Foreign Aid & Sri Lanka's  Military Expenditure

Sri Lanka Aid Group Meeting
Paris, February 7, 1992

Statement by the Delegation of the Commission of the European Communities

Mr Chairman, Ladies and Gentlemen

I would like to join in the appreciation of the well-prepared, constructive and also critical World Bank report which has been presented for this meeting. I would also like to thank the Sri Lankan delegation headed by the Honourable Mr Wijchunga for the informative and encouraging statements on the government's commitment to reforms, an open market economy and human rights.

It is with satisfaction that the Commission has noted the achievement of the Sri Lankan economic reforms centered around a rationalisation of the public sector, privatisation and improved private investments. However, it is equally important to note that the achievements are still fragile and need to be reinforced through the continuation of firm and coherent policies. The weakness in the financial sector and in macro-economic management raises well founded concern. The bold commitments of the Sri Lankan government to reforms need to be maintained and intensified so as to keep the progress intact. In addition it is hoped that the positive achievements can be strengthened through a political dialogue within Sri Lanka, facilitating the task of applying available financial resources most effectively and enhancing productive opportunities all over the country in support of the development process.

Sri Lanka has continued its positive trade development with the European Community using successfully the evolving European single market in strengthening and diversifying its exports. However, maintaining competitiveness and especially continuously improving product quality are crucial elements in penetrating the very sophisticated and demanding EC market. As concerns development aid, the Community has continued to support rural development through the combination of direct grant aid and use of food aid counterpart funds. Cofinancing projects with non-government organisations represent also a recognised important way of supporting development. The successful repatriation of Sri Lankan people caught in the Gulf crisis can further be mentioned.

The cofinancing, with the World Bank, of the National Irrigation Rehabilitation Project has been the most important new project decided in 1991, especially in view of its transfer of responsibilities for management, maintenance and project sustainability to the use groups.

In addition implementation of the on-going activities consisting of Mahaweli system projects, the pilot village development programme under Jana Saviya, and minor irrigation in the North Western Province will be pursued and strengthened.

As already mentioned in other recent aid group meetings, new guidelines for Community co-operations with the developing countries in Asia and Latin America have been adopted. It establishes an overall framework of co-operation for 1991-1995 with a financial volume of grant aid of 2.75 billion Ecus/3.5 billion US$ (1 Ecu = 1.28US$). This EC aid is made available through annual budget allocations and Sri Lanka competes on equal terms for these resources with other developing countries in Asia, based on quality of projects, effectiveness in project implementation, etc. It can be noted that the EC development aid centres around support for the rural sector in the broad sense of poverty alleviation environmental protection, fight against drugs and AIDS, and human and structural dimensions of development.

In addition, special and increasing attention is given to economic co-operation, providing technical assistance and facilitating transfer of technical know-how, serving mutual interest between economic operators in the EC and the Asian and Latin American countries. It is very much in line with the favourable trend to rely on private sector initiatives as an important vehicle for self-sustaining development. In this context, let me underline that Sri Lanka is a strong candidate to benefit from the special EC Investment Partner Scheme which is designed to promote private investments through joint venture activities. A total amount of 34 million Ecus or more than 43 million US$ is made available alone for supporting such activities in 1992.

However, to fully take advantage of these mentioned opportunities it is essential that the government of Sri Lanka firmly continues its policies of economic transformation and pursue every possible step in reconciling internal differences, working for progress within a clear commitment of respect for human rights. The Commission's representative in joining Community and the EC member states expressed positions is referring to the joint statement made by the UK delegation in the capacity of representing the EC Council Presidency.

Finally let me state that the EC will continue to be a constructive partner, using its various instruments in assisting the government of Sri Lanka's efforts of improving the living standard of the population.

Thank you Mr. Chairman.