Japanese ODA Loan
Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the Program
Country:
India
Project:
Tamil Nadu Investment Promotion Program
Loan Agreement: November 12, 2013
Loan Amount:
13,000 million yen
Borrower:
The President of India
2. Background and Necessity of the Program(1) Current State and Issues of the investment climate in India
Since India introduced its full-scale liberalization policy in 1991, its economy has maintained
steady growth. India’s 11th Five-Year Plan (April 2007 to March 2012) set the annual average GDP
growth target for the duration of the plan to 9%, with actual average growth exceeding 8%. The percapita GDP based on purchasing power parity topped 3,600 dollars in 2011. The number of middle
class population has increased and the domestic consumption is likely to grow. By the year 2025,
total consumer spending is expected to rise to a level three times higher than the 2005 level,exceeding that of Germany and becoming the world’s fifth highest. To achieve these levels ofexpansion of domestic consumption and potential demand, foreign direct investments in India aregrowing. As a result, foreign direct investments (inflow) in fiscal 2011 increased 34 percent to 46.9
billion dollars over the last year, thereby contributing to growth of the Indian economy.
Meanwhile, a challenge that must be addressed in order to promote more foreign direct investments
in India is the investment in infrastructures, both physical and institutional. For example, thesuggestions for the Government of India submitted in February 2012 by the Japan Chamber ofCommerce and Industry in India contains issues and reform approaches in area like taxation,
development of transportation infrastructure, social welfare program for workers, workers’ visas
and financial deregulation. Doing Business 2013, a report in which the World Bank assesses theinvestment climate in every country, ranks India 132nd among 185 countries. Particularly notable isthe fact that India is ranked 173rd in terms of “Starting a business” based on the number ofinvestment procedures, the number of days required, and the cost incurred. India was ranked 182nd
in terms of "Dealing with construction permits” based on the number of construction permit
procedures, the number of days required, and the cost incurred. Such rankings suggest that thecountry is facing a challenge particularly in its investment environment as pertaining to businessstartup procedures in order to further attract overseas investors.
(2) Development Policies for the investment climate in India and the Priority of the Program
The Government of India intends to address the infrastructure bottleneck that may inhibit its
economy in an attempt to further enhance the investment environment. This led the country’s sharein infrastructure investments in GDP during the 11th Five-Year Plan to grow from 5.7 percent to 8percent. The 12th Five-Year Plan (April 2012 to March 2017), in turn, proposes an investment of 1trillion dollars over a five-year period, as well as other programs, in order to further speed up
infrastructure investment. Moreover, as an industrial corridor following the Delhi Mumbai
Industrial Corridor (DMIC), the Government of India is planning to set up the Chennai-Bangalore
Industrial Corridor (CBIC), designed to integrally promote the economic development of Bangalore(the state of Karnataka), Chennai (the state of Tamil Nadu), and surrounding regions. Tamil Nadu isthus recognized as an important region for India’s economic development.
“Vision Tamil Nadu 2023” (March 2012), which presented the goals that Tamil Nadu aims toachieve by 2023, set the target GDP growth rate of the state over the next 11 years to 11% a year
and aims to increase the state’s per capita income six-fold from today to 450,000 rupees in 2023,
along with other measures, thus significantly improving the country’s economic indicators. It alsodeclares that such a policy makes it imperative to accelerate private investments and aggressively
attract investments, while promoting development of the investment environment. This program is1

to support the efforts to attract investors and develop the investment environment aligned with thestate’s political principles set forth in “Vision Tamil Nadu 2023”.
(3) Japan and JICA’s Policy and Operations for investment promotion
The “Promotion of Economic Growth” is one of the prioritized areas in the Japan’s Country
Assistance Program for India by the Government of Japan. The Assistance Program states thatefforts will be made to help develop infrastructure for key railways and roads, major airports andports, and other infrastructural facilities in order to promote development of the regional economy,increase physical distribution, and expand investments by foreign investors mainly in the designatedeconomic zones, economic corridors, and other industrial complexes located in India’s big six urban
areas (Delhi, Mumbai, Kolkata, Chennai, Bangalore, and Hyderabad) and in DMIC. The Assistance
Program also declares the intention to help provide assistance consisting of an organic collaborationof hardware and software, including the improvement of policies and institutions to increase theimpacts of infrastructural development projects.
Furthermore, Japan’s Ministry of Economy, Trade and Industry (METI) and the Government ofTamil Nadu have signed a Memorandum of Understanding in infrastructural development for thestate of Tamil Nadu in January 2011, thereby agreeing to jointly attract investments by Japanesecompanies and enhance the state’s investment environment, in order to boost the CBIC initiative. In
response to that agreement, this program was brought up at the second Working Group held inNovember the same year on infrastructural development by METI and the Government of TamilNadu. The program is thus of high priority under the Japan-India cooperation relations.
(4) Other Donors’ Activity
The World Bank regards India’s urban infrastructure and skill of labors as challenges that inhibit thecountry’s economic growth; therefore, it positions the development of power, roads, and other partsof urban infrastructure as an important sector, and provides technical cooperation and otherassistance intended to develop PPP projects.
(5) Necessity of the Program
The state of Tamil Nadu in southern India is located on the southeast cost line of India. Its abundantlabor, consistent foreign capital-luring policy, and other measures have attracted car manufacturers,electronic suppliers, and other industrial entities. Moreover, the state has developed CBIC being
promoted by the India-Japan Initiative, and is receiving more Japanese investors (meaning is notclear). Consequently, steady economic growth is projected, centering on the state capital of Chennai.
The number of Japanese companies, mainly automotive-related companies such as Nissan, hasincreased. 344 Japanese companies are based in the state of Tamil Nadu in October 2012 marking
more than a four-fold increase in less than five years (77 companies in January 2008).
Meanwhile, Japanese investors in the state of Tamil Nadu submitted suggestions on October 4, 2011
calling for development of infrastructure such as roads, power, waterworks and sewerage. “DoingBusiness in India 2009,” a report in which the World Bank analyzes India’s investment environment,
positions the investment environment of Chennai as 15th out of the 17 cities surveyed, and points
out that deficiencies in the infrastructure environment, institutions, and procedures in the Chennai
metropolitan area further deter foreign direct investments.
Development of the investment environment entails promoting the development of physicalinfrastructure and the enhancement of institutions. This program provides assistance along withefforts to attract investments and develop the investment environment in line with the state’s
political principles set forth in “Vision Tamil Nadu 2023,” thereby supporting realization of theCBIC that is being initiated by the Government of India and the Government of Japan.
The “Urgent Economic Measures for Reviving the Japanese Economy” approved at a Cabinet
meeting on January 11, 2013, also present a plan to provide assistance in the overseas deploymentof Japanese companies through ODA as a concrete approach for that purpose. Chennai is expected
to see a greater presence of Japanese companies including small and medium companies. This2

program is designed to resolve the bottlenecks for investment in order to accelerate the overseas
deployment of Japanese companies in a sense.
In view of the above, this program—designed to improve the investment environment of the area
through infrastructural development and the improvement of policies and institutions—satisfies theIndian government’s development policy and the assistance policies of Japan and JICA. Therefore,it is highly necessary and appropriate for JICA to provide assistance in implementing this program.
3. Program Description(1) Program Objective
The objective of this program is to further improve the investment climate through strengthening
the policy framework and enhancing the quality of urban infrastructure mainly of roads, power,waterworks, sewerage, and other infrastructure facilities thereby attempting to increase foreign
direct investments in the state.
(2) Program Site/Target Area
The Chennai metropolitan area in the state of Tamil Nadu
(3) Program Components
This program first organizes as a Policy Matrix the Policy Actions to be accomplished in each fiscal
year from 2012 to 2014 mainly regarding (1) the improvement of policies, institutions, andprocedures contributing to development of the investment environment, and (2) the development ofroads, power, water supply, sewerage, and other infrastructure facilities, in line with the principles
set forth in “Vision Tamil Nadu 2023.” Disbursement of the each tranche of the loan is linked to theachievement of the Policy Actions. The Government of Tamil Nadu and JICA shall monitor
progress of the Policy Actions, thereby promoting accomplishment of the Policy Matrix.
Particularly for small infrastructure projects that are the object of high demand from Japanesecompanies and other foreign investors, the Small Infrastructure Project Empowered Committee(SIPEC) prepares a Project Monitoring Matrix and sets the management and facilitation of suchactions as its Policy Actions, so that prompt action can be taken to develop the projects.
PolicyInfrastructure Project
Coordination andPrioritization

Goal* Tamil Nadu Infrastructure Development
Board (TNIDB), in which the Secretaries ofthe related regulatory departments areparticipated, will undertake prioritization of
the projects and coordination between thedepartments, thus accelerating the projects
implementation.
* Small Infrastructure Project Empowered
Committee will be established. TheCommittee will allocate budget properly tothe priority projects selected by theCommittee. The Committee willappropriately monitor and facilitate thepriority projects.
Investment application * Investment application process, related
process
regulations, and its operational system will
be improved comprehensively, according toan overall Business Process Re-engineering(BPR) study.
System Integration for * Tracking system for investors will bringinvestorsmore transparency to the investment
3Major Policy Action* Tamil Nadu
Infrastructure
Development Act isestablished* Priority small
infrastructure projects are
facilitated in accordancewith the established
Monitoring Matrix* Action plan for theimplementation of theBPR recommendation isestablished* System specification ofTracking System isapplication process, and investor confidence
would improve.

Promotion of businessenvironment forMSMEs

Human Resource
Development

Land Pooling
SystemMaster
Planning/Land-Use
Conversion* The function of Directorate of Industries
and Commerce will be enhanced as single
windows for MSMEs according to the resultof comprehensive study.
* Preparing web based single window
application system and Investment
Guidebook for MSMEs can streamline
investment procedures.
* Information dissemination and workshop
for attracting foreign MSMEs will beconducted.
* Comprehensive skill development action
plan will be undertaken and it will help
meeting the investors' demand of laborforce.
* Highway department would be able toacquire land, and compensate land owners
through the land allocation by utilizing theland pooling system. Through this scheme,
infrastructure development would beaccelerated.
* A better master-planning process would beable to cut the necessary time significantly.
By earmarking areas for future industrial
development, the time required for land-use
conversion will be shorter, thus enhancing
the investment activity for industries.

prepared throughnecessary consultations
with relevant
departments* Overall study for theissues for MSME
investments is executed* Investment Guidebook
is published on the website* The Overall long-term
action plan for Skill
Development in TN isannounced* Final approval ofHighway Act amendment
is issued* Master Plan for Phase 1
is finalized and officiallyannounced in theGazzette(4) Estimated Project Cost (Loan Amount)
13,000 million yen(5) Schedule
April 2012 – March 2015 (36 months in total); the Program will be completed when the lasttranche is disbursed (June 2015).
(6)
1)
2)
3)
4)

Project Implementation Structure
Borrower: The President of India
Executing Agency: Finance Department, Government of Tamil Nadu
Operation and Maintenance System: Finance Department, Government of Tamil Nadu
Fund management system: The loan proceeds are to be sub-lent to the consolidated fund ofthe Government of Tamil Nadu through the Reserve Bank of India account of the Governmentof India. The loan proceeds will be controlled as a general budget of the Government of TamilNadu. Usage of the loan proceeds are to be confirmed by vouchers for each fiscal year and byaccount auditing by the Comptroller and Auditor General of India, and then reported to JICA.

(7) Environmental and Social Consideration
1) Environmental and Social Considerations
4

(1) Category: C(2) Reason for the Categorization: In accordance with the “JICA Guidelines for Considerationof Environmental and Social Considerations” (April 2010), the Program is likely to haveminimal adverse impact on the environment.
(8) Collaboration with Other schemes, Other Donors
Technical assistance is to be provided in order to promote achievement of the Policy Actions bydispatching experts and/or other measures.
(9) Other Important Issues
The progress of this program is to be reported and deliberated at Joint Working Committee headedby the Consulate-General of Japan in Chennai and at periodic Working Group held between theGovernment of Japan (METI) and the Government of Tamil Nadu.
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)
Indicator

Baseline(Actual Value in FY2012)

Target (FY2014)[when the Program iscompleted]

－10－

10－

50－

40－

250,000

72,500－17,444(including updates of the existing
master plan)

Number of projects prioritized by theTamil Nadu Infrastructure Development
Board
Number of projects facilitated by theSmall Infrastructure Project Empowered
Committee
Percentage of investors satisfied withfunctions of the Guidance Bureau(%)
Number of Micro, Small, and Medium
companies using the functions of a new
single window
Frequency of workshop sessions designed
to attract investments by foreign Micro,
Small, and Medium companies
Number of trainees through the Tamil
Nadu Skill Development Mission
Number of projects based on the landpooling system

8,447

Range where a land-use master plan
exists(km2)2) Internal Rates of ReturnNot calculated.

(2) Qualitative Effects
Promotion of the economic development of the Chennai metropolitan region, improvement for theurban environment such as comfort in road traffic and alleviation of traffic jams, improvement ofconvenience by securing the timeliness of transportation, simplification of investment procedures,improvement of efficiency in administrative practices concerning investments, and improvement of
coordination capabilities for infrastructural projects

56. Lessons Learned from Past Projects(1) Evaluation results of similar projects
A ex-post evaluation of “Development Policy Support Program (II) (III)” for Philippine (??)
indicates that the dissemination and sharing of information (especially with Japanese companies andother private sector in the local community) are expected to enhance the usefulness and effects ofprogram loans focused on the development of the investment environment and infrastructure.
(2) Lessons learned for this project
Based on the lessons learned from the above, this program involved an exchange of views withJapanese companies and related organizations in establishing a Policy Matrix. In monitoring theachievement of Policy Actions, JICA will disseminate related information to, and share it with theprivate sector in collaboration with the JETRO Chennai office as necessary.
7. Plan for Future Evaluation(1) Indicators to be Used
1) Number of projects prioritized by the Tamil Nadu Infrastructure Development Board
2) Number of projects facilitated by the Small Infrastructure Project Empowered Committee
3) Percentage of investors satisfied with functions of the Guidance Bureau (investment singlewindow)
4) Number of micro, small, and medium enterprises using the functions of a new single window
5) Frequency of workshop sessions designed to attract investments by micro, small, and medium
enterprises overseas
6) Number of trainees trained by the Tamil Nadu Skill Development Mission7) Number of projects based on the land pooling system
8) Range where a land-use master plan exists(2)

TimingWhen the program is completed[end]6