Peace in Sri Lanka

Norway today paid US$ 2.7 million into a newly-established trust fund designed to help people in the North East of Sri Lanka reap early and tangible benefits from the on-going peace process. These were the first funds to be received by the North East Reconstruction Fund (NERF), which will be financed by international donors and administered by the World Bank’s International Development Association. This contribution is in addition to a US$ 16.5 million contribution for long-term assistance already pledged by Norway for Sri Lanka in 2003.

The fund will support the return of internally displaced persons, and help meet their immediate needs, such as housing, water, and temporary cash support, and will assist with de-mining activities. It will also provide health care, including special treatment for those traumatized by the war—with an emphasis on women and children, especially orphans. It will provide employment and income generating opportunities for all conflict-affected communities, with a focus on micro-finance, repair of minor infrastructure, and improved transport for market access. Other areas identified as requiring special attention include education, vocational training, primary health care, and reconciliation between communities.

The fund will focus on developing the capacity of communities to mobilize and influence the nature of their own development. It will provide support and training to enable them to design and implement their own small-scale projects.

“We have been encouraged by seeing the two parties work together to establish this fund, and it is heartening to note that, while discussing complex political issues at the negotiating table, they have shown their determination to build peace on the ground by restoring normalcy and improving security in people’s daily lives,” said Vidar Helgesen, State Secretary in Norway’s Royal Ministry of Foreign Affairs.

The World Bank was requested to administer the fund, on January 9, 2003, by the Sub-Committee on Immediate Humanitarian and Rehabilitation Needs (SIHRN)-- established by the two parties to the Sri Lanka peace talks.

It is envisioned that the NERF could last for a period of at least three years. This time horizon is in keeping with the parties’ vision of SIHRN as an interim institutional arrangement for immediate rehabilitation needs and that the feasible rehabilitation of returning Internally Displaced Persons would take up to three years. There will be the possibility to extend the NERF, but such a decision could only be made following the thorough review of the fund operations envisaged for December 2005

Donors are being encouraged to contribute to the NERF. All contributions—and correspondingly all payments out of NERF—will be on a grant basis. All questions about contributing to the Fund should be sent to Anders Bjorgung, administrator of the fund. E-mail: abjorgung@worldbank.org

A three-tier governance structure is proposed for the NERF: (i) IDA as Administrator; (ii) SIRHN; and (iii) contributing donors. IDA would help organize international meetings to generate donor commitments and arrange for the translation of commitments into actual disbursements into the Fund. IDA would assist SIHRN appraise sub-projects, evaluate the technical and managerial feasibility thereof, and assess fiduciary controls, risks, social safeguards and potential negative environmental impacts. IDA would support SIHRN on an on-going basis to help carry out its functions, avoid any conflict of interest and secure needed technical expertise.

A suitably qualified and experienced independent firm (the “Monitoring Agent”) will be contracted by IDA to monitor and review disbursements, payments, accounting and reporting for the activities to be financed by the NERF, on the basis of the terms of reference agreed with SIRHN, IDA and the Monitoring Agent.

The Monitoring Agent would: (i) monitor SIRHN’s procurement of goods, works and services; (ii) screen and recommend for approval withdrawal applications; and (iii) monitor expenditures out of the NERF to ensure that funds are disbursed only for the purposes for which they have been provided, in accordance with applicable IDA procedures and acceptable financial and auditing standards. Employment of the Monitoring Agent would take place in accordance with the procurement procedures of IDA.

IDA will also mount quarterly supervision missions that would review overall performance of NERF and the Secretariat, as well as physically inspecting a random sample of projects;