Koggala Export Processing Zone PPIE - Public Manufacturing Enterprise'

T E TAR:SRI 23426

This Report has been prepared for ASIAN DEVELOPMENT BANK the exclusive use of the Bank.

Currency Unit Sri Lankan Rupee (SRs) $ 1.00 Rs 39.78 SRs 1.00 $0.02516

For the purpose of calculation In the Report, a rate of $ 1.00 Rs 40.00 has been used. This was the rate generally prevailing during the time the Technical Assistance was formulated.

ABBREVIATIONS

EPZ - Export Processing Zone OCEC - Greater Colombo Economic Commission IPC - Industrial Policy Committee KGEPZ - Koggala Export Processing Zone PPIE - Public Manufacturing Enterprise'. PTC - Presidential Tariff Commission

•I'ì141

(1) In this Report, "$" refers to US dollars.

(ii) The fiscal year of the Government coincides with the caleñdar year.

(i) I SRI LANKA -4 C LOCATION OF THE PROPOSED KOGGALA EXPORT PROCESSING ZONE (KGEPZ)

N. --.-- / SRI LANKA '.----- / ).., ' .c \ (OEIYAYA - .

Eityi IC! COLOCO GALLE DISTRICT MOAWAA

, MATARA DI5T ICT '--- tryCd.no loot o.-l.' OCE.j

AKIESSA

AkmHnuol H.I4m.o GAI.Lt /

I.ACOLZO —-- OGGALA

MATAA 0 Kiometer

PROPOSED LAYOUT OF THE KGEPZ

. I

Pr/ Qvrr

LEG ENr .' ..... wrQ I-I Site fOr Sewage Treatment Flint WT site for Water Tower C.E.C. Service P.t.a

ProosreG 14.GEPZ Bourary T0 (BoundaT not necuarliy authoritetivi)

1. During the Bank's Country Consultation mission to Sri Lanka in March 1990, Government representatives stressed the need for diversifying the country's economic base through the provision of suitable infrastructure for creating investment, employment and income opportunities. For this purpose, the Government proposed to set up an Export Processing Zone (EPZ) -at Koggala in the Southern Province and requested Bank Technical Assistance for a feasibility study of the proposal. In tlay 1990, a Bank Mission followed up the request. In June 1990, a Fact-Finding Mission visited: Sri Lanka to formulate the Technical Assistance for the Koggala Export Processing Zone Study.

2. The Mission met with officials of the Government, the representatives of the Greater Colombo Economic Commission, private sector entrepreneurs and various multilateral andbilateriai agencies, and visited the sites of existing EPZs near Colonibo and the planned site for the Koggala EPZ. This report is based on the discussions and information obtained during the Mission. The proposed Technical Assistance first appeared in the AD8 Business Opportunities in June 1990. - -

II. BACKGROUND

A. Economic Settin g - Performance and Prospects

3.. The Sri Lankan economy responded modestly to the measures taken by the. Government in 1977 to enhance the country's economic activity through greater private sector participation, particularly in. the industrial sector. The large public investment program started by the Government at about the same time provided a stimulus for growth. However, since the mid-1980's, there has been a decline in the economic performance due to structural constraints, civil disturbances (since 1983), deterioration in the terms of trade and weak economic management.

1. . Notwitstanding the decline in the economic performance, Sri Lanka's basic capacity for growth remains strong, and the country still has considerable natural and human resources. The new Government formed in March 1989 has clearly indicated its commitment to growth-oriented adjustment reforms, while emphasizing its concern for more equity in the distribution of the benefits of development. The most serious constraints on the country's economic development have been structural in nature, and include: a large investment-savings gap and a consequent heavy reliance on foreign borrowings; a narrow agricultural export base resulting in trade and current account imbalances; a large and Inefficient public sector; and various constraints on the private sector. To remove these constraints and to achieve a higher level of sustainable growth, the Government drew us macroeconomic stabilization and medium term adjustment programs with assistance from IMF and the World Bank. The adjustment programs emphasize - private sector participation, and equitable growth.

5. Since the last. quarter of 1989, the level of social unrest has declined particularly in the.south of-the country. This has offered opportunity for the Government to undertake reconstruction and rehabilitation and implement its reforms in the : region. -

6.. Industrialization has been an important development policy objective of the Government. The development of Sri Lanka's industrial sector is considered essential for providing employment to a large and growing labor force and the need to broaden the economic base from its narrow concentration on plantation crops. Until 1977, industrial development was based on policies emphasizing import-substitution and state interventions which resulted in low economic growth and balance-of-payments problems. A shift in policies in 1977 did not alter the importance the Government assigned to industrial sector de.'elopment. In fact, under the policies introduced in 1977; the Government expected to achieve industrial growth and employment even more rapidly by enhancing the exposure of the economy to market forces, by encouraging industries with an export- potential, and by developing an industrial sector that could withstand international competition. -

A review of the industrial sector shows that the Government's development objectives have not been achieved fully. Contributing less than 15 per cent of GOP and providing employment to only 10 per cent of the country's labor force, manufacturing remains a relatively small-.sector of the economy, despite a high level of protection. The major factors underlying the sector's small contributionto growth are: Ci) preponderance of poorly performing Public Manufacturing Enterprises (PMEs); (ii) a high rate of effective protection; (iii) business environment which has discouraged private investors, with its cumbersome bureaucratic procedures and licensing requirements; and (iv) limitations on foreign private- investment which is restricted by regulations and taxes such as a 100 per cent tax on transfer of jquity shares to foreigners.

8. With due recognition of the constraints on industrial development, the recent (1987) reports of the Industrial Policy Committee (IPC) and the Presidential Tariff Commission (PlC) have addressed the key issues involved and' made several recommendations. The IPC proposes, that barring few exceptional cases, all PMEs be sold to the private sector. The IPC and PlC reports also re-commend reduction in the average rate of effective protection (from 100 per cent to about 50 per cent), as well as reduction in the dispersion of effective protection across sectors. As a-first step, the 1988 budget brought the maximum nominal tariff of 100 per cent down to 60 per cent, stipulated a minimum tariff of 5 per cent, and eliminated all import licensing requirements excepting those needed on health or security grounds.

9. The Government is taking steps to improve the business environment and the private sector's confidence. In the 1990 budget, three measures announced by the Government are noteworthy: (i) lifting of all restrictions on foreign equity participation except in specifically reserved areas and elimination of 100 per cent tax on transfer of equity shares to foreigners; (ii) reforming the quota allocation system to exporters of garments with a view to eliminating trade in unused quotas. Effective July 1989, quotas for garment exports to the United States and the European Community were made fully transferable, and the annual increase in quotas negotiated with importing countries will be auctioned from the quota year 1990-1991; and (iii) the appointment of a high-level committee to look into industrialists' recurrent complaints regarding cumbersome and time-consuming bureaucratic processes.

C. Exoort Promotion: Incentives and Ex-Post Exoerience

10. In its drive to develop an export-oriented economy, Sri Lanka has introduced a number of export promotion measures and developed a range of fiscal incentives. The primary objectives of the export promotion schemes are: providing exporters duty-free access to imported inputs; providing inducements to export activities; and providing exporters access to credit on attractive terni. The Greater Colombo-Economic Commission (GCEC) was established in 1978 for the establishment and promotion of EPZs. There are a number of schemes in place to ensure that firms that produce for export can gain inputs at world prices: first, the EPZs operated by the GCEC enables exporters in the zones to obtain imported inputs as well as machinery and equipment free of customs duty; second, the Manufacture-in-Bond Scheme permits duty-free imports meant for re- export directly into factory premises owned by exporters; and third, the Custom Rebate Scheme is a system of general rebates granted to raw materials and packaging materials for the processing of non-traditional exports.

11. There are a number of fiscal measures and other forms of assistance to •exporters designed to encourage export activities. First, under the Investment Relief scheme, those individuals purchasing shares in designated higt-priority industries are allowed to deduct the amount of the purchase from taxable income. Second, a five-year fufl tax holiday is applicable to profits derived from the export of manufactured goods. Those manufacturers, who have a net foreign exchange earnings of 50 per cent or more of the value of exports, are eligible for an additional five-year half tax holiday. Third,. the Export Development Investment Support Scheme is intended to reward exporters for past export performance and to encourage them to invest in further expansion of export activity. tn addition, there are schmes for supply of credit to exporters before and after shipment. The medium- to long- term credit takes the form of concessionary refinancing of up to 70 per cent of the amount advanced by commercial banks. Finally, there are services provided to cover exporters against non-payment by overseas buyers, issue bank guarantees for preshipment. or postshipment financing to cover against commercial default, and issue export performance guarantees.

12. Presently, there are two EPZs located near Colombo, one at Katunayake adjacent to the international airport and the other at Blyagama. The Katunayake EPZ has been in operation since 1978 and there are currently about 70 factories under commercial operation and an additional 12 factories are under construction. The Biyagama EPZ, established in 1 g 84, has about 24 factories currently in operation and a further eight factories are expected to begin construction shortly. Available information on the EPZs as of May 1990, suggests that these EPZS have played an important role in facilitating the implementation of the Government's export-oriented industrial strategy: of the total number of projects approved, about 60 per cent have been implemented in the EPZs; the ratio of foreign to local investment incurred is approximately 50:50; over 62,000 direct jobs have been created to date; and cumulative investment and export earnings during the period 1978-1990 amounted to Rs 16.1 billion and Rs 48.5 billion, respectively.

13. In the light of positive experience gained from these EPZs which are reaching saturation and are expected to be fully utilized by 1992, and considering the lead time required for developing a new industria' site, the Government considers it timely to undertake a detailed feasibility study of a possible tird EPZ at Koggala. The. site seiction at Koggala is based on a

Disclaimer : the PDF file attachment may not contain the complete text index. For documents generated from scanned hard-copies, there may be portions of viewable text that cannot be copied as selectable text as this is dependent on the quality of scanned documents. comparative analysis of alternative sites in the Southern Province and other potential areas. Preliminary investigations of the proposed EPZ site at Koggala have revealed certain advantages such as relatively skilled and educated labor force, availability of state-owned land, adequacy of power supply, telecommunication and off-site infrastructure facilities, nd ready access to road, rail and sea transport networks.

0.. Need for Technical Assistance

14. Though the ongoing program of industry and trade policy reforms is likely to have a positive impact, more work needs to be done to improve the investment climate. The provision of infrastructure and export schemes applicable to industrialists/exporters, require careful assessment in terms of the costs involved in providing incentives and In relation to the potential net gains to the economy as a whole. The techno-ecoriomic feasibility of establishing the Koggala Export Processing Zone (KGEPZ) therefore needs to be evaluated in the broader context of socioeconomic, industry and trade policies. The identificationand evaluation of policy issues would facilitate the incorporation of appropriate measures in the planning and implementation of the KGEPZ. A regional impact analysis is. also needed. Further, it is necessary to identify the means through which appropriate backward linkagescould be established to local resource-based industries and the hinterland of the Southern Province. The policy issues involved in making the Industrial sector export-oriented would ba clarified by the proposed technical assistance.

hr. THE TECHNICAL ASSISTANCE

A. Oblective

15. The primary objective of the Technical Assistance is to conduct an overall techno-economic evaluation of the proposed KGEPZ. The Technical Assistance will examine the feasibility of constructing the KGEPZ in the context of soda-economic, trade and industry policies with specific focus on the impact of policies for export-oriented industrial development.

B. Scope of Work

16. The main focus of the Technical Assistance will be on the economic, technical, institutional and physical aspects of the KGEPZ, comprising the phased development of about 91 hectares land (plus any possible future expansion of the area) between the main-coastal road and Koggala lagoon, about 15 kilometers from the town of Galle, (see Map on page (i)). The Technical Assistance will also review the overall trade and industry policies with specific reference to export development/promotion, and related institutional and organizational aspects. In this context, the main activities under theTechnical Assistance will include:

A. Demand Anal y sis and Ex-Post Assessment

(I) a study of the demand for space at KGEPZ from-the potential industries; - . -

(ii) a comparative assessment of KGEPZ vis-a-vis the existing and potential/planned EPZs, and the overall prospects for KGEPZ;

(iii) a study of existing EPZs interms of their contribution to (a) export growth, and (b) economic development.

B. Export Competitiveness and Polic y Review

(I) an examination of the competitiveness of major export industries and recommendations on measures for their promotion;

(ii) an evaluation of the KGEPZ proposal in the framework of trade and industry policies and programs.

C. Regional rn p act and Techno-economic Evaluation

(i) an investigation of specific infrastructural, institutional,. marketing and related requirements for setting-up the KGEPZ;

(ii). an evaluation of the regional impact on the Southern Province from the establishment of the KGEPZ;

(iii) an assessment of the environmental impact of establishment of the KGEPZ; and

(iv) -determination of the technical feasibility, financial soundness and economic viability of the KGEPZ.

Work under Part (A) and (B) will be concurrently initiated to determine the adequacy of market demand for the sjtes at the KGEPZ, and to review the competitiveness of export industries and to analyze the trade and industry policies. Part (C) of the Technical Assistance will be undertaken however, only upon confirmation of adequate demand availability for KGEPZ from the potential export industry firms.

C. Investment Potential

17. The total cost of an ensuing project, including provisions for related infrastructure facilties and consultant services, is tentatively estimated to be in the range of $35-40 million. The foreign exchange cost would be in-the range of about $25-30 million.

0. ConsultantServices

18. The Technical Assistance will be carried out by consultants to be selected in accordance with the Bank's Guidelines on the Use of Consultants. It is envisaged that the consultants with experience and expertise. in the. establishment of EPZs, industry and trade policy evaluation, export-oriented industrialization and market/economic analysis, regional planning and engineering and environmental assessment will be recruited to undertake the work. The consultant team will include at least three loca.l experts with expertise in the areas of regional planning, hydra-geology and civil engineering. It is estimated that the study will require about 18 man-months of consultant services including about 7.5man-months of local experts. (The detailed-terms of reference for the consultants are given in Appendix 1.)

19. The total cost of the Technical Assistance is estimated at $262,000 equivalent, of which $235,000 will, be in foreign exchange and $27,000 equivalent in local currency. The foreign exchange cost will be incurred for the consultants' remuneration, per diem, international travel, communication and reports, and participation cost of officials of GCEC for consultant contract negotiations in Manila. The local currency cost includes the salaries of counterpart staff of GCEC, cost of office supplies, office accommodation, secretarial services and city transportation cost of the consultants and counterpart staff. The Government has requested a Bank grant totalling $250,000 to meet the total foreign exchange cost ($235,000) and a part of the local currency cost ($15,000 equivalent). The local currency cost financed by the Bank will meet miscellaneous expenses including remuneration and per diem of local consultants, cost of computer services and transportation cost. The balance local currency cost amounting to $12,000 will be financed by GCEC from its own resources. (A summary of the cost estimates is given in Appendix 2). The Government has been informed that the provision of Technical Assistancedoes not commit the Bank to finance any ensuing project.

F.. Implementation Arrangements

20. The technical assistance will be implemented over a period of about eight months The.demand study underPart A will be submitted for consideration of the Government and. the Bank within two months from the start of field work. Part B will be carried out concurrently with demand study under Part A. Upon satisfaction of the Bank. and the Government on the adequacy of demand for industrial sites at tha KGEPZ, work on Part C of Technical Assistance will be authorized by the Bank. An interim, report will be provided by the consultants covering all aspects of the Technical Assistance at the end of about three-and- a-half months and a draft final report at the end of about five-and-a-half months from the start of the work. The subject reports will be discussed in tripartite meetings by the Bank, executing agency and the consultants. The final report will be available at the end of about eight months.

21. GCEC will be the Executing Agency for the Technical Assistance. GCEC will provide one full-time senior staff and two other staff to work with the consultants in their field work. GCEC will set up a Technical Committee comprising an economist, a regional planner, an engineer, an environment specialist and the full-time senior staff to oversee the implementation of the Technical Assistance. A Deputy Director General of GCEC will be the Chairman of the Technical Committee. The Technical Committee will meet at least once a month to monitor closely and review the consultants work in progress. The Chairman of the Technical Committee, in consultation with the Director General of GCEC, will keep the Board of GCEC informed of matters relating to policy aspects which may be communicated to the Ministry of Policy Planning and Implementation, as necessary. The Technical Committee will gather and update all information on related ongoing studies and make such information available to the consultants upon commencement of their work. Further, the Technical Committee will establish coordination linkages with all ministries, provincial agencies and the.privata. sector companies/entrepreneurs for data collection and information gathering by the. consultants..

22. At the provincial level, one staff of the Southern Provincial Council will liaise with GCEC and the consultants during their field work in the Southern Province. GCE will provide sufficient office space, facilities and equipment, and transport necessary to carry out the Study.

Vt. THE PRESIDENT'S DECtSION

23. The President, acting under the authority delegated to him by the Boarc, has approved the provision of Technical Assistance to the Government of the Democratic Socialist Republic of Sri Lanka in an amount not exceeding the equivalent of $250,000 for the purpose of the Koggala Export Processing Zone Study and hereby reports his action to the Board. The Technical Assistance will be finance1 from the Bank's Technical Assistance Grant Fund. This Technical Assistance wilibe provided initially as a grant, :but will b subject to the reimbursement arrangements set forth in the Board Paper on Technical Assistance Operations (Ooc. R51-77, dated 20 May 1977) in the event that theTechnical Assistance resulis in investment financing from external aid sources other than the Bank.

• TERMS rOF REFERENCE FOR CONSULThNTS •..•••.•

I. OUTLINE . •. ...

1. A team of consultants will be required to carry out a feasibility study for the establishment of the Koggala Export Processing Zone (KGEPZ) in the Southern Province of Sri Lanka. The consultant team will have experience and expertise in the areas Of industry and trade policy evaluation; éxport-orientéd industrialization and market/ecOnomic analysis, -regional and environmental assessment. The áonsultants will bea istédyt-lëaSt three local individual expertswith expertise in- rélatéd : technical ad economic areas including regiOnal planning, hydrology and civil ehgineering •Theinain focus of the technical assistance would be onthé economic, institutional and physical aspects of developingthe KGEPZ. The technical aistanOe-dll alsO examine the-ov?rall trade and ifldustry policies with specific reference to expbrt-led industrial development

2. The consultant team will prepare a comprehensive report on determining the feasibility of the KGEPZ. The report will be presented in two volumes: one on- the specific justification and requirements for establishing the KGEPZ including its technical and economic evaluation, and the other on the broad overview Zand analysis of trade and industry policies/programs in the context of setting-up the. KGEPZ. In addition, a separate Executive Summary" will be prepared highlighting thesalient features of the KGEPZ and major policy recommendations_ It. is expected that.the Study will require about 18 man-months of consultant services including at least 1.5-man-months of local experts.

II. SPECtFIC TASKS

3. The detailed terms of reference (TOR) for the consultants include, but are not necessarily limited to, the following:

A. Assessment of Export Development Programs and KGEPZ Feasibility

(a) Review the export promotion policies of the Government and strategy to enhance export-oriented growth through the establishment of industries and examine the export potential of agro-based, mineral- based, export-oriented and other industries with special attention to the Southern Province;

(b) • Examine the experience of existing EPZ5 within the country in terms of contribution to export growth and economic development and briefly review the experiences of other Asian countries in promoting export-led growth through EPZ establishments with the view to identifying constraints and issues and recommending appropriate policies for Sri Lanka;

(Reference in text: page 5,. para.. 18)

(ci) Undertake a demand analysis for Industrial establishments atthe • KGEPZ taking also into account the competition from existing EPZs • and other possible sites for locating industries. The demand analysis should focus on the identification of the firm and potential demand for the KGEPZ arising from industries which:

Ci) produce upstream and downstream products for exports-directly or from the major Industrial establishments;

(ii) provide ancillary products or services to the export industries;

(e) Indicate the risk elements inherent to the demand forecast and other risk factors and make recommendations for minimizing these risks through measures accompanying the development of KGEPZ and other EPZs/IEs or through readjustment of policies and regulations;

(F) Undertake a locational analysis of the site chosen for , the KGEPZ and its advantages/disadvantages in relation to other possible alternative sites and in terms of all related social and physical, institutional, natural resources! environmental, and other facilities/requirements;

() Examine the adequacy of low-cost custom clearance procedures for ,the import and export of goods and investigate the availability of assistance from zone management to enterprises in the existing and. future EPZs. for helping them obtain government approvals, licenses, permissions, clearance of regulations, etc.;

(h) Assess the availability of trading houses and marketing centers to assist in exports of products from the-existing and future EPZs and lEs in-the-country;

Ci) Outline, the comparative advantage for industrial activities in each region with specific emphasis on the Southern Province;

(j) Assess the technical, financial and economic viability of the KGEPZ by performing a cost-benefit analysis following the Bank's guidelines on economic and financial analyses in terms of EIRR/FIRR/NPV calculations and other economic criteria as found appropriate, and Undertake sensitivity analyses.

B. Review and Anal y sis of Industry and Trade Policies

(a) Review the Government's policy and strategy for industrialization and assess-its impact on industrial development over the past 7- 8 years; -

(b) Analyze -the principal constraints which - impede economic and industrial performance. and highlight the major issues relating to the development of the industrial sector;.

(c) Examine the main features of the Government's current trade policy with specific focus on tariffs, duty drawbacks and waivers, import duties and import liberalization schemes to be analyzed in view of its impeding/promoting effects on export-led growth, especially with respect to the establishment of EPZs;

(ci.) Identify the investment/trade opportunities and examine the potential for investments in the industrial sector and review the industrial incentives reform and package to local and foreign entrepreneurs for undertaking investments;

Ce) Evaluate the growth center strategy of the Government and recommend measures for its improvement and examine the infrastructural investment framework necessary for regional industrial dispersal with specific. reference to the Southern Province;

(f) Review available economic, sectoral nd project-related studies on the development potential of the industrial sector,; ;.w,ith the view of human, natural and environmental resources and other relevant locational conditions and supplement the assessment through own field work studies where required;

(g) Assess the institutional framework required for, the effective planningand implementation of regional industrial dëveloprent with due regard to identifying areas for potential streamiThing and • simplification of procedures and regulations; -

(h) Determine the- major constraints to industrial performance from a policy as well as structural- prospective, with a view to identifying possible areas of Bank-assistance through both project andprogram lending operations in the industry and trade sectors.

C. Technical and Engineering Aspects

(a) Review-- the preliminary layout plans for the KGEPZ against the physical requirements identified by the marketing study/demand analysis and examine the adequacy of such plans, upgrade and prepare appropriate s preliminary design and layout plans as considered necessary, and the possibility for phasing the provision of physical assets (including land acquisition or land lease, civil works, telecommunications, power, water, sewage and water treatment and appropriate standard factory buildings);

(b) Separate the physical assets to be acquired intà those to be provided by the KGEPZ authorities and those to be provided by the KGEPZ clients;

(c) Review the physical layout of the proposed KGEPZ to ensure efficient use of land space and support facilities, aqpropriate. location of similar industries in the same areas, appropriate locations of support facilities to provide optimum service to the production industries, and adequate drainage and water treatment facilities;

(d) Review the construction layout and design parameters to ensure compliance with applicable codes and standards of the country;

(e) Review the material and equipment lists and pecifications to ensure their adequacy and appropriateness and provide the revised lists and specifications, draft bid invitation documents and contract, and bid evaluation criteria;

(f) Review the proposed construction and procurement- arrangements and schedules to ensure their appropriateness and efficiency and assess the need for consultant assistance for carrying out the design, preparation of bid invitation, construction and equipment procurement and installation activities and supervision;

(g) Review the studies on the establishment and construction of the KGEPZ facilities, including regional planning aspects (in association with the local expert on regional planning), regulations and quality standards;

(h) Assess the adequacy of water availability (in association with the ldcal expert on hydro-geology), through critical review of ongoing hydrological studies with regard to utilization of a-)ternative ground/surface water resources, their likely environmental impact and recommend optirrcurn water utilization plan;

(I) COnsolidate with information, collected by local expert on civil engineering and aspects relating to the KGEPZ (in association with the-locaT expert on civil engineering) and integrate all such information as part of the feasibility study on the KGEPZ.

(j) 'On thebasis of the.above 1 review the cost estimates (for base year 1990) and calculate appropriate physical and price contingencies (and if capitalization of loan interest during construction is requested by the Government, also calculate the interest during constructions) and prepare a detailed cost estimate and a quarterly fund disbursement schedule for both the foreign exchange and local currency costs of the project;

C. I. Hydro-Geology/Water Resources Engineering

(a): Review the findings o-f the ground water study made by the Water Resources Board and make objective assessment of the water availability through ground water sources including its capital/recurrent costs of development and operation;

(b) Collect and collate all data with respect to surface water supply options and analyze all such data (including geomorphologic and terrain analysis) with the view to identifying the least cost water supply option;

(c) Conduct a preliminary water demand analysis for the KGEPZ, make projection on, future water requirements and make appropriate recommendations far future expansion of water supply schemes;

(d) Provide justification for the proposed water supply options taking into account the engineering, socio-economic, financial and environmental aspects.

C It. Re g ional Planning

(a) Undertake a land classification with the intent to identifying areas for settlements with consideration to related service- oriented industries, ancillary industries and feeder industries, etc.;

(b) Analyze. the regional impact on the Southern Province due to the establishment of the KGEPZ with the view to identifying ways and means of establishing backward linkages to the hinterland and the local industries;

(c) Assess the socio-economlc lmpat on the regional development due to the . establishment of the KGEPZ vis-a--vis socio-cultural patterns, resource conservation, etc., and propose apprOpriate measures for the diversification of the region's economic base in an orderly and harmonious manner.

C. III. CiviT Engineerin.

(a) . Study and :review. the preliminary layout plans and prepare, in consultation with appropriate Government agencies preliminary desl9ns.. and. cost estimates. for:

(1) internal roads arid walkways, water supply storage and distribution schemes, stormwater collection and disposal schemes, sewage treatment and: effluent collection, solid waste disposal and related items as appropriate.;

(ii) land development for industrial plots and provision of standard factory buildings of say three different sizes, and provision of ancillary buildings and structures for administration and related facilities;

(iii) the provision f electric power, telecommunication networks and facilities; including cable networks and distribution points, and transport infrastructure facilities, etc..

C. tV. Environmental Assessment

(a) Undertake-an environmental impact assessment with due consideratIon of the. existing guidelines/requirement of the Government and the Bank, covering the followingaspects:

(I) Examine and evaluate the actual implementation, experience and effectiveness of the environmental impact process and recommend. measures for improvement;

(ii) Collect environmental, baseline data. with the view to establish' KGEPZ irrarr environmentally sound manner; Disclaimer : the PDF file attachment may not contain the complete text index. For documents generated from scanned hard-copies, there may be portions of viewable text that cannot be copied as selectable text as this is dependent on the quality of scanned documents. Ao pendix 1 Page 6

(iii) Formulate appropriate pollution control strategies taking into account future developments in the KGEPZ;

(iv) Identify and define the boundaries of major industrial clusters for which Centralized Wastewater Collection and Treatment Schemes (CWCTSs) would be more cost effective than individual on—site treatment plants;

Cv) Develop a waste disposal (liquid and solid) plan including a. monitoring program for compliance with environmental regulations and standards;

(vi) Prepare cost estimates required for CWCTSs including organization and maintenance of CWCTSs and cost recovery mechanisms; and

(vii) Prepare a comprehensive environmental monitoring plan.

III. IMPLEMENTATION

4. Implementation of TOR items under Part A (g) to A (j), and all the items underPart C, is conditional upon the results of the Demand Study Report to be provided by the consultant at the end of initial two months work on TOR items under- Part.A (a) to (f). Part. B of the Technical Assistance will be. carried out concurrently with the Demand Study under Part A. In the event, demand for KGEP is-considered to be inadequate implementation of: the above— mentioned. TORs will be deleted.

IV. REPORTING REQUIREMENTS

5. The consultant wilT submit to the Bank- and the Government 5 and 10 copies respectively of the inception report within 15 days from the start of field work. The consultant will provide similar copies of the demand study about 2 months after the start of field work for review and consideration by the Bank and the Government. A report on policy aspects under Part. B of the Technical Assistance will be made available about 3 months from the start of field work. Upon confirmation of demand and at the authorization of the Government and the Bank, further work on the Technical Assistance will be undertaken. The consultants will submit 5 and 20 copies of the interim report to the Bank and the Government respectivelywithin 3.5 months from the start of the Technical Assistance for comments on the study. The draft final report (25 copies) will be submitted after about 5.5 months from the start of field work. About two weeks after the receipt of draft final report, a tripartite meeting will be held in Colombo to review the draft final report. Upon incorporation of comments from the Bank and the Government, the consultant will submit 25 copies of the final report (plus 25additional copies of the "Executive Summary") in about 45 days from the receipt of comments.

COST ESTIMATES AND FINANCING PLAN (in$)

I. Bank Financing

A. Local Currency

Remuneration 7500 Per diem 3,000 Transportation 3,000 Rental of computer 1,500

Subtotal (A) 15O00

B. Foreign Exchan ge Currency -

Remuneration 150,000 Per Diem 22,000 International. Travel jj 24,000 Communication -- - 3,500 Report: Preparation 4,500- Contingencies (@ approx. 15%) 31,000

Subtotal (B) 235,000

Total (A + B) 250,000

II. Government Financing

Salaries of Supporting Staff 4,000 Incidental Transportation Cost 1,500 Office Rent, Supplies and Misc. Items 5,000 Contingencies (@ approx. 15%) 1,500

Total (C) 12,000

GRAND TOTAL (A, B & C) - 262,000

1/ Inclusive of travel expenses of two Government representatives during contract negotiations with the consultant in Manila.

(Reference in text: page 6, para.. 19) Disclaimer : the PDF file attachment may not contain the complete text index. For documents generated from scanned hard-copies, there may be portions of viewable text that cannot be copied as selectable text as this is dependent on the quality of scanned documents.