Proposal on Rural Livestock

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					ASIAN DEVELOPMENT BANK                              TAR: SRI 31282

                  TECHNICAL ASSISTANCE
           (Financed from the Japan Special Fund)

                          TO THE


                   FOR PREPARING THE


                       December 1999
                           CURRENCY EQUIVALENTS
                            (as of 15 December 1999)

                          Currency Unit   –    Sri Lanka Rupee (SLRs)
                             SLRe1.00     =    $0.01392
                                 $1.00    =    SLRs71.85

The Sri Lanka rupee is allowed to float against a weighted average basket of the
currencies of Sri Lanka’s major trading partners. For the purpose of calculations in this
report, a rate of $1.00 to SLRs72.00 has been used.


       ADB            –        Asian Development Bank
       CBO            –        community-based organization
       IRDP           –        integrated rural development project
       NGO            –        nongovernment organization
       NORAD          –        Norwegian Development Agency
       REAP           –        Regional Economic Advancement Program
       Sida           –        Swedish International Development Cooperation Agency
       SPRDP          –        Southern Province Rural Development Project
       TA             –        technical assistance


             (i)    The fiscal year of the Government ends on 31 December.

             (ii)   In this report, “$” refers to US dollars.
                                          I.       INTRODUCTION

1.      The Government of the Democratic Socialist Republic of Sri Lanka requested the Asian
Development Bank (ADB) for technical assistance (TA) to prepare a Southern Province Rural
Economic Advancement Project for possible ADB financing. The TA Fact-Finding Mission
visited Sri Lanka 23 November-3 December 1999 and reached an understanding with the
Government on the objective, scope, terms of reference, cost estimates, financing plan, and
implementation arrangements of the TA. The Mission confirmed that the TA is consistent with
the Government’s priorities and policy to reorient its approach to rural development. The TA is
included in ADB’s 1999 country assistance plan for Sri Lanka.

                               II.      BACKGROUND AND RATIONALE

2.      Sri Lanka has achieved a high level of social development since the early 1970s, partly
as a result of its socialist tradition and policies. Indicators of life expectancy, health, school
attendance, literacy, and population growth place Sri Lanka well ahead of most Asian
developing countries. With a human development index of 0.721, the country ranks 90th
worldwide, 22 positions ahead of its ranking based on per capita gross domestic product in
1997. While poverty is not widespread in Sri Lanka, its incidence has remained high in
pockets, especially in rural areas. In 1996, 24.4 percent of the population in rural Sri Lanka
was below the poverty line, compared with 13.5 percent in urban areas, 24.4 percent in estate
areas, and 22.9 percent for the national average. The majority of the poor in rural areas are
employed in low-productivity occupations in agriculture and fisheries. They experience a
variety of economic and social constraints, including lack of (i) access to productive assets
such as land and water, (ii) critical physical infrastructure, (iii) properly functioning markets for
agricultural products and inputs, and (iv) appropriate technology and institutional support.

3.      The Government has pursued poverty reduction by providing free or subsidized access
to social and income transfer schemes. The latest initiative is the Samurdhi (prosperity)
program started in 1996. The Government has also implemented area-based integrated rural
development projects (IRDPs) to alleviate rural poverty and reduce the regional disparities in
economic growth. Since 1979, a total of 21 IRDPs have been implemented, including two
projects assisted by ADB, three by the World Bank, four by the International Fund for
Agricultural Development, four by the Swedish International Development Cooperation Agency
(Sida), and two by the Norwegian Development Agency (NORAD). IRDPs have been

   The TA first appeared in the ADB Business Opportunities in November 1997.
   United Nations Development Programme. 1999. Human Development Report 1999. New York. The human
   development index is a simple average of three indexes that reflect a country’s relative performance in terms of
   life expectancy, educational attainment, and adjusted per capita gross domestic product converted at purchasing
   power parity exchange rates. The average human development index of all developing countries was 0.637 and
   that of South Asian countries was 0.544.
   Department of Census and Statistics. 1997. Household Expenditure and Income Survey, 1995/96. Colombo. The
   poverty incidence is based on the “lower poverty line” at the consumption level of SLRs772.89 (about $14.3 at an
   exchange rate of $1.0 = SLRs54.0 as of the end of 1995) per person per month.
  The program comprised welfare subsidies, village development, and microcredit. Households with incomes of less
   than SLRs1,000 ($13.9) per month are eligible for welfare subsidies of cash and food coupons until the six-month
   average income reaches SLRs2,000 ($27.8) per month.
   Loan 1128-SRI (SF): Southern Province Rural Development Project, for $39.3 million, approved on 26 November
   1991; and Loan 1462-SRI (SF): North Central Province Rural Development Project, for $18.8 million, approved
   on 24 September 1996.
   The numbers include projects that were cofinanced with other funding agencies.

characterized by limited area coverage, a multisectoral approach, target group orientation, and
beneficiary participation (especially in later projects). IRDPs have helped build an environment
for both physical and social growth, but have not succeeded in developing sustainable
opportunities for employment and income generation. The impact of IRDPs has not been very
discernible because of their thin dispersal across many sectors and activities across the district
or province concerned. Projects have often tended to be blueprints rather than process-
oriented and have been filled with organizational and managerial problems due to their
complexity and mismatch between their multisector approach and the Government’s
organizational structure, although these issues have been addressed in recently designed
IRDPs. Finally, IRDPs have suffered from a lack of focus on establishing linkages (marketing,
technology, and associated skills) and on promoting the private sector.

4.      Based on the lessons learned from the IRDPs, the Government introduced in 1997 a
new concept called the Regional Economic Advancement Program (REAP) to replace the
IRDP approach. The REAP concept has four basic elements comprising (i) formulation of
regional development plans, (ii) integrated village development, (iii) market-based farm
enterprise development, and (iv) rural nonfarm enterprise development. Particular emphasis is
given to promoting the private sector and integrating the rural economy with the urban
economy. To implement REAP, the Government seeks assistance from external funding
agencies in policy development, institutional and capacity building of the private and
government sectors, investment in market-based farm and nonfarm activities, and investment
in supportive infrastructure. Other funding agencies have reassessed their involvement with
IRDPs and are modifying or reorienting their rural development strategies accordingly. The
general direction that appears to be emerging is in line with the Government’s REAP, with
emphasis on private sector-led growth and employment generation. The International Fund for
Agricultural Development has prepared and approved a project based on the REAP concept
for Matale District in Central Province. Similarly, the Netherlands has designed projects in
Nuwara Eliya District in Central Province and Ratnapura District in Sabaragamuwa Province,
and NORAD and Sida are jointly preparing a project in Hambantota and Matara districts in
Southern Province, where they have been implementing IRDPs since 1979.

5.      The Government recognizes Southern Province as one of the most poverty-stricken
areas in Sri Lanka and is giving high priority to its development. To expedite the development
of Southern Province and adjacent areas, the Southern Area Development Authority was
established under the Ministry of Finance and Planning in 1996 and a master plan prepared in
1997. The per capita gross regional product of the province was the lowest among seven
provinces and only at about 70 percent of the national gross domestic product per capita in
1997. The three districts in the province are ranked among the lowest in terms of per capita
gross regional product: Galle is 12th, Hambantota is 13th, and Matara is 15th out of 17 districts
in seven provinces. The unemployment rate in the province is high at 17.0 percent in 1994,
compared with the national average of 13.7 percent. Poverty incidence in the province, at 25.8

   Matale Regional Economic Advancement Project, for $11.7 million, approved in December 1998. The loan was
   not effective as of the TA Fact-Finding Mission.
   Japan International Cooperation Agency. 1997. The Master Plan for Southern Area Development (12 volumes).
   Tokyo. The study area covered the entire Southern Province and southern parts of Eastern, Sabaragamuwa, and
   Uva provinces.
   Excluding Eastern and Northern provinces which have been affected by civil conflict. Poverty is presumably more
   severe in the two provinces, but no reliable data are available.
   United Nations Development Programme. 1998. National Human Development Report. Colombo. The study
   provided no data for the eight districts in Eastern and Northern provinces affected by civil conflict.

percent, was higher than the national average of 22.9 percent in 1996. ADB has been
supporting development in Southern Province through two loan projects. Another loan has
been approved to finance the construction of the Southern Highway between Colombo and
Matara, which is envisaged to open the southern region to development and support ongoing
and proposed development programs.

6.      The Southern Province Rural Development Project (SPRDP) started in 1991 and will be
completed in March 2000. SPRDP has provided production supports, such as credit for small
and medium enterprises and commercial agriculture and market-related infrastructure,
including about 690 kilometers of village roads and 410 kilometers of farm-to-market roads.
Improved infrastructure has had significant impacts on the economic activities and the quality
of rural life in about 300 villages. SPRDP has also strengthened planning and implementation
procedures and institutional capacities of the local governments for development activities.
While SPRDP demonstrated an effective intervention of the public sector, more active initiative
and participation of the private sector are needed to create sustainable employment and
increased incomes. The Government has requested ADB assistance in Southern Province to
formulate a REAP-based project that incorporates the lessons learned from SPRDP.

7.     However, the Government-initiated REAP remains at a conceptual level and needs to
be developed into a strategic framework and then into an operational plan. Such a strategy
would help provide clear direction, take a planned approach, and ensure policy and functional
coordination with other funding agencies and sectoral programs. During the TA Fact-Finding
Mission, the Government and other funding agencies, including those that have started
formulating REAP-based projects, expressed support for the ADB initiative to make the REAP
concept operational.

                               III.     THE TECHNICAL ASSISTANCE

A.      Objective

8.      The objectives of the TA are to (i) translate the REAP concept into a strategic
framework and an operational plan, and (ii) prepare a detailed proposal for the Southern
Province Rural Economic Advancement Project (the Project). The Project aims to reduce rural
poverty by increasing income and employment opportunities for the rural population. The
Project will achieve this objective by (i) implementing development plans in poor villages
through a participatory planning process incorporating microenterprise promotion, necessary
infrastructure, and private sector involvement; (ii) promoting rural farm and nonfarm
enterprises, including supporting infrastructure and input supply systems in relatively
developed villages; (iii) strengthening capacity of the private sector in providing enterprise
promotion services; and (iv) strengthening REAP planning capacity at each level of local

   Loan 1128-SRI (SF) (footnote 5) and Loan 1567-SRI (SF): Southern Provincial Roads Improvement Project , for
   $30.4 million, approved on 30 October 1997.
   Loan 1711-SRI (SF): Southern Transport Development Project, for $90 million, approved on 25 November 1999.
   The proposed project area additionally covers Embilipitiya Division in Sabaragamuwa Province and
   Thanamalwila Division in Uva Province because of their close economic linkage with Southern Province.

B.         Scope

9.      The TA will be in two phases. The first phase will translate the REAP concept into a
strategic framework and an operational plan, and the second phase will prepare a detailed
proposal for the Project. Specifically, in the first phase the TA will (i) review the current REAP
concept based on a reassessment of the performance of past rural development projects and
taking into account current REAP-based project proposals; (ii) reformulate the REAP concept,
as necessary, and translate it into a strategic framework; (iii) develop an operational plan to
implement REAP; and (iv) based on the findings, revise the scope of work, specialist inputs,
and the terms of reference for the second phase activities. The strategic framework and
operational plan will be formulated consistent with the policies of the concerned Government
agencies and the country assistance plans of ADB and other funding agencies.

10.     The second phase will (i) review the existing Southern Area Development Master Plan
and develop a methodology for rural economic planning that is linked with regional and
national economic planning; (ii) analyze the production potential in the project area; (iii) define
selection criteria for villages where development activities will be done under the Project and
prepare the participatory planning process for such activities; (iv) identify stakeholders of farm
and nonfarm enterprise promotion, and infrastructure and input supply development; (v) review
the existing financial services for village-based microenterprises and rural enterprises, and
identify mechanisms to strengthen such services; (vi) design the project components in
consultation with various stakeholders; and (vii) prepare detailed cost estimates and an
implementation plan, and evaluate the social, environmental, economic, and financial impacts
of the Project. The Project will be designed to directly focus on poverty reduction. Appendix 1
provides the outline terms of reference for the consulting services.

C.         Cost Estimates and Financing Plan

11.     The total cost of the TA is estimated at $1.0 million equivalent comprising $662,000 in
foreign exchange cost and $338,000 equivalent in local currency cost (Appendix 2). ADB will
finance $800,000, covering the entire foreign exchange cost and $138,000 equivalent of the
local currency cost. The TA will be financed by ADB on a grant basis from the Japan Special
Fund, funded by the Government of Japan. The Government will provide the balance of
$200,000 equivalent in local currency cost, to cover the costs of local counterpart staff, office
accommodation, vehicles, office furniture and equipment, and indirect project administration
expenses. The Government has been advised that the approval of the TA does not commit
ADB to finance any ensuing project.

D.         Implementation Arrangements

12.     The TA will be implemented in a participatory way by the Regional Development
Division of the Ministry of Plan Implementation and Parliamentary Affairs. A steering committee
will be formed comprising representatives of the Ministry of Plan Implementation and
Parliamentary Affairs, other government agencies, and other stakeholders, including the
private sector and nongovernment organizations. The TA will coordinate with other bilateral
and multilateral funding agencies, especially NORAD and Sida. Consistency and

     Including the Ministry of Provincial Councils and Local Government, Ministry of Finance and Planning, Ministry of
     Agriculture and Land, Ministry of Livestock Development, Central Bank of Sri Lanka, and Southern Provincial

complementarity with their project (para. 4), including possible cofinancing, will be sought
during preparation of the Project. The Government has agreed to provide (i) one full-time TA
director and one counterpart staff member in Colombo, one part-time counterpart staff member
in each district, and support from the project staff of ongoing IRDPs in Southern Province;
(ii) transport for consultants, including vehicles from existing IRDP offices; (iii) office space,
utilities, furnishings, office equipment, and local communication facilities for consultants in
Colombo and in each district; and (iv) assistance in conducting participatory workshops.

13.     The TA will be implemented in two phases over nine months, from April-December
2000. The first phase will be implemented over the first three months and the second phase
over the next six months. About 25 person-months of international consulting services and
about 27.5 person-months of domestic consulting services will be needed. The international
consultants will be experts in the fields of rural development (economics), rural enterprise
development, institutional development, community development, rural finance, marketing and
postharvest processing, and geographic information systems. The domestic consultants will
have expertise in regional development, rural enterprise development, agronomy, livestock
production, training, environment, rural sociology, and law. A consulting firm will be engaged in
accordance with the ADB’s Guidelines on the Use of Consultants and other arrangements
satisfactory to ADB for the engagement of domestic consultants. A simplified technical
proposal procedure will be adopted for recruiting the consultants.

14.     The consultants will submit an inception report one month after the commencement of
the TA. The draft phase one report will be prepared by the end of the second month, and
contain a review of the REAP concept, a draft REAP strategic framework and operational plan,
and revised terms of reference and work program for the second phase. The steering
committee, other stakeholders, and ADB will review this report, which will be finalized by the
end of the fourth month. An interim report will be prepared by the end of the fifth month of TA
implementation. The draft final report, with a detailed formulation of the Project, will be
submitted to the Government and ADB by the end of the seventh month. The final report will
be submitted within one month of receipt of the comments on the draft final report from the
Government and ADB. Tripartite meetings will be held between the Government, consultants,
and ADB to discuss the inception report, draft phase one report, interim report, and draft final
report. Workshops for representatives of the central and local governments, the private sector,
nongovernment organizations, financial institutions, and ADB will be held to discuss the final
phase one report, interim report, and draft final report at the national, provincial, and district

                             IV.    THE PRESIDENT’S DECISION

15.     The President, acting under the authority delegated by the Board, has approved the
provision of technical assistance, on a grant basis, to the Government of the Democratic
Socialist Republic of Sri Lanka in an amount not exceeding the equivalent of $800,000 for the
purpose of preparing the Southern Province Rural Economic Advancement Project, and
hereby reports such action to the Board.
                                                                           Appendix 1, page 1


1.      Consulting services for the technical assistance will be provided in two phases. During
the first phase (three months) the consultants will focus on assisting the Government in
preparing a strategic framework and operational plan for implementing the Regional Economic
Advancement Program (REAP) and defining basic data needs for the proposed Southern
Province Rural Economic Advancement Project (the Project). During the third month, the
Government and the Asian Development Bank (ADB) will review the draft REAP strategic
framework and operational plan. During the second phase (six months) the consultants will
assist the Government to prepare the proposed Project in a format suitable for ADB financing.

2.       The consultants will maintain close coordination and regular dialogue with Government
agencies and bilateral and multilateral funding agencies involved in REAP to ensure they are
fully involved in analyzing the problems to be addressed by REAP and developing the strategic
framework, operational plan, and project proposal. The consultants will also conduct national,
regional, and district workshops to promote stakeholder participation in and ownership of the
REAP strategic framework, operational plan, and project proposal. Stakeholders will include
representatives of the national and local governments, the private sector, nongovernment
organizations (NGOs), and community-based organizations (CBOs); rural entrepreneurs and
farmer leaders (including representatives of the poor and women); and representatives of
bilateral and multilateral funding agencies. Specific tasks of the consultants follow.

A.     Phase One

3.   The rural development economist and team leader (international, 2.0 person-
months) and regional development specialist (domestic, 2.0 person-months) will

       (i)    Review the experience with the integrated rural development projects (IRDPs)
              and lessons learned from IRDPs and other rural sector projects for their
              relevance to the REAP concept; reference should be made to the applicable
              sector and country syntheses of operations evaluation findings. Review progress
              with formulation of the REAP concept and specific REAP projects by various
              funding agencies. Confirm the problems to be addressed by REAP, together with
              REAP’s objectives and purposes using a participatory approach involving the key
              stakeholders. Review available regional development plans and planning at the
              divisional, district, and provincial levels. Evaluate the role of regional
              development plans in the REAP concept; and develop an approach to
              formulating rural development plans with vertical and horizontal linkages with
              regional and national development plans.

       (ii)   Review the design, implementation, and effectiveness of community mobilization
              and participatory planning components of past rural development projects and
              identify key lessons. Review the status of microenterprises assisted through
              community mobilization. Assess the potential for and constraints to expansion
              and creation of microenterprises. Assess the capacity of NGOs and CBOs to
              undertake an increased role in village and microenterprise development. Assess
              the status and potential of less-developed villages, particularly for poverty
              reduction, through the promotion of sustainable village-based microenterprises.
              Determine the needs for support to agricultural inputs and rural infrastructure.
              Based on experience with existing programs, propose alternative approaches for

                             (Reference in text: page 4, para. 10)
                                                                              Appendix 1, page 2

               promoting microenterprises, including the use of public-private sector
               partnerships. Analyze the poverty situation and the project impacts as well as
               discuss other alternatives to achieve the objectives such as establishing social
               funds. Develop a REAP strategic framework and operational plan.

4.     The rural enterprise development specialists (international, 1.5 person-months;
domestic, 1.0 person-month) will assess the status and role of rural farm and nonfarm
enterprises (including processing, marketing, and services) in provincial and district economic
development, particularly for employment creation and poverty reduction; assess the potential
for developing rural enterprises, and determine the impact on economic development and
income promotion; identify constraints to the expansion of existing and development of new
rural enterprises; and based on discussions with potential stakeholders, propose suitable
mechanisms for alleviating the identified constraints, including changes in Government policy.

5.      The institutional development specialist (international, 1.5 person-months) will
evaluate institutional arrangements for rural development projects and social safety net
programs, and identify the strengths and weaknesses of involved Government institutions. The
specialist will assess the potential for involving provincial and local government agencies,
NGOs, CBOs, chambers of commerce, private companies, and others; evaluate the
opportunities for partnerships between the private and public sectors; assess the progress of
decentralizing government functions to local levels; and recommend further actions for
improving accountability and transparency of the public sector at the local level, particularly for
implementing the REAP strategy.

6.     The community development specialist (international, 1.0 person-month) and rural
sociologist (domestic, 0.5 person-month) will analyze the background of poverty in rural
areas; propose an approach to be taken under REAP to address the poverty reduction; and
design a social assessment study for the project area in accordance with ADB’s Guidelines for
Incorporation of Social Dimensions in Bank Operations and Handbook for Incorporation of
Social Dimensions in Projects based on the use of participatory rural appraisal methods, group
discussions, and key informants, covering all agroclimatic zones in the project area.

7.     The training specialist (domestic, 0.5 person-month) will assess institutional and
vocational training needs for REAP implementation and rural enterprise and microenterprise
development; identify institutions that is capable of providing training; and propose appropriate
mechanisms for promoting training within the proposed REAP strategic framework and
operational plan.

8.     The legal specialist (domestic, 1.0 person-month) will examine laws and regulations
relevant to microenterprise and rural enterprise development, including those impacting
formation and registration, credit supply, marketing, and export of production; and suggest ways
of simplifying processes, including policy changes and amendments to the relevant legislation.

9.    The consultants will prepare a phase one report that contains a REAP strategic
framework and operational plan, and refine the scope of work and terms of reference for the
second phase, as necessary, for review by the Government, ADB, and other stakeholders.

B.     Phase Two

10.     The consultants will formulate a project proposal, in a format acceptable to ADB,
detailing the background information, rationale, scope, the project framework, cost estimates, a
                                                                              Appendix 1, page 3

financing plan, implementation arrangements, consulting services, economic and financial
analyses, and environmental and social impacts, including anticipated poverty reduction.

11.  The rural development economist and team leader (international, 5.0 person-
months) and regional development specialist (domestic, 4.5 person-months) will

       (i)     Develop a detailed project framework in accordance with ADB’s guidelines for
               Using the Logical Framework and develop a project performance management
               system consistent with the existing benefit monitoring and evaluation system of
               the Government and in accordance with ADB’s Project Performance
               Management System Guidelines. Identify and quantify linkages between the
               proposed project area and the remainder of the country. Assess the need for
               strengthening linkages to promote employment and income generation within the
               project area; assess the planning and implementing capabilities of the executing
               agency and potential implementing agencies; identify where institutional
               strengthening and management support are required; recommend necessary
               changes; and develop a project component as required.

       (ii)    Through interactions with local governments, chambers of commerce, NGOs,
               and others, identify and quantify the number and types of rural farm and nonfarm
               enterprises and microenterprises in the project area, including inputs used,
               outputs produced, and employment generated. Prepare an inventory of rural
               enterprises and microenterprises suitable for promotion under the Project and
               assess the need for project interventions to improve essential infrastructure and
               input supplies. Identify a representative sample of rural enterprises and village-
               level microenterprises for detailed specification, including identification of
               required supporting infrastructure and incremental inputs of raw materials.
               Present the analysis for the subsequent benefit-cost analysis.

       (iii)   Prepare benefit-cost models for selected rural enterprises, village development,
               and the overall Project. Undertake financial and economic analyses in
               accordance with ADB’s Guidelines for the Economic Analysis of Projects. Identify
               and evaluate all project risks, propose mechanisms for reducing their impact, and
               carry out sensitivity analysis. Prepare cost estimates and a financing plan for the
               Project using COSTAB software; and address issues of subsidies, sustainability,
               cost recovery, and willingness of the beneficiaries to pay and contribute to the
               success of the Project.

12.     The rural enterprise development specialists (international, 3.0 person-months;
domestic, 3.5 person-months) will identify through case studies the need for and potential
means of improving the management and operation of rural enterprises; evaluate the potential
of alternative management structures such as joint ventures, people’s companies, outgrowers,
contract growers, and others; determine how they can be promoted; and define the proposed
rural enterprise promotion component, including what is to be done, who will be the
implementers, how it is to be done, and what it will cost. They will also develop linkages with the
German Agency for Technical Cooperation-assisted Enterprise Information Project and other
similar activities.

13.     The institutional development specialist (international, 2.5 person-months) and
training specialist (domestic, 2.0 person-months) will assess in detail the institutional
training needs of the proposed executing and implementing agencies and the vocational training
                                                                                 Appendix 1, page 4

needs of potential beneficiaries in the project area; identify existing sources that can satisfy
these needs, taking into account the ongoing ADB-financed Skills Development Project (Loan
1707-SRI[SF], for $18.8 million, approved on 28 October 1999); and design innovative
approaches to support training to ensure that it is responsive to stakeholders’ needs and
produces quantifiable benefits. They will also identify policy constraints to successful project
implementation; recommend necessary changes; develop innovative implementation
arrangements for the Project, taking into account the institutional capacity of the public and
private sectors; identify institutional strengthening requirements; and propose strengthening
mechanisms. They will design the project implementation arrangements by identifying the most
appropriate executing agency, assessing its capability, designing project fund flow and reporting
mechanisms, and preparing a staffing plan, including the appropriate qualifications and number
of staff in each office, and their training needs.

14.    The community development specialist (international, 2.5 person-month) and rural
sociologist (domestic, 3.5 person-month) will

       (i)     Interact with the World Bank on the status of the pilot community-based social
               fund and assess the potential for adopting a similar approach in the proposed
               Project. Define broad selection criteria and use them to prepare a “longlist” of
               poor villages suitable for including in the village development component. Rank
               the selected villages using the defined criteria. Formulate and test a participatory
               planning process in some selected villages. Assist village representatives,
               including the poor and women, in preparing a village development plan. Each
               plan should identify microenterprises and small industries as well as the
               availability of or need for raw materials, marketing facilities, local infrastructure,
               and training and include a time-bound action plan. Design a Project component
               based on the results of the pilot test.

       (ii)    Conduct a benchmark socioeconomic survey in accordance with the design
               prepared in the first phase to establish baseline socioeconomic data covering
               poverty incidence, modes of livelihood, existing microenterprises and rural
               enterprises, income levels, health and education, and institutional structures.
               Carry out a social assessment and evaluate the social impact of the Project,
               particularly emphasizing the expected impact on the poor and women. Assess
               the impact of the proposed Project on poverty reduction, both quantitatively and
               qualitatively, without double counting the effects of other projects.

15.      The rural finance specialist (international, 2.0 person-months) will conduct a
detailed review of the rural financial sector (formal, semiformal, and informal), particularly for the
availability of credit, interest rates, transaction costs, risk, loan recoveries, and long-term
sustainability of existing approaches; review the performance and sustainability of the existing
credit guarantee scheme in Matara; explore the potential of developing similar schemes; and, if
feasible, develop a proposal; and review the existing role and potential of venture capital. The
consultant will also estimate the amount of credit required under the Project for promoting rural
enterprises, taking into account beneficiaries’ operational capacities and existing financial
institutions; propose options for credit delivery, taking into account the prevailing terms and
conditions of loans; identify operational, institutional, and regulatory constraints to disbursement
and recovery of credit; and recommend measures for strengthening the system and for the
improved availability of credit for organized groups of the poor and women.
                                                                               Appendix 1, page 5

16.   The marketing and postharvest processing specialist (international, 2.0 person-
months), agronomist (domestic, 2.0 person-months), and livestock production specialist
(domestic, 2.0 person-months) will

       (i)    Review postharvest and marketing arrangements for crop- and livestock- based
              products for local and export markets and assess their development potential.
              Identify the backward and forward linkages and quantify the local value added
              and employment generated. Prepare a map showing facilities, including those for
              collection, storage, and processing; and determine the potential for promoting
              rural enterprises and microenterprises to increase value added and employment
              opportunities. Assess the existing market information system, including that for
              export markets, and, if necessary, recommend specific measures for more
              effective dissemination of correct and updated market information.

       (ii)   Assess the effectiveness of the current public and private sector agricultural and
              livestock support services and recommend short-, medium-, and long-term
              reforms for improving their effectiveness. Collect data relating to production
              resources of the project area, including, but not limited to, population, agricultural
              and livestock production, land, climatic resources, existing agro-industries, and
              manufacturing and service industries. Update the information through fieldwork
              and discussions with potential stakeholders.

17.     The environmental specialist (domestic, 4.0 person-months) will review
environmental legislation and identify the environmental impact assessment requirements for
rural enterprise and microenterprise development; examine the environmental issues of the
Project, and for a representative sample of microenterprises and rural enterprises; and identify
the potential environmental impacts of the Project. The specialist will prepare an initial
environmental examination in accordance with ADB’s Environmental Assessment Requirements
and Environmental Review Procedure; prescribe necessary measures to enhance
environmental benefits and minimize possible adverse impacts; and propose an environmental
management and monitoring system. Based on the findings of the initial environmental
examination, the specialist will indicate whether a full environmental impact assessment is
required and, if so, provide the terms of reference.

18.     The geographic information system specialist (international, 2.0 person-months)
will prepare a spatial database of rural enterprises, and agriculture and livestock potentials
using geographical information system software; develop a user-friendly manual for the
completed system, including how to update information; define the potential role of the
geographical information system as a tool for subsequent monitoring of project activities; and
provide familiarization training to officials of the executing and implementing agencies. The
specialist will also produce various maps that will be used for project planning and monitoring.

19.     The legal specialist (domestic, 1.0 person-month) will identify legal impediments to
successful project implementation, recommend the necessary changes, and provide
government and private sector agencies with specific legal advise and recommendations
relating to legal documents required for the Project.
                                                       11                                                Appendix 2

                              COST ESTIMATES AND FINANCING PLAN

                                                                            Foreign  Local              Total
                                                                           Exchange Currency            Cost

A.     ADB Financing
       1. Consultants
          a. Remuneration and Per Diem
             i. International Consultants                                      498            0           498
             ii. Domestic Consultants                                            0           94            94
          b. International Travel                                               60            0            60
          c. Reports and Communications                                          5           12            17
       2. Equipment                                                             15            0            15
       3. Seminars and Workshops                                                 0           15            15
       4. Government Representative for Contract Negotiations                    4            0             4
       5. Contingencies                                                         80           17            97
                 Subtotal (A)                                                  662          138           800

B.     Government Financing
       1. Counterpart Staff                                                      0           35            35
       2. Office Accommodation in Colombo and Three Districts                    0           90            90
       3. Travel and Per Diem of Counterpart Staff                               0           35            35
       4. Vehicles, Office Furniture, and Equipment                              0           25            25
       5. Venue for Workshops and Tripartite Meetings                            0           15            15
                Subtotal (B)                                                     0          200           200
                    Total                                                      662          338         1,000
       Financed from the Japan Special Fund.
       Includes one facsimile, two computers, one printer, geographic information system, and office software.
       Two vehicles in Colombo, and one vehicle and one computer in each district.
Source: Staff estimates.

                                   (Reference in text: page 4, para. 11)

Description: Proposal on Rural Livestock document sample