47045 Public Disclosure Authorized

September-October 2008 Issue no 8 March - April 2008 Issue no 6 Ian Porter: Seven Wonderful Years World Bank Country Director for South East Asia Retires

even years ago as the during his final visit as Director for region was emerging from . H.E. Mr. Bouasone S the Asian financial crisis, Bouphavanh, the Prime Minister of Ian Porter became the World thanked Ian for his

Public Disclosure Authorized Bank Director for South East Asia. contribution to the development of Being optimistic by nature, he was Laos, and on behalf of the confident that the region would Government of Laos, Minister of see solid economic growth, Planning and Investment, H.E. Mr. especially in Laos. Ian strongly Soulivong Daravong awarded a believed that the Government’s Friendship Medal, which Ian policies to attract investment and accepted on behalf of the World stabilize the economy would lead Bank Group, in recognition of his the country in the right direction. contribution to the country. Seven years later as Ian retires During this final round of meetings from the World Bank, he explains with the government, Ian that the results have been even highlighted three areas that better than he expected. (for require continued focus and more see the interview with Ian emphasis to take advantage of the on page 2-3). ongoing reform agenda: Public Disclosure Authorized At a recent farewell party, hosted Farewell meeting with the Prime Minister of Lao PDR, 1) Natural Resources by the World Bank, Country Manager for Laos, Patchamuthu H.E. Mr. Bouasone Bouphavanh Management The country's Illangovan, highlighted some of growth will continue to be fulfilled the major achievements that occurred under Poverty Reduction Support Operation through exploitation of natural resources. Ian’s leadership. Perhaps the most important (PRSO). Four years later the PRSO has This needs to be done in a sustainable way. has been the success of the Nam Theun 2 become an effective means of supporting the Both the NT2 Hydropower Project and Lane (NT2) process. In the early years of this Government’s reform effort and now includes Xang Minerals mining project in Sepon have decade, there were many skeptics who Australia, the European Union, and Japan as shown that Laos can be a world leader in this “Ian thought concerns related to environment, partners. According to Illangovan, respect. Future projects should continue to fought hard to win the approval of PRSO social, governance/transparency, and public take advantage of such lessons, and ensure from Bank senior management at a time financial management were too big a that quality investments are attracted, when not everyone was convinced that the challenge to be overcome. Some believed benefits are equally shared among all Lao Government was ready for such a program that the NT2 project was too large for a people including future generations, and driven approach to reform. The rest is small country like Laos. In short, there were resources and social and cultural practices history, and we are now in the fifth year of many doubts about whether the project are protected. >> PRSO and a long list of reforms have been would go ahead. Under Ian’s leadership, Public Disclosure Authorized accomplished.” however, the World Bank was able to design interventions to ensure that all In addition to these, Ian’s vision for IN THIS ISSUE stakeholders’ concerns were addressed. getting the World Bank more involved Now, we are just over a year away from in the Greater Sub-region has seeing NT2 begin its operations and start led to major activities, such as a ♦ Ian Porter: Seven Wonderful Years generating power and revenues for the regional power transmission project ♦ Interview with Karin Finkelston, country, while benefiting the impacted and initiatives in water, trade, labor Director of East Asia Pacific, people. migration, environment and climate International Finance Corporation change. Another major achievement has been ♦ James Bond Advises Mekong to engage the Government in a major The Lao government recognized Ian’s Countries to Develop Hydropower reform effort through the use of the contribution to the development of Laos Sustainably

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• recognizing that IDA resources are lim- Q: Did you expect this rapid growth? ited, the World Bank should consider A: Whenever I met the Minister of Finance providing other instruments such as IBRD (International Bank for Reconstruc- throughout the years, I told him I was very tion and Development) credits to Laos; optimistic about the Lao economy. However, like most of us in the World Bank, as much • the World Bank should look into increas- as we were confident of the potential of the ing its involvement in financial ser- country, we have all been pleasantly sur- vices to encourage private sector prised with the level and consistency of the development, including providing growth. financing to small and medium en- Q: Other than NT2, what have been the terprises; major achievements of the World Bank At his meeting with the Minister of Planning during the last 7 years? and Investment, major issues discussed included developing a sound legal framework A: Other than NT2, important challenges we through the preparation of a good practice have taken on include supporting the gov- Investment Law; government revenue gen- ernment to strengthen its overall financial On behalf of the World Bank Group, Ian eration through effective taxation, royalties management and public expenditure man- receives Friendship Medal from Minister of and fees; benefit sharing (community, pro- agement, supporting the government in the Planning and Investment, H.E. Mr. vincial, national); managing major infrastruc- area of trade facilitation and with accession Soulivong Daravong. ture projects (especially for hydropower); to WTO. At the sector level, we have worked managing environmental and social concerns with the government to develop its first sec-

building on the experience of NT2 and the tor-wide transport operation. In social sec- “Ian has put significant effort Sepon mining project; and governance and tors, we have programs to improve the qual- into aid coordination between contract management. ity of education and health services and to the World Bank and the Lao Gov- ensure that people have access to those ernment to mobilize soft loans Interview with Ian C. Porter services. And, at the moment, we are carry- and funding grants for the imple- ing out important analytical work on the mentation of 28 projects in vari- issues affecting the development of upland Before his farewell party, Ian shared some of ous sectors worth more than villages - to increase income and livelihood in his impressions and experience working in US$350 million. On behalf of the remote areas, and conserve the environment Laos. Lao Government, we express our for future generations. sincere gratitude to Ian for this Q: Can you share with us your perspec- great contribution to Lao socio- tives on Laos seven years ago and economic development and the now? fight against poverty in his 7 years in charge of the World A: In the last 7 years there have been major Bank’s South East Asia section.” changes in Laos, even bigger than I could H.E. Mr. Soulivong Daravong, have anticipated. A major thing that comes Minister of Planning and Invest- to mind is the rapid economic growth reach- ment. ing a consistent level of 6-7% per year over the last 7 years. This growth has had a sig- 2) Financial Sector - The need for nificant impact on reducing poverty and access to finance is huge, especially in rural improving social indicators. It’s not just the areas. As Laos contemplates more reforms in numbers either. I can see the changes with this sector, emphasis should be placed on my own eyes when visiting Vientiane and developing a more modern and well regu- rural areas where we can see improvements lated sector that offers a range of products in infrastructure, significant new housing and Minister of Finance, H.E. Mr. Somdy and services that can contribute to the ex- construction and a general improvement in Douangdy speaks at Ian’s farewell pansion of domestic and foreign private the lives of the . reception sector, and help rural households. Q: What have been the most significant 3) Public Administration/Civil Q: How about the challenges of work- changes in Laos since 2001? ing in Laos in general? Service - Over the past four years, sev- eral partners have contributed to capacity A: The strong economic growth has been A: In the last few years, the World Bank development among institutions, organiza- stimulated by very important economic re- and the Government have developed a tions and individuals. Laos needs to move to forms. The government introduced processes stronger partnership – a lot more trust, con- the next stage of building a more modern such as the Lao Business Forum to reach out fidence and respect on both sides. Because and efficient public administration, through to the private sector, and has developed a of this strong partnership the government is more targeted reforms. better business enabling environment more direct with us and at the same time we The Prime Minister indicated his sup- through reforms such as the Enterprise Law are also more frank with the government port for the World Bank’s continuing and the Law on Commercial Banks. Also through our interaction and because of the efforts in these areas and agreed with recognizing that Laos is in the middle of a good dialogue developed over the last few all three points raised while supporting very rapidly growing and dynamic region, the years through PRSO. The big challenge on further cooperation with concerned government has made an extra effort to the government side is the need for greater ministries. The Prime Minister also made attract private investment, which is benefit- capacity to effectively implement reforms.>> some suggestions to the World Bank: ing the country.

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“We at the World Bank have been both lucky and privileged to have had Ian serve as our Director for this long. He brought leadership, passion,

commitment, and dedication to the job. My colleagues in the Vientiane Office join me in applauding your leadership. We wish you the very best

as you retire from the World Bank at the end of the month after 32 years of outstanding contribution to development.” Patchamuthu

Illangovan, World Bank Country The World Bank Group staff has grown from 13 (2001) to 60 (2008) Manager for Laos Association) has, together with that of the also need to continue to help the govern- IFC and MIGA (Multilateral Investment Guar- ment in implementing important programs

antee Agency) to help the government both that we have been supporting such as public Significant changes are taking place in the in policy and at the operational level. One financial management, infrastructure, rural government with a new generation of lead- ers accelerating the pace of reform. In the area we have in mind already for strengthen- development, and social services. ing this collaboration is the financial sector. last 7 years the significant growth of the Q: Can you share with us your most World Bank country office in Vientiane has IFC has already done some important work memorable personal achievement made the dialogue with the government recently to develop the legal and regulatory framework and strengthen banking supervi- working in Laos in the last 7 years? much easier. We are working on very com- sion. IDA will strengthen its work in this area plex issues, and it can be difficult from time A: In terms of my role as Director in Laos, by further engaging the government on its to time. However, the strong partnership and the day I look back at with the most satisfac- financial sector strategy and by finding op- increased capacity of the World Bank and the tion is when the Board of Directors approved portunities to support the development of government are making our relationship and the Lao Country Assistance Strategy (CAS) in the financial sector infrastructure perhaps in our work in the country more effective. 2005, which included the PRSO operations the areas of secured transactions and pay- and support for NT2. In particular, NT2 is Q: To support the Government of Laos ment and clearing systems. something that we had been working on in achieving its 2020 goal of graduating In the hydropower sector, we will see what wholeheartedly for a number of years. Once from least developed country status, we can support in terms of operations. The it was approved as part of the CAS there was what should the World Bank be doing World Bank is planning a large capacity no turning back. This was the result of the more of and do differently? building project to support the development hard work the government and we had been A: Also discussed with Minister of Finance, and sustainability of the hydropower sector. putting in for a long time. To be honest, I Such support combined with financing from H.E. Mr. Somdy Douangdy in my last meet- was not sure the day would ever come that IDA, IFC and MIGA could lead to significant ing with him, an important strategy for us is the NT2 project would be approved. I look developments in this sector. forward to the next memorable day at the to strengthen our collaboration within the end of 2009, when I come back for the World Bank Group. We need to combine the We need to continue to support the govern- launching of NT2. experience, capacity, resources and instru- ment in the area of capacity building, par- ments that IDA (International Development ticularly in public administration reform. We

James Bond Advises Mekong Countries to Develop Hydropower Sustainably

he Mekong River Basin is nearly the size while the basin has crucial aquatic resources We need to have information and T of France and Germany combined. It that can offer tremendous benefits to people facts to base any judgments on a solid ana- flows through six countries and its water and in Laos, , and , lytical foundation. Unless careful studies and biodiversity resources are second only to the changes to its flow and system can impact assessments are conducted, the full extent of Amazon River Basin. The region is so large, many of the people living along it. the benefits and detriments of development that the Lower Mekong River Basin – Thai- In order for any developments in the in the basin cannot be properly evaluated. land, Vietnam, Cambodia and Laos – is home Lower Mekong River Basin to be done sus- My second proposition focuses on to about 60 million people, almost a third of tainably, there are five considerations that I the importance of keeping a regional per- the countries’ combined populations. would suggest. spective on the basin’s development and the But who are these 60 million people The first focuses on weighing bene- political and economic issues at stake in all living along the basin? Unfortunately up to fits and impacts. For any management of the the Mekong countries. The studies that need one third of them are very poor, living on river basin to take place, careful considera- to take place must take into consideration less than US$1 a day. Mainly rural farmers tions need to be taken. It is essential to es- the effects any development will have in the and fishermen, these people rely heavily on tablish what the impacts are, how extensive whole lower river basin. Moreover, they also the resources that the river offers them – they are, who they impact, and what the need to take into consideration the regional both fish and water. Any changes to this ultimate benefits are. We cannot ‘jump the effects that the development can have with aquatic system can have an impact on their gun’ and say that any developments in the an aim of ensuring that the benefits of the lives – whether floods, loss of fishery, im- region would have a negative or a positive developments can be widely shared. pacts to their diet, income, and more. So impact. CONTINUED ON PAGE 4

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Karin Finkelston Director of East Asia Pacific, International Finance Corporation Q&A

sector, rural electrification, and other areas projects. I think NT2 is a good example of where we can put IDA and IFC products how a project can strive for very high

together to better serve Laos and the Lao standards of environment and social n August 18, 2008 Karin Finkelston people. sustainability while at the same time earning took over as Director of East Asia and revenue for the country. We also need to In addition to collaborating in the power O Pacific (EAP) for the World Bank’s look at ways for IFC and IDA to work sector, IFC and IDA have been discussing International Finance Corporation (IFC). Prior together to help the government to do these ways to collaborate more to support financial to this position, Karin was the Deputy projects more efficiently so we can speed up sector development. As the World Bank Director of EAP focusing on IFC’s investment the process without losing focus on Group, we would like to support the program in the region and IFC Country environmental and social concerns. I believe Government in increasing access to finance Manager in . Her first job in IFC 12 the combined strengths of IDA and IFC can for Lao people and businesses. IFC is years ago was as Country Officer for Laos. help the government to achieve these goals. working with the government to develop the Being familiar with Laos, Karin shared with legal framework for commercial banking, and What opportunities are there for IFC to us her mission and priorities as the new we invested in the ANZ Vientiane Commercial strengthen it operations in Laos? Director. Bank. I think this is a good first step and In Laos we have focused on providing What are your first priorities for the now we would like to do more around Small advisory services to the government through region and for Laos in your new role of and Medium Enterprise Finance, micro- legal reforms such as the Enterprise Law, IFC EAP Director? finance, and potentially support the Law on Commercial Banks and currently the First, let me speak about IFC priorities across government with the privatization of the Investment Law. We also serve as the the EAP region. We have two top priorities. state-owned bank BCEL (Banque Pour Le secretariat for the Lao Business Forum. We The first is that IFC in EAP is trying to do Commerce Exterieur Lao). are working closely with the rest of the much more in IDA countries versus the What would you like to see Laos World Bank team to support the middle income countries. For EAP, this achieve in the next 10 years? improvement of the business enabling means Mongolia, Laos, Cambodia, Vietnam environment. We are now planning to I think Laos has a huge competitive and the Pacific. So, in short Laos is a big strengthen our team in Laos by hiring two advantage in hydropower and natural priority for IFC. The second priority in the investment officers who will be tasked with resources. This is something that the Lao region is climate change and the developing our investment portfolio in Laos. I government, on behalf of the Lao people, development of renewable energy. In Laos I see a lot of investment potential in Laos not need to manage well. There are about 70 think we have an opportunity to promote only in the natural resources sector but also hydropower projects of various sizes being climate change work through support of the in supporting SMEs through bank looked at, so I would really like to see the hydropower sector. investments and by making smaller government prioritize these projects and set investments to meet the demand of Lao I am here in Laos to find ways to work with a high standard for managing the businesses. the World Bank to support the hydropower environmental and social impact of these

CONTINUED FROM PAGE 3 ments, providing policy advise to the various countries, disseminating informa- The third consideration is prop- tion, engaging stakeholders, ensuring erly mitigating the impacts on the envi- transparency of processes and more. The ronment and the people affected. While MRC clearly needs to exercise its role of stakeholder participation and engage- helping countries cooperate and promote ment is important throughout all the sustainable development of its water as it processes that I have mentioned, it is takes forth its Hydropower Program. especially important when social and I believe that these five consid- environmental impacts are being man- erations can help Thailand, Cambodia, aged. Communities need to have a say in Vietnam and Laos think about develop- this process, as well as civil society or- ments in the Lower Mekong Basin in a ganizations and partners. Best practice more sustainable fashion. We must all programs need to be implemented. James Bond visited NT2 while in Laos ensure that any developments are truly For example, Laos can draw on for the benefit of these countries’ popula- the lessons that are emerging from the may be foremost in developers mind, the tions. Nam Theun 2 project. The preparation of importance of developing socially and envi- NT2, with the numerous studies conducted James Bond is Chief Operating Officer of the World ronmentally sustainable and responsible and the at-length consultation processes, Bank Group’s Multilateral Investment Guarantee hydropower projects must also be at the top paved the way for more participatory, trans- Agency. This piece is based on his speech at the of the priority list. parent and improved hydropower develop- consultation on hydro- In order to bring all these elements power on September 25, 2008. The piece was ment in Laos. These lessons can be evalu- together, my last consideration is the impor- featured in the Bangkok Post. ated and replicated in future projects so the tance of the MRC. Sustainable hydropower best social and environmental programs are development in the Mekong basin will not be For more information about put in place in order to effectively manage the World Bank in Lao PDR, possible unless there is an institution that impacts. please contact: can liaise and coordinate between the vary- Fourth, a key player in all of these ing interests of all the countries. The MRC Nanda M. Gasparini developments is the private sector. There is Email: [email protected] can add great value to the whole process of a need to attract responsible partners that Viengsamay Srithirath hydropower development, from enhancing can help the Government to appropriately Email: [email protected] the impact assessments that are done, lead- implement social and environmental pro- Website: http://www.worldbank.org/lao ing the way on cumulative impact assess- Editor: Anita Dean grams. While the lure of the construction