32691 At the Frontlines of Public Disclosure Authorized Development Reflections from the World Bank Public Disclosure Authorized Public Disclosure Authorized EDITED BY INDERMIT S. GILL & TODD PUGATCH Public Disclosure Authorized THE WORLD BANK At the Frontlines of Development Reflections from the World Bank At the Frontlines of Development Reflections from the World Bank Edited by Indermit S. Gill and Todd Pugatch Washington, D.C. © 2005 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington,DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail [email protected] All rights reserved. 123408070605 The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Exec- utive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work.The boundaries, colors, denominations, and other informa- tion shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions: The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law.The World Bank encourages dissemination of its work and will normally grant permission promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher,World Bank, 1818 H Street NW,Washington, DC 20433, USA, fax 202-522-2422, e-mail pub- [email protected]. ISBN-13: 978-8-213-60418-5 ISBN-10: 0-8213-6041-8 e-ISBN-13: 978-8-213-60426-0 Library of Congress Cataloging-in-Publication Data has been applied for. Contents Tables, Figures, and Boxes vii Foreword ix Gobind Nankani and James W.Adams Acknowledgments xi Abbreviations and Acronyms xiii 1 Introduction: Policies, Politics, and Principles: Three Hundred Years of World Bank Experience 1 Indermit S. Gill and Todd Pugatch 2 Basil Kavalsky 17 Armenia, the Baltic States, Belarus, Georgia, Moldova, and the Ukraine (1993–97) and Poland and the Baltic States (1997–2000) Pictures and Lessons of Development Practice 19 3 Phyllis Pomerantz 47 Mozambique and Zambia (1996–2000) A Little Luck and a Lot of Trust: Aid Relationships and Reform in Southern Africa 49 4 Gobind Nankani 65 Brazil (1997–2001) Acting Strategically and Building Trust: Reflections on Brazil 67 5 Edwin Lim 87 China (Chief of Mission, 1985–1990) and India (1997–2002) Learning and Working with the Giants 89 v vi CONTENTS 6 Shahid Javed Burki 121 China (1987–1994) World Bank Operations:Some Impressions and Lessons 123 7 Yukon Huang 151 Russian Federation and the Former Soviet Union (1992–1997) and China (1997–2004) On Good Policies and Great Men: Reflections on China and Russia 153 8 Olivier Lafourcade 161 Western Africa (1992–1996) and Mexico (1996–2000) Lessons of the 1990s:A Personal Account 163 9 Christiaan Poortman 197 Balkan States (1997–2002) Leadership, Learning, and Luck: Reflections on the Balkans 199 10 Ajay Chhibber 213 Turkey (1997–2003) Turkey’s Tumult: Lessons From Crisis and Institutional Reform 215 11 Inder Sud 241 Middle East (1995–2001) Reflections on Development 243 12 James W.Adams 271 Tanzania and Uganda (1995–2002) The Right Approach to the Right Policies: Reflections on Tanzania 273 13 Myrna Alexander 289 Argentina (1997–2002) A Practitioner’s Perspective of the 1990s:The Case of Argentina 291 14 Jayasankar Shivakumar 313 Thailand (1997–2001) Bank Engagement in a Country: A Practitioner’s View 315 References 339 About the Editors 345 Index 346 Tables,Figures,and Boxes Table 1.1 All Over the Map: The Diverse Background and Experience of World Bank Country Directors 3 Figures 10.1 Turkey Integrated Rapidly in the Past Two Decades: Trade to Gross Domestic Product Rose by More Than 50 Percentage Points 218 10.2 A Sequence of Crises during the 1990s 219 10.3 Turkey: An Outlier among Comparators in Volatility of Real Effective Exchange Rate and Gross Domestic Product Growth, 1990–2000 220 10.4 Growth and Inflation Rates in the 1980s and 1990s 220 10.5 Banking Sector Profit and Loss 226 10.6 Fiscal Costs of Banking Crises since 1990 227 10.7 Indicative Contingent Liabilities in Power Sector (US$ Million) 229 10.8 Electricity Prices for Industry 229 10.9 What Is the Most Important Problem That Should Be Resolved in Turkey? 232 10.10 Trust in Institutions 232 10.11 Inequality in Turkey and Comparator Countries 235 vii viii CONTENTS 10.12 Scaling Up:Average IBRD Loan Size to Turkey,1994–2002 236 10.13 Linking Knowledge to Lending 237 11.1 East Asia’s Growth Was Rapid between 1970 and 1995 244 11.2 The Middle East’s Growth Decelerated after 1985 248 11.3 Jordan Performed Well Relative to Most Developing Regions in the Late 1990s 255 11.4 The Growth of the Middle East Has Been Uneven in the Late 1990s 260 Boxes 4.1 On the Value of Bank AAA: A View from Brazil’s Press 76 5.1 A Personal Note about Robert McNamara 103 5.2 The First Mission and the Future Premier 105 8.1 Another Illustration: The Training and Visits System of Agricultural Extension 183 10.1 The Children of Hope Project 231 11.1 Lebanon: The Mystery Economy 261 11.2 The Syrian Arab Republic: The Impossible Dream 266 12.1 Tanzania and the Washington Consensus 284 Foreword YOU HOLD IN YOUR HANDS A DIFFERENT KIND OF WORLD BANK DOCUMENT.THIS collection of essays by former World Bank country directors recounts their experi- ences, both as managers of the World Bank’s portfolio in global economic hotspots of the 1990s as well as throughout their careers in development.The essays detail how China and India lifted hundreds of millions out of poverty, while the Russian Federation collapsed; how Bosnia and Herzegovina and Mozambique remade their war-ravaged economies; and how Argentina,Thailand, and Turkey fell into financial crisis, among other stories of development in the 1990s. But those stories have been told before by the World Bank and by others, and it is not the stories themselves that make this volume remarkable.What is remarkable about this collection is that the stories are told in the first person by those who were there to witness them. In a departure from many accounts that the World Bank has published about the same events, these former country directors offer their candid assessments of what suc- ceeded, what failed, and what lessons emerged. The country directors do not always agree on the policies and aid modalities that best promote development, and their diverse viewpoints reflect the diversity of opin- ions within the World Bank itself. But they are all agreed on the central importance of economic growth in the development process: those countries that grow rapidly and share the benefits of economic growth widely are most successful at reducing poverty, promoting educational achievements, and eradicating disease. Stimulating and sustaining economic growth is, therefore, the focal point of their perspectives. This book is part of a larger effort undertaken by the World Bank in 2003–05 to understand the development experience of the 1990s—an extraordinarily eventful decade. Each of the project’s three volumes serves a different purpose.The first vol- ume of the project, Economic Growth in the 1990s: Lessons from a Decade of Reform,pro- vides comprehensive analysis of the decade’s development experience.The second volume, Development Challenges in the 1990s: Leading Policymakers Speak from Experi- ence, offers insights on the practical concerns faced by policymakers.The third and pres- ent volume, At the Frontlines of Development: Reflections from the World Bank, considers the operational implications of the decade for the World Bank as an institution.From an operational standpoint, this book serves an internal mentoring function for current ix x FOREWORD and future World Bank country directors, as well as providing external audiences with a glimpse of the human face behind World Bank operations. The World Bank’s Poverty Reduction and Economic Management (PREM) Network and Operations Policy and Country Services departments combined to supervise this project, which is based on a proposal by Indermit Gill. Indermit Gill and Todd Pugatch of the PREM Network edited the essays, with the assistance of Alfred Friendly. Basil Kavalsky and Roberto Zagha provided substantive inputs and advice from the beginning to publication. Contributors were chosen on the basis of both their management capability and their position as country director of a partic- ularly compelling country or region during the 1990s. Additionally,the contributors no longer serve as country directors of the countries that they have written about, providing them the time and space to reflect properly on their experiences. The position of country director is a relatively new one at the World Bank, the result of the major internal reorganizations of 1987 and 1996. Many of the former country directors represented here were the first to be based in their country of responsibility during their tenure. As a second generation of field-based country directors takes their place, now is an appropriate time to reflect on the results of this new approach after a lively decade.