objectives we identified was governance. We recognize this is a difficult and contentious area to engage in any country and Sri Lanka has a long history of democracy and proud institutions of governance. But time and conflict have eroded some of these checks and balances and at the Bank we are also globally challenged to ensure that the work we support in countries is not undermined by corruption. Thus our strategy on governance is twofold: supporting Sri Lanka in strengthening its core governance institutions and putting in place systems to safeguard our operations including a dedicated accountability and transparency team. Let me also mention a strong linkage between good governance and one of our key objectives, that of improved and accountable service delivery. Across the world we have learned that key to effective service delivery is accountability: teachers who show up to school, doctors who come to the clinic and systems for citizens to voice effective complaints if those teachers and doctors don’t show up. In Sri Lanka it is commonly observed that the feedback mechanisms between users and providers is weak, that there is little transparency around service standards and resource allocation, and not many opportunities for beneficiaries to hold service providers accountable. As the Bank engages in these service delivery sectors like health and education we will seek opportunities to strengthen those accountability mechanisms and ensure that services reach those who need them. Indeed in health and education we are already involved in numerous such efforts. Whether we call this accountable service delivery or good governance it amounts to the same thing: the citizen gets better service and is healthier and better educated as a result.

A third issue I’d like to mention which really came out very strongly during our public consultations was a thirst for knowledge from the World Bank. There was a suggestion we were not doing enough; that we need to more systematically engage diverse audiences. Indeed this was also reflected in the client survey that we conducted to support this CAS and understand better how we meet or fail to meet our clients’ expectations. I would really like to change this by reaching out to partnerships with local think-tanks and civil society organizations. Technology is on our side. We have global video conferencing facilities that can hook Sri Lankans up to fellow practitioners in Malaysia, Brazil or South Africa to name but a few. Knowledge and international best practices and expertise are now easier than ever to plug into and share and I want us to be far more proactive in helping Sri Lankan audiences do just that and to help nurture public policy discussions.

My colleague from the International Finance Corporation, the World Bank Group’s private sector window, will speak to us shortly but I do want to note that the formulation of this CAS has really been a joint effort by the World Bank and IFC. There are huge opportunities in Sri Lanka for us to collaborate and thus leverage our impact.

I would like to conclude my thoughts with a comment about risk. We are Bankers afterall! We do believe that this CAS which we discuss today responds to the country’s current needs and emerging opportunities while taking into consideration ongoing uncertainties and risks. But I don’t need to tell you though that no matter how careful the design and mechanisms already incorporated, the CAS is not free of risks. The highest of these is of course further deterioration of the armed conflict. The rigorous implementation of a conflict sensitive approach including using our “conflict filter” will help mitigate the risks of fueling the conflict on the ground. But to do development work, we need to get to that ground; project implementing teams need a safe space to work; our own teams need access to be effective in their oversight role. Additionally the Bank faces considerable fiduciary risks, in particular in operations in the North and East, where the situation is especially volatile. Another tremendous challenge lies in managing the significant macroeconomic risks arising from high fiscal deficits, high inflation and Sri Lanka’s vulnerability to external shocks. This requires strong corrective actions by the Government.

But that is not the note I want to end on. Despite these risks we do believe that there are substantial benefits to our engagement in Sri Lanka, both in assisting the Government in fulfilling its long-term development objectives of sustained growth and poverty reduction, and in proactively addressing the causes and consequences of the conflict. These would be lost if we were to disengage. This CAS presents our way to remain engaged as Sri Lanka’s long-standing development partner in this fluid and complex situation. We do all look forward to your wisdom in helping us achieve this, today and in the future we hope, if you will be so generous.

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