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By Ravi Ladduwahetty

The Luxembourg based European Investment (EIB) Bank will provide long-term funding for infrastructure projects in Sri Lanka. The EU funded bank will fund projects which are above 30 million Euros(Rs. 3.9billion) direct to the implementing agency.

Negotiations are already in progress between the European Union and other Government institutions such as the Ceylon Electricity Board, the Road Development Authority and Water Supply and Drainage Board for some specialised projects.

EIB President Philippe Maystarte told a news conference following the signing of the Agreement between the Government of Sri Lanka and the EIB where 40 million Euro will be provided for private sector projects in Sri Lanka. The funding will be provided through the DFCC bank to the private sector for industrial, agro-industrial, mineral and mineral processing and other related industries.

The signatories to the agreement were: Finance Minister K.N. Choksy on behalf of the GOSL, President Philippe Maystadt on behalf of EIB and General Manager/CEO Nihal Fonseka on behalf of DFCC Bank. The agreement was signed at the Finance Ministry auditorium. Minister of Rural Economy and Deputy Finance Minister Bandula Gunawardena, Acting Treasury Secretary Faiz Mohideen and DFCC Bank Chairman Michael Mack were also present.

The EIB will directly provide funding of amounts over 30 million Euro directly to the promoters of the project unlike the present credit line where small and medium scale industrialists will benefit by going through the DFCC bank.

The EIB President was responding to a question as to whether the EIB had plans of expanding business in Sri Lanka. He said that the expansion of credit lines into Sri Lanka would depend on the success of the first loan scheme, he said.

Maystadt also said that the Framework Agreement leading to this agreement was signed during President Chandrika Bandaranaike Kumaratunga's visit to the EIB. This is the 67th loan in the history of the Bank which has been disbursed to the Asian and Latin American regions since the inception of the Bank in 1958. The speciality of this agreement is that it has a tripartite character where the GOSL functions as an intermediary where local companies could access long term funds at concessionary terms. By using the DFCC Bank as the Executing Agency the impact of the funding could be maximised as the DFCC Bank has been a leader in the field of development banking, he said.

He also said that this was an ideal opportunity for Sri Lanka's SMI sector to open up with the ongoing peace process widely believed to be on the right track.

He said that the due diligence has proved that the EIB and the DFCC bank talk the same language, he said. It was also stressed that this loan funding was coming at a time with durable peace on the horizon and this was an ideal opportunity for Sri Lanka's economy to pick up.

Addressing the media, Finance Minister K.N. Choksy said that the signing of this historic agreement between the Government and the EIB broke new ground and was also symbolic of the recognition Sri Lanka has been given by the European Union. This recognition is further enhanced by the fact that the President of the Bank himself is present in person in Sri Lanka to sign the agreement.

He said that the EU should be admired as a unique political and economic experiment and achievement. It has welded together a group of neighbouring states with a common parliament, a common currency, highly advantageous inter-state tariff arrangement, and an investment bank which has served not only its members but also the developing countries such as Sri Lanka.

Responding to a question about the timeframe for the loan agreement DFCC bank General Manager Nihal Fonseka said that there was a drawback period of four years on a 15-year term.

Asked whether this credit line was competitive in terms of other credit lines adopted by DFCC Bank Fonseka said that the funding was competitive for the Government as it was the Government which served as the intermediary to channel the loan to the DFCC bank. He said that the borrowers of this credit line would be at a definite advantage as the funding could be disbursed in either Euro, US Dollars, Sterling Pounds, Japanese yen or Sri Lankan rupees.

Asked what sectors he envisaged the majority of the borrowings and growth, Fonseka said that there were sectoral restrictions but added that the probability lies in agriculture and agro based industries drawing a higher component of the loan funding.

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