Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
Many government purchases are made by public tenders, which are usually advertised in the local media and increasingly through government websites. The government has publicly committed to follow international government procurement standards but often implementation of international procurement standards is weak, especially for projects and goods not funded through international financial institutions. Well-informed local agents can be the key to winning these tenders, though even the most connected local firms have trouble navigating the labyrinth of the government-tender process. Previously, tender specifications being drawn up to suit a particular company’s product was standard practice. It is a common belief that the tender process lacks transparency and accountability. Even on occasions when a U.S. company wins a tender, the contract can be canceled on a technicality, often at the urging of a competitor. The practice of accepting unsolicited proposals without competing bids continues and there is a lack of clarity in the government procurement process which leads to reports of large-scale corruption.
Local agents also often represent more than one foreign supplier, so when they encounter difficulties, including charges of possible corruption, they are reluctant to voice concerns fearing it will jeopardize other business interests. It can sometimes be difficult to get an objective appraisal from local agents.
Many governments finance public works projects through borrowing from the Multilateral Development Banks. Please refer to the “Project Financing” Section in “Trade and Project Financing” for more information.
Sri Lanka is not a signatory to the WTO Agreement on Government Procurement (GPA) but has been an observer of the GPA since April 2003.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult “Advocacy for Foreign Government Contracts” for additional information.
Financing of Projects
Multilateral agencies also provide long-term lending for government projects. The Asian Development Bank (ADB), the World Bank, and the Japan International Cooperation Agency (JICA) are the major sources of project financing. In addition, bilateral donors, such as India, Japan, and Germany, fund major government projects by providing long-term concessional loans. China is also a significant lender for large-scale government projects. The government has difficulty obtaining foreign commercial borrowing for project finance due to high interest rates driven by the country’s current credit rating.
In addition to public-sector lending, the ADB also lends directly to the private sector to finance projects. The World Bank’s International Finance Corporation (IFC) supports private-sector projects in Sri Lanka in the form of equity and long-term debt financing. IFC also supports SMEs.
Retained profits finance approximately 70 percent of private investment, with short-term borrowing financing an additional 20 percent of investment. The stock market and, to a lesser extent, the corporate-securities market are also used to raise capital.
Companies registered in Sri Lanka are allowed to borrow abroad. In June 2016, CBSL removed the maximum borrowing limit. Currently, the minimum loan tenor allowed is three years.
The U.S. Export-Import Bank (USEXIM) can work with your private lender to help secure financing for international sales. A lender receives a loan “guarantee” from EXIM, guaranteeing repayment for a percentage of the loan if the borrower (i.e. U.S. exporter) defaults. You can use the loan from your bank to pay for the labor, materials, and other inputs required to fulfill sales. EXIM doesn’t replace your private bank; it simply backs their loan and increases your borrowing power. USEXIM also provides export credit insurance. More information regarding USEXIM’s programs is available at: https://www.exim.gov/.
The U.S. Trade and Development Agency (USTD
A) funds feasibility studies, orientation visits, specialized training grants, business workshops, and other forms of technical assistance to help American businesses compete for infrastructure and industrial projects. Further information on USTDA programs is available at https://ustda.gov/.
U.S. International Development Finance Corporation (DFC) is a development finance institution that provides financing for private development projects. It is an independent agency of the U.S. Government. Further information on DFC programs is available at www.dfc.gov/
The Small Business Administration’s (SBA) Office of International Trade supports small business in international trade development. SBA works with other federal agencies and public- and private-sector groups to encourage small business exports and to assist small businesses seeking to export. Further information on USTDA programs is available at www.sba.gov/
Multilateral Development Banks and Financing Government Sales. Price, payment terms, and financing can be a significant factor in winning a government contract. Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks. The U.S. Department of Commerce’s (USDOC) International Trade Administration (ITA) has a Foreign Commercial Service Officer stationed at each of the five different Multilateral Development Banks (MDBs): the African Development Bank; the Asian Development Bank (ADB); the European Bank for Reconstruction and Development; the Inter-American Development Bank; and the World Bank.
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